Globalization and Regionalization As The Counteracting Forces Essay

Globalization and Regionalization As The Counteracting Forces - Essay Example Globalization is characterized by economies opening up their local markets for international firms, which then creates a global market ideally open to all countries and firms. On the other hand, through regionalization countries seek to form economic blocks primarily to create preferential treatment for their firms as regards access to each other’s market as well as resources. In essence, globalization and regionalization are forces that act in opposite directions. This paper will demonstrate that the origins and purposes of regionalization are too varied and distinct to be classified as parallel to the process of globalization. Globalization and regionalization: forces in conflict In the contemporary world, various world economies have been pursuing a number of market approaches in an effort to promote their economic growth (for less developed countries) or economic stability (for industrialized countries). Regionalization, or formation of regional trading blocks, has been am ong the major approaches aggressively pursued by countries across the world. The European Union, North Atlantic Free Trade Area (NAFTA) and Association of East Asia Nations (ASEAN) are classic examples of regional trade blocks. As noted earlier, regionalization process gives more focus on certain regions rather than the global economy in general. Regional blocs tend to minimize interactions between different parts of the world, particularly in terms of trade. They in effect tend to threaten the process of globalization. Countries within a regional trade block apply a number of mechanisms to effect preferential treatment of their fellow members, thus giving them a competitive edge over non-members. One of the most used mechanisms is discriminative tariffs. Others are government subsidies, and import quotas, technical assistance (Mucchielli, Buckley and Cordell, 1998). Regional trade blocs are among the most popular the regional integrations developments that have and continue to char acterize the modern world economy. Many countries have joined one or more regional blocks. In furthering their course, members of a regional trade block may go as far as taking such drastic measures as removing both tariff and non-trade barriers between the member states and thus offer complete and unrestricted access to each other’s market and productive resources (Kacowicz, 1998). Since regional blocks are more inclined towards implementation of policies that protects the state members from global competition, it tends to obstruct global trade liberalization. As a result, trade between members of a regional trade block and non-member states suffers significantly. This evidently discourages the process of globalization. Since globalization process is characterized by the move towards free trade and increased interdependence among different economies despite of regional differences, regionalization effectively becomes a powerful force that tend to move opposite to the directi on of globalization (Mucchielli, Buckley and Cordell, 1998). When punitive tariffs are imposed on imports from non-member states, the imported goods automatically become more expensive compared to similar goods from a trade partner within the regional trade block.