Economics Assignment Paper on Global Economy and Trade

Global Economy and Trade

Globalization is an important factor that drives the economic activities in the world today. Globalization has enabled goods and services to easily move from one part of the world to the next through an increasingly complex system. In most cases, the interaction involves various people, companies, as well as governments through activities like trade, investments, and the exchange of technology. Large corporations currently find it easier to set their operations in various countries as dictated by the various economic factors than before (Aggarwal and Evenett 552). It is important to note that adopting the global economy and trade poses numerous impacts to the local persons and business.

Global Economy

The global economy is a complex system that connects people and the various parts of the world through the movement of goods, services, and information technology. Therefore, it eases the movement of goods and services to the various parts of the world, which has increased in the past decades. Consequently, various countries have registered an increase in exports and imports that have boosted their economic balance and trade. At present, multinationals and individual medium companies can easily set their operations in different parts of the world with limited trade barriers (Sturgeon and Gary 3-7). Undoubtedly, the interconnection to form the global economy has led to positive trade results. Globalization started thousands of years ago and evolved to its current state of global economy. During the Middle Ages, Silk Road was used in connecting China, Europe, and Central Asia. However, the increase in trade across borders started in the early 1950s and by 2000s, the amount of foreign investment had significantly increased. After the Second World War, many governments expanded foreign investments and trade by adopting free-market policies that encouraged trade between countries.

According to Aaronson, the expansion of the global economy is a result of various factors (6). For instance, innovations in information technology have made it possible for accessing of information on the best practices for trade. Development in the transport industry is another factor that has contributed to the expansion of the global economy. It has led to a decreased cost of transporting goods and services to the various market destinations. Additionally, the formation of regional blocs has worked towards creating centers of operations with specific laws and regulations. Some regional blocs like the European Union (EU) and the North American Free Trade Association (NAFTA) have played major roles in encouraging export and import activities as regulated by trade laws (Utting-chamorro 590-591).

The global economy depends on available policies and related legislations in place. Before the current trend of globalization, countries had legislations that did not allow free trade with other countries. Today, countries around the world put in place policies that allow for the domestic and international movement and consumption of goods and services. Free-market economic systems have made it possible for the governments encourage their growth potential, as well as attract international organizations to operate in their economies (Utting-chamorro 590-591). In most cases, countries with favorable trade policies attract multinationals who establish operational bases to the benefit of the host countries. Governments also negotiate to allow exports and imports into their countries, providing more opportunities for business. With such arrangements, goods can easily be moved from one country to another to increase consumption.

Technological advancement has been the most important factor in driving globalization. In the global economy, technology provides a tool that producers, investors, and marketers use to identify markets for operation. The market analysis provides information that investors use to map out economical situations for different regional markets (Mohan 6). Proponents of globalization hold the opinion that a global economy is the only solution of making the world a better place because of the employment opportunities and eradication of poverty that it offers, especially in the developing countries. Additionally, the global economy is an indication of the free trade between different countries, which leads to the economic growth. This means that a country benefits from opportunities provided by the trading partner. New jobs are created from the new companies that establish their operations in the new markets (Bowman 12).

A free-market economy encourages competition amongst the companies in the market, leading to the reduction of consumer prices. Competition is an element of the global economy that helps in lowering of prices goods and services. In most cases, this strategy works as customers enjoy lowered prices.[1] However, opponents of global economy note that most countries end up manipulating their currencies to enjoy the differences in price. Another advantage of globalization comes from the fact that poor countries benefit from the foreign technologies and capital brought by the multinationals. In such circumstances, the poor country has an excellent chance for economic growth, as well as gaining democratic virtues. Most of the countries with policies that allow free trade also gain from the expansion of the democracy.

Consumers easily access goods and services from other parts of the world because of the global economy. Such a system is an advantage to local consumers and businesses that enjoy goods with minimal effort, adding value to money and consumption. In addition, the expansion of world economy has led to the emergence of a new global power system whereby politics ensure that decisions are made with respect to their economic significance. With time, all political decisions are made for the benefit of the global population. Moreover, globalization has encouraged the movement of people and information to and from different parts of the world. Cultural interaction has made it possible for coexistence with people who were considered as aliens; people are becoming more tolerant of others because of the shared business and cultural practices (Utting-chamorro 590-591).

At present, people travel faster through the development of better transport networks across different countries. Also, the internet has made it easy passing information from one part of the globe to another. These, among other gains, result from the quest to achieve a global economy in which people and information can travel faster. Developing countries have continued to benefit from sharing of technology with developed countries, spurring growth. When new multinationals establish their operations in developing markets, they train and employ local workers to help fight poverty and improve their standard of life. Globalization expands from the various trade agreements by various blocs. Therefore, those countries that are interested in the global market must agree to sign the agreements. Consequently, many countries have adopted free-market policies to attract investments and enable economic growth.

