With the idea to globalize comes the concept of outsourcing - may it be in the form of supplies or even the very human resources. Needless to say, outsourcing has always been interconnected with globalization.
Globalization is imposed focusing on the various facets of one's country.
This includes growth of trade, flow of capital thereby ensuring financial capability, stable migration flow, entry of Information Technology (it) and web thus dissemination of technology (Keohane and Nye, 2000).
Trade plays a pivotal role in the economy this is why this is one of the focal point of globalization's purpose. Trade shows the relationship of total factor productivity and growth. Globalization includes increase of trade as one of its goals for it is believed that trade can enlarge the markets for domestic producers, allow the market to reap scale economies, force such market o be competitive and offer incentives and opportunities to incorporate as well as develop new technologies (Krueger, 1997). More so, with proper facilitation of trade, enough export earnings will be achieved. Export earnings is believe to be capable of loosening foreign exchange constraints on the economy and thus making it possible to facilitate expansion of other sectors Ades and Glaeser (1999).
Another major goal of globalization is to increase capital flow and strengthen financial capability. Capital flow is and could be serve as a major source of investment of a country and a channel for the transfer of technology as well as the spur to financial deepening. FDI is able to produce encouraging outcomes for the country even if spillovers are present because of competition and linkage effects. It also produces productivity and better wages among employees or workers (World Bank 1999). FDI can also expand the stock of skills, increase technology level, enhance access to international markets and combine countries to internationally produce networks. Meanwhile, financial capability ensures a one or two percentage points to the annual growth rate as a result of increased allocative efficiency (Levine 1997).
Stable migration is the third most important goal of globalization. This is because several researches and studies have proven that endogenous growth and economic geography is highlights the importance of migration and its relationship with trade and capital movements (Faini et al. 1999). Moreover, there are some researches on migration which shows that even during the early period of globalization, capital movement implied a possibility to be substituted by migration and serving to narrow factor price differentials (Williamson 1998). Hence, migration is a proven beneficial factor to developing countries. First among the reasons is the fact that migrants can send back remittances which can reach up to $75 billion per annum. This amount can of course lessen or eliminate foreign exchange constraints on growth. Also, a big part of this amount can be given to the poorer families which helps reduce the skewness in household consumption. Lastly, migration serves as the basis of international networks among the globalizing countries. Such network can encourage continuous flow of prospective migrants' worldwide access. Simply put, migration plays a very important part to the developing countries in a way that it enable workers to find better employment abroad, acts as a major source of remittances, skills, technology and capital and it is a means of becoming a part of international production networks (Faini et al. 1999).
As for the technology, it can easily be reflected that on the above facets of globalization, technology is always included. May it be on the increase of trade and capital or on the stability of migration, the probability of influx of technology is always connected. This is because several researches have proven that as more advance the technology is of a certain country, the more opportunity for the trade, capital and/or migration comes in.
Generally speaking, these four facets of globalization summed to two important factors of the country, and that is the economy and the culture. Thus, globalization is aimed at protecting and enhancing the country's economy and culture.
To enhance the country's economic level is one of the foremost goals of globalization. In the twenty years since the initiatives for globalization has started, a notable increase in the economy can is very noticeable especially among developing countries. These movements are in the form of importation, exportation and trade flows.
Table 1. The Role Played by the Developing Countries in Trade and Capital Flows
Source: IMF, Direction of Trade Statistics Yearbook and Balance of Payments Statistics Yearbook.
The data above shows how the developing countries performed before and during globalization. It must be noted that both the level of imports and exports of the developing countries increased dramatically during the mid-1990s. Exports increased from 27.2% to 34% while Imports had an increase of 25.4% to 34.3%. Similarly, trade flows, in general, rose rapidly during the same period (Stallings, 1995).
In terms of the financial aspect, the increase in trend is equally dramatic as the trade. Based on the data, the developing countries' share of foreign direct investment (FDI) started with 32.7% during the early 80's and declined to 14.3% during the later part of the 80s and rocketed high to 43.2% when the 1990's came (Stallings, 1995). It must also be noted that globalization has enable for the developing countries to have access with external sources of finances. This in turn has prevented any more constraints in foreign exchange that the population was experiencing during the early 1980s. More so, there has been a growing share of the new funds which were consisted of foreign direct investment that is currently highly valued by the governments of most developing countries. Both of these became the adding factors to the continued accumulation of capital thereby providing higher growth levels (Maxfield, 1999).
The increasing amount of investment being held by the developing countries also resulted to the upsurge of technologies coming inside the country, thereby opening more opportunity for developing countries to become more competitive and participate into more trade investments, and other business exchange with other countries (Maxfield, 1999).
Indeed, generally speaking, globalization has made it possible for the developing countries to be at an equal pace with the more developed countries, or the first world countries when it comes to technology, business investments and gross domestic income.
On a regional perspective, it can be noted which continent benefit more and which does not, during the entire reformation program to globalize.
Table 2. Regional perspective on the Effects of Globalization.
Source: IMF, Direction of Trade Statistics Yearbook and World Bank, Global Development Finance, 1999.
Based on the table above, the fastest growing region, especially when talking about rates of trade, is the Asia, who has gathered almost double the amount from 1980's to the 90s and continually surge upwards during the later years of the 1990s. On the other hand, the trend of trade Middle Eastern region fell and was attributed to the drop in oil prices. Differential trade coefficients on a regional perspective are (Stallings, 1995):
36% in Asia year ending 1990's (which raised almost 22% from the 1980s)
19% in Latin America (also an increasing rate that started in 17% in 1980)
34% in Africa (which, in contrast, was a decline from 39%)
It can be noted from the above-shown data that Asian countries had a leading trade performance and a stronger growth as compared with other regions which grew more slowly and traded less (Stallings, 1995).
However, by looking specifically at the countries that are directly concerned with globalization, there was still variation in the responses depending upon the focus and/or strategic targets of a particular country.
Table 3. The Effects of Globalization in Selected Countries (Feliciano, 2001).
In reference to Table 3, it can be inferred that different countries across all regions who have been subjected to globalization were showing similar responses to it. Changes in trade policies and other measures of globalization are clearly reflected and are shown to have been giving significant changes to the concerned countries.
Table also lists down the major reforms that took place during the 1980's and 1990's in each of these countries. Based on the data presented in the table, despite Argentina's and Colombia's short-lived trade reforms on the late 1970's, most countries still implemented unilateral trade reforms during the later part of the 80's up to the early 1990's. It is also worth noting that included in the reform was the drastic reduction of tariffs, which were high prior to liberalization and a crucial component of trade protection (Feliciano, 2001).
Table 3 also shows that in response to the unilateral trade reforms, there are a number of countries which lowered their trade barriers vis a vis specific trading partners through regional trade agreements. The said regional trade agreements stimulated changes in the geographic composition of trade in these countries (Feliciano, 2001).
Lastly, table 3 specifies that many developing countries have experienced large currency fluctuations during the 1980's and 1990's. In some instances, these exchange rate changes may have exposed the pertinent countries to international…