Trade & Finance Globalization Effects

The globalization of trade and finance is changing international relationships at several levels of interaction. One expects changing relationship in the conduct of commercial activities, and some people accept that compromises are both desirable and necessary in relation to labour standards, the protection of the physical environment, and other socially and politically sensitive issues. Even many of the people who accept the need for compromise in some areas, however, tend to balk at actions that lead to substantial curtailments on state sovereignty to support unfettered free trade on a global basis (Laxter 11).

Nevertheless, there are policy proposals related to globalization, as well as provisions in existing multilateral and bilateral free trade agreements that hold the potential for the imposition of substantial curtailments on state sovereignty. In some instances, the threats to state sovereignty are greater for smaller countries than for larger countries because governments of smaller countries tend to have less bargaining power than do governments of larger countries. In most instances, however, multinational corporations (MNCs) gain power at the expense of state sovereignty. While more MNCs are based in larger countries than in smaller countries, the major power shift, when such shifts occur, tend to be from states to MNCs than from smaller state to larger state (Laxter 14).

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the contemporary manifestation of the process of globalization. Both the capacity and the willingness of the parties who control financial capital to supply or withdraw capital from an economy quickly contribute to the rapid development, as well as to the severity, of balance of payments and debt crises for some economies. Sovereign states find it difficult to influence either the volume or the rapidity of capital movements in the contemporary environment. GlobalizationÆs Threats to National Sovereignty Colander (201) argued that, because the process of globalization leads to an overall increase in the level of economic activity, everyone benefits from the process. Heilbronner and Milberg (182) pointed out, however, that increasing the strength of economic linkages among states does lead to a situation wherein social benefits and social services generally trend downward toward the lowest common denominator. Canada, as an example, found it necessary to reduce the level of many of its social services to the level of those in the United States to remain economically competitive following strengthened economic linkages between the two countries resulting from the North American Free Trade Agreement (NAFTA) and the evolution of th
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Approximate Word count = 2089
Approximate Pages = 8 (250 words per page)

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