Introduction
Economic integration makes international trade easier through the removal of trade barriers and tariffs. With economic integration, good and services, labor, and capital find their way in the country where they can be put into maximum use. Increase in mobility of factors of production faces some negative challenges especially because of the economic pressures in the global market. Today, the global economy has increased to significant levels and all this have been facilitated by trade agreements. Globalization is at the center stage but it is affected by international trade, and free trade. This paper looks into globalization, international trade, and free trade. It will also look into merits and demerits of international business and ethical issue in international business.
Modern Globalization
After the Second World War, politicians and economists engaged themselves in vigorous planning aimed at breaking trade hindrances thus promoting interdependence. The move was both economical and also aimed to reduce chances of future wars. They established Bretton Woods Conference for laying down international commerce framework. They also established other international institution with the responsibility of supervising the globalization process.
Some of these institutions were international monetary fund (IMF) and the World Bank. Technology and industrialization have played a crucial role in facilitating globalization. Trade negotiations costs have significantly reduced since the establishment of General Agreement on Tariffs and Trade (GATT). To ensure more efficiency, World Trade Organization (WTO) was established to work together with GATT for the promotion of free trade. Free trade promotion includes: reduction of tariffs, transportation costs, capital controls, subsidies, and appreciation of intellectual property. Some of the international agreement made by GATT was the removal of barriers to trade such as tariffs (Bhagwati, 2004).
International Trade
International trade is the exchange of goods, services or/and capital between different countries. It has been in existence many years ago although much of its significance has been recognized recently. It has continually strengthened economically, politically, and socially with many countries participation. International trade plays a very important role in ensuring continuity of globalization. It has benefited nations with variety of options to choose from, which they would not have accessed without it.
Barriers exist which put restriction to international trade. These trade barriers are governmental policies, fiscal and physical barrier. The government may impose restrictions which bars the importation or exportation of goods or services from certain countries. On the other hand, there are trade regulations defined in different nations which restrict trade with specific goods and services. It may also open its borders to facilitate trade. A recent case is East Africa Community (E.A.C.) which started operation on July 1st 2010. It has five members, Kenya, Rwanda, Burundi, Tanzania, and Uganda. Trade barriers take many forms including but not limited to import licenses, quotas, subsidies, tariffs and non tariffs barriers, and embargoes. Most of the trade barriers use the same principle; they impose some cost on trade so as to raise the prices of the goods in question (Gills & Thompsons, 2006).
Top traded commodities (exports)
Free Trade
Campaigners of free trade argue that barriers to trade reduce trade among countries and should therefore be abolished. Free trade agreement removes these trade barriers except the ones they deem necessary for the nation’s security. Examples of such agreements are North American Free Trade Agreement (NAFTA), European Union (EU), South Asia Free Trade Agreement (SAFTA), Union of South American Nations and European Free Trade Association. Free trade is a policy in trade that enables countries to transact without government interference. Traders benefit from the trade of goods and services in accordance to their comparative or relative advantage. In a market with free trade, the prices of goods and services are determined by the forces of demand and supply; this differentiates free trade from other trade policies where prices are determined by other forces such as the government (Joseph, 2003)
Impacts of Globalization
Benefits of Globalization
There is some evidence from both small and large economies of the benefit of globalization. As nations trade among themselves, it is the citizens’ who benefit. They enjoy a wide variety of goods and services, increased employment opportunities, and improvements in health and standards of living. In a period of about twenty years a big number of countries have entered into global economies leading to a reduction in the number of people living in poverty. Many trade unions have been set up for example the European Union which accrues a lot of benefits to its members. Citizens from member countries can travel to any country of their choice provided that it’s a member of the union. They get a chance of securing job places in any member country and can choose where to reside. On the other hand, nations benefit from free trade and financial assistance.
Globalization has brought about economic integration which has promoted corporation among nations. Nations can seek help or assistance from other international countries in times of difficulties. Nations which were not able to venture into the international market because of trade restrictions have been able to do so with free trade. International trade has also helped nations in realizing their potential. Some nations are well known for the production of petroleum products while others are popular for the production of agricultural products such as coffee and tea.
With globalization, information can be shared and dispersed easily among nations. Innovators get a platform for borrowing ideas to assist them in their inventions. This can be from previous records where they are able to analyze them and extract the useful ones (Martin, 2005).
Problems of Globalization
Although globalization has had many benefits, it has not been able to encompass all sectors. Many nations continue to experience regional disparities. Poverty rates are still high in sub-Sahara Africa although there has been a fall in its rates in South and East Asia. Statistics from the United Nations (UN) shows that about one billion people live on less than one dollar per day and about 2.6 billion live on less than two dollars. It is believed that this has been as a result of too little globalization. If globalization is increased, some of these problems can be eliminated.
The benefits of globalization came along with some risks associated with it. These are a result of capital movements among nations. IMF employs policies from time to time that help nations manage some of these risks. It offers technical assistance in some of the macroeconomic policies, the exchange rate, and financial sector (Gray, Richard, 2008).
Countries that have done really well in the Past
United States of America is the world’s largest economy. It has embraced international trade where it is a net exporter. Germany has been the world largest exporter followed by United States but of late (2009), China is catching up with them. According to Economic survey conducted in 2009 and released in August 2010, China has had a continuous economic growth rate to a point that it surpassed Japan to be the second largest economy in the world. Germany in 2006 enjoyed revenue of approximately $11,330,000,000 (see appendix for a detailed analysis).
