The paper is focused on the difference between developed economies and developing economies. The focus is to look at the gross domestic products (GDP), export rates, and import rates of advanced economies with those from less developed economies. These are compared to see those factors that have resulted in the increasing gap between advanced economies and developing economies. These choices of data are chosen because they are very factual and explain the real world situation. Also, the datasets are useful in giving explanation to the continuous dependence of developing economies on advanced ones.
International trade has continued to grow in volume and the numbers of active players have continued to increase in the 21st century as globalization impacts is having a far reaching effect. Many Multinational and companies dealing in international trades are now able to quickly transact their businesses, as many governments have continued to relax barriers to international trade and beginning to operate an open economy. In contemporary times, the neo-liberalist views of open market economy have been adopted even in Eastern European countries, which hitherto practiced communism. This has further expanded the scope and areas of operation for international trade. However, it is observed from data that in international trade the flow of goods and services between advanced and developing countries still have some levels of lacuna to be covered. While trade balance is more favorable to rich countries, it is not for developing countries.
The choice of the data
Choosing the data for countries international trade inflows of goods and services is very germane in this era of globalization. The data is a good yardstick to measure the impact of globalization on international trade and how this has benefited countries taking in cognizance their development level.
It is a well-known fact that developments from globalization have constantly effective the levels of labour, industrialization, how manufacturing are conducted, the way government regulates machineries of production and many contemporary changes that have come to stay. Many countries are made to derived benefits from globalization through dealings with other countries at the comity of nations. They get to know, copy technicalities of producing and the sharing of innovative breakthroughs. Nevertheless, the gains of this globalization are sometimes threatened by the level of global order with the existing gap between the developed and advanced countries, and that of the developing countries is getting wider (ILO, 1999). Globalization has brought prosperity and inequalities; this is acting as a test to the limits of collective social responsibilities. According to Public Services International (2005), the features of globalization are that it is being dominated by multinational corporations that have made the international market scene as their own property where entry for new players are made very difficult and sometimes unreliable. The powers of these multinational corporations are growing by the day; where they have power to influence governments’ policies and turn it to their own advantages. Hence, there is a consensus to deny non- multinational corporation business from gaining power to act in the international scene.
At a simplistic level globalization is assumed to be expressed as progress in the way interaction between organizations, countries, people as if they are within the same village square. Multinational corporations influence goes beyond influencing government, but have close relationship with many inter-government organizations. They have advantages of winning contracts from International organizations like World Bank, IMF etc. this place these multinational corporations in a better position to enjoy most benefits accrued from the globalization process.
Globalization also effects labour workforce in organizations. Capital flows and production processes are being impacted positively by globalization. This makes markets to be interlinked. This has resulted to increase foreign take-overs via the coming together of organizations to form alliance and mergers and causing them to improve on their innovation in enhancing efficiency. This tends to destabilise the traditional employment arrangement in developing countries and thereby leading to jobs lost and fear from job insecurity.
This problem can only be turned around to the advantages of the small scale companies, when they get the same opportunities available to these multinational corporations and cheap raw materials and labour cost. Also if the various governments give them rebates in tariffs when exporting and importing their goods and raw materials, this will place them in a better position to compete and share the advantages available with globalization.
For this, the thesis statements to be adopted include the following null hypotheses (H0):
- There is no positive correlation between international trade inflows of goods and services and the percentage contribution in Gross Domestic Products (GDP) countries are likely to generate.
- Free trade has not benefited advance countries more than developing countries
Data analysis tool:
Correlation analysis is utilized in analysing the data for this report.
The data showing graphical presentation of merchandise good exports in $ billion and a corresponding value for merchandise good exports in percentage of GDP of countries listed.
In figure 1 we can see that the scatter diagram presents a relationship between the values of international trade exports in $billion to international trade inflow exports in percentage of GDP. While the values for inflow of goods exported in $ billion is well scattered, there is little dispersion or scattering of the values for international inflow of goods export in percentage of GDP. Hence, it is concluded that there is almost similar contribution of inflows of exportation of good to the countries list’s GDP. It means that the level of contribution each of the countries generated from its exports have contributed almost range of similar value to the value of its GDP.
The diagram in figure 2 shows a bar chart presentation of the values of international flow of goods exports in $ billion and corresponding values of international trade exports in percentage of GDP. It is observed from the diagram that majority of the countries listed have wide gap in the value of their trade exports and the corresponding contribution of this to their Gross Domestic Product (GDP). From the presentation Nigeria and Ethiopia from the diagram have closer measurements of their exports value and the percentage contribution of this to their GDP. The advanced countries such as United States, Norway, and Australia have greater gap in their international trade exports value and the corresponding percentage contribution of this to the GDP.
