The Essentials of Economic Globalization and the World Trade Organization (WTO)
This article talks about the essentials of economic globalization and the World Trade Organization (WTO). WTO is credited and at the same time blamed for the benefits and challenges associated with globalization. It defines globalization as an increase in international deals in markets for goods, services, and other factors of production, in addition to expansion of institutions whose scope span beyond national borders like firms, governments, international institutions, and nongovernmental organizations (NGOs).Evidence of globalization was observed just before the onset of World War I when trade and the foreign direct investments (FDI) were at the peak at the time when technology for transportation and communication was still poor. It is after the second half of the twentieth century that international trade and various kinds of international capital flows were steadily increasing to bring about the concept of globalization. These rapid changes were brought about by technology and policies.
Growth and Benefits of Globalization
Globalization is associated with growth in international trade where everybody in a country stands to gain from trade benefits in their role as consumers of goods and services. Apart from diverse goods and services to consumers, globalization has resulted in increased progress in technology and productivity as a result of innovations resulting from stiff competition. After the World War II, postwar institutions saw the need create policies of cooperation. This involved the countries sacrificing some of their interests for the greater good of globalization. Such institutions involved the World Bank and the IMF which over time expanded their power and have been very important in influencing policies to a point they can grow at their own pace. Globalization is however blamed for policies from these international institutions as they are seen as formulating policies that favor the developed countries. WTO was therefore created with the aim of preventing countries from developing bad policies that might harm other countries, particularly the poor ones. In the developed countries also, globalization is blamed for the widening of income inequality as the owners of large factors tend to gain more as compared to those with scarce factors who cannot easily shift their locations, industry of employment and skills.
The Dynamic Effect of Globalization and Trade
The dynamic effect of globalization is that it greatly serves the purpose of helping the future generations in the long run. Some economists foresee that trade only allows a country to grow larger than it otherwise would while others also suggest that trade allows countries grow faster indefinitely. And there are also some models where trade may be considered bad for growth though empirical evidence with countries with countries such as Hong Kong, Singapore, South Korea, and Taiwan show that trade and globalization is actually good for growth. Due to the benefit of countries involved in the international trade, it is argued that globalization and trade can only be beneficial for everyone in the entire population if the trade allows the countries to continue growing indefinitely into larger size. The other benefit of globalization apart from economic growth of a country, technological growth and productivity growth is that globalization reduces inflation rates which might benefit everyone.
The Impact of Globalization on Local Cultures
Finally, globalization has been widely considered as a good thing but it also affects the local cultures. Products of globalization has brought several people together from diverse backgrounds causing the possibility of culture conflict, new policies should thus be created to protect cultures.
What Do Trade Agreements Really Do?
This article addresses the free trade and its agreements, the various logic of trade agreement, and the individuals who gain from the trade agreements. Free trade is defined as the optimal policy for an economy that provides compensatory policies that can be decreed to address the adverse interactions associated with the market failures. It states that freer trade makes better the production efficiency and provides consumers with better choices of goods and services. This is because a nation can consume any good from other countries even if it has an absolute advantage in the production of that good. Trade agreements can also at the same time be utilized by other countries to protect their interests. Modern time trade agreements are wider in scope such as in covering; regulatory standards, health and safety rules, intellectual property, labor, the environment, investment, banking and finance, and many other subjects. When these trade agreements are successfully implemented then they can protect against harmful regulations on the protection of import side.
Challenges and Controversies of Trade Agreements
Some economists however do not agree that free trade is truly free in its true sense due to challenges that accompanies the creation of trade agreements. This is based on the fact that trade pacts involve creation of winners and losers. Basically, trade agreements are meant to control terms-of-trade manipulation. There is the underlying influence of special interests groups that convince policymakers and the broader public that their goals also aims at furthering the interest of the public which in turn just benefit themselves after their suggestions have been incorporated in the nation's trade agreement. Again, due to the secret nature of these trade agreements, the interest groups have played the determining role in most the consultative process in favor of expansion of trade. The government also can make up decisions on trade policy agreement based on fear of its opposing parties; this brings about development of partisan policies that do not really help the country in trade agreements.
The Role of Trade Agreements and Mutual Benefits
Economists say that in the event that the trade agreements are lacking, then there is the possibility of the barriers to trade becoming too high which thus minimizes the trade. Trade agreements are therefore mechanisms that are used to neutralize the interest of the protectionists. It is also argued that the exact details of the agreement do not count entirely provided the trade-creating interests are energized to upset the prevailing influences of protectionist. Alternatively, trade agreements must follow suitable path because they are a counterweight to protectionists. For the trade agreement to bring about the realization of free trade which is mutually beneficial, then there should be an exchange of market access. This could automatically bring about the upgrading of global regulations and standards for various factors of trade such as labor.
Works Cited
Deardorff, Alan V. and Stern, Robert M. “What You Should Know about Globalization and The World Trade Organization” Review of International Economics, vol. 10, no.3, 2002, pp. 404–423
Rodrik, Dani, “What Do Trade Agreements Really Do?” Journal of Economic Perspectives vol. 32, no. 2, 2018, pp.73–90
