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What Is Globalization?

US Has Supported Globalization For Decades

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Globalization, for good or ill, is here to stay. But what is globalization? Globalization is an attempt to abolish barriers, especially in trade. In fact, globalization has been around longer than you might think.

Definition

Globalization is an elimination of barriers to trade, communication, and cultural exchange. The theory behind globalization is that worldwide openness will promote the inherent wealth of all nations.

While most Americans only began paying attention to globalization with the North American Free Trade Agreement (NAFTA) debates in 1993. In reality, the U.S. has been a leader in globalization since before World War II.

End of American Isolationism

With the exception of a spate of quasi-imperialism between 1898 and 1904 and its involvement in World War I in 1917 and 1918, the United States was largely isolationist until World War II changed American attitudes forever. President Franklin D. Roosevelt had been an internationalist, not an isolationist, and he saw that a global organization similar to the failed League of Nations might prevent another world war.

At the Yalta Conference in 1945, the war's Big Three allied leaders -- FDR, Winston Churchill for Great Britain, and Josef Stalin for the Soviet Union -- agreed to create the United Nations after the war.

The United Nations has grown from 51 member nations in 1945 to 193 today. Headquartered in New York, the U.N. focuses (among other things) on international law, dispute resolution, disaster relief, human rights, and the recognition of new nations.

Post-Soviet World

During the Cold War (1946-1991), the United States and the Soviet Union essentially divided the world into a "bi-polar" system, with allies either revolving around the U.S. or the U.S.S.R.

The United States practiced quasi-globalization with nations in its sphere of influence, promoting trade and cultural exchanges, and offering foreign aid. All of that helped keep nations in the U.S. sphere, and they offered very clear alternatives to the Communist system.

Free Trade Agreements

The United States encouraged free trade among its allies throughout the Cold War. After the collapse of the Soviet Union in 1991, the U.S. continued to promote free trade.

Free trade simply refers to a lack of trade barriers between participating nations. Trade barriers typically mean tariffs, either to protect domestic manufacturers or to raise revenue.

The United States has used both. In the 1790s it enacted revenue raising tariffs to help pay off its Revolutionary War debts, and it used protective tariffs to prevent cheap international products from flooding American markets and prohibiting the growth of American manufacturers.

Revenue-raising tariffs became less necessary after the 16th Amendment authorized an income tax. However, the United States continued to pursue protective tariffs.

The Devastating Smoot-Hawley Tariff

In 1930, in an attempt to protect U.S. manufacturers trying to survive the Great Depression, Congress passed the notorious Smoot-Hawley Tariff. The tariff was so inhibiting that more than 60 others nations countered with tariff obstacles to U.S. goods.

Rather than spur domestic production, Smoot-Hawley probably deepened the Depression by hobbling free trade. As such, the restrictive tariff and counter-tariffs played their own role in bringing about World War II.

Reciprocal Trade Agreements Act

The days of the steep protective tariff effectively died under FDR. In 1934, Congress approved the Reciprocal Trade Agreements Act (RTAA) which allowed the president to negotiate bilateral trade agreements with other nations. The U.S. was prepared to liberalize trade agreements, and it encouraged other nations to do likewise. They were hesitant to do so, however, without a dedicated bilateral partner. Thus, the RTAA gave birth to an era of bilateral trade treaties. The U.S. currently has bilateral free trade agreements with 17 nations and is exploring agreements with three more.

General Agreement on Tariffs and Trade

Globalized free trade took another step forward with the Bretton Woods (New Hampshire) conference of World War II allies in 1944. The conference produced the General Agreement on Tariffs and Trade (GATT). The GATT preamble describes its purpose as the, "substantial reduction of tariffs and other trade barriers and the elimination of preferences, on a reciprocal and mutually advantageous basis." Clearly, along with the creation of the U.N., allies believed that free trade was another step in preventing more world wars.

The Breton Woods conference also led to the creation of the International Monetary Fund (IMF). The IMF was intended to help nations that might have "balance of payments" trouble, such as Germany had paying reparations after World War I. Its inability to pay was another factor that led to World War II.

World Trade Organization

GATT itself led to several rounds of multilateral trade talks. The Uruguay Round ended in 1993 with 117 nations agreeing to create the World Trade Organization (WTO). The WTO seeks discusses ways to end trade restrictions, settle trade disputes, and enforce trade laws.

Communication and Cultural Exchanges

The United States has long sought globalization through communication. It established the Voice of America (VOA) radio network during the Cold War (again as an anti-Communist measure), but it continues in operation today. The U.S. State Department also sponsors a multitude of cultural exchange programs, and the Obama administration recently unveiled its International Strategy for Cyberspace, which is intended to keep the global Internet free, open, and interconnected.

Certainly, problems exist within the realm of globalization. Many American opponents of the idea say it has destroyed many American jobs by making it easier for companies to make products elsewhere, then ship them into the United States.

Nevertheless, the United States has built much of its foreign policy around the idea of globalization. What's more, it has done so for nearly 80 years.

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