What is meant by globalisation? What is the exact definition of globalisation?

Author: Vikram Jain

Globalisation can be defined as "integration of a country's economy with world economy, where goods and
services as well as capital move across the border, where a country's financial markets are affected by
fluctuations in the global market."

Globalization is a term that is used to describe the changing world order in which various aspects of a
nation that include the economic, social, political, cultural and environmental factors are viewed as
being part of a global community and not restricted in their scope.
The term came to be used to describe the phenomenon of global flux in which trade as represented
by capital and material can move freely across the world with lesser restrictions with respect to
national boundaries.
Globalization though it has been essentially connoted with economic issues synonymous with
multi national companies (MNC) and their policies that directly or indirectly affect populations across
the world has also consequently ushered in an era of change with respect to social and cultural
matters inducing a competitive spirit in world culture for the better or worse according to the social
fabric of various communities and their flexibility and adaptability.
Knowledge, with respect to developments in science and technology is perceived to be the driving
force behind globalization and continues to be the decisive factor what with the outsourcing trends
of several MNCs to offshore destinations in recent times.
Globalization has often been seen as being a subtle factor that tries to undermine welfare policies of
governments across the world and individual choice and being elitist in nature but it has also
unconsciously forced democratic nations to be more affirmative and inclusive with respect to the
betterment of all sections of societies and also to address vital issues like the conservation of the
environment.

Types of Globalization
Financial globalization

Interconnection of the worlds financial systems e.g. stock markets

More of a connection between large cities than of nations

Example: What happens in Asian markets affects the North American markets.

Economic Globalization

A worldwide economic system that permits easy movement of goods, production, capital, and resources
(free trade facilitates this)

Example: NAFTA, EU, Multinational corporations

Technological Globalization

Connection between nations through technology such as television, radio, telephones, internet, etc.

Was traditionally available only to the rich but is now far more available to the poor. Much less
infrastructure is needed now.

Political Globalization

countries are attempting to adopt similar political policies and styles of government in order to facilitate
other forms of globalization

e.g. move to secular governments, free trade agreements, etc

Cultural Globalization

Merging or watering down of the worlds cultures e.g. food, entertainment, language, etc.

Heavily criticized as destructive of local culture

e.g. The Simpsons is shown in over 200 countries in the world.

Ecological Globalization

seeing the Earth as a single ecosystem rather than a collection of separate ecological systems because
so many problems are global in nature

e.g. International treaties to deal with environmental issues like biodiversity, climate change or the ozone
layer, wildlife reserves that span several countries

Sociological Globalization

A growing belief that we are all global citizens and should all be held to the same standards and have
the same rights

e.g. the growing international ideas that capital punishment is immoral and that women should have all
the same rights as men.

Negative Effects of Globalization

Globalization is a very controversial issue today. Globalization is the buzzword of
today. Economies of the world are being increasingly integrated as new
technology and communication has brought people together. We often hear the
phrase that the 'world has become a global village' - which itself signifies how
much has changed in the world in the past few decades.

The Negative Effects of Globalization

In order to cut down costs, many firms in developed nations have outsourced
their manufacturing and white-collar jobs to Third-World countries like India and
China, where the cost of labor is low. The most prominent among these have
been jobs in the customer service field as many developing nations have a large
English-speaking population - ready to work at one-fifth of what someone in
developed world may call 'low-pay'. This has caused a lot of resentment among
the people of developed countries, and companies have been accused of taking
their jobs away. Another problem is that many Americans are not satisfied with
the level of customer service that they are subjected to, and this has caused a
lot of animosity among people and has added to the dissent that people already
have against outsourcing.
There are various schools of thought which argue that globalization has led to an
increase in activities such as child labor and slavery. In countries with little or no
accountability, corporations employing children can work smoothly by bribing the
officials, which may result in an increase in illegal activities. Critics opine that
globalization has resulted in a fiercely-competitive global market, and unethical
practices in business are a by-product of this.

Globalization may have inadvertently helped terrorists and criminals. At the

heart of globalization is an idea that humans, materials, food etc. be allowed to
travel freely across borders, but 9/11 was a ghastly reminder that people with
evil intentions can use it as an opportunity and cause damage.

