According to Hill (2004), "we are moving away from a world in which national economies were relatively self-contained entities, isolated from each other by barriers to cross-border trade and investment; by distance, time zones, and language. . ." (p. 4). Globalization has minimized the gap between these entities and created an economy for all countries that was not possible 20 years ago. This paper will define globalization and identify what some of the traditional international trade theories that support the concept of globalization. This paper will also list the major drivers of globalization along with three examples of each; explain four effects of globalization that influences the community and the author's organization. Lastly, this paper will identify some major regional trading blocs and specify at least two in the author's region of interest.
Definition of GlobalizationAccording to Hill (2004), "globalization refers to the shift toward a more integrated and interdependent world economy.
Globalization has several different facets including the globalization of markets and the globalization of production" (p. 6). Steven Suranovic (2007) states, "the main support for free trade arises because free trade can raise aggregate economic efficiency" (p. 1). Free trade has led to more consumption of goods, creating a need for more production. This has allowed countries to be able to produce more without more cost.
Traditional International Trade TheoriesFree trade has sparked debates around the world of whether this is something that is good or bad for the economy. Some trade theories have been used to help end the debate of whether free trade is good or bad. There is no set theory that truly explains the obvious mold of international trade, but collectively the theories such as Life Cycle, Mercantilism, Heckscher-Ohlin, New Trade, and Smith theories help to determine which factors are important when determining if...