Academic journal article Journal of Southeast Asian Economies

Globalization, WTO, and ASEAN

Academic journal article Journal of Southeast Asian Economies

Globalization, WTO, and ASEAN

Article excerpt

I. Introduction

The pervasive effects of the process of globalization are being felt in poorer economies, at least as much as in richer ones. They are also being affected by, and are affecting, international institutions such as the World Trade Organization (WTO). The WTO's evolution in turn is altering the policy options of developing and transition economies. Furthermore, the ability of those countries to influence the WTO is beginning to increase. This three-way interaction between globalization, the WTO, and the trade and development strategies of developing and transition economies is explored in this article with a view to drawing out implications for further action by governments of Southeast Asian countries for the early twenty-first century. Those actions certainly involve removing, or not introducing, certain types of government interventions in markets, especially those whose inappropriateness is increasing with globalization. However, attention is also given to the question of what new government actions may be required -- at international as well as at national levels -- to maintain or improve the smooth functioning of economic and political markets.

The remainder of this article is organized as follows. Section II defines globalization and briefly describes indicators of its growth. Section III summarizes the technological aspects of globalization relevant to ASEAN countries. Section IV notes the changes in national economic policies that have contributed to globalization. As discussed in Section V, the General Agreement on Tariffs and Trade (GATT) and now the WTO have added significantly to those governmental contributions to globalization. The concluding section of the article explores the implications of these developments for the policies and strategies of ASEAN countries in some detail. Particular attention is given to rural development strategies, because globalization is likely to strengthen urbanization and thereby add to the burden of adjustment to economic growth that rural areas traditionally bear.

II. Definition and Extent of Globalization(1)

Globalization could be defined simply as the decline in costs of doing business internationally. One of its key effects is to enhance the international integration of markets for goods, services, technology, ideas, financial and other capital, and labour. An indicator of its progress is reducing differences in prices for those products and factors across space (within and between countries). That and related effects of globalization are being felt by all countries of the world, especially in open economies such as Southeast Asia.

As was evident in Seattle in late 1999, when trade ministers of WTO member countries tried to meet the expectation of launching the next round of multilateral trade negotiations, not everyone favours globalization. Trade union representatives of some low-skilled workers in rich countries fear it threatens their members' jobs, while environmental groups fear it contributes to national and global environmental problems. Others simply prefer their country to be more self-sufficient in producing what its citizens consume. Protestors from among such groups were sufficiently mobilized in Seattle to at least contribute to the postponing of the launch of the next WTO round.

Both technological and governmental barriers contribute to the costs of interacting internationally. Falls in transport costs, the huge decline in communication and information costs, and cuts in tariff and non-tariff governmental barriers to trade in goods and services have combined in the late twentieth century to accelerate globalization to an unprecedented speed that shows no sign of abating.

While the extent of the acceleration in globalization cannot be captured in a single statistic, several provide partial indications of what is involved. A standard indicator is the comparison between trade and Gross Domestic Product (GDP) growth. …

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