‘We are living a transformation which is going to reconstruct population and economy for the coming century. There will be no more national products and technologies, no more national firms, no more national industries, no more national economies. Only individuals, which constitute nations, will be kept within the country's boundaries'. (Reich 1993: 13).
After World War II, countries, in order to maintain peace, decided to organize trade agreements. Free trade became a priority in order to reconstruct countries as well as to prosper. This agreement, GATT (General Agreements on Tariffs and Trade), was created in 1948 in order to reduce trade barriers. Its main objectives were to make exchanges free by lowering custom fees and by restraining quantitative and qualitative restrictions. The GATT also applied a non-discriminative principle which had to impede discrimination between foreign exporters and national producers.
The last round of negotiation, the Uruguay Round (1994), resulted in the creation of the WTO (World Trade Organisation).
Globalization is the process by which the world composed of different countries, cultures, language etc is moving to be more like one country. Globalization refers to the increase of countries' interdependence.
This theory is in accordance with the definition given by Fletcher and Brown (2005: 396). Their definition regarding the globalization of markets explains that the globalization of markets is the convergence of firm structures, products, prices etc in order to attack the world as one market.
What are the forces of globalization and what do they expect? What impact does globalization have on international business and trade?
We will start off with an overview of the pros and cons of globalization. Then, we shall identify the actors of the globalization and how they are influenced by globalization and conversely, how they influence globalization.
[...] Disadvantages As a matter of fact, people think that globalization facilitates the increase in the GDP of a country and improves the living conditions of the country. However, does this come at steep price? Actually, globalization is being increasingly contested and criticized for the reasons below: According to the Challenge of Slums, a 2003 UN-habitat report, cyclical nature of capitalism, increased demand for skilled versus unskilled labour, and the negative effects of globalization in particular, global economic booms and busts that ratchet up inequality and distribute new wealth unevenly contribute to the enormous growth of slums. [...]
[...] Positive effects on international business and trade Globalization has impacted world economies with different positive effects. There are economic, social and ecologic impacts. Effectively, it can be seen that globalization increases standard of living, literacy and health and thus facilitates the development of the country. Sharing ideas, lifestyles and experiences permits the development of new products not previously available in the country. In addition, multinational companies bring foreign currency to local economies and allow economies to become richer. Thus, thanks to globalization, trade barriers have decreased and permitted promotion of free trade. [...]
[...] Negative effects on international business and trade As mentioned before, the current trend of international business and trade clearly profits only a section of the populace. The whole process of production, which creates funds, is distributed on an unequal basis. In response, many defenders of small producers created fair trade companies. We can take the example of the Max Havelaar label, which promotes the small producers in disadvantaged regions, along with some organizations like AlterEco and Altro Mercato. Furthermore, mass relocation compels other companies to follow the same strategy. [...]
[...] The globalization permits the mobility of the capital created by multinational enterprises and allows the MNE to easily invest in others countries. That is why for MNE, the globalization is very important: it enables business across the world as well as access to new profitable markets. The evolution of the international economy is clearly heading for globalization. The numerous players in the movement are ensuring that the manufactured products and services are attainable all around the world. New technologies of information and communication make the distances shorter and enhance trade. [...]
[...] III- The influence of globalization on the main players Governments National governments naturally involve the idea of autonomy. Nevertheless, globalization changed the scenario. Globalization has reduced states' power resulting in a loss of autonomy in the conduct of their policies. Because of globalization, states face difficulties in managing national policies as they have to take external factors into account. The more powerful a country is, the more power it will have to face globalization. Their power depends on their national market size, their economy, their FDI etc. [...]
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