Globalization continues to take shape across various parts of the world. Countries worldwide are opening their borders, making it easier for commodities, capital, and human resources to flow from one country to the other. World economies are now more interdependent than ever before. Besides the spread of international capital, nation-states have also benefitted from the spread of technologies. Markets have now globalized, and business activities across the world are now transcending national borders. The market integration has given birth to international bodies such as the World Trade Organization (WTO), the United Nations (UN), World Bank, and the International Monetary Fund (IMF). Voluntary international treaties have also emerged to strengthen the ongoing integration of nation-states. China appears to be the biggest beneficiary of the globalization and the eventual integration of markets. The global economy has continued to turn its attention towards China. As its market expands, China has continued to champion for globalization, trade, and cooperation. The changing economic dynamics brought about by globalization will influence the world trading system, world monetary system, global commodity prices, and business strategy.
The World Trading System
The world trading system refers to different modern arrangements of trade relations between nations or states. As Winham (2009) illustrated, the world trading system focuses on aspects such as the general agreement on tariffs and Trade (GATT). The world trading system further allows countries to converge and create rules that prevent unhealthy practices such as protectionism that result from nontariff means. Globalization has improved international trade. International trade is defined as the commercial exchange of commodities and services that occur in the context of international borders (Winham, 2009). The formation of organizations such as the WTO changed the world trade system by enhancing integration and interdependence among states. Trade plays a fundamental role in ending the perennial global poverty. The ongoing market integration promotes international trade, and countries tend to benefit faster than before. International trade enables nations to innovate, leverage productivity, and grow more quickly. Such countries are better placed to create more opportunities for people. For this reason, Winham (2009) argues against protectionism and strict tariff guidelines that limit international trade.
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China has been a member of the WTO for over two decades. The entry of China into the WTO formally changed the trade landscape in the country. Rosen (1999) illustrated, "WTO accession will formally commit China to dramatically reduce its tariff and nontariff barriers to imports of foreign-made goods and services." The last few decades have witnessed a global economic shift that has seen a growing focus on China. The country has responded by championing for cooperation, globalization, and trade. In return, China has also expanded its market across the world. A good example is the Huawei brand, which has transcended borders around the globe. Success in market integration has also relied on other factors, such as understanding and appreciating foreign culture. Countries must also remain aware of the political policies and regulations dominant in the country. As discussed by Lu (2018), protectionism might only result in short-term benefits. However, in the long run, the global economy can suffer tremendously if business and capital flow are affected. Based on China's case study, globalization and the market's integration have revolutionized the world trading system (Winham, 2009). However, China's aggressive nature has also resulted in friction leading to hostile business policies, as seen in the case of Huawei in the United States.
World Monetary System
The world monetary system encompasses the official arrangements and policies focused on achieving the international balance of payments. The monetary system also pays significant attention to the exchange rate arrangements. The world monetary system has failed to impress in the face of globalization. Therefore, this has called on the need to implement necessary reforms required to achieve the desired effects. Critics have maintained that the current monetary system requires immense reforms. As illustrated by Santor and Schembri (2011), “It has not facilitated the timely and symmetric adjustment in the real exchange rate necessary to accommodate the integration of China and other emerging market economies," (p.1). Therefore, a more efficient monetary system needs to be developed in the wake of the ongoing globalization. The current system in place has been described as a hybrid due to the lack of harmonized exchange rate policies. The economic recession experienced in 2007 to 2009 is partly accredited to the instability in the exchange rate policies. Since then, the G-20 countries have identified the need to reform the international monetary systems (Santor & Schembri (2011). Several policies and suggestions have been developed to create an efficient method that meets market integration needs.
First, the G-20 countries have proposed a system that will address the stock imbalances and the ubiquitous flow (Santor & Schembri, 2011). Secondly, and most importantly, there is a growing need to establish an alternative system other than the US dollar. Also, there have been calls to improve the special drawing rights (SDR) under the IMF's leadership. However, the quest for an increased SDR role has not augured well with the rest of the international community (Wang, 2017). The development of domestic currency and IMF intervention calls has asserted China's position in the global community. Throughout its history, China has continually advocated for an increased SDR role in shaping international policies (Lin, Fardoust, & Rosenblatt, 2012). Such a decision would make it easier for developing countries to exchange with their developed counterparts. Reforms to the world economic system must factor in the issue of exchange rates, which essentially refers to the price of one currency in relation to another. The continued globalization has also seen a push to have an international currency. The establishment of a universal currency would eliminate the fluctuations experienced during the exchange of commodities across international borders (Lin, Fardoust, & Rosenblatt, 2012). However, this remains a far-distant reality as superior and well-developed countries would have little to gain when exchanging using a global currency.
Global Commodity Prices
Globalization has directly contributed to the integration and of developing and emerging economies into the international economy. International trade has also become a fundamental aspect and contributor to the economy. The countries have responded by opening their borders and allowing capital flaws in the form of foreign direct investment. In the wake of these changes, immense attention has been placed on the global commodity prices worldwide. Although the global commodity remained low for many decades, increases were witnessed in the wake of the 21 st century (Wei, 2016). Commodity prices have been witnessed, especially as regards oil, raw materials, industrial inputs, and metals. The integration of the markets has also seen a significant increase in the prices of beverages and food. The increase in the prices is attributed to the rise in demand, especially in China and other Asian fast-growing economies. The growth in the demand is quickly outpacing the supply, and the trend can only be cushioned through price increases. Besides China, Russia has also reported a surge in demand (Wei, 2016). Countries from the former Soviet Union have also recorded a similar growth in the demand for commodities and services. However, evidence has shown that the current boom in prices is expected to reduce as supply continues to gain momentum in specific fields such as the food and metal industry.
