Editor's Pick:

We must resist de-globalization

By David Greenaway (China Daily European Weekly) Updated: 2011-05-20 10:34

Ancient Egypt's trade in the Near East might be considered an early example. More recognizably, the Silk Road between China and the Roman Empire and the efforts of traders and explorers during the Islamic Golden Age represent important landmarks in the process.

Fast-forward to the present day and we find a truly worldwide nexus of trade, technological and financial integration, investment and migration, embodied and exemplified by global organizations including the International Monetary Fund and the World Trade Organization. In some respects, the so-called death of distance is all but complete.

The criticisms of globalization are well known. Increased inequality, poverty and social exclusion, imbalances in economic power and double standards in international rules are regularly cited. They present challenges that have to be managed. However, they must be weighed against very real and tangible gains.

Globalization brings more efficient use of scarce resources, a greater and cheaper range of goods and services, reduced poverty, faster economic growth and rising living standards.

The last two of these benefits are clearly linked. Taking some random examples, we can easily demonstrate how even small differences in growth rates lead to large differences in living standards.

In 1900, the GDP per capita of Argentina and Austria was $2,765 and $2,882 a year. During the course of the next century their growth rates were 1.13 percent and 1.94 percent. By 2000, their GDP per capita was $8,544 and $20,077.

Looking at more recent success stories, both China and India had highly protective and inward-looking economies prior to the 1990s. Even by 1992 China's tariffs on imports averaged more than 40 percent and India's a prohibitive 90 percent. By 2008, China's average tariff was under 10 percent and India's under 30 percent.

To date, China, of course, has substantially outperformed India. Greater roles for foreign direct investment, export development and technology upgrading - all key elements of globalization - have been crucial to the disparity.

China's rise has become perhaps the defining story of globalization. More dramatically than any other nation, it has shown how increased globalization can lead to an increase in both the quantity and quality of available productive assets.

Globally, meanwhile, the numbers speak for themselves. Worldwide merchandise trade in 2005-2006 amounted to $11.8 trillion and services trade $2.7 trillion; foreign investment flows stood at $916 billion; and foreign investment stocks were worth $10.1 trillion.