TOPIC 1 WHAT IS INTERNATIONAL BUSINESS?

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SELF-CHECK 1.2

Explain the differences between globalisation of markets and

globalisation of production.

1.1.3 The Globalisation Debate

SELF-CHECK 1.3

So far, we have looked at the positive aspects of globalisation. What do

you think are the negative aspects?

As globalisation is dependent on the concept of free trade without restrictions or

barriers being imposed by national governments, several arguments have
emerged in support as well as in opposition. While many economists, politicians
and business leaders view globalisation positively, there were also street
demonstrations held protesting it. These arguments mainly arose from the
following issues:

(a) Loss of Jobs and Income

Jobs in the manufacturing sector of the wealthy and advanced economies
would be destroyed when declining trade and investment barriers allow
firms to shift their manufacturing activities to countries where labour costs
are much lower.

However, supporters of globalisation argue that the benefits are greater than
its costs. Free trade will encourage countries to specialise in the production
of goods that they can produce most efficiently while importing the goods
that they cannot produce as efficiently. This will result in the whole economy
being better off. For example, the US imports textiles from China where it
can be produced at a lower cost and this will lead to lower prices for clothes
in the US. This would enable consumers to spend more of their money on
other items. At the same time, the increased income in China from textile
exports would increase the income levels in the country which would allow
the Chinese to purchase more products produced in the US.

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