What Is Globalization?
The World Trade Organization is the international organization established by countries to help administer global commercial transactions; one of its functions is to measure the globalization of markets. To do so, it compares two variables: international trade and world production. If international trade in goods and services is increasing faster than production, globalization is said to be occurring. For example, between 1950 and 1964, world production increased by 5.3% a year while world trade increased by 7.6%. This means that trade was growing 1.4 times faster than production, which economists have connected to the process of globalization. Today, globalization is speeding up even more: in 1995, the rise in global trade was 3 times higher than the increase in production.
What sustains the globalization process? There are three fundamental factors which, after the event of the Second World War, are responsible for globalization. The first factor is the progresses made in the areas of communications and transportation. International commercial transactions and communications are now much easier than they were forty years ago. In addition, transportation is less expensive. The second factor is related to the development of new strategies in the ways individuals and companies invest. Now they explore for new markets for their products as local and national markets are reaching their limits.
The third factor shaping globalization is government policies. It is certainly the most decisive factor since these policies can hasten, slow or even roll back the progress of globalization depending on whether or not the various national governments adopt policies that are harmonized with international trade rules or policies that are intended to protect the domestic market.
Trade agreements in various regions of the world have definitely hastened the globalization process. Over 100 nations are members of the General Agreement on Tariffs and Trade (GATT), recently renamed the World Trade Organization as a reflection of the globalization of commerce. The signing of the NAFTA (North American Free Trade Agreement) is an example of a trade agreement that has touched Canada, particularly as North Americans since this treaty links the economies of Canada, Mexico and the United States. It is intended to remove all barriers to trade and investment between these countries, and to eventually open their resources and labor force to access by all others without restrictions. This Agreement is now being negotiated with other states in Western hemisphere, most notably Chile.
There are also other pacts in other regions of the world. The ASEAN (Association of South East Asian Nations) has been signed by Thailand, Malaysia, Indonesia, Singapore, the Philippines, Brunei and Vietnam, and seeks to reduce import tariffs on all products, with some exceptions, to less than 5% by 2003, and to eliminate most non-tariff barriers.
On their side, Canada, the United States, Japan, China, Chile, Australia, Hong Kong, Taiwan, South Korea, New Zealand and once more Brunei, Malaysia, Indonesia, the Philippines and Singapore are all part of the APEC (Asia-Pacific Economic Co-operation Council). The APEC has for its objective the liberalization of trade by 2010 for industrialized countries and by 2020 for less developed countries. This will probably become a powerful economic bloc: by the end of the century, all these countries together are expected to account for 60% of the world's population, 50% of its GDP (Gross domestic product) and 40% of its consumption of goods and services.
Introduction | Concerns