Major Drivers of Globalization
There are two major drivers of globalization that work together. These are the lowering of barriers to trade and investment and the advancement in technology.
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Lower Trade and Investment Barriers
This major driver has a great impact on globalization as governments of countries around the world reduce or abolish tariffs, allowing increased trade. Tariffs are essentially taxes that a country imposes on imported goods and services in order to maintain competitive pricing within that country. These tariffs increase the prices of imported goods, thus decreasing the influx of goods from other countries into your country and often result in higher consumer pricing.
Positive results of lowered trade and investment barriers include lower tariffs, increased attractiveness of foreign direct investment (FDI), the formation of regional trade agreements (RTA) such as the North American Free Trade Agreement (NAFTA), and the formation of trade associations such as World Trade Organization (WTO), International Monetary Fund (IMF), the World Bank and the United Nations (UN).
These concepts of Foreign Direct Investment (FDI) and regional trade agreements, which characterize and describe the influence these changes in barriers, will be described in detail later lessons in the course.
Technology Advancement
The rapid increase in technological advancement has contributed vastly to globalization. Technology has opened many doors that were closed to organizations and individuals in just the last century. For example, if we go back to the late 1800s and early 1900s, common forms of transportation included railroads and ships. It took weeks and sometimes months for passengers and products to reach their destination. Today, given modern transportation including jet airlines and refrigeration cars, both passengers and goods can reach their destination sometimes within hours.
Any discussion of advancement in technology must include the World Wide Web and the Internet. The Internet is a major reason for the vast increases in exported goods. Many small companies that were once at a disadvantage in the international marketplace due to limited resources can now be involved in international trade. A company is considered international if it ships goods and/or services to another country. These companies can be both large corporations, and even small internet stores. Check these links out; they may inspire you to learn more about international business!