The diagram above shows the scatter diagram and correlating relationship between the trade inflow exports in $ billion and the trade inflow exports for goods in percentage of GDP. Hence, it is seen that the relationship is not well correlated from the diagram.
Analysis of data to show correlation relationship
Correlation coefficient (r) = -8960.0445 / √ 1083577912.047213
= - 8960.0445/ 32917.74
= - 0.27219500791974175626880824746778
The correlation coefficient takes values from +1 to -1.
The more positive the value for ‘r’ is the relationship of the variables that is measured and more negative the value of ‘r’ is the weaker the relationship between the two variables.
Hence, we conclude that there is a weak downhill negative relationship between international trade export of goods and the corresponding percent value of their contribution to Gross Domestic Product (GDP) of the countries.
- Based on the value of ‘r’ we will accept the null hypothesis (H0) which says there is a positive correlation between international trade inflows of goods and services and the percentage contribution in Gross Domestic Products (GDP) countries are likely to generate. Hence, we reject the alternate (H1) hypothesis.
Exports of merchandise goods ($ billion) between developed and developing countries
The graph in figure 4 shows the difference between international trade exports of the selected developed countries compared with those of advance countries. It is seen that the developed countries are far more prevailed in accruing the gains of international trade and the gain between the developed and developing countries is still very wide.
Correlation analysis to test hypothesis 2
Correlation coefficient (r) = 52948.88 / √2809538009.505458
= 52948.88 /53005.0753
Decision for hypothesis 2
The result for the correlation coefficient (r) shows that there is a strong perfect relationship between the exporting of merchandise from developed countries and those from the developing countries. Hence, this justifies the saying that developed countries are more favored to benefit more from the international open trade.
Hence, we reject the null hypothesis which says free trade has not benefited advance countries more than developing countries. And we accept the alternate hypothesis that free trade has benefited the developed countries more than the developing countries.
Policies of structural adjustments, free trade, deregulation, privatization, and removal of subsidies and all other ideas of the neo-liberals have also being conditionality put forward before any developing countries seeking for assistance in form of loan for economy resuscitation. These policies in developing countries has not only failed to revive the dying economies of these states, but also made them greatly dependent on the western developed countries. As Lairson & Skidmore (1993), argue, “as a mechanism, international trade has by its very operation, led underdeveloped countries to stagnation or impoverishment, and developed countries into automotive cumulative growth”. Scholars have come up with the ‘Dependency theory’ to show how modernization in less developed countries as simply the adoption of economic and political systems developed in Western Europe and the North America. While scholars like Ander Frank Gunder sees underdevelopment as the effect of the penetration of modern capitalism into the archaic economic structures of the Third World. He feels that the eventual development of the underdeveloped countries will be stimulated by indiscriminately transferring capital institutions and values from developed countries (Dibie, 2000, p. 17).
The dataset analyses have revealed several variables pertaining distribution in international inflow of exports and imports among developed and developing countries. The data has enabled the testing of the study’s hypothesis. Hence, we know there is no there is no positive correlation between international trade inflows of goods and services and the percentage contribution in Gross Domestic Products (GDP) countries are likely to generate. Also Free trade has benefited advance countries more than developing countries, and there is a wide gap to be filled by developing countries for them to enjoy the benefits of international open trade.
The problem of shortfall in international trade integrity small scale companies should try to first, gain market value in their domestic countries of operations. Then when this is achieved they can then strategize with the available resources to break into the global market. With adequate protection guidelines from international bodies like World Trade Organization (WTO) they can overcome the unfair practices from large multinational corporations. These protective measures and guidelines in place will enable multinational corporations give room for small scale commercial organisation, operating in domestic front; this will enable them to operate with less hindrances and obscurities.
Also, individual government in developing countries should formulate policies to protect their indigenous small scale industry, so that their countries shores will not be a dumping ground for the Multinational Corporation. This will make room for these small scale companies to thrive and develop, thereby creating a good ground for competition between domestic companies and large multinational corporations.
Dibie, Robert. (2000), Understanding Public Policy in Nigeria: A Twenty-First Century Approach. Lagos: Mbeyi & Associates (Nig.) Ltd
ILO (1999), ‘Human Resource Implications of globalization and restructuring in Commerce’. Tripartite meeting on the Human Resource Implication of Globalization and Restructuring in Commerce. Geneva.
Lairson, T. & Skidmore, D. (1993), International Political Economy: The Struggle for Power and Wealth. New York: Harcourt Brace Jovanovich College Publishers.
Public Service International (2005), ‘Globalization and Public Sector Trade Unions’ http://www.world-psi.org/globalization/ (9/12/05).