GLOBALIZAITON: IS IT MORE THAN TRADE?

1. GLOBALIZAITON: IS IT MORE THAN TRADE? Joseph J. St. Marie The University of Southern Mississippi

2. ABSTRACT This paper explores the relationship between trade and other forms of globalization.  We ask the question:  do higher levels of trade actually increase other forms of globalization such as political, social, and cultural globalization. 

3. INTRODUCTION This paper asserts that globalization is not a one dimensional phenomena or action but a multi-faceted process that is not only economic but political and cultural as well. Trade as a wealth creator allows for increased incomes between trading partners and with increased incomes generally comes more trade. We assert that trade is not only a purveyor of increased national income but it also expands globalization in not economic ways, such as the spread of culture and political influence. We test our propositions with a quantitative model.

4. GLOBALIZATION Fundamentally, it is the closer integration of the countries and peoples of the world which has been brought about by the enormous reduction of costs of transportation and communication and the breaking down of artificial barriers to the flows of goods, services, capital, knowledge, and (to a lesser extent) people across boarders. (Stiglitz 2003) “Globalization encompasses many things: the international flow of ideas knowledge, the sharing of cultures, global civil society, and the global environmental movement.” Stiglitz (2007)

5. ECONOMIC GLOBALIZAITON • Trade is often a source of growth • Growth is on average good for increasing income in developing nations • Foreign Direct Investment is correlated with economic growth • Short term capital liberalization can have adverse effects on income • Staged liberalization can help alleviate negative impacts on income • Education and health care are important factors ensuring the poor benefit from globalization • Poverty measures should include education and health as well as income • Elite control of an economy or political apparatus have negative impacts on income • Political reform is needed in many developing countries

6. Data The data for this paper comes from the KOF Index of Globalization (Dreher, 2006). This data set is comprised of 95 countries from 1970 to 2003. The index measures globalization on three primary factors—economic globalization comprising actual trade and FDI flows and trade restrictions. A second measure is Social globalization comprised of measures on personal contact, information flows and cultural proximity. Political globalization is measured by a countries participation in diplomatic missions and international organizations.

7. The Model The present study utilizes a model of the form: Y = β1 T + β2 I + ε Where: Y is a measure of globalization T is a measure of trade I is income level There are four models, one for each of economic, social, political, and cultural globalization. Since there are four trade variables and four globalization measures there are 16 models. The income variables are used in all models to control for the effect of income level on globalization.

8. Imports and Globalization This table depicts the results for each of the globalization model. Each column represents a different globalization measure and is used as a dependent variable. The rows depicts the factors. All variables are significant in models using economic, social, and political globalization at levels less than 0.001. Two factors in cultural models are not significant. All the significant factors are positive indicating that an increase in the corresponding variable would result in an increase in the corresponding globalization measure.

9. Exports and Globalization This table shows the results for similar models with exports replacing the imports variable, other things remain the same. The results are very similar; the same factors are significant, and all are positive. Furthermore, the coefficients are very close to the previous model indicating similar effects.

10. Total Trade and Globalization In this table total trade is used with the income levels. Here again there is no major difference among the models. The coefficients for total trade are different than the coefficients for import or export. Nevertheless, they are all positive and significant at 0.001 level.

11. Net Trade and Globalization The results of using the net trade are very different than the results for other models. In particular, all coefficients for net trade are negative. This would have been different had the net trade was calculated as import – export instead of the other way around. Other results are very similar to the previous models with one exception. The coefficient for net trade is significant at less than 0.05 instead of 0.001.

12. CONCLUSIONS • The results indicate significant support for the hypothesis that trade increases the various forms of globalization. First, imports, exports, total but not the net trade increase all forms of globalization. • Social globalization tends to be less influenced by trade than overall globalization. Social globalization includes such measures as telephone traffic, tourism and the media in general. The findings indicate that while social globalization tends to increase with trade that those nations who are wealthier tend to benefit most from the effects of trade and social globalization. • Political globalization measured by the political involvement a nations has with other nations and the rest of the world is also increased by trade.

13. CONCLUSIONS • Cultural globalization is the laggard in this model. Trade does increase cultural globalization but much less than the other forms of globalization. This may be due to the fact that culture is a difficult concept to measure or that developing nations simply see their culture under siege by larger, wealthier nations who seek some sort of cultural hegemony. • The implications are that the effects of globalization will continue to expand as long as trade expands and lesser developed nations turn to trade as a way to increase national wealth. The lagging aspect of cultural globalization needs to be addressed by nations and firms who provide FDI so resistance to the benefits of trade and globalization are not rejected by the poorest nations.