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).