On July 22, 2022, CNN’s Nic Robertson showed the dismantling of a captured Russian drone in Ukraine. The Ukrainian officers discovered that the engine of the drone was made in Japan, the thermal imager module was made in France, and the cell phone tracker was made in the USA. They claimed that the drone also included components from Austria, Germany, Taiwan, and the Netherlands. That’s globalization!
We have moved away from a world in which national economies were relatively self-contained entities and created a world of interconnected and interdependent economies through the movement of goods, services, and capital across national borders.
But how has this happened? What has caused this globalization?
Well, two reasons can be readily identified. One, the tariff and non-tariff barriers in international trade and investment have gone down enormously, and the other is huge technological advancements have taken place in communication and transportation.
The reduction of tariff and non-tariff barriers in international trade and investments may be attributed to the collective efforts of GATT, WTO, IMF, and World Bank.
At the end of World War II, industrialized nations took the initiative of removing barriers to the free flow of goods, services, and capital between countries. They formalized the process through the General Agreement on Tariffs and Trade, GATT in 1947. The GATT was subsequently replaced by World Trade Organization, WTO in 1995. According to a research paper by Chad P. Bown and Douglas A. Irwin published by the National Bureau of Economic Research, Massachusetts, USA the average tariff level of the GATT participant countries was about 22% in 1947. And, according to World Integrated Trade Solution data, the world tariff (effectively applied weighted average for all products) was only 4.22% in 2015.
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This article was published in the Daily Sun on August 4, 2022. Please read the full article here or here.