Globalization Case - the Different Facets of Globalization and Their Manifestations

Globalization

Over many centuries, human societies across the globe have established progressively closer contacts. Recently, the pace of global integration has dramatically increased. Unprecedented changes in communications, transportation, and computer technology have given the process new impetus and made the world more interdependent than ever. Multinational corporations manufacture products in many countries and sell to consumers around the world. Money, technology and raw materials move ever more swiftly across national borders. Along with products and finances, ideas and cultures circulate more freely. As a result, laws, economies, and social movements are forming at the international level.

Globalization is not something we can hold off or turn off . . . it is the economic equivalent of a force of nature -- like wind or water." Bill Clinton (American 42nd US president (1993-2001)).

Globalization refers to the increasing unification of the world's economic order through reduction of such barriers to international trade as tariffs, export fees, and import quotas. The goal is to increase material wealth, goods, and services through an international division of labor by efficiencies catalyzed by international relations, specialization and competition.

It describes the process by which regional economies, societies, and cultures have become integrated through communication, transportation, and trade. The term is most closely associated with the term economic globalization: the integration of national economies into the international economy through trade, foreign direct investment, capital flows, migration, the spread of technology, and military presence. The term can also refer to the transnational circulation of ideas, languages, or popular culture through acculturation. An aspect of the world which has gone through the process can be said to be globalized.

The Different Facets of Globalization And Their Manifestations

Globalization is manifested in four interrelated developments:

-The increase in the international exchange of goods and services, and despite all the restrictions therein, the movements of human resources;

-The internationalization of production and real investments;

-The increased integration of financial markets;

-The relative high degree of policy convergence among countries.

The statistical evidence on these developments is truly impressive. In the trade area, the ratio of international trade to the GDP of practically all countries has more than doubled over the last two decades. Trade has substantially outpaced the growth of the GDP in all but very few years over the past twenty- five years. A major new phenomenon is the size of services in total trade, in particular financial services.

In the exchange of human resources, the movement of labor across international borders, legally or illegally, together with the growth of immigration from poor to rich countries has reached such levels that immigration has become an explosive political issue in all the recent political campaigns of Western Europe. Even in the US, a traditional country of immigration, the increased scale of economic immigration is beginning to be a standard feature of political campaigns and is heavily exploited by politicians in quest of electoral gains. In the finance arena, businesses have increased their recourse to international sources as testified by the increased volume of floatation of foreign bond; the increased issuance of international bonds in the Euro markets, and the increased international lending in direct and indirect forms. Moreover, big companies have substantially increased their stock listings on the various public exchanges. The financial institutions, led by banks, have become truly international not only in doing international financing like their predecessors have done since the nineteenth century, but in addition, by locating in various countries through some times outright establishment or acquisition of local banks. On both the assets and liability sides of their balance sheets, banking is now international: loans and deposits are denominated in different currencies originating from and going to different points of the globe.

Declining Trade and Investment Barriers

Many of the barriers to international trade took place the form of high tariffs on imports of manufacturing goods. The typically aim of such tariffs was to protect the domestic industries from foreign competitors. For removing of the barriers for flow of goods, services and capital between nations, GATT (General Agreement on Trade and Tariff) established. Under the umbrella of GATT, eight round of negotiation among the members worked to lower barriers to free flow of goods, services.

In addition to reducing trade barriers, many countries have also been progressively removing restrictions to foreign direct investment (FDI).According to United Nations, 94% percent of 1885 changes made worldwide between 1991 to 2003 in the laws governing foreign direct investment created a more favorable environment for FDI. FDI also has been reflected in a dramatic increase in the number of bilateral investment treaties designed to protect and promote investment between two countries. As of 2003, 2265 such treaties in the world involved more than 160 countries, while in 1980's only 181 treaties were exist.

Such trends have been driving both the Globalization of the Market and Globalization of production. The Lowering of Barriers to International trade enables firms to view the world rather than a single country, as their market. The lowering of trade and investment barriers also allows firms to base production at the optimal location for that activity.

The media and almost every book on globalization and international business speak about different drivers of globalization and they can basically be separated into five different groups:

1) Technological drivers

Technology