Economic

Globalisation and
International Trade
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Fast Facts:
689 million people live in extreme poverty, surviving on
less than $1.90 a day.

Children and youth account for two-thirds of the world’s

poor, and women represent a majority in most regions.

1.3 billion people in 107 developing countries, which

account for 22% of the world’s population, live in
multidimensional poverty. About 84.3% of
multidimensionally poor live in sub-Saharan Africa and
South Asia.

644 million children are experiencing multidimensional

poverty.
The Emergence of
the Global Economy
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The Concept of ‘Economic Globalisation’

Joseph Stiglitz:
the closer integration of the countries and peoples of the world which has been
brought about by the enormous reduction of costs of transportation and
communication, and the breaking down of artificial barriers to the flow of goods,
services, capital, knowledge, and (to a lesser extent) people across borders.

Economic globalisation is the gradual integration of national economies

into one borderless global economy. It encompasses both (free)
international trade and (unrestricted) foreign direct investment.

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THE CASE FOR INTERNATIONAL TRADE AND
TRADE LIBERALISATION
• Most economists agree that countries can benefit from international
trade. In 1776, Adam Smith wrote in his classic book, The Wealth
of Nations that “… If a foreign country can supply us with a commodity cheaper
than we ourselves can make it, better buy it of them with some part of the produce of
our own industry, employed in a way in which we have some advantage…”
• Smith’s lucid and compelling argument for specialisation and
international trade was further built upon by David Ricardo who, in
his 1817 book, The Principles of Political Economy and Taxation,
developed the theory of ‘comparative advantage’.
• Paul Samuelson, Nobel Prize Winner for Economics, wrote that
free trade promotes a mutually profitable division of labor, greatly
enhances the potential real national product for all nations, and
makes possible higher standards of living all over the globe .
• A study by the World Bank confirmed by WTO Study showed that
the developing countries that increased their integration into the
world economy in the achieved higher growth in incomes, longer
life expectancy and better school- ing.

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WHAT CAUSED GLOBALISATION TO HAPPEN?

1. the democratisation of technology;

2. the democratisation of finance; and
3. the democratisation of information.

Problems of current economic globalisation

1. Asymmetry barriers between groups that can cross

international borders
2. Globalization engenders conflicts within and between
nations over domestic norms
3. It exceedingly difficult for governments to provide social
insurance
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TRADE LIBERALISATION
VERSUS
PROTECTIONISM
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In the Case of Protectionism

• When a domestic industry is in crisis and jobs are lost, the political decision-
makers may well ‘scramble for shelter’78 by adopting protectionist
measures. This may happen even when the decision-makers are well aware
that such measures are by no means the best response to the crisis in the
industry concerned.

• To pursue a protectionist trade policy is infant industry protection.

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FILM STUDY
ECONOMIC
GLOBALISATION:
A BLESSING OR A CURSE?
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