The author if this paper will begin by providing a definition of globalization. Next, the author will identify and examine at least two of the traditional international trade theories that have been developed. Next the author will identify the major drivers of globalization and lastly, the author will explain four effects of globalization that impact the author’s community and organization.
According to Hill (2009), globalization is the shift towards a more integrated and inter-dependent world economy. Some of the traditional international trade theories that support the concept of globalization include: •Absolute Advantage Theory
•Comparative Advantage Theory
There are several other relevant theories however, for the purpose of this paper; the focus will be on the two previously mentioned theories. The Absolute Advantage Theory was authored by Adam Smith in 1776 and his position was that a country has an absolute advantage in the production of a product when it is more efficient than any other country in producing it (Hill, 2009). With that being established, he further theorizes that it is in the countries best interest to basically stick to what it does best and trade those products it has absolute advantage in producing for goods and/or services that it does it is not specialized in producing. In 1817 David Ricardo expanded on Smith’s trade theory by authoring the Comparative Advantage Theory. He agrees with Smith in the fact that countries should specialize in the products that it is most efficient at producing and then buy the products it is less efficient in producing (even if they buy products from other countries that it could produce better). His theory basically states that at the end of the day both countries would have more and be able to consume more. Falling trade barriers and technological advancements are two of the main drivers of the globalization concept. For example, the GATT (General...