defining globalization

RECENT TRADE HISTORY

Trade accelerated after WWII with the massive exchange of goods, information and resources, first in the developed world and then in the developing world. This process of globalization began first in the developed world and then in the developing world. A “developing country” is defined by the World Bank in their World Development Report (1996) as a country having a less than $9,000 per capita GNP. In other words, each person earns less that $9,000 a year. According to this definition, 80% of the world’s population lives in a developing country. Most earn less than $1,000 per capita. The United States in contrast enjoys a $25,000+ per capital earnings (Ray, 1998).


Figure 1.1. Percentage of growth in world exports as a whole and by developing countries.
Source: International Monetary Fund, Issues and Developments in International Trade Policy (1992).

Figure 1.1 shows the growth the entire world was enjoying in the new export environment of the 1960s onward. Developed countries (DC) experienced the largest growth percentages as they entered into the markets for the first time in the 1960s-1970s. Upon their establishment within the export markets which included the development of infrastructure, protocol, and a demand for new products and materials, the less developed countries (LDC) began to also participate. Most of the export products coming from the LDCs are raw materials and primary products such as food, fuel, and minerals. These exports generate less internal income for the country than manufactured exports which have more labor and internal costs associated with their production.
Over the years, the LDC exports of manufactured goods has increased dramatically from 7% in 1970 to 17% in 1990 with most growth taking place in Asia and more trade occurring between LDC countries. This happened largely because of LDC government recognition of the importance of entering into manufacturing production as a security against fluctuations and vulnerabilities in the primary markets. Overall though the LDCs still have a very low percentage of global export manufacturing. Latin America produces just 2% of all manufacturing exports worldwide. (World Bank, 1995, United Nations 1992, Ray 1998). Manufactured exports are the more desirable of the two. Economically, more income is generated by manufacturing exports, due to higher wages paid towards manufacturing jobs and higher process received for manufactured products. Primary exports offer much fewer opportunities.