On July 22, 2022, CNN’s Nic Robertson showed the dismantling of a captured Russian drone in Ukraine. The Ukrainian officers discovered that the engine of the drone was made in Japan, the thermal imager module was made in France, and the cell phone tracker was made in the USA. They claimed that the drone also included components from Austria, Germany, Taiwan, and the Netherlands. That’s globalization!
We have moved away from a world in which national economies were relatively self-contained entities and created a world of interconnected and interdependent economies through the movement of goods, services, and capital across national borders.
Well, two reasons can be readily identified. One, the tariff and non-tariff barriers in international trade and investment have gone down enormously, and the other is huge technological advancements have taken place in communication and transportation.
The reduction of tariff and non-tariff barriers in international trade and investments may be attributed to the collective efforts of GATT, WTO, IMF, and World Bank.
At the end of World War II, industrialized nations took the initiative of removing barriers to the free flow of goods, services, and capital between countries. They formalized the process through the General Agreement on Tariffs and Trade, GATT in 1947. The GATT was subsequently replaced by World Trade Organization, WTO in 1995. According to a research paper by Chad P. Bown and Douglas A. Irwin published by the National Bureau of Economic Research, Massachusetts, USA the average tariff level of the GATT participant countries was about 22% in 1947. And, according to World Integrated Trade Solution data, the world tariff (effectively applied weighted average for all products) was only 4.22% in 2015.
Let’s now look at how technological advancements in communication and transportation have accelerated globalization. When the East India Company came to India, the voyage time from England to India was about 6 months. Now it takes around 3 weeks. And, by air, it takes approximately 9 hours to reach Delhi from London. Improvements in transportation such as containerization and the development of super freighters and large and fast aircrafty have dramatically shrunk the time it takes for people and products to get from one place to another. Microchips and the internet have revolutionized communication and information processing and reduced their costs drastically.
As a result of these two developments, international trade has grown at an amazing speed. According to WTO and UNCTAD, world trade amplified from $0.13 trillion in 1960 to $28.50 trillion in 2021. Countries can now easily import things that they can’t produce themselves. Thus, people can enjoy products and services in a more or less uniform manner throughout the world. We can find McDonald’s, KFC, Coca-Cola, Pepsi, etc. in every corner of the world.
We started this writing with the story of a Russian drone. Such examples are in abundance in our modern era of globalization. According to a research paper by Rongshan Li and Yu Lu published in the WSEAS Journal in May 2020, Boeing 787 Dreamliner was manufactured with components from Australia, Canada, England, France, Italy, Japan, South Korea, and Sweden.
Globalization has transcended political polarization. According to World Economic Forum, the EU imported 40% of its gas requirement from Russia in 2021, and in the same year, over 25% of the EU’s oil imports came from Russia.
In an article published on TechTarget, news writer Makenzie Holland noted that more than one-third of the essential components for producing technology goods in the USA are imported from China. Also, according to DW news, China supplies 98 percent of the EU’s rare earths which are required for wind and solar energy equipment and battery production.
International trade and Foreign Direct Investment not only create economic interdependence but also develop a friendly relationship between countries through interactions and understanding.
Besides the growth of international trade, the speed and ease of modern transportation have led to the growth of tourism which again creates cultural exchanges and friendships among people of different countries. We are already talking about the globalization of culture.
Globalization should therefore be deterrence against war between nations.
The First World War started in 1914 and ended in 1918. The Second World War started after 21 years in 1939. Seventy-seven years have passed since the Second World War ended in 1945. There has not been a third world war yet.
The reason that is widely attributed to this deterrence is nuclear weapons. Major military powers all possess nuclear weapons. But they also know that using nuclear weapons will be MAD – Mutually Assured Destruction. And consequently, the conventional war against a nuclear-powered enemy has also to be restricted within certain limits – you can’t push your enemy to the point when he has no other alternative but to use nuclear weapons. So, the world is in balance. A third world war is not on the horizon.
That’s alright but globalization is also working in the background in deterring a major escalation of military intervention. That’s why we see nowadays the use of economic sanctions instead of direct military actions in many international conflicts. With the strengthening of globalization, military intervention may someday become an obsolete means of conflict resolution.
The writer is a retired
government officer and academic