Globalization's Impacts Shape Trade Realities of Multilateralism (Essay Sample)

Globalization’s Impacts Shape Trade Realities of Multilateralism
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Introduction
Globalization refers to the increasing internationalization of marketing, distribution and production of goods and services. It has resulted in transnational and global mobility of people, ideas, and capital. The world economy has become highly integrated through investment and trade. Government deregulation and technological improvements have resulted in the expansion of transnational networks in finance, trade, and production. The speed and quantity of services and goods traded across the globe has increased. In the financial sector, new financial instruments have facilitated the sale and purchase of a wide range of financial services in the world economy. The multilateralism brought about by globalization has had both positive and negative effects on global and national economies. A deep analysis of the economic effects of multilateralism reveals that it has had positive effects for the global economy, and negative effects on national economies.
Discussion
Public polls reveal that citizens feel that multilateralism hurts rather than helps national economies (Ritzer, 2009). Only less than half of citizens of the United States believe that globalization offers more trade opportunities. Technology has resulted in the interconnection of the world on a massive scale. The modern economic infrastructure no longer recognizes national borders. What happens in one country affects the economies of the other countries as happened during the recent international economic crisis. Multilateralism has become an indispensable partnership to the economic community as the social, economic, and political facets of life depend on internal cooperation and global partnership (Carbaugh, 2013). Technology plays a larger role than trade in determining the impacts of globalization.
Multilateralism involves economic cooperation among multiple countries. Countries usually come together to form regional and international trading blocks. To determine the effects of multilateralism, it is prudent to evaluate both the advantages and the disadvantages that have resulted from the globalization of the world economy. The reduction of real and virtual barriers has been facilitated by the rapid development of communication and transportation technologies (Anderson, 2009). The most fundamental positive impact of multilateralism is the expansion of markets. The technology transfer, increase in capital movements, and exchange of currencies have been phenomenal. Every day, the volume of financial transactions flowing through currency markets in New York exceeds 1.2 trillion U.S. dollars. Liberalization of trade has resulted in a liberal trading system in the world due to reduction of trade regulations (Anderson, 2009). Barriers and tariffs to trade in services and goods have been reduced significantly.
Multilateralism has resulted in remarkable growth of the global economy. Per capita Global GDP growth increased from 1.4 percent annually in the 1960s to more than 5.0% in the 1990s (Carbaugh, 2013). It s estimated that economic cooperation between the G-20 countries could increase the global GDP by 7%, and increase jobs by over thirty six million. The quality of goods and services has increased significantly due to competition. Domestic companies have had to upgrade services to fend off competition from foreign companies. Multilateralism has been most beneficial in developing countries where the standards of living have improved significantly, and the rates of poverty have reduced drastically (Haugen & Mach, 2010). Numerous economic opportunities have been generated in developed countries since labor has been transferred from developed counties to developing countries.
Investment and capital flows have increased due to ventures such as direct foreign investment. Companies from developed countries have started production units in developing countries such as Brazil and India. Big corporations in developed countries such as Apple in the United States have shifted production to emerging economies such as China as production and labor is cheaper there (Carbaugh, 2013). Foreign trade has created comparative advantages resulting in mutual and humane terms of trade between countries. Corporations and countries which violate ethics and trade laws can be held accountable by multilateral organizations such as the World trade Organization. Multilateral trade organizations now have the power to regulate and control trade activities. Massive technological transfer has been the hall mark of globalization. Most technological innovations originated in developed countries in the Western world. Multilateralism has enabled the transfer of technological knowledge to countries in Asia, Africa, and other developing parts of the world (Bertho, Crawford, & Fogarty, 2008). Technological transfer has spurred innovations in other parts of the world. It has improved economic opportunities and standards of living among people from all walks of life.
Multilateralism has, therefore, been very beneficial to developing countries. It has however had negative impacts on domestic economies in developed nations. The negative effects of globalization have played a critical role in the ongoing economic decline of the West and the consequent economic rise of the East. The most devastating effect of globalization on national economies has been the massive loss of jobs. Globalization makes it hard for developed countries to compete on an equal level with developing countries in the labor market. Developing countries have lenient rules on environmental pollution, inexpensive energy resources, and lower benefits and wages for workers (Ritzer, 2011). Developed countries, on the other hand, have to adhere to strict pollution rules, use expensive energy, and enforce the labor rights of workers. Researchers have pointed out that jobs started declining in the United States in 2001 when China became a member of the World Trade Organization (Anderson, 2009). Domestic companies in developed countries have been compelled to stop production or relocate production to developing countries where costs are lower. The rates of unemployment in developing countries have increased, and it is almost impossible to reverse the bleak situation of workers.
The problem of tax avoidance has also hit national economies due to globalization. Multinational corporations prefer to invest in countries where taxes are low. The tax competition which results from integration of multilateral economies limits the ability of governments to control their tax systems, and reduces the revenues that governments earn from taxes (Haugen & Mach, 2010). Corporate taxes are one of the biggest sources of government income in developing countries. Tax avoidance and tax competition have limited the ability of governments to provide safety nets and social programs due to inadequate revenues. Certain countries, territories, and states have turned into tax havens. Businesses are using tax havens for tax evasion and tax avoidance through establishing shell subsidiaries. A 2012 economic report by the United States government revealed that approximately 21-32 trillion dollars are lost through tax avoidance annually (Carbaugh, 2013). Tax havens have also been linked to negative practices such as terrorism, money laundering, and fraud.
Domestic investments in developed countries have reduced significan...