Globalization: pros n cons

seperti Stiglitz baru-baru ini bilang,
saya tidak anti globalisasi, namun globalisasi perlu dimanage

Trade liberalization is a condition that we can keep away from. The world is becoming more globalized; there is no doubt about that. Globalization brings with it many new challenges, and in the field of world trade, the challenge of gaining market access in the new global economy calls for a consistent rethinking of strategy. Sometimes the discussion of trade liberalization is parallel with the emerging of regional trade block. If WTO is connected with globalization, trade block is related to regionalization phenomenon. There is no contradiction between trade regionalization and globalization. Global economy integration needs some new trade block establishment.

Even though globalization is a condition that can not be avoided, there are many pros and cons. There are many costs of trade liberalization and FTA, beside their advantages. The pros part thinks trade globalization and integration as a beneficial movement that can promote economic growth, development and poverty reduction. The resulting integration of the world economy has raised living standards around the world. Many developing countries have substantially increased their exports of manufactures and services relative to another condition before. Opening up their economies to the global economy has been essential in enabling many developing countries to develop competitive advantages in the manufacture of certain products. There is considerable evidence that more outward-oriented countries tend consistently to grow faster than ones that are inward-looking.

In the other side, the cons say that trade globalization and integration tend to make a new “oligopolies” and “monopolies” market. The greatest impact will be experienced by developing countries. For most developing countries, many negotiating that are dominated by industrialized countries have been marginalized their position in the economy. Globalization can make an adverse demand-side effect to Gross Domestic Product cause of import growth will be greater than export growth.

Some previous researches find out three costs of globalization and free trade area (FTA). First is trade diversification. FTA causes the trade or economic diverting from efficient non member economic to non efficient member economic. This condition occurs when trade barriers are removed that create a new cost, if the trade diverting is larger than trade creation, it will perform static welfare loss. This problem can be solved through (i) commodities are not perfect substitution, (ii) no trade diverting if non-member tariff is small enough, and (iii) if member trade barriers is quite small, cost and price should be similar with non-member countries. Second is decreasing tariff revenue for several countries. The import tax revenue will decrease when trade is diverted to the member country as a consequence of agreement. The last cost of FTA is adjustment cost. The adjustment cost is a short run cost. The cost arise cause of industries rationalization for efficiency and competitiveness.