The purpose of this paper is to evaluate what roles should be played by international trade so as to ensure that globalization would play a central role in building the world economy. The recent global financial crisis has prompted the needs for nations to play major roles at both the national and international level through trade in order to save the economy of the world (Otter, 2008). Globalisation can only be achieved if all the nations come together and agree to cooperate. This paper will find out how globalization is important as explained by the trade theory. Among the strategies used by nations to facilitate trade at both the national and international level is the use of marketing in trade (Rodrik, 2007). The nations of the world have a diversified world of commodities with different nations able to manufacture particular goods (Stiglitz & Charlton, 2005). The information on such goods can only be accessed by other nations through a proper marketing method (Stiglitz, 2002). Therefore, this paper will also consider the methods that firms can use to market their products.
International trade and its effects
International trade can be defined as the form of trade that is practiced by firms across borders. Nations of the world have different capabilities in terms of success in trade (Stiglitz, 2010). As a result of this, Nations become dependent on each other and this has been achieved through international trade (UNCTAD, 2010). The major effect of international trade is that it fosters good relationship among states. This relationship is responsible for facilitating globalization since a form of mutual understanding among states exists (Stiglitz, 2007). International trade is therefore important in developing the economy of the world especially at this time of global recession. When there is a good opportunity for international trade, firms develop modes of advertising that ensure that they can market their commodities at the national and also international levels (Stiglitz & Charlton, 2005). Firms are able to do this by first carrying out a market research that helps to develop marketing strategies.
Adoption of the Washington policies
The adoption of the Washington consensus happened in 1989. This consensus developed ten economic and financial policies that would help the growth of the developed countries which frequently encountered major financial and economic difficulties (Mohan, 2005). The policies were based on how to international institutions like the World Bank, International Monetary fund and the US Treasury Department would implement growth policies in the poor nations (Stiglitz, 2006). Most of these policies were based on market fundamentalism whereby, trade across nations was emphasized so as introduce economic growth reforms. For this reason, globalisation was considered as a key process to introduce the kind of reforms expected (Stiglitz & Charlton, 2005). The ten recommendations of the Washington consensus were:
- Introduction of fiscal policies
- Introduction of subsidies in order to reduce public spending
- The change of the tax policies; adoption of moderate marginal tax and also tax base to be widened
- Introduction of market-determined interest rates
- Introduction of exchange rates that were competitive
- Liberalization of trade
- State corporations were to be privatized
- Guaranteed legal security for the right to properties
- Deregulation as away to restrict competition
However, the Washington policies did not receive positive feedbacks As a result of few inadequacies. According to Guiltinan (2006) “most criticism has been focused on trade liberalization and the elimination of subsidies, and criticism has been particularly strident in the agriculture sector”. There were little elimination on these critics such as nations that had large amount of natural resources; such countries tended to concentrate on privatizing their industries so as to exploit those resources.
Problems facing the world trade
Critics of the Washington policies argue that trade liberalization world result to the opening of the labour market of the undeveloped countries which would in turn result to the exploitation of such countries by the developed nations. Rodrik &Trebbi (2006) notes that “the prescribed reductions in tariffs and other trade barriers allow the free movement of goods across borders according to market forces, but labour is not permitted to move freely due to tough visa laws”. This would therefore result to a favourable economic environment whereby goods can be manufactured in the developing nations, by the use of cheap labour and later exported to the rich nations were they are sold at high price (Haugtvedt, Petty & Cacioppo, 2002). Consequently, the employees of the poor nations remain poor as argued by Rodrik, (2009) who said that “workers in the Third World economy nevertheless remain poor, as any pay raises they may have received over what they made before trade liberalization are said to be offset by inflation, whereas workers in the First World country become unemployed, while the wealthy owners of the multinational grow even more wealthy”.