The major argument against the global economy comes from the fact that some countries are poor while others are rich which makes it hard for all countries to benefit equally. Additionally, with a global market, investors and business owners enjoy all the benefit at the expense of the workers. In most cases, large companies establish their operations in the developing or emerging economies to enjoy benefits such as cheap labor and raw materials. Such companies take advantage of the poor labor laws in these countries to reduce their production cost through, for instance, offering poor pay to the workers. The developed countries also face a challenge when multinationals relocate their manufacturing plants to the low-income countries to take advantage of the low wages. For instance, the U.S. has lost millions of jobs to China as most companies base their operations in the latter country today. Furthermore, most of the workers in the developed countries face pay-cut as the business owners threaten with relocation to other countries if they do not conform to their demands. This means that the global economy would make the middle-class threatened and insecure. Multinationals pose various problems to the individual countries regarding their immense influence. These large organizations may have the ability to manipulate and avoid paying taxes, to the disadvantage of the local economies (Jaffee 101). Additionally, some of these multinationals have also been accused of funding operations that affect the environment and ecology. These are a part of the worker exploitation and poor working conditions in the foreign countries of operation. The growing fear of globalization comes from the increasing influence when it comes to the local political decisions. For this reason, opponents argue that globalization will soon lead to the large corporations ruling the world.

From the arguments above, it is clear that the global economy plays an important role in ensuring economic growth in the world. The benefits are immense, making it an important concept of creating wealth and eradicating poverty. However, arguments against are also valid, which suggests that the adoption of certain measures to safeguard against exploitation and negative influence is necessary. Globalization is an important economic concept that exists for the benefit of everyone. Moreover, to counter the negative indicators, there is a need for a firm’s leadership to confront trading partners who manipulate their currencies. Imports from these countries should have some special tax to discourage unfair practices. Similarly, Trade Agreements are good; however, they do not favor other markets as they work to make developed countries jobless while rewarding others. Countries should also work to enforce trade rules to have a fair group of operation. For instance, the U.S. accuses China of manipulating their currency, subsidizing those companies owned by the state, selling counterfeit products and imposing trade barriers without notice (Jaffee 100). When these factors are enforced, global trade remains to be a game-changer with regard to the economic growth.

Global Fair Trade

Trade is the major driver towards globalization. From the historical times, merchants traveled from China and Europe to Southeast Asia to obtain agricultural products. Over time, migration started with the establishment of the trade routes that made it possible for more merchants to move safely. Therefore, trade is an important part of economic activities as it spurs growth. For instance, there would be no global economy without the trading activities of the products within the market. Trading involves the exchange of goods and services within the economy, with all players benefiting from the process. Trade is the only method that ensures the movement of goods and services to different parts of the world in order to satisfy a certain demand. The current trend in the global economy entails the establishment of the free-trade concept that allows the market forces to control the process. The free-market economy has worked to the disadvantage of the local producers by reducing their ability to achieve economic growth.[2]

According to Buthe, the free-market global economy has failed in the protection of the local exporters (9-11). The social and economic activities in the current system lead to the exploitation of some people while enriching others within the trading chain. Consequently, most of the people at the bottom of the production chain do not have product value. As a result, people in the underdeveloped and developing countries face numerous challenges such as poor housing, lack of electricity, poor healthcare, among other challenges. Globalization leads to the loss of land and inability to keep pace with the growing national debts.

With the continued problem in developing countries, competition has increased in an attempt to attract more foreign investors into the local economies. Consequently, some of these countries lower their minimum wages to appeal to the foreign investors. The locals who remain landless and jobless have no option but to work in such companies without proper remuneration. Most of such products are exported to other parts of the world for trade. It, therefore, follows that while trade is essential, it does not guarantee fairness in terms of the input in the process. Thus, there is a need for fair trade to ensure that all parties benefit in the exchange of goods and services. Currently, the corporate control and global policies in place do not guarantee wages and remuneration that can help the workers meet their basic needs or achieve economic growth. The inequality has existed for a long time to the disadvantage of the workers. Fair trade is possible if certain factors are put in place to bring onboard all the relevant stakeholders. Sustainability is an important factor that makes fair trade necessary. Trade should ensure that the producer earns the right amount for the product to sustain the social and economic activities in place (Tojo 13).

Fair trade is achievable because it seeks to pay farmers and producers extra in order to cater for other social and economic development within the society. Most of the traders who deserve fair trade are small farmers who may not have much money to diversify their operations. Therefore, diversification of the resources could help the farmers improve their income due to price fluctuations. Making trading fair demands that laws and policies are put in place to safeguard the rights of the farmers and small traders who export their products. When laws are in place, such traders have a voice and right to demand fair prices that enable them to make social and economic progress. Small-scale producers and workers need to have a say on matters that affect their welfare. Therefore, they can only achieve fair trade when they are empowered to negotiate, control, and hold accountable some of the institutions with the mandate of representation. As a result, one of the strategies that can be implemented towards achieving fair trade lies in the formation of independent organizations for the small-scale producers with a common goal. Such organizations would help when it comes to the negotiations with employers or starting other investment projects (Aggarwal and Evenett 550).

