The integration of national markets through international trade and investment, known as economic globalization, has had an enormous beneficial impact on the world. Based on capitalism and powered by advances in telecommunications, transportation and finance, globalization has boosted competitiveness, productivity, innovation, and standards of living. Plus, it has enabled companies and individuals to establish relationships anywhere in the world. But that's not all.

World poverty is rapidly falling and globalization is responsible, according to Laurence Chandy and Geoffrey Gertz of the Brookings Institution, a Washington, D.C.-based public policy research organization. In 2005, the World Bank estimated one in every four people in the developing world lived below the international poverty level of $1.25 a day. Since then, Chandy and Gertz say, the poverty rate has declined by approximately 70 million people each year, a number equal to the population of Turkey. More surprisingly, they conclude "It took 25 years to reduce poverty by half a billion people up to 2005, the same feat was likely achieved in the six years in between then and now." Chandy and Gertz credit a variety of factors that are all manifestations of global integration.

And who would know this better than former Mexican president Ernesto Zedillo, who said, "In every case where a poor nation has significantly overcome its poverty, this has been achieved while engaging in production for export markets and opening itself to the influx of foreign goods, investment and technology—that is, by participating in globalization."

International trade and investment also has become a vital factor in the economic growth of the United States. According to the Business Roundtable, an association of chief executive officers of leading U.S. companies, trade accounts for nearly one in every five jobs. It also delivers approximately $1 trillion in benefits annually to the U.S. economy or $10,000 per American household, according to Gary Clyde Hufbauer, Peterson Institute for International Economics.

What's more, workers in globally engaged companies earn substantially more than the average wage, the U.S. Department of Commerce says. Plus, trade and investment also benefit consumers by enabling them to purchase the best the world has to offer.

But globalization also presents difficult challenges similar to those introduced by the industrial revolution. Shifting from an agrarian society to an industrial economy created anxiety and fear, and compelled workers to learn new skills. Today, global integration has advanced the convergence of powerful technological and economic forces that are shaping the 21st century. This requires workers and companies to specialize in the production of more complex, value-added goods and services, a dynamic process that is not always easy.

In addition to stimulating economic growth, reducing costs and offering consumers more choices, international trade also encourages good government. Plus, it inspires cooperation and helps prevent global hostilities. Stated by the World Trade Organization, "sales people are usually reluctant to fight their customers. In other words, if trade flows smoothly and both sides enjoy a healthy commercial relationship, political conflict is less likely."

This article appeared on the World Trade Centers Association website, October 2011.

John Manzella
About The Author John Manzella [Full Bio]
John Manzella, founder of the Manzella Report, is a world-recognized speaker, author of several books, and an international columnist on global business, trade policy, labor, and the latest economic trends. His valuable insight, analysis and strategic direction have been vital to many of the world's largest corporations, associations and universities preparing for the business, economic and political challenges ahead.

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