Daily Management Review

Globalization: the world looks better without walls


07/14/2016


Globalization is an unstoppable force, which inevitably makes the world more united. Now, however, it seems to be receding. Trade growth has not yet reached the pace that had been marked before the financial crisis of 2008.



KangZeLiu
KangZeLiu
Donald Trump is building his campaign on fears about free trade and immigration. On the other side of the planet, the United Kingdom has decided to withdraw from the EU, which, if anything, was the most ambitious project in the field of globalization. Many analysts, including Bill Gross, believe that Brexit marks the beginning of the end of globalization.

In some sense, they are right. The rich Western countries have launched the globalization process. At the heart of the idea is a perfect representation that countries related to each other by ties of trade, money and culture are unlikely to destroy each other.

Now, however, the United States and European countries are considering themselves affected by globalization, and they want to get everything back to normal. Isolationism is now called independence.

However, those who believe that globalization is dead, do not fully understand what is happening. Despite the fact that there has been some resistance to the processes, countries, companies and communities of people are still linked closely. Instead of slowing down, globalization deepens and expands, whether Trump and Brexit supporters want it or not.

The first phase of globalization is moving from West to East. The economic system promoted the Western world under US leadership, and technology development allowed to do business in the international arena. This, in turn, led to the fact that financial companies and businesses have rushed from rich to poor regions. As soon as countries such as China, Japan, South Korea have got the Western doctrine and culture, they took the lead in its economic development. Eventually, the poor countries have reduced poverty and the rich countries got great economic benefits.

Success of the first phase has pushed the process further, and now it began to spread in many different directions. Emerging economies are linked with increasingly close ties, as China, India and other countries are increasing their wealth, status and confidence.

An the World Trade Organization estimated in 2014, 52% of the developing countries’ exports went to other developing countries, compared with 38% in 1995. In 1997, trade volume between China and India amounted to $ 1.7 billion. By 2014, it rose to $ 72 billion.

Many countries continue to strive for free trade, despite the fact that a number of experts and politicians, including Donald Trump, see the North American Free Trade Agreement (NAFTA) as a catastrophe.

China is promoting establishment of Pan-Asian free trade zone; the Association of South-East Asia creates a common market, while African countries have started negotiations on a continental free trade zone.

Today, globalization is coming in even sceptic countries. Last year, textile and garment factories in Bangladesh, China and Turkey have invested $ 2.2 billion in Ethiopia to open a factory and export goods to the US and Europe. The Philippines, which for a long time have been the laggard, have recently become a major world’s call-center.

Many countries see their future as part of something larger. India has long feared to participate in the globalized world. However, once rules of direct foreign investment were liberalized, office of Prime Minister Narendra Modi said that India is "the world’s most open economy for foreign direct investment."

The Government in Myanmar has come to the conclusion that their poor country should no longer remain isolated. They hope to benefit from globalization, seeing in it new sources of growth, financing and profit, new sources of innovation and information, new jobs and consumers, as well as new ideas in the world culture.

Many of isolationism supporters blame globalization for their problems, and believe that the world looks better from behind the wall.

However, the outside reality suggests otherwise. Fall of the pound sterling’s exchange rate after the announcement of the referendum’s results shows one obvious thing. Investors believe that the independent UK is less competitive than the United Kingdom within the European Union. Proponents of globalization, on the other hand, believe that politics should be directly engaged in solving real problems, rather than to promote the isolation idea.

Workers who lose their jobs because of free trade should be able to undergo training to acquire skills for a new job. University education should be less costly, and vocational schools - more accessible.

source: cnn.com