The rapid development of China to second largest economy is facilitated by an increased international trade. The living standards of people in the country have increased as consumers are enjoying a wider range of products fetched all over the world. The country’s economic growth rate is expected on average to be 8% in the year 2010. The second Quarter of year 2010, the country had a growth rate of 11.6% (Stephanie & Cherian, 2010).
Top trading nations
Main articles: List of countries by exports and List of countries by imports
Ethical and International Trade, Free Trade and Globalization
With globalization of business, there is need for developing international ethical standards and codes to be applicable to all companies in the world. With advances in information communication technology, it will be easy to internationalize and communicate these standards and codes. With globalization, information can be shared and dispersed easily among nations. Innovators get a platform for borrowing ideas to assist them in their inventions. This can be from previous records where they are able to analyze them and extract the useful ones. Globalization has opened countries to trade together. This has enabled people to know their rights.
People are aware of the quality that they should be getting for a certain product. This has been enabled by globalization. The rights of human beings have been protected by globalization and thus businesses are compelled to act ethically in this effect. There are some set rules that are followed by trading countries; this is rules that protect and set the way of doing business. There are some set rules that affect the way a certain business was conducted and thus unethical issues that had been practiced by some companies come out. An example of this is the way products are marketed, the way products are advertised, and issues about pollution. It is after globalization was taken into place that a meeting was conducted at Copenhagen to discus about atmospheric pollution.
Fair Trade
This is an ethical concept where in case of trade there is mutual benefit between the producer, sellers, and consumers from a certain production. It emphasis on equality in benefits and sometimes dangers caused by a production process; sometimes fair trade is used to refer to how producers are paid, the level of quality of production and efforts made to restore nature. There are different international organizations which support fair trade; they include Fair-trade Labeling Organizations International (FLO), created in 1997 and World Fair Trade Organization (formerly the International Fair Trade Association).
Analysis
Globalization has facilitated international trade when a number of countries are trading together for a general good. When countries open their boarders to create more trade among them, there is an increase in good available in the market for a particular countries consumption. When this is the case, there is an increase in welfare of citizens since they have a wider range of choice. International trade increases the welfare of a country and ensures that efficiency has been attained in a certain production.
Findings
The influx of international trade and globalization has both negative and positive impacts on human life. It has lead to an increase in world efficiency but has been challenged to favor the developed countries at the expense of less developed ones. However this is in the short run. The net effect is a better world which is integrated economically, socially and politically.
Evaluation
Despite numerous advantages brought about by globalization, there is need to control some of its effects to human life. Environment is one of the most affected area and thus should be s restored to its natural state.
Recommendations
Current economic conditions require that countries should join efforts and enhance international trade. There is need to open ones borders and facilitate free trade. Customs officers should not be revenue collection officers of goods imported or exported. Their duty should be scaled down to prevention officers and control officers. They are supposed to ensure that only legitimate goods a get into a country. Globalization results into mutual country benefit. Each country will be enhanced to produce those goods and services which it has a comparative advantage and the end result is a world full of efficiency. Free trade and globalization leads to enhanced international trade; creating a strong political, social, and economic country.
Conclusions
As economies expand and trade with each other, with assistance of improved technology, the world is becoming a global village. The enhanced transport and communication networks are the foundations of globalization. All over the world, economies are joining efforts to develop an economic, political or/and, social block as they prepare to play a role in the global environment. International trade is one of the ways in which many nations exchange their social and economic benefits. It is the exchange of goods, services or capital between different countries. Globalization has many benefits accrued to the trading countries.
These benefits include: the access to a wide variety of goods and services, increased employment opportunities, and improvements in health and standards of living. In a period of about twenty years, a big number of countries have entered into global economies leading to a reduction in the number of people living in poverty. Although globalization has had many benefits, it has not been able to encompass all sectors. Many nations continue to experience regional disparities. Poverty rates are still high in sub-Sahara Africa although there has been a fall in its rates in South and East Asia. Statistics from the United Nations (UN) shows that about one billion people live on less than one dollar per day and about 2.6 billion live on less than two dollars. It is believed that this has been as a result of too little globalization. If globalization is increased, some of these problems can be eliminated.
Reference List
Bhagwati, J. N. 2004. In defense of globalization A Council on Foreign Relations Book Series. Oxford, Oxford University Press.
Gills, B. & Thompson, W. R. 2006. Globalization and global history. New York, Routledge.
Gray, R. 2008. “Fair-trade fails to tackle poverty, report says – Telegraph”. The Daily Telegraph (London). Retrieved May 2, 2010.
International Trade Center. 2010. Trade Map Trade statistics for international business development.
Joseph, S. 2003. Globalization and Its Discontents. New York, W.W. Norton & Company.
Martin, W. 2005. Why Globalization Works. London, Yale University Press.
Moore, M. 2009. Saving Globalization: Why Globalization and Democracy Offer the Best Hope for Progress, Peace and Development. New York, John Wiley and Sons.
Stephanie P. and Cherian, T. 2010. China Overtakes Japan as World’s Second-Biggest Economy. Bloomberg News. Web.