It is not only the developed nations that are complaining about its negative
effects, people in developing nations - where most of the industries have been
set up, have their own set of reasons against globalization. They often complain
that their cities have been reduced to garbage-dumps where all the industrial
waste is accumulated and pollution levels are sky-high.
Fast food chains like McDonalds and KFC are spreading fast in the developing
world. People are consuming more junk food which has an adverse impact on
their health. Apart from the health concerns, there is something else that
globalization has been criticized for, and it is the accusation that it has opened
floodgates for restaurants and eateries which are insensitive to the religious
beliefs of the host nation.
For example, a lawsuit had to be filed against McDonalds in India, after it was
accused of serving beef in their burgers.

While the rich are getting richer, the poor are struggling for a square meal. If the
current Occupy Wall Street protests are a reminder of how angry people are with
the current set-up, then those who govern us should take notice, and work
towards alleviating poverty. Ideally, globalization should have resulted in creation
of wealth and prosperity, but corporate greed and corrupt government has
ensured that money is not distributed equally.
When the first-known case of AIDS came up in America, only few would have
traced its origin to Sub-Saharan Africa. Globalization bought people from various
countries together, and this is perhaps the reason that a virus from a jungle was
transported to almost every country in the world.
Environmental degradation is an issue which has been debated ferociously in
various international meetings, and it has to be accepted that globalization is
one of the most important factors that has aggravated the situation. The amount
of raw materials needed to run industries and factories is taking a toll on the
natural reserves of planet earth, and pollution has severely impacted the quality
of air that we need so very much for our survival.
As we mentioned in the beginning of the article that like everything else,
globalization has its own share of kudos and brickbats. We have reached a stage
since our evolution that discarding the concept of globalization may not be
possible at all, therefore, the strategy should be to find solutions to the threats it
poses to us so that we can work towards a better, fulfilling future.

Read more at Buzzle: http://www.buzzle.com/articles/negative-effects-ofglobalization.html

What is meant by trade barriers with definition?

Trade barriers are government-induced restrictions on international trade.[1] The barriers can take many forms,
including the following:

Tariffs

Non-tariff barriers to trade

Import licenses

Export licenses

Import quotas

Subsidies

Voluntary Export Restraints

Local content requirements

Embargo

Currency devaluation[2]

Trade restriction

Most trade barriers work on the same principle: the imposition of some sort of cost on trade that raises the price
of the traded products. If two or more nations repeatedly use trade barriers against each other, then a trade
war results.
Economists generally agree that trade barriers are detrimental and decrease overall economic efficiency, this can
be explained by the theory of comparative advantage. In theory, free trade involves the removal of all such
barriers, except perhaps those considered necessary for health or national security. In practice, however, even
those countries promoting free trade heavily subsidize certain industries, such as agriculture and steel.
Trade barriers are often criticized for the effect they have on the developing world. Because rich-country players
call most of the shots and set trade policies, goods such as crops that developing countries are best at producing
still face high barriers. Trade barriers such as taxes on food imports or subsidies for farmers in developed
economies lead to overproduction and dumping on world markets, thus lowering prices and hurting poor-country
farmers. Tariffs also tend to be anti-poor, with low rates for raw commodities and high rates for labor-intensive

processed goods. The Commitment to Development Index measures the effect that rich country trade policies
actually have on the developing world.
Another negative aspect of trade barriers is that it would cause a limited choice of products and would therefore
force customers to pay higher prices and accept inferior quality.[3]
[edit]Examples

of free trade areas

North American Free Trade Agreement (NAFTA)

South Asia Free Trade Agreement (SAFTA)

European Free Trade Association

European Union (EU)

Union of South American Nations

New West Partnership (An internal free-trade zone in Canada between Alberta, British Columbia, and
Saskatchewan)

Gulf Cooperation Council common market

Tariff & non tariff barriers to trade Presentation Transcript

1. Tariff & Non- Tariff barriers to Trade Unit 3 Chapter 1

2. Introduction: International Trade policies deals with the policies of the

national governments relating to exports of various goods and services in various
countries either on equal terms and conditions or on discriminatory terms and
conditions. Trade policies also aim at protecting the domestic industry from the
competition of the advanced countries through imposing quotas and build
competencies by providing subsidies.

