Concept of Globalization and Its Impact on the International Trading Order

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Table of Contents

Introduction
Conclusion
Works Cited

Introduction

According to Temin (1), globalization is a subject that catches the attention of many people across the globe. Recent debates on globalization have centered on its impact in north and south countries.

Globalization has an enormous impact on the rate at which countries adapt to the trading order and trend in the international market. According to the discussion, there is a pointer to the fact that a lot of controversies exist in globalization. Globalization presents many challenges in trade for nations lying in different developmental zones; the north and the south.

Many actions are taken to make globalization be of benefit for different countries across the world. This paper discusses the subject of globalization. The paper discusses the concept of globalization and its impact on the international trading order. In the paper, it is argued that most of the concerns raised to improve the benefits of globalization, are not promising to all nations.

As observed in the introductory note, globalization is a broad subject that seeks to describe the new order of trading and other relations on the global arena. Globalization is rooted in the argument that increased cohesiveness among distant nations in the world, results in mutual benefits.

The world needs to be opened up to trade and other relations through the elimination of cross-trade barriers. In order to realize the true spirit and sense of globalization, a number of actions are pursued in international economics, which seek to enhance mutual gains in international trade transactions.

Efforts are ongoing to establish a new world economic order through: the transfer of technology, increased foreign assistance, regulation of multinational corporations and the pursuance of favorable trade policies and agreements (Temin 87).

The main concern of globalization is that the whole process of globalization favors richer countries; north. The developing countries, which are commonly referred to as south, often come out as victims of the process. This is the epicenter of criticism of the concept of globalization and its variability.

Up to this end, it is clear to many developmental economists that globalization posits many negative impacts to developing economies. However, there are a number of pointers which show the benefits of globalization to nations that lie in the south. An example, commonly quoted in the recent economic times, is the economic gains attained by newly industrializing economies.

It is argued that, through the opening of trade in the global scene, many countries that lie in the south have made substantial gains in international trade. Comprehensive studies of the newly industrializing nations have been done.

The studies show that economic development in these countries comes from the pursuance of sound economic policies. Sound economic policies are pursued from within the countries which give them a strong force in international economics.

Asian Pacific countries have come up strongly and are breaking the economic barriers that are still faced by many other developing countries in Africa and South America (Adams, Bishop and Reinke 117).

It is worthwhile to recognize the efforts that are made to bring about a level playing ground for all nations, in international trade. The efforts, aim at helping to develop a global framework, which will in turn ensure that the gains of globalization are shared amongst the rich and the poor countries.

Magariños (58) observed that several commissions have been set up and given the mandate of developing such a framework. The most famous commission is the Bruntland Commission of 1987.

Having studied the disparities in attaining a balanced economic order on the globe, the Bruntland commission came up with recommendations. The recommendations were aimed at striking a balance between the developed and the developing countries. While the recommendations seemed strong, it is still evident that implementing the recommendations is only an easier said than done exercise.

The global order has not managed to bridge the gap between the developed and the developing economies of the world. Most of the recommendations are criticized for failing to provide a long lasting solution to the economic problems facing the developing world.

They proposed a framework for offering developmental aid to the developing economies. The question, that remains lingering, is whether fairness can be attained in international economics, given the fact that there exists a large gap between the developed and the developing economies. There is also the question of competition and interests of different nations in international transactions (Kiggundu 2).

The developed countries have not fully shown the will of giving the developing countries a chance to bridge the development gap between them. Competition remains to be the order of the day in international transactions, which have been enhanced by globalization.

The thought that poor countries can benefit from globalization is overridden by the forces of competition and the dominance of the market by the economically able giants.

When it comes to the global market, economic giants of the globe, often have a high competitive power over other nations in the world. They end up reaping massive returns from international trade as compared to the poor countries that are disadvantaged in numerous aspects (Nathalie and Alain 243).

The opening up of international borders has resulted in increased cross border trading activities. Big business corporations that emanate from the developed world have strongly capitalized on the elimination of trade barriers. They are using this opportunity to expand into new markets in the world.

