For example, the two most successful global food and beverage outlets are American companies, McDonald's and Starbucks, are often cited as examples of globalization, with over 32,000 and 18,000 locations operating worldwide, respectively as of 2008.
The term globalization implies transformation.
Globalization has expanded recreational opportunities by spreading pop culture, particularly via the Internet and satellite television.
Religious movements were among the earliest cultural elements to globalize, being spread by force, migration, evangelists, imperialists and traders.
Free trade zones are organized around major seaports, international airports, and national frontiers – areas with many geographic advantages for trade. It is a region where a group of countries has agreed to reduce or eliminate trade barriers.
A Billboard in Jakarta welcoming ASEAN Summit 2011 delegates.
A free trade area is a trade bloc whose member countries have signed a free-trade agreement, which eliminates tariffs, import quotas, and preferences on most (if not all) goods and services traded between them.
By the same reasoning, it should import commodities in which it has an absolute disadvantage. While there are possible gains from trade with absolute advantage, comparative advantage – that is, the ability to offer goods and services at a lower marginal and opportunity cost – extends the range of possible mutually beneficial exchanges.
The growth of international trade is a fundamental component of globalization.
An absolute trade advantage exists when countries can produce a commodity with less costs per unit produced than could its trading partner.
When people think about globalization, they often first think of the increasing volume of trade in goods and services. Trade flows are indeed one of the most visible aspects of globalization. But many analysts argue that international investment is a much more powerful force in propelling the world toward closer economic integration. Investment can alter entire methods of production through transfers of knowledge, technology, and management techniques, and thereby can initiate much more change than the simple trading of goods.
But policy and technological developments of the past few decades have spurred increases in cross-border trade, investment, and migration so large that many observers believe the world has entered a qualitatively new phase in its economic development. Since 1950, for example, the volume of world trade has increased by 20 times, and from just 1997 to 1999 flows of foreign investment nearly doubled, from $468 billion to $827 billion. Distinguishing this current wave of globalization from earlier ones, author Thomas Friedman has said that today globalization is “farther, faster, cheaper, and deeper.”
This current wave of globalization has been driven by policies that have opened economies domestically and internationally. In the years since the Second World War, and especially during the past two decades, many governments have adopted free-market economic systems, vastly increasing their own productive potential and creating myriad new opportunities for international trade and investment. Governments also have negotiated dramatic reductions in barriers to commerce and have established international agreements to promote trade in goods, services, and investment. Taking advantage of new opportunities in foreign markets, corporations have built foreign factories and established production and marketing arrangements with foreign partners. A defining feature of globalization, therefore, is an international industrial and financial business structure.
The tremendous growth in levels of foreign direct investment is a recent phenomenon and is one of the most powerful effects—and causes—of globalization. In 1982, the global total of Foreign Direct Investment (FDI) flows was $57 billion. According to UNCTAD 2013, by the end of 2012, FDI flows reached an estimated $1.35 trillion, a 14 percent decline since 2011 (OECD). Global international investment has still not yet returned to pre-crisis levels.
But as with many of the other aspects of globalization, foreign investment raises many new questions about economic, cultural, and political relationships around the world. Flows of investment and the rules which govern or fail to govern it can have profound impacts upon such diverse issues as economic development, environmental protection, labor standards, and economic and political stability.
Although increased international trade has spurred tremendous economic growth across the globe —- raising incomes, creating jobs, reducing prices, and increasing workers’ earning power — trade can also bring about economic, political, and social disruption.
At the same time, focusing entirely inward on domestic production to limit foreign investment and international interaction is largely detrimental to one’s economy. For some nations, this has manifested itself in import substitution industrialization (ISI), which refers to an international economic and trade policy based on the belief that a nation should reduce its dependency on foreign investment and goods by domestic production of industrial goods.