3. Instruments of Trade Policy: Broadly classified into.. Tariff Non-Tariff

4. Tariff Barriers What are tariff barriers? Refers to the tax imposed on the
goods when they enter or leave the national frontier or boundary. What is the
purpose of tariffs? To protect the domestic industry by increasing the cost of
imported goods. Example : GoI imposed tariffs to protect domestic automobile
industry, sugar industry, cement industry and steel industry.

5. Types of Tariffs: On the basis of Purpose: Revenue Tariff: To provide

state with the revenue. Levied on luxury goods. Protective Tariff: To maintain and
encourage those branches of home industry protected by the duties.
6. On the Basis of Origin and Destination: Ad Valorem Duty: Levied as

the percentage of the total value of the imported common duty. Specific Duty:
Levied per physical unit of the imported commodity. Compound Duty: Levied a
percentage ad valorem duty plus a specific duty on each unit of the commodity.
Eg. 1 lac + 10% of the price.
7. On the Basis of Country-wise Discrimination: Single Column Tariff: A

uniform rate of duty is imposed on all similar commodities irrespective of the

country from which they are imported. Double Column Tariff: Two different rates of
duty have been imposed. Triple Column Tariff: Two or more tariff rates are levied
on each category of commodity.
8. Who Gain from Tariff? Government of the importing country earns in

the form of the revenue. Industries of the importing country would find market for
their products as the imported goods will be expensive. Jobs in the domestic
markets are saved. Business for the ancillary industry, servicing, market
intermediation etc. is also protected.
9. Who are adversely affected? Consumers Industries of the exporting

country.

10. Other Impacts of Tariff Barriers Tariff Barriers tend to Increase :

Inflationary pressures Special interests privileges Government control and political
considerations in economic matters. Tariff Barriers tend to Weaken : Balance-ofpayments positions Supply-and-demand patterns International relations (they can
start trade wars) Tariff Barriers tend to Restrict : Manufacturer supply sources
Choices available to consumers Competition

11. Non- Tariff Barriers Non-Tariff measures include all measures, other
than tariffs, the effect of which is to restrict imports, or to significantly distort trade.

12. Different Types of Non-Tariff Barriers: (1) Specific Limitations on

Trade: Quotas Import Licensing requirements Proportion restrictions of foreign to
domestic goods (local content requirements)

13. (2) Customs and Administrative Entry Procedures: Valuation systems

Antidumping practices Documentation requirements Fees (3) Government

Participation in Trade: Government procurement policies Export subsidies

Countervailing duties Domestic assistance programs

14. (5) Others: Voluntary export restraints Monetary Barriers (4) Charges
on imports: Prior import deposit subsidies Administrative fees Special
supplementary duties Import credit discriminations Border taxes

15. Impact of NTBs: Have emerged as potent Protectionist tool. It being

less transparent, its difficult to identify and quantify its impact.

How Do Tariffs Affect Prices?

Tariffs increase the prices of imported goods. Because of this, domestic producers are not forced to
reduce their prices from increased competition, and domestic consumers are left paying higher
prices as a result. Tariffs also reduce efficiencies by allowing companies that would not exist in a
more competitive market to remain open.

Figure 1 illustrates the effects of world trade without the presence of a tariff. In the graph, DS
means domestic supply and DD means domestic demand. The price of goods at home is found at
price P, while the world price is found at P*. At a lower price, domestic consumers will consume Qw
worth of goods, but because the home country can only produce up to Qd, it must import Qw-Qd
worth of goods.

Figure 1. Price without the influence of

a tariff

When a tariff or other price-increasing policy is put in place, the effect is to increase prices and

limit the volume of imports. In Figure 2, price increases from the non-tariff P* to P'. Because price
has increased, more domestic companies are willing to produce the good, so Qd moves right. This
also shifts Qw left. The overall effect is a reduction in imports, increased domestic production and
higher consumer prices. (To learn more about the movement of equilibrium due to changes in
supply and demand, read Understanding Supply-Side Economics.)

