In the modern economy, globalisation can be recognised as one of the defining trends, observed even in those countries where other features of the global economy are either not obviously present or completely absent. Globalisation was facilitated by several important factors, including liberalisation of foreign trade and financial markets, the introduction of supranational regulation systems, improvement of stock markets, expansion of national companies internationally and growth of scientific and technological progress. The stronger role of financial measures, i.e. profitability and shareholder wealth maximisation, has also contributed to globalisation.
The common indicator of a country’s integration into the world economy is the growth rate of its foreign trade and its involvement in the national economy of other states. In the 1990s, the growth rate of global exports was twice the growth rate of global GDP.[1] An important element of this trend was the transnationalisation of entrepreneurial activity, which means enhancing role of transnational corporations in global economy. This process provided a cross-country exchange of investments, primarily direct investments, and rationalised the allocation of production resources on a global scale. From 1990 to 2016, the total number of multi-national enterprises elevated from 35,000 to 100,000, and the branches and subsidiaries of transnational corporations from 135,000 to 860,000.
However, the growth rate and volume of world exports has stalled significantly since the end of 2011. This almost equalised dynamics of growth of world trade with the growth trajectory of the world GDP. Moreover, in 2015–2016, the growth rate of global GDP exceeded the growth rate of international merchandise trade.[2] This trend could be explained by various factors, such as the reconstruction of the Chinese economy towards domestic consumption as well as the increasing protectionism, which led to the introduction of trade restricting measures.
However, in 2017, the growth rate of global trade recovered and exceeded global GDP growth by 1.5 times. This increase was due to multiple factors, including increased investment costs and higher commodity prices, which contributed to a growth in demands for imports across regions.[3] Nevertheless, according to the WTO forecasts, the ratio of the growth rate of world GDP will exceed that of international trade by a measure of 1.3 times in 2019.[4]
Shifts in world trade’s geographical structure and a greater role of developing countries in the global exchange of goods and services are more examples of the impact of globalisation on the global economy. The total share of developing countries in the global exports of goods and services increased from approximately 22% in 1997 to 36% in 2017, mainly due to Asian countries becoming more integrated in the world economy.[5]
Over the long run, the dynamics of direct investments are more volatile when compared to the dynamics of international trade, and this characterises the current stage of globalisation. Total exports of goods, in terms of physical volume (1990–2016), increased on average by 5% annually.[6] At the same time, the corresponding inflows and outflows of FDI were defined by double-digit changes.[7]
Another component of globalisation is regional economic integration. Regional trade agreements account for more than half of international trade (67%) and are closely related to the WTO’s multilateral trade agreements. In 2017, the total number of operating Regional Trade Agreements reached 279 (in 1996 – 60).[8]
The period from 1992 to 2016 was marked by a deceleration of the liberalisation of world trade and international investment exchange. According to the WTO, in 2010-2016, the total number of protectionist measures of international trade increased by approximately 5 times. The number of cancelled restrictions in 2016 amounted to less than a quarter of total measures. The UNCTAD data demonstrates that in 2016, the liberalisation and promotion of investments accounted for 79% of changes in investment policy, which is significantly lower compared to the 1990s (94%).
Modern globalisation can also be described by the amorphous nature of international organisations, such as the WTO. Despite their important role in world trade, it can be argued that their actions haven’t led to a significant improvement in conditions for the international exchange of goods and services. The WTO, in seeking to liberalise international trade, has simultaneously promoted protectionism. For instance, in the period from October 2009 to October 2010, WTO member governments used 200 new measures restricting imports, mainly special protection measures of national markets, which covered 1.2% of its global volume. This indicates that as of now, national interests prevail over global.[9]
Bibliography:
[1] World Trade Statistical Review 2017 // World Trade Organization. –Switzerland. – 2017. – p. 20. - URL: https://wto.hse.ru/data/2017/08/04/1173600215/wts2017_e.pdf
[2] World Trade Statistical Review 2017 // World Trade Organization. –Switzerland. – 2017. - URL: https://wto.hse.ru/data/2017/08/04/1173600215/wts2017_e.pdf
[3] WTO // Strong trade growth in 2018 rests on policy choices URL: https://www.wto.org/english/news_e/pres18_e/pr820_e.htm
[4] Strong trade growth in 2018 rests on policy choices. – WTO. - URL: https://www.wto.org/english/news_e/pres18_e/pr820_e.htm
[5] World Economic Outlook: Seeking Sustainable Growth – Short-Term Recovery, Long-Term Challenges. // IMF - October 2017. - р. 242, 256. URL: https://www.imf.org/en/Publications/WEO/Issues/2017/09/19/world-economic-outlook-october-2017
[6] World Investment Report. N.Y. UNCTAD, 2010-2017 URL: http://unctad.org/en/Pages/DIAE/World%20Investment%20Report/Annex-Tables.aspx
[7] World Investment Report. N.Y. UNCTAD, 2010-2017 URL: http://unctad.org/en/Pages/DIAE/World%20Investment%20Report/Annex-Tables.aspx
[8] Recent developments in regional trade agreements, January-June 2017 – WTO - URL: https://www.wto.org/english/tratop_e/rtajan-june17_e.pdf)
[9] Obolensky V.P. Liberalization and protectionism in international trade. // Russian Foreign Economic Bulletin. - 2013. - №3