For the longest time, the global prices of commodities have depended on the prices of oil. A small shift in the price of oil affects the price of goods and services. It is common knowledge that oil virtually controls every aspect of the economy. The integration of the markets means that the rest of the world relies on the Middle East and other oil-reach countries for supply. The dependence can have adverse effects on oil prices, especially when the demand is higher than the supply (Wei, 2016). The relationship between market integration and commodities prices can best be assessed using China as the case study. The growth of China as an emerging market dates back to the 2000s. During this period, the prices of commodities rose sharply. However, during the last decade, the country experienced a significant slump in its economic fortunes. Wei (2016) described, "China's slowdown began in 2011, energy prices have fallen by 70 percent, metals prices by 50 percent, and agricultural commodity prices by 35 percent." Therefore, this shows that China's influence in the market has a significant effect on commodity prices' behavior. China is influential in the world, thanks to its staggering commodity-consumption growth (Wei, 2016). Globalization and the integration of markets are not expected to have positive impacts on the prices. More price increases are expected thanks to the economic revitalization of emerging and developing economies such as China.
Business Strategy between Corporations in the US and Europe
Researchers have attempted to assess globalization from a business perspective. Two types of outcomes have often emerged. First, interdependency among countries has significantly increased. Secondly, various multi-faceted business aspects are involved. Examples of these aspects include political, economic, sociological, technological, and cultural tenets (Motohashi, 2015). Companies in both the US and Europe have also appreciated the need for cooperation through partnerships and mergers. Most of these organizations have changed strategy to realize that they need each other to succeed in the foreign markets. Globalization does not necessarily refer to the establishment of links. Instead, it compels n organization to establish standards as what happens in one company might influence what happens in the other. For instance, companies in the US and Europe have focused on developing tastes for their customers. For example, a store like McDonald's must ensure that its franchises in Europe adhere to the same standards of commodities and services in the US (Erixon, 2018). Major international corporations such as aircraft manufacturing and pharmaceutical companies must sell their products to foreign markets in a bid to have a return on the vast capital investment (Motohashi, 2015). The respective companies have relaxed trade barriers to ensure that companies can enjoy oversea markets without problems. Also, large firms in the US and Europe have demystified their research and development (R&D) to aid in the uniform advancement of commodities and services across the franchises.
According to Erixon (2018), globalization has improved output in the western economy. Firms are now specializing more and have increased their engagement in R&D. The same has also been witnessed in innovation and technological success. New companies across the two regions have thus received the much-needed resurgence to compete with their old adversaries. However, the emergence of China as a superpower has toppled issues in western societies, especially in the US and Europe. Erixon (2018) contended that China had been eliminated from the manufacturing market in North America and Europe as perceived as a threat. The recent trade wars between China and the US exemplify the intensified animosity between the two regions. The US and Europe are ready to protect their markets from infiltration by the East (Erixon, 2018). The integration of markets has also promoted the spread of technology across the companies. The use of technology has assisted in establishing green economies that adhere to international sustainability protocols. The integration of the European and American markets has led to an increased flow of commodities between the two regions. American firms such as Coca-Cola, Pepsi, Wal-Mart, and Google, among others, continue to thrive in foreign markets (Erixon, 2018). The favorable business and political environment between the two countries have facilitated the expansion of these corporations' markets.
Conclusion
The changing economic dynamics brought about by globalization will influence the world trading system, world monetary system, global commodity prices, and business strategy. The integration of the market continues to change the world trading system. Many countries have opened their borders allowing for the free movement of goods and services. China has taken this opportunity to spread its wings across various markets in the world. Globalization has also triggered the need to reform the world monetary system. The use of the dollar as the standard exchange model has proven restraining and limiting for nations across the world. Countries such as China call for more intervention by the IMF and the possibility of establishing a universal currency. The global prices of commodities have experienced an upward trend with globalization. Emerging economies such as China have toppled the demand-supply dynamics hence leading to the increase in commodity prices. Corporations in the US and Europe have continued to reshape their strategies to conform to globalization's needs. Such strategies have also included blocking potential threats such as Chinese firms to enable consumers to appreciate the local products.
References
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Lin, J. Y., Fardoust, S., & Rosenblatt, D. (2012). Reform of the international monetary system: a jagged history and uncertain prospects . The World Bank.
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Rosen, D. H. (1999). China and the World Trade Organization: An Economic Balance Sheet. Peterson Institute for International Economics https://www.piie.com/publications/policy-briefs/china-and-world-trade-organization-economic-balance-sheet
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Wang, H. (2017). China and the International Monetary System. Foreign Affairs https://www.foreignaffairs.com/articles/asia/2017-12-19/china-and-international-monetary-system
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Winham, G. R. (2009). The Evolution of the World Trading System – The Economic and Policy Context. Oxford Handbooks Online. doi:10.1093/oxfordhb/9780199231928.013.0002