Globalisation is also linked to the problem of exploitation as some anti-globalization critics argue. Supporting this Guiltinan (2006) argued that “First World countries impose the consensus’s neoliberal policies on economically vulnerable countries through organizations such as the World Bank and the International Monetary Fund and by political pressure and bribery”. These anti-globalisation critics argue that the process has not lead to any development in the developing countries; for instance, in Latin America, the process has lead to an increase in external debts (Sheppard, Hartwick & Warshaw, 2008). Some of the policies outlined by the Washington consensus like deregulation and tax reforms result to the growth of few rich individuals in the third world who achieve numerous political power and use labour exploitation as way to maintain the status quo (Stiglitz, 2006).
International Trade Theory
Trade history is based on Ricardian theory of international trading which assumes that, goods usually form the basis of international trade. But this theory has since then been expanded by many researchers to necessitate the inclusion of intermediate goods such as fuel and machinery. By the inclusion of other goods, markets have become more competitive than before, hence leading to reduced prices of goods. The current country partners in the Australian and the U.S markets are; China, Japan and New Zealand. These countries have played a significant role in developing the two markets.
In the past many countries did not consider international marketing but preferred internal trading, since it was less involving and cheap. Nowadays many countries have partnered hence going further to form trading blocs, which are being considered as the basic way of trading. These trading blocs have enabled many economies to develop from shackles to the new heights of today. These trading blocs have off late had a positive implication in the international politics, which is a good trend. The emergence of trade blocs started way back in 1834 where German Custom Union was formed (Nigel, 2007). The other trading blocs that have since then emerged are;
- European Free Trade Association
- European Union
- North America Free Trade Association
- East Africa Economic Community
- Economic Community of West African States
- Asia Pacific Economic Cooperation
In these trading regions and other trade markets there are barriers and restrictions to countries which want to venture in such markets (Pavlik, 2008). Trade barriers or restriction may come inform of tariffs, subsidies, embargos, import licenses, export licenses and voluntary export restraints (Stiglitz & Charlton, 2005). These types of restrictions have an overall increase in the cost of doing business and product prices go up.
In international trade markets, it is always prudent for countries to consider the products they are offering in these types of markets; that means providing a high quality and improved product to the market (Sheppard, Hartwick & Warshaw, 2008). Product life cycle should also be determined; this enables the entrepreneur to determine the amount of money to use while marketing. It is also important to take into consideration the product packaging and branding, if the two are done properly marketing becomes easier.
Factors Facilitating Globalisation
The modern advancement of the technological industry especially the telecommunications sector has had a positive response to the trend of international trade (Bruner and Anand, 2003). This has created an opportunity for many industries to shift from the old online advertising that used simple ads to the use of rich multi-media experience. The result of this paradigm shift is that, companies are provided with the chance to ensure effective engagement and management of advertising companies that will lead to influencing customers to develop tastes and feelings towards certain commodities or services (Bruner and Anand, 2003). An example of the technological advancement that is leading to increase of online advertising is the use of broadband.
The use of broadband in America is growing; by the year 2005 most of the residences in America had adopted the broadband technology. The trend continued until the year 2008 when close to ninety percent of the American homes had adopted this technology (Chekitan and Schultz, 2005). According a study conducted by Nielsen 2008, the number of citizens who were able to use and access internet in the United States was 220,141,969. From this total, more than one hundred and ninety nine people used the broadband technology (Chekitan and Schultz, 2005). These people are therefore able to see advertisements posted on companies’ websites any time they open their computers. Through the use of rich multimedia content, online advertisement will lead to creating fuzzy feelings which can be liked by the audience (Fiore and Shawn, 2005).
The result of this technological advancement has enabled many banks to use online services in the United States (Gray, 1999). This has been much successful because many people now prefer to use this system since it easier instead of going to the banks branches to seek these services. Statistics of the study conducted by Nielsen (2008) found that there are close to one hundred and fifty million adults in the United States who use online banking. This growth is attributed to the high rates of internet connectivity in America due to the use of the broadband technology. The study also found out that forty four percent of the internet users are able to access bank services online (Hoffman and Novak, 34).
