Friday, March 26, 2010

What Expedite Globalisation?

(1) Advancement of transportation system. Transport efficiency whether through the sea or air is as a result of continuous innovations. Ships and cargo planes have not only become larger but also faster. Goods that are ordered from another country can reach in another country in a matter of weeks. On top of that, the cost of doing so is cheap too. One of the reasons is emergence of many firms which create price competition. Secondly is due to the principles of dimension, where increase in cost is slower than the rate of increase in capacity. This will definitely encourage more goods to be delivered, since cost per unit of delivery is lower now

(2) Fast-evolving communication technology. There is no longer the need for someone to travel to another country just to have a look and place an order for the goods. One can easily view the goods online and communicate with the overseas supplier through channels like e-mail, phone calls or even through messages. Channels to promote these are like Facebook, Yahoo, online forums and especially e-bay

(3) Emergence of MNCs. MNCs (Multinational Companies) refer to firms that have operation in more than one country. There are many reasons why MNCs would like to expand their operation worldwide. Some of them are like saturated market in home country, to increase supernormal profits, to take advantage of weaker environmental law and especially abundance of cheap labour. For whatever reasons, their decision to relocate overseas has big impact. For instance, I will not be able to enjoy Krispy Kreme, Burger King, Starbucks and many more if these foreign firms do not relocate to Malaysia. By operating in other countries, goods and services which used to be available only in US, can now be enjoyed by people worldwide

(4) Establishment of trading blocs. Also known as trade pacts. Countries which belong to the same pact will give trade preferential to one another such as reduction of tariffs while at the same time imposes trade barriers to non-members. Most commonly cited examples are like EMU, NAFTA and MERCOSUR. This is said to expedite globalisation since member countries will trade with one another at greater intensity. Main reason is because of cheaper cost. For instance Germany may find cost of importing lamb from France is now lower than from New Zealand. However some may argue that the globalisation process is not expedited. It merely diverts one to another

(5) WTO. The role of WTO is instrumental in promoting the spirit of free trade. Here WTO will oversee the rules of international trade and policing countries that engage in such activity. As a result, the average world tariffs have fallen from 40% to just 4%, ever since the Second World War. This means it will be easier for foreign goods to penetrate local economy hence facilitate globalisation. WTO is also said to be very strict in accepting new member countries. Applicants must be able to prove that the remaining protectionist measures are not excessive or likely to be scrapped off in near future. That explains why Russia and Iran still fail to gain admission

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