Figure 2. Price under the effects of a

tariff

Tariffs and Modern Trade

The role tariffs play in international trade has declined in modern times. One of the primary
reasons for the decline is the introduction of international organizations designed to improve free
trade, such as the World Trade Organization (WTO). Such organizations make it more difficult for a
country to levy tariffs and taxes on imported goods, and can reduce the likelihood of retaliatory
taxes. Because of this, countries have shifted to non-tariff barriers, such as quotas and export
restraints. Organizations like the WTO attempt to reduce production and consumption distortions
created by tariffs. These distortions are the result of domestic producers making goods due to
inflated prices, and consumers purchasing fewer goods because prices have increased. (To learn
about the WTO's efforts, read What Is The World Trade Organization?)
Since the 1930s, many developed countries have reduced tariffs and trade barriers, which has
improved global integration and brought about globalization. Multilateral agreements between
governments increase the likelihood of tariff reduction, while enforcement on binding agreements
reduces uncertainty.
The Bottom Line

Free trade benefits consumers through increased choice and reduced prices, but because the
global economy brings with it uncertainty, many governments impose tariffs and other trade
barriers to protect industry. There is a delicate balance between the pursuit of efficiencies and the
government's need to ensure low unemployment.

Definition of 'Bilateral Trade'

The exchange of goods between two countries. Bilateral trade agreements give preference to
certain countries in commercial relationships, facilitating trade and investment between the home
country and the foreign country by reducing or eliminating tariffs, import quotas, export restraints
and other trade barriers. Bilateral trade agreements can also help minimize trade deficits.

Bilateral trade
Bilateral trade or clearing trade is trade exclusively between two states, particularly, barter trade based on
bilateral deals between governments, and without using hard currency for payment. Bilateral trade
agreements often aim to keep trade deficits at minimum by keeping a clearing account where deficit would
accumulate.
The Soviet Union conducted bilateral trade with two nations, India and Finland. On the Soviet side, the
trade was nationalized, but on the other side, also private capitalists negotiated deals. Relationships with
politicians in charge of foreign policy were especially important for such businessmen. The framework
limited the traded goods to those manufactured domestically and as such, constituted a subsidy to
domestic industry.
Bilateral trade was highly popular within Finnish business circles, as it allowed the commission of very large
orders, additionally with less stringent requirements for sophistication or quality, if compared to Western
markets. The Soviet side was motivated to participate in clearing trade because the arrangement
essentially provided cheap credit. The option was to sell obligations to the international market, and pay
interest in hard currency. Capital, such as icebreakers, train carriages or consumer goods, could be
obtained from Finland, and the cost would simply become clearing account deficit, eventually to be paid
back as e.g. crude oil, or as orders such as nuclear power plants (Loviisa I and II).
Clearing trade was at its busiest up to the 1970s, but began to lose its momentum in the 1980s. In the last
of its years, the Soviet Union's debt began accumulating on an alarming rate into clearing accounts. As a
result, the Soviet Union started to pay the deficits with oil, a good with little value added and easily
exchangeable to hard currency, which militated against the principle of bilateral trade. With the dissolution
of the Soviet Union, this form of trade has mostly disappeared. Bilateral trade is a manifestation
of bilateralism; in contrast, multilateralism and in particular multilateral trade agreements became more
important.
Strategic goods, such as nuclear technology, are still traded bilaterally rather than in a multilateral open
market.

What is "Multilateral trade"?

Definition: Multilateral trade agreements are between many nations at one time. For this reason, they are very
complicated to negotiate, but are very powerful once all parties sign the agreement. The primary benefit of
multilateral agreements is that all nations get treated equally, and so it levels the playing field, especially for
poorer nations that are less competitive by nature.

Examples: The Doha round of trade agreements is a multilateral trade agreement between all 149 members of
the World Trade Organization.

The World Bank and The International Monetary

Fund
The IMF and World Bank have been empowered by the governments which control it (led by the U.S., the
U.K., Japan, Germany, France, Canada, and Italy -- the "Group of 7," which holds over 40% of the votes on
their boards) with imposing economic austerity policies in the countries of the so-called "Third World" or
"global South." Once Southern countries build up large external debts, as most have, they cannot get credit
or cash anywhere else and are forced to go to these international institutions and accept whatever
conditions are demanded of them. None of the countries has emerged from their debt problems; indeed
most countries now have much higher levels of debt than when they first accepted IMF/World Bank
"assistance."
Through loans, often to governments whose constituents suffer the most under the global
economy, and "structural adjustment" policies, the World Bank (WB) International Monetary Fund
(IMF) has kept most nations of the global south in poverty. Conditions on accepting loans ensure open
market access for corporations while cutting social spending on programs such as education, health care
and production credits for poor farmers.
Created after World War II to help avoid Great Depression-like economic disasters, the World Bank and the
IMF are the world's largest public lenders, with the Bank managing a total portfolio of $200 billion and the
Fund supplying member governments with money to overcome short-term credit crunches.
But when the IMF and the WB lend money to debtor countries, the money comes with strings attached.
These strings come in the form of policy prescriptions called "structural adjustment policies." These policies
or SAPs, as they are sometimes calledrequire debtor governments to open their economies to