As noted above, sustainability is an important factor that determines the fairness in trade. Such sustainability should be measured in the livelihood of people. Therefore, fairness relies on the ability of the economic activities in place to withstand economic shocks(Bowman 2). For instance, many of the small-scale producers face numerous challenges concerning the economic fluctuations. Additionally, people should be able to register improving income, better lifestyle, and a healthier environment without depleting economic resources. Small-scale farmers and producers can achieve the above in a trading system that encourages fairness. A fairtrade approach should include creating elaborate supply chain models, customer awareness, and strengthening civil societies. Achieving fair trade requires that small producers come together in organizations that are independent with the ability to provide various forms of support to the farmers. Support should include credit, training, and negotiating power with the buyers. Besides, workers should join strong trade unions in order to have a voice when it comes to negotiating issues that affect their welfare. Workers and other small traders should be aware of the chain of command that exists in the local as well as international levels. Such organizations help the participants have a say in the making of various trade policies and legislations.[3]

Having a clear business chain helps the traders or small farmers achieve prosperity through confidence. Such confidence ensures that all members are respected while the value of the goods and services is achieved (Bowman 12). Adequate investment can only take place where there is confidence. Consumer behaviors also determine the survival of the local workers or producers. The locals within a country must be aware of some of the unfair trade practices in place to influence their choices. Such a move can help the consumers make decisions towards consuming the local products. Such a move can help spur growth, especially in developing countries. Lastly, civil society action still plays an important role in helping push for the fair trade practices at the local, regional, and international levels. Such actions groups excel at mobilizing members at the grassroots to participate in advocating for the favorable trade policies.


It is apparent that trade is an essential activity that influences economic growth. Globalization has been realized in the quest for trade between different countries. The global economy is important because it avails goods and services to the locals. It has also led to the integration and ease of tension between countries. Most importantly, economic growth in developing countries has been possible due to globalization. Nevertheless, there is a need to ensure proper leadership and strict adherence to trade laws and policies to avoid unfair trade policies that affect the local producers or workers. Globalization remains an important part of the world economy. Since various challenges face the present situation, governments should ensure due diligence concerning the formulation and implementation of necessary laws. Though multinationals are blamed for improper trade practices, this paper finds that the measures taken by the local producers and workers remain important in advocating for proper trade practices. Fairness in world economic activities depends on various laws that make it difficult to manipulate people. Globalization remains a viable option in easily accessing various resources across the world. Besides, countries have also realized significant strides towards economic growth and self-sufficiency.

Works Cited

Aaronson, Susan. How China’s Employment Problems Became Trade Problems. Global

Economy Journal Manuscript, 1635.

Vinod, Aggarwal K., and Evenett, Simon. A Fragmenting Global Economy: A Weakened WTO,

Mega FTAs, and Murky Protectionism, Swiss Political Science Review, 19, 2013, 550-


Bowman, Sam. “Markets, poverty, and Fair Trade.” Adam Smith Institute, 11 March 2011.

Buthe, Tim. The politics of market competition: trade and antitrust in a global economy, Oxford

Handbook of the Politics of International Trade, 2014.

Jaffee, Daniel. “Weak Coffee: Certification and Co-Optation in the Fair Trade Movement.”

Social Problems. 59 (1), 2012, 94–116.

Mohan, Sushil. Fair Trade Without the Froth. Institute of Economic Affairs. Monographs,

            Hobart Paper No. 170, 2010.

Sturgeon, Timothy and Gary Gereffi. Measuring success in the global economy: international

trade, industrial upgrading, and business function outsourcing in global value chains. Transnational Corporations, Vol. 18, No. 2 (August 2009).

Tojo, Yoshizumi. Trade and competition policy in a global economy: convergence or

divergence, 2009.

Utting-chamorro, Karla. “Does fair trade make a difference? The case of small coffee producers

in Nicaragua,” Development in Practice. 15, 2012, pp. 584–599. 

[1]Aggarwal K. Vinod and Simon Evenett, A Fragmenting Global Economy: A Weakened WTO, Mega FTAs, and Murky Protectionism (Swiss Political Science Review, 19, 2013), pp. 551.

[2]Karla Utting-chamorro. “Does fair trade make a difference? The case of small coffee producers in Nicaragua,” Development in Practice. 15, 2012, pp. 584.

[3]Sushil Mohan,  Fair Trade Without the Froth. Institute of Economic Affairs. Monographs (Hobart Paper No. 170, 2010), pp. 12-13.