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Table of Contents
Causes of Globalization ................................................................................................................................. 2
Trade Agreements......................................................................................................................................... 3
GATT .......................................................................................................................................................... 3
The European Community ........................................................................................................................ 4
NAFTA ....................................................................................................................................................... 4
Summary ....................................................................................................................................................... 6
Bibliography .................................................................................................................................................. 7
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GLOBALIZATION
We live in a time of worldwide change. What happens in one part of the
world impacts people on the other side of the world. People around the world
are influenced by common developments.1
The term “globalization” is used to describe this phenomenon. According
to Harris, the term is being used in a variety of contexts.2 However, most often
the term is used to describe the growing integration of economies and societies
around the world.3
The business world uses this term in a narrower context to refer to the
production, distribution, and marketing of goods and services at an international
level. Everyone is impacted by the continued increase of globalization in a
variety of ways. The types of food we eats, the kinds of clothes we wear, the
variety of technologies that we utilize, the modes of transportation that are
available to us, and the types of jobs we pursue are directly linked to
“globalization.” Globalization is changing the world we live in.
Causes of Globalization
Harris indicates that there are three main factors contributing to
globalization. These factors include:

The reduction in trade and investment barriers in the post-world war
II period.

The rapid growth and increase in the size of developing countries’
economies.
1
Schaeffer, R. K. (1997). Understanding Globalization. Lanham, MD: Rowman & Littlefield Publishers, Inc.
Harris, R. G. (November 1993). Globalization, Trade, and Income. Canadian Journal of Economics, 755.
3
The World Bank Group. (2004, February 5). Globalization. Retrieved from
http://www.worldbank.org/economicpolicy/globalization.
2
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
Changes in technologies.4
Trade Agreements
Originally each nation established its rules governing trade. Regulations
and tariffs were often the outcome, leading to the tariff wars of the 1930s.
However,
During the 1950s a concerted effort was made to reduce these
artificial barriers to trade, and as a result the quotas and other
controls limiting foreign trade were gradually dismantled.5
Many trade agreements exist in the world today. There of those
agreement (General Agreement on Tariffs and Trade [GATT], the European
Community, and the North America Free Trade Agreement[NAFTA]) have had a
significant impact on the UnitedStates.
GATT
The first trade agree ment of significance was the General Agreement on
Tariffs and Trade. The purpose of the GATT was to lower tariff barriers among its
members. The success of the organization is evidenced by its members.
Originally signed by 22 countrys in 1947, the number of participats countries
continues to grow.
The Uruguay Round of GATT is the most ambitious trade agreement
ever attempted. Some 108 nations would lower tariff and other
barriers on textiles and agriculture goods; protect one another’s
4
5
Harris, R. G. (November 1993). Globalization, Trade, and Income. Canadian Journal of Economics, 763.
Encyclopedia Americana. (2001). Trade Policy, 26, 915. Danbury, CT: Grolier Incorporated.
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intellectual property; and open their borders to banks, insurance
companies, and purveyors of other services.6
The European Community
The European Community is another example of how trade agreements
impact the production, distribution, and marketing of goods and services. The
12 member nations of the European Community have dismantled the internal
border of its members to enhance trade relations.
Dismantling the borders was only the first step toward an even greater
purpose—the peaceful union of European countries. The first step was done by
the Paris and Rom treaties, which established the European community and
consequently removed the economic barriers. The treaties called for members
to establish a market; a customs tariff; and economic, agricultural, transport,
and nuclear policies.7
NAFTA
A trade agreement that will have an impact on the way business is
conducted in the United States is the North American Trade Agreement. This
trade agreement involves Canada, the United States and Mexico. Proponents
of NAFTA claim that the accord will not only increase trade throughout the
Americas, but it will also moderate product prices and create jobs in all the
countries.8
Over the years a number of trade agreements have been enacted that
promote trade. The result of these agreements has been a better quality of life
6
Richman, L. S. (1993, September 20). Dangerous Times for Trade Treaties. Fortune, p. 14.
Fact Sheet: European Community. (1994, February 15). U.S. Department of State Dispatch, 4, 7, 89. Washington,
DC.
8
Bognanno, M., & Kathryn J. Ready, e. (1993). North American Free Trade Agreement. Westport, CT: Quorum
Books.
7
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because of the increased access to goods and services produced in other
countries.
The growth in developing countries’ economies is another major reason
for globalization. According to Jacob, the surge means more consumers who
need goods and services.9 These needs appear because of the increase in
percapita incomes of the developing countries.
According to the U.S. Department of Commerce, the world’s ten biggest
emerging markets include:

Argentina

Brazil

China

India

Indonesia

Mexico

Poland

South Africa

South Korea

Turkey
Of these emerging markets, the most dramatic increase is in the East
Asian countries. India, for example, has been able to achieve higher growth in
incomes, longer life expectancy, and better schooling through increased
integration into the world economy.10
Recent technological developments have also contributed to
globalization. Because of these developments, the world is a smaller place;
9
Jacob, R. (1994, May 30). The Big Rise. Fortune, pp. 74-75.
India's Income Per Capita Way Behind China. (2004, February 9). Retrieved from
http://in.news.yahoo.com/021204/43/1ysk5.html
10
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communication is almost instant to many parts of the world. The extent of the
technological developments can be sensed in Engardio’s comments:11
Places that until recently were incommunicado are rapidly
acquiring state-of-the-art telecommunications that will let them
foster both internal and foreign investment. It may take a decade
for many c countries in Asia, Latin America, and Eastern Europe to
unclog bottlenecks in transportation and power supplies. But by
installing optical fiber, digital switches, and the latest wireless
transmission systems, urban centers and industrial zones from Beijing
to Budapest are stepping into the Information Age.
Videoconferencing, electronic data interchange, and digital
mobile-phone services already are reaching most of Asia and parts
of Eastern Europe.
All of these developing regions see advanced communications as
a way to leapfrog stages of economic development.
Summary
The world continues to become more globalized. The trend will continue
because of three main factors: new and improved trade agreements, rapid
growth rates of developing countries’ economies, and technological advances,
All of these factors foster globalization.
11
Engardio, P. (1994, May 18). Third World Leapfrog. Business Week, p. 47.
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Bibliography
Fact Sheet: European Community. (1994, February 15). U.S. Department of State Dispatch, 4, 7, 89.
Washington, DC.
Encyclopedia Americana. (2001). Trade Policy, 26, 915. Danbury, CT: Grolier Incorporated.
India's Income Per Capita Way Behind China. (2004, February 9). Retrieved from
http://in.news.yahoo.com/021204/43/1ysk5.html
Bognanno, M., & Kathryn J. Ready, e. (1993). North American Free Trade Agreement. Westport, CT:
Quorum Books.
Engardio, P. (1994, May 18). Third World Leapfrog. Business Week, p. 47.
Harris, R. G. (November 1993). Globalization, Trade, and Income. Canadian Journal of Economics, 755.
Jacob, R. (1994, May 30). The Big Rise. Fortune, pp. 74-75.
Richman, L. S. (1993, September 20). Dangerous Times for Trade Treaties. Fortune, p. 14.
Schaeffer, R. K. (1997). Understanding Globalization. Lanham, MD: Rowman & Littlefield Publishers, Inc.
The World Bank Group. (2004, February 5). Globalization. Retrieved from
http://www.worldbank.org/economicpolicy/globalization.