penetration by foreign corporations, allowing access to the country's workers and environment at bargain
basement prices.
Structural adjustment policies mean across-the-board privatization of public utilities and publicly owned
industries. They mean the slashing of government budgets, leading to cutbacks in spending on health care
and education. They mean focusing resources on growing export crops for industrial countries rather than
supporting family farms and growing food for local communities. And, as their imposition in country after
country in Latin America, Africa, and Asia has shown, they lead to deeper inequality and environmental
destruction.

The Origins of the IMF and World Bank

The World Bank and International Monetary Fund (IMF) were created at the end of World War II by the U.S.
and British governments. During the war the business classes of Europe were either supporting the Nazis,
getting their banks and factories bombed into oblivion or they fled Europe with all the money they could
carry. On the other hand, socialists, communists and anarchists had high credibility because they were the
leaders of the Resistance to Nazi occupation. In order to prevent leftists from coming to power in western
Europe, it was crucial to U.S. and British elites to get the business classes back into power. This required
international institutions that would promote capitalist policies and strengthen the power of the corporate
sector.
The World Bank focused on making loans to governments in order to rebuild railroads, highways, bridges,
ports and other "infrastructure", i.e., the parts of the economy that are not profitable for private companies
to build so they are left to the public sector (the taxpayers). After an initial focus on western Europe the
World Bank shifted its lending toward the third world.
The IMF was established to smooth world commerce by reducing foreign exchange restrictions and using
its reserve of funds to lend to countries experiencing temporary balance of payments problems so they
could continue trading without interruption. This pump-priming of the world market would benefit all trading
nations, especially the biggest traders, the U.S. and England.
The unwritten goal of the IMF and World Bank was to integrate the elites of all countries into the capitalist
world system of rewards and punishments. The billions of dollars controlled by the IMF and World Bank
have helped to create greater allegiance of national elites to the elites of other countries than they have to
their own national majorities. When the World Bank and IMF lend money to debtor countries the money
comes with strings attached. The policy prescriptions are usually referred to as "structural adjustment" and
they require that debtor governments open their economies up to penetration by foreign corporations,
allowing them access to the workers and natural resources of the country at bargain basement prices..
Other policies imposed under structural adjustment include: allowing foreign corporations to repatriate
profits, balancing the government budget (often by cutting social spending), selling off publicly owned
assets ("privatization") and devaluing the currency.
Many grassroots groups in the Third World talk about the recolonization of their countries as they steadily
lose control over their own land, factories and services.

Differance between Domestic Business

and International Business:
S.No

Domestic Business

International Business

1.

The Domestic Business Follow the marketing

It is extension of Domestic Business and

Principles

Marketing Principles remain same.

No such difference. In a large countries

Difference is customs, cultural factors

2.

languages likeIndia, we have many languages.

3.

Selling Procedures remain unaltered

Conduct and selling procedure changes

4.

No such changes are necessary

Working environment and management practices

change to suit local conditions.

5.

These have little or no impact on Domestic trade. Will have to face restrictions in trade practices,

6.

Short Distances, quick business is possible.

Long Distances and hence more transaction time.

7.

Currency, interest rates, taxation, inflation and

Currency, interest rates, taxation, inflation and

economy have little or no impact on Domestic

economy have impact on trade.

licenses and government rules.

Trade.
8.

No such experience or exposure.

MNCs have perfected principles, procedures and

9.

No such advantage once plant is built it cannot be MNCs take advantage of location economies

practices at international level

10.

easily shifted.

wherever cheaper resources available.

It is possible to get this benefit through

Large companies enjoy benefits of experience

collaborators.

curve

11.

Cost Advantage by automation, new methods etc. High Volume cost advantage.

12.

No such advantage

Global Standardization

13.

No such advantage

Global business seeks to create new values and

global brand image.

14.

No such advantage and get competition from

Can Shift production bases to different countries

some spurious or SSI Unit who get patronage of

Government.

whenever there are problems in taxes or markets