Drivers and Features of Globalization

Topics: Globalization, International trade, World Trade Organization Pages: 3 (900 words) Published: December 16, 2012
The term ‘globalization’ in the most basic level can mean the globalization of international trade, however it is also expansion of foreign direct investment (FDI), multinational corporations, integration of the world capital markets and much more. Thus, globalization can be defined as the interdependence of national economies through trade, finance, production and a growing web of treaties and institutions. The evidence of globalization is clear. Nowadays, over $4 trillion in foreign exchange transactions are made every day, where more than $15 trillion of goods and $3.7 trillion of services are sold across national borders. A more intuitive example can be a British person driving the German car with a Dutch engine that was assembled in Mexico from made in US components, which in turn, were fabricated from Korean steel. But what influenced the trend for globalization? This essay will outline two main macro factors that helped globalization to evolve. It will then pass on to describing four major features of globalization. To begin with, the globalization was driven by the decline in barriers of the free flow of goods, services and capital that has occurred since the end of the Second World War due to the GATT arrangements. This resulted in significant fall in average tariff rates since 1950 that are now at a 4% level leading to steady growth of international trade over the last half of the century, when by 1998 it was three times more than it was in 1950. In addition, many countries removed restrictions to FDI. Therefore, these trends resulted in the globalization of markets and production. Firms saw the opportunity of expanding their single-country market to the many countries in the world due to decreased barriers of international trade, while the diminished investment barriers allowed companies to base their production at the most cost advantageous locations, so that they started dispersing parts if the production process to different locations. Thus, the...
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