Although this increase in globalisation was largely down to trade liberalisation, there must have been other factors involved as trade liberalisation was confined to Europe, whereas the US practiced protectionism throughout the period as tariffs remained largely between 40-50% (Chang, 2002). Even in Europe, only Britain and the Netherlands continued to follow the policy of free trade throughout the period. However, during this period free trade was also imposed upon the colonies of Europe’s various empires. In 1842, for example, China signed a treaty with Britain which capped its tariffs at 5%, and in the 1840s free trade was imposed on India by Britain and on Indonesia by the Netherlands (Nayyar 2006). Therefore, it is clear that at the end of the 19th Century globalisation was not as much promoted as it was imposed upon the less developed world. In this age of Imperialism, only Britain and the Netherlands stuck by the policy of free trade while other developed nations used protectionism where necessary. However in the ‘third world’ as it was known at the time, protectionism was not an option and so a large chunk of world output could be traded with no tariffs or taxes.
Since 1950, global markets are again becoming more integrated and the rate at which they are doing so is on the increase, with globalisation increasingly rapidly in the last 35 years. World exports increased from $61bn in 1950 to $883bn in 1975 to $6338bn in 2000 (Nayyar 1996). Although world output also grew between 1950 and 2000, it was at a slower pace than the rate of exports. In the latter half of the 20th Century, the vast majority of states across the world are members of the World Trade Organisation (WTO), which promotes free trade (and hence globalisation) by limiting, although not eliminating completely, tariffs and trade barriers. Most countries are also members of regional free trade blocs such as the EU, NAFTA and ASEAN which lower trade barriers among participating countries. Although there is still some protectionism present in both developed and developing countries, the prevailing view across the globe is that free trade is beneficial. Therefore, unlike in the age of Imperialism, all countries are participating in free trade by consent rather than by force which means the free trade agreements are more sustainable and globalisation is more likely to continue to increase in the future, barring another unforeseeable event like the Great War which broke down international trade in 1914.
It is clear that policy decisions to reduce barriers to trade and factor flows have had a very significant influence on the swift integration of markets over the past half-century, but another crucial factor is that both phases of globalisation coincided with a technological revolution in transport and communications bringing about key reductions in both time needed and the cost incurred for international trade to occur. The second half of the nineteenth century saw a key macro invention in the steam engine, which helped to reduce the cost of ocean-freight by two-thirds while increasing the speed of transport between 1870 and 1900 (Lewis, 1977). Furthermore, the opening of the Suez Canal in 1869 halved the distance from London to Bombay by ship, bringing about a huge reduction in freight costs between Britain and India (Nayyar 1996). Meanwhile, the spread of the railways combined with the introduction of steam engines vastly improved transport and communication domestically as goods and people could be transported more quickly and at a lower cost than ever before.
Similarly, the closing decades of the twentieth century saw the introduction of the jet aircraft (and many subsequent micro inventions which reduced speed and cost of the aircraft). The world also saw a technological revolution, with computers and satellites coming onto the scene and changing the way the world works completely. These technological breakthroughs have had a huge impact on reducing geographical barriers; the world is effectively a much smaller place than it was 50 years ago. There is a clear link between these breakthroughs and the increase of globalisation experienced in the past few decades. However, there is still some way to go before the ‘death of distance’. Although transport and communication costs are much lower now than they have ever been before, evidence suggests that distance still has a strong deterrent effect on economic interactions. The reason for this appears to be that transport costs have fallen proportionately more for short distances than long distances, as handling costs have fallen relative to fuel costs, which are on the rise in the face of scarce resources.
To conclude, there have been two key epochs of globalisation over the past few centuries, both of which have occurred simultaneously with a technological revolution in transport and communications. The first saw the introduction of the steam engine while the second occurred on the advent of the jet engine, information technology and satellites. This is no coincidence, as these inventions have significantly reduced both the time and cost of worldwide trade, making integration of markets a more feasible notion. The other trend present in both phases of globalisation is the relative absence of tariffs and other trade barriers, which is clearly necessary for globalisation to occur. In the age of Imperialism, colonies had free trade enforced upon them and the laissez-faire governments of Western Europe aimed to lower their tariffs, with Britain and Holland following a completely free trade policy. By contrast, by the end of the 20th Century most states chose to become members of the WTO which limited tariffs and promoted free trade, with several trading blocs forming across the world facilitating total free trade between member states. The key difference between the two epochs is that in the latter countries are choosing to follow a policy of free trade as they see themselves benefiting from it rather than having it enforced upon them, meaning that this time round globalisation is more sustainable and is likely to continue as countries can see the overall positive effect it is having on their economies.
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