Drivers of Globalization

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Drivers of Globalization

There are two main drivers of Globalization which seem to underlie the trend towards greater globalization. First is the decline in barriers to the free flow of goods, services and capital that is occurred since the end of World War II. And the second driver is technological change in particular areas which has dramatic development in recent years as communication, information, processing, and transportation technologies.

Declining Trade and Investment Barriers –

Many of the barriers to international trade took place the form of high tariffs on imports of manufacturing goods. The typically aim of such tariffs was to protect the domestic industries from foreign competitors. For removing of the barriers for flow of goods, services and capital between nations, GATT (General Agreement on Trade and Tariff) established. Under the umbrella of GATT, eight round of negotiation among the members worked to lower barriers to free flow of goods, services.

In addition to reducing trade barriers, many countries have also been progressively removing restrictions to foreign direct investment (FDI).According to United Nations, 94% percent of 1885 changes made worldwide between 1991 to 2003 in the laws governing foreign direct investment created a more favorable environment for FDI. FDI also has been reflected in a dramatic increase in the number of bilateral investment treaties designed to protect and promote investment between two countries. As of 2003, 2265 such treaties in the world involved more than 160 countries, while in 1980’s only 181 treaties were exist.

Such trends have been driving both the Globalization of the Market and Globalization of production. The Lowering of Barriers to International trade enables firms to view the world rather than a single country, as their market. The lowering of trade and investment barriers also allows firms to base production at the optimal location for that activity. Thus a Firm might design a...
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