Essay on the Globalization of Trade !
The term ‘globalisation’, now-a-days, is known to all and has become an expression of common usage. Different people use this term with different colours representing ‘a brave new world with no barriers’; ‘a world of doom and destruction’; and ‘a disneyesque beacon of light and a fake optimism’.
“The need of a constantly expanding market for its products chased the bourgeoisie over the whole surface of the globe………. transforming the world in its own image” was the Communist Manifesto s prescient description of what is now referred to as ‘globalization’.
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The term ‘globalisation’, generally, means integration of economies and societies through cross country flows of information, ideas, technologies, goods, services, capital, finance and people. But the term ‘globalisation’ is used, at present, in the limited sense of economic integration leaving cultural, social and political dimensions, which can happen through the three channels of (i) trade in goods and services; (ii) movement of capital and (iii) flow of finance by influencing market integration efficiency and industrial organisation.
Globalisation consists of the liberalisation component viz.
(i) Reduction of trade barriers so as to permit free flow of goods across national frontiers;
(ii) Creation of an environment in which free flow of capital can take place among nation – states;
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(iii) Creation of environment for free trade; are
(iv) Permitting free flow of technology
Globalisation indicates the desire to interrupt nation-states within the overall framework of the WTO. It is nothing but a modern version of the ‘Treaty of Comparative Costs Advantage’. It leads to allocation of resources that is consistent with comparative advantage. This results in specialisation which enhances productivity and reaches the full potential of their resources availability. Capital flows across countries by playing an important role in enhancing the production base and by using highly sophisticated technology. The rapid development of the capital market has been one of the important features of the current process of globalisation. The expansion in foreign exchange markets and capital markets is a necessary pre-requisite for international transfer of capital.
It is argued that international specialisation due to globalisation benefits both the countries which enter into trade relations. The protagonists of globalisation want an export-led-pattern of growth to replace the import- substitution trade policies followed earlier. For developing countries like India, the globalisation opens access to new markets and new technology globalisation is not end in itself, it is only a means to achieve social goals. These goals are high growth rate, self-reliance, full employment, better the lot of the poor to put it in a nutshell, ‘growth with equity’.
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The protagonists of the ‘global village’ thesis do not visualise any fundamental conflict either between nations or between trading blocks. They believe the world will be more integrated and it will be guided by global interdependence. According to Kiran Karnik, the communication revolution has effectively “abolished distance, and made terrain irrelevant………… We are no more than a second away from anyone anywhere on earth”. Information Technology is creating a ‘woven world’ by promoting communication, integration and contact at a pace of change that far outruns the ability of any government to manage. Territorial sovereignty and control on the movement of goods and people, the two attributes of the nation-states, “are being undercut by the communication revolution”. Global currency, Bond market, Internet, Channels of T.V. is the new empires of mind whose images swamp our consciousness.
The entire world is adopting the technologies, values, life style and aspirations of the western developed world. The culinary homogenisation and transnationalisation of beverage consumption patterns sought to be achieved by international giants may have led to the cocacolisation and McDonaldisation of the globe.
Some studies reveal that globalisation has raised the ratio of average income of the richest country in the world to that of the poorest from about 9 to 1 to atleast 60 to 1 today. “Ironically, inequality is growing at a time when the triumph of democracy and open markets was supposed to usher in a new age of freedom and opportunity.
While the protagonists of globalisation have sought to perpetuate myths like the poor catching up with the rich and growing convergence of rich and poor, in reality the gap in per capita income between the industrial and developing world has tripled. The share of the poorest fifth of the world’s population in global income has dropped from 2.3 per cent to 1.4 per cent over the past one decade and the proportion taken by the richest fifth, on the other hand, has risen.
Some argue that empirical evidence on the impact of globalisation on inequality is not very clear. The share in aggregate world exports and in world output of the developing countries has been increasing. In aggregate world exports, the share of developing countries increased from 20.6 per cent – in 1988-90 to 29.9 per cent in 2000. Similarly the share in aggregate world output of developing countries has increased from 17.9 per cent in 1988-89 to 40.4 per cent in 2000. The growth rates of the developing countries both in terms of GDP and per capita GDP have been higher than those of the industrial countries. All these data do not indicate that the developing countries as a group have suffered in the process of globalisation. In fact there have been substantial gains four of the countries which were developing countries are now classified as newly industrialised Asian economies. As for income distribution within the countries, it is difficult to judge whether globalisation is the primary factor responsible for any deterioration in the distribution of income. Trade liberalisation should have relation with the poverty reduction policies.
If globalisation leads for and ensures “free and fair” trade among countries, it is well and good, but the emphasis so far has been on ‘free’ rather than ‘fair trade’. It is in this context that the rich industrially advanced countries have a role to play. While requiring developing countries to dismantle barriers and join the mainstream of international trade, they have been raising significant tariff and non-tariff barriers on trade from developing countries.
Although average tariffs in the United States, Canada, the European Union and Japan-the so called quad countries – range from only 4.3 per cent in Japan to 8.3 per cent in Canada, their tariff and trade barriers remain much higher on many products exported by developing countries. Major agricultural food products such as meat, sugar and dairy products attract tariff rates exceeding 100 per cent. Fruits and Vegetables such as bananas are hit with a 180 per cent tariff by the European Union, once they exceed quotas. Even in the case of dismantling the Multi-Fibre Agreement (MFA), it is stretched upto 2005 and has been back-loaded so that much of the benefits will accrue to countries like India only towards the end.
In fact these trade barriers impose a serious burden on the developing countries. It is important that if the rich countries want a trading system that is truly fair, they should on their own lift the trade barriers and subsidies that prevent the products of developing countries from reaching their markets.
To attain ‘globalisation’ in trade, time is required. This is why international multilateral trade agreements make exceptions by allowing longer time to developing economies in terms of reduction in tariff and non-tariff barriers and by providing ‘special and differential treatment’ by dividing the countries as developed, developing and least-developed countries.