Term Paper on "Trade Blocs in the Global Economy"

Term Paper 5 pages (1489 words) Sources: 5

[EXCERPT] . . . .

Trade Blocs in the Global Economy

Economic globalization is perhaps one of the most important phenomena of our days and of the 20th century. It combines all the developments in technology, culture, politics, and economic sciences in order to determine a new way of managing local and national economics at the same time. Globalization has come to incorporate the evolution of the world, as it was known before the World Wars, and that of the technology and trans-border cooperation.

Trade blocks such as NAFTA, ASEAN, or even the European Union in its trade related perspective, are all examples of the power globalization has come to represent in the world. However, there are voices that argue against globalization considering that the importance of the subject is overrated and that its effects are in fact limited.

There is no generally accepted or decided upon definition of the term "globalization." As Doug Henwood pointed out, "Globalization" has been on so many lips that it's easy to forget how recently it entered daily speech (…) what does it mean exactly? Like many deeply ideological words, it's rarely defined; everyone knows what it means."

Nonetheless, there have been made numerous attempts to try to describe and capture the true meaning of the word. David Held notes, "We no longer inhabit, if we ever did, a world of discrete circumscribed communities. Instead, we live in a world…where the trajectories of all countries are deeply enmeshed with each other…it is not only the violent exception that links people together across borders; the very nature of everyday living- of works and money and beliefs, as well as of trade, commerce and finance, not to speak of the earth's environment- connects us in multiple ways with increasing intensity. The word for this story is 'globalization'."

Therefore, it is obvious that the aspects of globalization vary greatly and, depending on the perspective of the scholar discussing them, it may be that the economic, political, cultural or moral issues are given additional attention. In this respect Held concludes that it is not just about economies, but also cultural, commercial and legal domains. He adds that, in the end, "it is about power as much as poverty or the lack of it."

It is in this point that the critics of globalization stress the disadvantages of the inevitable process, effects that in the end lead to the impoverishment of the world's population.

An important example of globalization is the existence of trade blocks. In terms of segmentation of the economies around the world, there are indeed several poles of economic powers. These include North America on the one hand, Europe and the EU on the other hand, India, South East Asia among others. At the same time however, it is very difficult to consider these poles as being independent of each other. These poles have been created as a result of international organizations or trade agreements. In this sense, according to Wood

(2004), globalization has determined the existence of international organizations, non-governmental organisms, which in turn determine a transnational connection among countries or regions. Proper examples for these poles of economic powers are the ASEAN for South East Asia, NAFTA for North America, or the European Union for Western and Central Europe. These are all proofs that globalization determined the existence of transnational forums that determined poles of power.

The fundamental issue arising in this context is the capacity of the developing countries to adapt to this flow of financial resources and investing interests. The mechanism behind the market structures revolves around the free movement of capital and investments. Therefore, in an era of increased demand and need for additional quantities of goods and services, there is an astute competitiveness for every free segment of the consumer's demand. This, in exchange attracts more and more development in respect to production services and costs. Thus, the emerging economies of South East Asia, "especially Japan, Taiwan, and Korea"

have become terrible competitors for the traditional capitalist giants such as the U.S. And Europe. Goldin and Reinert, quoting Frankel, point out that "lowering the costs of goods due to the improvement of technological means" makes it possible for instance to send "fresh cut flowers, perishable broccoli and strawberries, live lobsters and even ice-cream between continents."

On the one hand, these changes favor consumers who benefit from a wider range of products and are given the opportunity of choice that maximizes their investment. Thus, competition triggers a more generous array of offers that in turn provides greater consumer satisfaction. On the other hand, however, the imports of cheaper, even if same quality products at the expense of national production often harms the internal balance between imports and exports; moreover, it is seldom a blow for the national industry and manufacturing segment, as the market is suffocated by products and services which represent better results of the cost-quality ratio.

Given the above, NAFTA represents the most important economic pole in North America particularly because it provides a sound and unified trade environment for the member countries. The presence of the United States in this environment guarantees the successful execution of the trade agreements and the sustainability of the market. Despite the fact that at the moment, the 2009 economic crisis has had considerable repercussions on the way in which economy is perceived, the basic considerations of trans national trade remained the same. In times of crisis, measures are taken at national level that would reduce the impact of the free market, as pointed above in order to offer a more protectionist domestic economic environment. At the same time though, it is important that the power of NAFTA be maintained particularly because of the regional necessities for such blocks.

The United States have encouraged the foundation of NAFTA with due regard for the evolutions that became obvious after its creation in 1994. Along with its two other members, Canada and Mexico, NAFTA represents a crucial trading point for the world. The benefits are quantified in economic indicators that provide a positive image of the impact the trade block has had on the improvement of economic performances for its members.

Another important economic pole of the world is represented by ASEAN, the Association of South East Asian Nations. Its creation in 1967 had as main aim "To accelerate the economic growth, social progress and cultural development in the region through joint endeavours in the spirit of equality and partnership in order to strengthen the foundation for a prosperous and peaceful community of Southeast Asian Nations;"

. Furthermore, the core idea of the Association is "one vision, one idea, one community"

. Therefore, the general aim of the organization was in fact to create a proper means of conducting trade, in an environment that could, at the same time, foster understanding and cooperation among its members.

The two presented trade blocks are important for pointing out the effects globalization has on reshaping the economic background. In terms of NAFTA, another interest of the United States is to maintain the good relationship at the level of its neighbors as well to ensure a more prosperous development of Mexico that in turn would reflect in a better quality of life for the Mexican population. For ASEAN, the desire is to further advance its economic cooperation so that this can contribute to the well being of the region.

National governments have decreased power in face of economic and political external pressures in the last decades. As globalization of commerce has reached virtually all corners of the world, a global interdependence between countries and regions has appeared and these immense economic forces shift and change public policy strategies, foreign investments of government financial strategies. Overall, it can be concluded that globalization represents a day-to-day reality that has affected at this moment the entire economic… READ MORE

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