One factor which many people would argue has led to increased globalization is the development of trading blocs. A Trading bloc’ refers to a set Of countries that form an economic or customs union. An obvious example would be the European union (ELI), which is made up of 28 member states, including the UK, France and Germany. There are no tariffs or quotas on trade between these 28 countries, meaning there is free trade. This allows for countries to switch from a high cost producer to a low-cost producer in the purchasing of particular goods.
For example, since 1973, consumers from the UK have had access to cheaper wine from France. However, this free trade between member states comes at a cost, as upon joining the E, all agricultural produce from outside the bloc became subject to very high tariffs. This has meant that over the years many countries have had to lower their imports on particular goods, and have had to turn to domestic supplies or goods from other member states. As well as this the EX. also guaranteed to buy any surplus goods at a minimum target price.
Once the surplus was purchased it would be dumped on the world arrest, which caused problems for world farmers, as there was excess supply on the market, leading to lower incomes. The USA then retaliated in a few ways, one of which was by imposing restrictions on E exports to the US. In the long run a lower level of exports from the EX. would lead to economics problems for all of the member nations, due to their levels of interdependence. Therefore, in order to resolve this issue the EX. agreed to make changes to the cap by reducing the import duties.
An added advantage for many citizens of member states within the E. Is that they have the freedom to travel without a visa between each country. This has resulted in many people migrating from their homes in hope of finding work. This has led to an increase in the size of the workforce. The free movement of labor has meant that many highly skilled workers have been able to move to areas that are in need of their skills. However, some would argue that migration has led to a shortage or increased demand for jobs within certain countries such as the ELK.
Moreover, the flip side Of the coin is that migration has helped any developing countries in recent years through remittances. For example, in 2012 the World Bank estimated that migrant workers sent $406 billion in savings to their families who are living in developing countries. The World Bank expects this figure to reach $534 billion by 201 5. For some countries finance sent back in the form of remittances from migrant workers comprises a substantial portion of GAP. For example, in Atkinson, remittances make up around 50% of GAP, and so it is obvious to see how much this country relies on money flowing in to their country.
This money is sent back to family members and therefore unlike foreign aid, it cannot be put into the hands of corrupt people. However, a significant drawback of remittances is that it means many developing countries lose their skilled workers, which can lead to an imbalance in those countries labor markets. Moving on, the rapid growth of the internet has contributed to the rise in globalization. The rise in e-commerce has enabled many firms of all sizes to compete more easily on a global scale. Consumers from across the globe are able to purchase products 4 hours a day.
The internet also has positive implications for the firms, in the form of lower running costs and cheap marketing. As well as this many firms can access global markets, so even small local businesses can afford to serve customers from different regions. However, despite the simple nature of the internet and its widening ‘global reach’, there is a very uneven spread of internet usage around the globe and many developing countries are being left behind. This may be due to the costly infrastructure and hardware that is squired to access the internet.
In addition to this, many countries have censorship laws (Such as Saudi Arabia and China) which further limit the expansion of the internet and restrict its ability to create links between world economies. Lowering transport costs have also contributed to globalization. Improvements in consternation have drastically lowered freight transport charges. This has resulted in a boost in trade flows, as transport costs are now less likely to cancel out the gains from a countries comparative advantage.