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The nexus of globalization and international trade

Mostly globalization is equated to increase in the global economic activity through international trade but actually, economy is just one component of it. The urge to see the world, interact with the people and trade their products in the countries around the world has always been an instinct of the people living this world since time immemorial. However, due to lack of communication and transportation resources, this social and economic activity was meager. However, with development of the communication and transportation resources, this social and economic activity has picked up and is growing. This has made the world what we call global village.

Globalization has influenced every sphere of contemporary society including social, legal, political, technological, economical, strategic and even psychographic aspects of the life. Pervasiveness of globalization is not proportional to the size of the international trade and as such squeezing international trade does not necessarily mean a setback to globalization. I would rather say that less international trade could be a natural outcome of the success of the globalization.

The size of the world merchandise trade that historically used to grow at the rate of 1.5 to twice of the world GDP has slowed down to a rate equal to or lower than the world GDP since 2012. Ease of transportation and desire of industrialization has enabled countries to set up their own manufacturing facilities. Moreover,trend offshore manufacturing / production facilities by business giants like Honda, Toyota, Unilever, Coca Cola, Pepsi etc.has also minimized international trade. Therefore, despite being global and multinationals, these companies are local as well. This has not only created new jobs in the respective countries but have also helped to save on high freight charges to ensure cheaper products for their people.

Globalization thrives on the concept of connecting the people from around the world. The establishment of the World Trade Organization in 1995 together with development of the modern communication technologies has accelerated the social interaction and economic cooperation. Economic globalization, however, warrants special caution so that it may not take the form of neoliberalism i.e. a laissez-faire approach of economy freeing the economy by eliminating regulations and barriers. If this laissez-faire approach goes unchecked, this can further aggravate the economical polarization. The WTO intercedes to protect the individual and regional economic interests of the countries to ensure a level playing ground for the economic world. WTO legitimizes some trade barriers like antidumping duties to protect the local industry but the overall purpose is to streamline and open trade lines between the global players. Allowing countries to erect trade barriers and developing economic silos would defeat the very purpose of free trade and that is why WTO keeps on warning on rise of protectionist measures by G20 economies.


This globalization of the trade has not only helped the countries to augment their GDPs but has also benefitted the consumers around the globe. They got access to the international brands, better quality, competitive prices and a myriad of choices to select among the products. GDP growth of the countries and offshoring of certain operations by the big economies has resulted in more jobs adding to the middle class of the society,especially in developing countries, with more disposable income. However,there is still a lot to do, as this economic wellbeing has yet not trickled down to the lowest of the have-nots like people living in poor rural areas and working in mines. Klaus Schwab, Founder & Executive Chairman of Word Economic Forum put it as “Globalization has lifted over a billion people out of poverty. But in its present form, it is no longer fit for purpose.”

Likewise, the globalization has also prompted social change effecting the people living and working in different places in the world. Blessed by the efficient communication system in the form of cable TV, internet, WhatsApp etc., flow of information is so fast that it is even quicker than the word of mouth in a small village of ancient times. Due to fast sources of communication, people around the world have real time access to the events. Olympic Games, international matches of Football, cricket, squash equally attract the game lovers from around the world. Similarly, domestic elections in UK, USA, France etc are now international events and people from around the world show their interest in games and political activities much like the local people. Arab Spring, Brexit and Scottish independence referendums were not local events but were also watched and reacted by people living seas apart. Political and social movements across the world could affect the society and political struggle of other regions as well. Hostilities on one community or nation in one region can instigate protests and demand for economic embargoes by the supporters in other countries and regions.

Stakeholder concept describes that the whole population of this world is beneficiary of whatever happens around the globe. Globalization is not just confined to the economy and the international trade and as such, its success should not be measured merely by increase in economic activity. Globalization is meant for the well-being of the whole population of the world living in every region irrespective of its resources. Globalization is not based upon Darwin’s evolution theory of survival of the fittest, which might be better suited to the jungle life. It is also not Karl Marx slogan “from each according to his ability, to each according to his need”.

It is something in between Darwinian Theory and Karl Marx’s slogan. We should consider the world as community of shared responsibility. Kofi Annan, former Secretary General of the United Nations very rightly mentioned, “It has been said that arguing against globalization is like arguing against the law of gravity. But that does not mean we should accept a law that allows only heavy weights to survive.”

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