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Globalization has greatly influenced international business and free trade. However, the combination of these three not only spurs global economic growth but also individual country’s economy and how countries relate with each other internationally. In the current global economy, deep-seated political problems such as poverty and unemployment are no longer viewed as individual country’s problem but as global problems. Those who are opposed to globalization and international trade, cite the death of indigenous cultures as a result of continued westernization of countries around the world. In addition, it is also attributed to the exploitation of people living in less developed countries by multinationals corporations, as some of the negative impacts of globalization, international business, and free trade. However, it is the contention of this paper that countries have all the reasons to support and embrace international trade and free trade. A number of good points have been highlighted in order to give a picture of how countries stand to benefit economically and politically both domestically and internationally.
Economic globalization provides opportunities through which the world economy can be integrated. In a globalized economy, countries are encouraged to remove all barriers and instead open up their domestic markets to imported goods and services as well as capital from foreign countries. Economic globalization enables countries to create opportunities that encourage trade and attract both domestic and international investments. In an economic globalization, there are numerous opportunities for individual countries to increase trade and investment and thus, the potential to spur economic growth and create more employment opportunities for its citizens.
Through economic integration, international barriers to free trade and investments are lowered, thus, creating room for free movement of goods, services, and capital. In addition, economic integration enables companies to be exposed to advanced technology and competition. However, less profitable and competitive corporations tend to fail and subsequently leave the market. In such an environment, only competitive companies can survive .Thus, free trade creates incentives for businesses to be more cost-efficient so as to maintain their competitive edge. Therefore, the nations that participate in the international trade are forced to change their production patterns so that they can only produce goods and services which can be competitively traded at the global level. Furthermore, owing to enhanced mobility of capital in international trade as well as higher return on investments, countries stand to gain from making foreign direct investment in potentially profitable markets, thus, creating mutually benefiting relationships between countries.
Socially, economic globalization can enable countries to open up and be more tolerant towards others. Economic integration is a means of promoting cultural and political integration not only between countries but also among individuals of different nations. The cultural intermingling that has been brought about by international trade and globalization, enables people from different countries to understand their cultural differences and similarities, and in so doing, they learn to tolerate their differences hence, promote international relations. In addition, economic globalization can enhance the flow of information between nations including, the ones that do not have anything in common. This promotes understanding between nations, thus, enhancing international relations. In addition, in a globalized economy; countries that lacked political power in the previous years have an opportunity to participate in international decision making process. In other words, economic globalization redistributes power across the globe by forcing powerful nations to engage the rest of the world in making decisions that touch on global development.
While the benefits of globalization, international trade, and free trade cannot be refuted, it is disheartening that at this time and age, countries still adopt protectionist measures to block certain goods and services as well as industries from operating in their domestic market. According to Baldwin & Evenett, protectionism is a policy whereby a country restrains other countries from trading or investing in its domestic market by charging tariffs on imports, implementing restrictive quotas as well as through a number of state regulations aimed at promoting “fair competition” between domestically manufactured goods and services in addition to imports. The industries that have utilized protectionism have grown to become gradually inefficient as they wanted the competition caused by free trade to sharpen their operations. Protectionism has attracted both supporters and opponents in the same measure with each clinging to strong opinions on how free trade and international trade should run.
The supporters of protectionist measures argue that government restrictions and regulations are very legitimate in a free trade world where there is increased mobility of capital in order to safeguard the lives of the citizens and economy of a country. Conversely, the opponents of protectionism argue that government restrictions and regulations hurt individual country’s economy and people, more than they are intended to protect. It is argued that free trade seeks to put each country at par to produce goods and services that gives it comparative advantage to compete in the global market. According to Baldwin & Evenett, free trade produces more gains than losses as it creates more employment opportunities domestically. It is against this principle that most debates on whether or not protectionism is necessary have revolved. While the opponents refute the comparative advantage argument, those who oppose to protectionism argue that trade barriers lead to deadweight loss and thus benefit no one.
According to Baldwin & Evenett, about 78 trade measures were “proposed and/or implemented” between late 2007 and 2009 as the financial crisis sent shock across the world . Of these measures, 66 were related to trade restrictions, of which 47 trade barriers were implemented. While the effects of these new restrictive measures can be inconsequential on a large extent it is important to realize that the potential effects of industries and goods and services, lock out potential markets. A number of the above trade barriers included tariff increases (in Russia and Ecuador), tightened standards (India banning Chinese toys), export subsidies (EU on milk products) and other non-tariff measures. It is worth noting that majority of these latest trade barriers were mostly found in G20 countries which had proposed earlier to lift all barriers restricting free trade. However, Daniels, Radebaugh, & Sullivan, note that there is emerging trend whereby developed countries are changing their tact by adopting export subsidies as a way of restricting free trade as opposed to border barriers. Developing countries on the hand are using all manner of restrictive measures to protect their domestic goods and services.
Most countries still adopt the above discussed measures, when it is clear that increased globalization, international trade, and free trade has a great impact on economic growth and international relations between countries. This matter has faced a wide debate around the world. However, most countries are driven by fear of losing to other countries in the competitive world markets. Apart from lacking competitive edge, the developing countries perceive the investment from the developed nations as a form of neo-colonialism. Competition is however tight among the world leading economies to get the lion’s share of the global market for their goods and services. And to be dominant internationally, each country seeks to build a strong domestic market and this means protecting that market before launching abroad.