Globalization and Free Trade

Topics: International trade, Corporation, World Trade Organization Pages: 5 (1665 words) Published: February 7, 2011
In the actual free trade context in the globalized nation, it is referring to a freedom for businesses to trade between countries at no barrier from government intervention which includes imposing tax on the products and services, subsidies, import and export quota limitation, as well as imposing trade legislation. However, this cannot be realized in today’s world (White, 2008) due to the fact that each country needs to protect and balance between the three major aspects which is the social, economy and politic domestically in order to compete in the competitive world and at the same time contribute to peace of the world. This is especially true for the developing countries such as Malaysia, China, India and et cetera as compared to the developed countries like United States of America and United Kingdom which are rich in nation. Throughout this essay, we will look at how free trade and globalization affects the developing countries from many angles not restricted to the education, cultural, standard of living, and threat to government.

When globalization and free trade converge, many businesses have moved their production and operation from their country to another country that able to offer cost efficiency in terms of labor cost and raw material cost, and also to take advantage of the loose trade regulation. If there is no government intervention towards the phenomenon, the domestic small businesses are not going to be able to compete with the foreign business that came into the developing countries having to say that the advancement of technology and knowledge of the foreign business players are better. Large multinational corporations are seen to buy over the smaller domestic businesses to achieve economies of scale where the same products and services can be marketed to the global market. Nevertheless, this process has concentrates the wealth in a fewer large corporations.

As fewer large corporations dominate the business in a country, it indirectly generates a form of threat to the government. Take for example, the major businesses in Kulim, Malaysia was previously based on agriculture. However, due to the foreign direct investment in focuses more on manufacturing businesses, most of the residents who are mostly farmers, fisherman, and mining workers moved from their core agricultural business to become workers in the manufacturing businesses whereby the higher management of the corporations were mostly foreigners. Since these large corporations were hiring a large pool of domestic workers, they have the asset to negotiate with the government for further reduction in cost incurred for the raw material. Eventually, government has no choice but to accommodate to the request made by these foreign large corporations taking into the consideration that if the large corporation were to close their operation in the country, massive loss of job employment in the domestic resident will flood the country. Direct implication to this phenomenon is that the domestic resident does not have enough income to support their daily needs such as food and shelter. In relation to this, local resident were forced to voice up their dissatisfaction and anger by organizing street protest which in turn will disturb the social, economy and politic balance in the country.

Most of the developing countries are rich in high quality raw material in one way or another such as Middle Eastern countries is rich in petroleum, Asian countries is rich in rubber and et cetera. Under the concept of free trade, since there is no government intervention, there will be control over the export and import limit of the raw material. The domestic business owner who governs over their raw material business will export these high quality raw materials. As there is no government intervention, these business owners took the advantage of making profits out of the opportunity that the domestic market unable to afford the pricing that the foreign market has to...
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