Another business that is growing as a result of the use of broadband technology is the use of internet auctions (Korgaonkar and Wolin, 1999). Some commodities which were traditionally found in flea market only can now be sold through internet auction websites like eBay. The use of e-stores to sell many commodities has as well increased in the United States, commodities like, clothing, gadgets and move props are currently sold through such stores. Through the websites like eBay sellers and buyers can access the prices of commodities; this enables them to determine the prices without going to the flea market which would provide the same prices. This ensures that vendors in the flea market post the prices of their commodities on the advertising websites while at the same time they run their businesses at the business premises (Korgaonkar and Wolin, 1999).
The trend of online advertising in the United States has developed at a high speed to make it worth many billion United State dollars per annum. Price water house coppers (2006) established that 16.9 billion US dollars are used in the process of internet marketing (Kotler and Keller, 2009). Internet marketing has also been used in the political arena in the United States; the 2008 campaigns employed this method whereby the Presidential aspirants used it to communicate their objectives to their constituents.
- Bruner, G. & Anand, K. 2000. Web Commercials and Advertising Hierarchy-of- Effects. Journal of Advertising Research, 40 (12), 35-42.
- Chekitan, P. & Schultz, P. 2005. In the mix: a customer-focused approach can bring the current marketing mix into the 21st Century. Marketing Management, 14 (1), 23- 27.
- Fiore, F. & Shawn, C. 2001. Successful affiliate marketing for merchants. New York: QUE Publishing.
- Gray, D. 1999. The complete guide to associate and affiliate programs on the net. New York: McGraw-Hill Trade.
- Guiltinan, N. 2006. Marketing management: strategies and programs. New York: McGraw Hill.
- Haugtvedt, C., Petty, R. & Cacioppo, J. 2002. Need for cognition and advertising: understanding the role of personality variables in consumer behaviour. Journal of Consumer Psychology, 5 (3), 239-260.
- Hoffman, D. & Novak, T. 2006. Marketing in hypermedia computer mediated environments: conceptual foundations. Journal of Marketing, 7 (60), 50-68.
- Korgaonkar, P. & Wolin, L. 1999. A multivariate analysis of web usage. Journal of Advertising Research, 3(12), 53-68.
- Kotler, P. & Keller, K. 2009. A framework for marketing management. New York: Pearson Prentice Hall.
- Mohan, J. 2005. International marketing. New York: Oxford University Press.
- Otter, D. 2008. The business environment: themes and issues. Oxford: Oxford University Press.
- Pavlik, J. 2008. New media technology: cultural and commercial perspectives. Boston: Allyn and Bacon Publisher.
- Rodrik, D. 2007. How to save globalisation from its cheerleaders. Oxford: Oxford University Press.
- Rodrik, D. 2009. Development policy and development economics. Oxford: Oxford University Press.
- Rodrik, D. 2009. Growth after the crisis. Oxford: Oxford University Press.
- Rodrik, D. 2009. Making room for china in the world economy. Oxford: Oxford University Press.
- Rodrik, D., Subramanian, A. &Trebbi, F. 2006. Institutions rule: the primacy of institutions over geography and integration in economic development. Oxford: Oxford University Press.
- Sheppard, R. Hartwick, J. & Warshaw, P. 2008. The theory of reasoned action: A meta-analysis of past research with recommendations for modifications and future research. Journal of Consumer Research, 15 (1), 325-343.
- Stiglitz J and Charlton, A. 2005. Fair trade for all. Oxford: OUP.
- Stiglitz, J. 2002. Globalisation and its discontents. London: Penguin.
- Stiglitz, J. 2006. Taking control of globalization. The Seattle Post-Intelligencer journal, 2 (1), 13.
- Stiglitz, J. 2006. Managing globalization, Q & A the international herald tribune, Post- Intelligencer journal, 6 (12), 26.
- Stiglitz, J. 2007. Managing Globalization, Q&A, International Herald Tribune, February 14.
- Stiglitz, J. 2010. Making globalisation work. London: Norton publishers.
- UNCTAD, 2010. Trade and development report. Oxford: Oxford University Press.