Globalization, which internationalises almost every country today can be seen to be very closely linked to economics. Ever since the 2nd World War, various international agreements have been created to promote free trade and the freedom of investment - for example, the General Agreement on Tariffs and Trade (GATT). This promotion of free trade has since led to positive factors such as:
- the reduction/ elimination of tariffs (a tariff is a tax on foreign goods, usually imposed upon them being imported into a country
- the reduction of goods transportation costs
- the reduction/ elimination of capital controls (a monetary policy device that a government makes use of to regulate the flow of money/currency into and out of a country mainly through investments)
FREE TRADE?
Free trade is basically a market model in which trading of goods and services between countries is not controlled by or slowed down by government taxes/tariffs and other barriers. Some aspects of free trade would be:
- international trading without taxes/tariffs or other barriers/obstacles (e.g. fixed quotas on imported goods)
- no more policies which distort free trade (e.g. those which give domestic companies/businesses advantages over foreign ones)
- free access to financial and economic markets
- free access to such markets' information
Free trade agreements have since helped to promote free trade, and globalization has pushed these agreements forward to further encourage the idea and mindset of having an idealized free economy. An example as mentioned was GATT. Another example would be the World Trade Organization (WTO). Both originate from the United States, which has been one of the largest and most consistent supporters of free trade.
General Agreement on Tariffs and Trade (GATT)
The GATT's main purpose is to reduce barriers and restrictions in international trade. The GATT, through various smaller agreements, has tried to do so by reducing tariff barriers, other quantitative restrictions, and subsidies on trading. The first version of GATT was developed in 1947 during a United Nations Conference on Trade and Employment. The GATT continued to work all the way until 1994, when it was somewhat merged and updated, through the WTO.
World Trade Organization (WTO)
The WTO is an international organization, with an aim to supervise over and liberalize trading in the world. It was formally formed in 1995. It comprises more than 150 countries worldwide. The WTO deals with trading rules between various countries and nations mostly at a global level. Its main responsibility is to negotiate, create and implement new trade agreements, and is also responsible for ensuring that the member countries adhere to all WTO agreements. It ultimately wants to reach the goal of improving the welfare of people, by lowering/removing trade barriers, solving trade disputes and creating a platform for trade negotiation. The WTO also reviews and ensures the transparency of national trade policies, and is a center of economic research and analysis of global economics and trade. It closely works with the International Monetary Fund (IMF) and the World Bank.
The WTO's trading policies have a framework comprising 5 main concepts and components:
- 1. Non-Discrimination
- For example, the WTO requires that "a product made in one member country be treated no less favorably that a very similar good that origiinated in any other country".
- 2. Reciprocity
- This ensures that the policy of non-discrimination, while existing, does not encourage people who are 'freeriders'. When gains are made by a nation thanks to another nation, these gains should be reciprocated.
- 3. Binding and enforceable commitments
- An example of such commitments would be that member countries have tariff commitments.
- 4. Transparency
- An example of how the WTO tries to maintain transparency would be that all members are required to publish their trade regulations, to uphold institutions which allow the review of administrative decisions that affect trade, to respond to requests for information by other members, and to notify the WTO of changes in trade policies.
- 5. Safety Valves
- An example of a safety valve would be that in specific/dire situations, governments are given the power to restrict trade.
These are only a few parts which explain the economics of globalization - there is also the expansion, creation and development of a world market, global business, and the various different economic developments of various countries around the globe. These will be explored in another post. (:
Resources:
http://images.google.com.sg/imgres?imgurl=http://www.mazzaroth.com/ChapterSeven/Images/GATT.gif&imgrefurl=http://www.mazzaroth.com/ChapterSeven/GATT-WTO.htm&h=245&w=232&sz=4&hl=en&start=3&tbnid=LMYSj2n3OZZtKM:&tbnh=110&tbnw=104&prev=/images%3Fq%3DGATT%26gbv%3D2%26svnum%3D10%26hl%3Den%26sa%3DG
http://www.wto.org/
1 comment:
argh im reposting this again blogger ate up my comment ): this shows that we cannot depend too much on technology despite globalisation...
Indeed, countrys' economies have become increasingly dependent on each other due to globalisation. international organisations is convenient way for countries to communicate and seek cooperation, for example, in economic matters. Linking to my point of state soverignty(in my post), a country's state soverignty is comprimised as a result of affiliation to these organisations. They will not be free to make decisions at times, as they might have to seek approval or agreement of other countries in the organisations they are affiliated to.
Clearly, although such international organisations(a result of globalisation) like those you have mentioned boosts economic cooporation, it definitely undermines state sovereignty.
posted by Jia Wen.
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