INTERNATIONAL FINANCE (BS419/THM407

UNIT TWO (2)

GLOBALISATION, TRADE LIBERALISATION AND ECONOMIC INTEGRATION

1. GLOBALISATION

Globalisation has helped driving change in the world: has brought about increased trade, reduced poverty, increased business dealings, increased foreign investments, access to technology, increased international financial activities etc.

What do you understand by the term globalization? What are the globalization issues affecting international business and international finance?

1.1 Globalisation Defined: Globalisation website define Globalisation as ‘expansion of global linkages, organisations of

social life on global scale, and growth of global consciousness, hence consolidation of World society’

Friedman T.L (1999), defined Globalisation as “The inexorable integration of markets, nation-states and technologies to a degree never witnessed before – in a way that is enabling individuals, corporations and nation-states to reach around the world further, faster, deeper and cheaper than before; the spread of free market capitalism to virtually every corner in the world

Globalization (or Globalisation) refers to the increasing global relationships of culture, people and economic activity. Most often, it refers to economics: the global distribution of the production of goods and services, through reduction of barriers to international trade such as tariffs, export fees, and import quotas. Globalization contributes to economic growth in developed and developing countries through increased specialization and the principle of comparative advantage.[1][2] The term can also refer to the transnational circulation of ideas, languages, and popular culture.

According to Hill, 2009, Globalisation is ‘the shift toward a more integrated and interdependent world economy’

Redding, cited in Hartungi, 2006, defines Globalisation as ‘the increasing integration between the markets for goods, services and capital and at the same time the breakdown of borders”

1.2 Drivers of Globalisation Technological change – eg ICT has increased connectivity between people Declining trade barriers Dec lining investment barriers Changing demographics, cultural and other societal aspects eg beliefs, clothing, consumption

preferences etc

1.3 Effects of Globalisation

Enlarged markets eg financial markets – through globalization of markets More goods and services – through globalization of production Global institutions eg WTO, UN, World Bank etc IT and knowledge proliferation Reduced trade barriers through commodity agreement, trade blocs and most favoured nations Increased international financial transactions Increased need for more accountability and reliability in international financial reporting There are also negative effects eg stiff competition, cultural imposition by the powerful to less

powerful nations etc.1.3 Recent Trends in the Globalisation of the World Economy