Given the competition that prevails in their mother countries, these corporations seek access into the developing regions of the world. These regions present varied trading opportunities for multinational companies. Given the fact that multinational have vast capital and have a technological advantage of over the local firms that are found in the developing regions of the world, they often outcompete the local firms.

Compared to multinationals, local firms are at a greater disadvantage. They lack the capital and technological strength to compete the transnational companies. They are thus impeded from growing. Research shows an increasing number of multinationals that keep accessing and setting subsidiaries in the developing world (Nathalie and Alain 243).

Several issues surround the control of the activities of multinational in foreign countries. This further complicates the fate for the existence and survivals of local firms in countries that have weak economies. Multinationals are reported to control trillion of dollars in term of global assets and wealth.

Most of them, control large budgets, which in some cases, surpass national budgets of some countries. They are considered as economic pillars in most areas in which they control production. This gives them a favorable ground for influencing administration in areas in which they are rooted.

In most cases, multinationals end up being the main influencers of politico-economic decisions. As a result of their influence in economic performance, they are protected by governments. Most of their views are given significant preference by governments. Therefore, it is quite difficult to control the activities of multinationals (Flores and Aguilera 1187).

The setting of commodity prices in the global market is often dictated by the main producers. The efforts to control prices in local markets have not yielded the desired results. Weak firms operating in local markets have a minimal say in the final prices of goods and services.

They are disadvantaged in various aspects. First is that they are not favored by economies of scale as they have no capacity to produce massively. The second point is that their production systems are inefficient. They have low levels of technology development and usage in improving the production efficiency (Awuah and Amal 122).

The cost of production, in the developing world, remains low despite efforts made to adopt technology. There is also a significant gap between the level of employment of technology in the developed and the developing world. Therefore, products and services from the north are mostly preferred over those from the south.

The south expects to price their products higher than the products from the north due to high costs of production. They are thus challenged by complementary products that come from the developed world.

These countries have a comparative advantage in producing such products and services. Thus, they offer them at competitive prices. International market surveys indicate a lot of dominance of trade in goods from the developed world (Awuah and Amal 121).

Conclusion

The debate about globalization and its impacts is a raging debate across different spectra of society. Concepts underlying globalization covers the free flow of trade, people and factors of production. Globalization favors the richer nations more than it does to the developing world.

Richer countries benefit from free trade because they are competitively positioned to conduct international trade. Many factors favor the rich nations, even as efforts are made to raise the gains that are realized by the developing countries. Policies being pursued have proved to have weaknesses. This means that globalization will keep benefiting the developed world more than it benefits the industrializing world.

Works Cited

Adams , Tommy, Tiffany Bishop and John Reinke. “Globalization: trends and perspectives.” Journal of International Business Research 10.1(2011): 117-25. Print.

Awuah, Gabriel Baffour and Mohamed Amal “Impact of globalization: The ability of less developed countries’ (LDCs’) firms to cope with opportunities and challenges.” European Business Review 23.1(2011): 120-132. Print.

Flores, Ricardo and Ruth Aguilera. “Globalization and Location Choice: An Analysis of US Multinational Firms in 1980 and 2000” Journal of International Business Studies 38.7(2007): 1187-1210. Print.

Kiggundu, Moses N. Managing Globalization in Developing Countries and Transition Economies: Building Capacities for a Changing World. Westport, CT: Praeger, 2002. Print.

Magariños, Carlos A. Economic Development and Un Reform: Towards a Common Agenda for Action; a Proposal in the Context of the Millennium Development Goals. Vienna: United Nations Industrial Development Organization, 2005. Print.

Nathalie, Hilmi, Ihsen Ketata and Safa, Alain. “Multinational Firms’ Foreign Direct Investment.” The Business Review 7. 2 (2007): 242-50. Print.

Temin, Peter. “Globalization.” Oxford Review of Economic Policy 15.4(1999): 76-89. Print.

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Concept of Globalization and Its Impact on the International Trading Order

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