1.2.3 Drivers of globalisation: Declining trade and investment barriers
Hill (2005) uses the term drivers to explain the forces that fuel the process of globalisation. The first of the two major forces described by Hill (2005) is declining trade and investment barriers . The second major force is technological change , about which you will read further on pages 12-14 of your textbook. However, for the moment, consider both business and personal life without the Internet and email, computers, satellites, aircraft and containerisation .
International trade as we know it today probably had its beginnings in the Mediterranean area in the third millennium BCE. As societies became more and more complex, trade grew. From your current knowledge of history, geography, accounting and/or economics, identify:
- Which were the dominant nations of the world in terms of trade and economic strength between 1500 and 1999?
- Which nations do you think will dominate the 21st century?
Your list might look something like this:
16th century |
Spain |
17th century |
Holland/England |
18th century |
Great Britain |
19th century |
Great Britain |
20th century |
Great Britain / United States of America |
21st century |
United States of America/China/India? |
The study of 20 th century history shows why the United States of America (USA) became the world's largest economy and the most powerful nation in military terms. The dynamics of history, geography, demography and economics ensure that no nation remains forever dominant. The USA , currently at the height of its economic and military power, is seen by some historians and economists to be in decline when viewed against the rising power of China and India .
Study of the 20 th century also shows that the establishment of trade barriers which occurred in the period between the end of World War I and the Great Depression of the 1930s, depressed world trade (Hill 2005, p. 9).
The push for free trade has as its basic premise the belief that both import controls and export incentives (such as subsidies) are self-defeating and result in wasted resources. Since World War II, however, this push has led to the decline of trade and investment barriers and changes in the pattern of activities such as foreign direct investment (FDI). Production is being globalised as companies, free from most or all trade restrictions, choose optimal locations for their production facilities, generally where labour costs are lowest. We address FDI in detail in Chapter 4, but for now note the world pattern of FDI as described by Hill (2005) in pages 18-19.
We examine free trade in more detail in Chapter 3, but for now you should be aware that the goal of free trade is enshrined in the General Agreement on Tariffs and Trade (GATT). GATT is administered by the World Trade Organisation (WTO), a Geneva-based organisation established in 1995.
The meeting of the WTO in November 1999 in Seattle in the US ended in chaos because of disputes within the meetings and the activities of anti-globalisation protesters on the streets of Seattle , all of which gained plenty of attention in the media!
Late 2001 saw a new round of talks, this time in the more remote location of Doha in Qatar . During these talks, an agenda of issues for negotiation for the next few years was agreed. Further discussion of the GATT and the WTO can be found on the WTO website at http://www.wto.org.
Activity 1.2
Conduct a library and/or web search and record for your future study the results of the WTO Conference held in Doha in 2001. In particular, note
- the major issues for negotiation included in the agenda
- the concessions made by European Union and the US
- he benefits to developing countries
During your search, determine the main concerns of the anti-globalisation protesters at the Seattle conference in 1999 - do you believe their concerns are legitimate?
Previous Page