April 20, 2022 Latest News

Accept and Embrace Globalization

As countries move on from the COVID pandemic, it is important that they identify and leverage the strengths, to enhance and advance their economies.  Furthermore, it is imperative that countries implement strong measures to mitigate the risk associate with the fiscal measures implemented during the pandemic, and plan for the predicted economic lag.  Embracing Globalisation, and allowing trade and investment to cross-borders seamlessly, may be a channel available to revert to a stronger world economic environment.


In beginning of the new century, we have witnessed a massive increase and growth in international trade and investment.  This has been facilitated and aided by the extraordinary and exponential development in information, technology and communication capabilities.

Cross-border investments, in the form of Foreign Direct Investment (FDI), has seen a multifold growth, since the 1990’s, into the 2000’s. in addition, the massive increase in cross-border, export and import trade, has been aided by the sharing of resources and capabilities between countries, allowing better economies of scale.

This has resulted in companies and organisations, increasingly outsource the goods and services, which they traditionally used to produce or source in their domestic country, now outsourced, to companies or organisations, overseas.  Furthermore, we have seen, with the implementation of COVID regulations, closing of cross-border activities, there has been a massive economic shrinkage.  This has been exacerbated by socialist mindsets within countries, demanding more inward investments, rather than global economic value sharing.


Declining economies and the anti-globalisation movement

We have witnessed one of the most devastating pandemics in recent history.  With the stringent lockdown methods adopted by countries around the World, the closing of boarders, as well as the fiscal policy changes, as contributed to a worrying anticipated economic fallout.  The resulting economic lag, is predicted to last for another 3 to 5 years, due to the increasing debt burden created at a macro, micro and socio economic level.

Accordingly, this has increased the ire of anti-globalisation campaigners (“AGC”), who have traditionally found inherently sinister motives in corporations’ which operate across international borders. These AGC’s, are convinced that, more often than not, multi-national businesses, enterprises, and organisations, are focussed on exploiting the human resources within countries, in the form of indentured employment slavery, or availing the beneficial taxes offered.

However, the long term objective economic evidence clearly contradicts these jaundiced views: in truth , real salaries and wages have seen an increase in countries which attract FDI and, global corporate tax revenues have been increasing rising, not falling.  Furthermore, with FDI in emerging economies, there clearly is a drive to reverse the base erosion and profit shifting model (BEPS).

In further support of corporate globalisation, the in introduction of internationally active businesses, enterprises and organisations, creates aspirational pressures on local companies and businesses, as well as the local government, to raise the in-country quality and standards, especially in the areas of management, technology, and environmental quality, whereby the host country is better and more strategically placed more effectively in the globalised world.

The most glaring problem with the current globalisation, is that the wealthiest countries are responsible for the majority of international and cross-border investments, business and trade.  Based on the investment gap, the longer developing countries take to find a means to challenge and, as the international supply chains become more complex, advanced and sophisticated, the tougher it is becoming for these companies from developing countries to operate on an international level.

Barriers to economic trade

Based on the foregoing, regulators, policymakers, businessman and enterprise leaders, as well as ordinary citizens in developing countries have accepted that it is imperative that there is continuous engagement towards promoting a fair and equitable globalisation model.

Developing countries, eager to advance their export of goods and services, as well as improved their investment links, are resolved to attain a more equitable trading environment.  These countries have continued to engage at multiple levels, demanding a more important and contributory role within the World Trade Organization (WTO), as well as the OECD demanding that the powerful trading countries implement the free-trade agreements and allow market access in protected sectors, such as agriculture, technology and textiles.

One of the most important responsibilities, post-COVID, which is facing the developed world, and the major beneficiaries in globalised trade, including negotiators, leaders and politicians, is to allow better trade access in key growth sectors, which would benefit developing countries.

The WTO, OECD and other critics, point out that trade barriers are just as harmful to the countries that implement them, as to the countries which imports are blocked.

Actions for poor countries

Notwithstanding, the foregoing, should rich countries reduce trade barriers, developing countries may not benefit until these countries reduce certain protection mechanisms which have been implemented, as well as soften the regulatory defences in their own markets.  High tariffs have sheltered the domestic industries in developing countries to such an extent, that many, if not most of them, could not compete effectively in the international market, even if all of the tariffs were to be eliminated forthwith.

An important benefit of free trade and open market policy, and trade liberalization is that allows for increased and beneficial competition, which is the foundation of a successful, healthy and progressive market economy.  Furthermore, it may contribute to combating corruption which may arise when there is an overregulated market, with too much red tape and protection.

Developing countries have also been a major driving force behind the increased awareness around BEPS, and the new and sweeping regulatory changes, allowing a more favourable and equitable global tax system.  This will protect developing countries from exploitative corporate structuring mechanisms, which leach off of these economies.

Eventually, each developing country, will be responsible for ensuring their own success or contributing to their own failure. It must be appreciated, that with all the various fiscul, and market forces, whilst good government may not guarantee absolute economic success, on the contrary, bad government does lead to economic failure.  Excessive, meddling, protectionist, burdensome regulations are also enemies of potential economic opportunities and freedom.  Governments must realise that it is their duty to create an economic environment which is conducive for businesses to thrive.  It is not their duty to play in that environment.

Trade engagements towards fair and equitable global economies

Developing countries continue facing massive challenges. The juggling of the macro, micro and socio economic environments post COVID, is an unenviable task for any country leader and regulator.  This together with the historic notion that not embracing globalisation in these times, will only magnify the penalties for failure, whilst being aware that there is clearly available and increasing rewards for success. As countries pickup the pieces post COVID, the opportunities available from opening borders, renewed movement of personal, free trade and potential for increased investment are greater than ever. Accordingly, more than ever, countries and nations must recognise the kinetic potential within, unshackle their fears which are holding them back, and advance towards their economic interdependence.  

By embracing the globalised international economy, understanding the strengths within the country, there appears no better time for developing countries to advance their mutual economic self-interest than through globalisation and more beneficially negotiated multilateral trade relationships.

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