Question

using Examples, Discuss and illustrate the arguments supporting and opposing globalization of trade and investment

Answer 1

Supporting:

Globalization of production has increased the productive efficiency of manufacturing firms because they are able to decompose their value chain into individual components or parts, and then outsource their production to different countries where these components can be produced most efficiently

For example, Nintendo’s Wii remote is manufactured with components sourced from several countries in the world: the accelerometer is manufactured in the United States; the base memory chip in Italy; the data converter in the United States, Thailand, and India; the plastic casing is assembled in China and designed in Japan; the Bluetooth chip is manufactured in Taiwan and designed in California (US); and the rumble pack is manufactured in various countries in Asia. Foreign direct investment and outsourcing have increased business investment in these countries and provided smaller and less developed countries the opportunity to participate in international trade

Against

The complexity of trading relationships has also increased with the development of sophisticated global supply chains that include not only final goods but also intermediate goods and services. Increased global interdependence has changed the risk and return profiles of many countries. Countries that have greater international links are more exposed to, and affected by, economic downturns and crises occurring in other parts of the world. For example The contagion effect of the Asian financial crisis, which began in Thailand in July 1997, spread to many other markets, such as Indonesia, Malaysia, South Korea, Philippines, Hong Kong, Singapore, and Taiwan. It even affected Brazil and Russia to some degree, although there is less clarity about the mechanisms by which the crisis spread beyond Asia. Among the outward symptoms of the crisis were exchange rate problems, such as currency speculation and large depreciation of currencies, capital flight, and financial and industrial sector bankruptcies.