Economic Impact of Globalization
Globalization widely implies the interaction and connectivity of countries. In another context, globalization refers to the integration process, particularly for nations, usually at a higher quality level than historical stages of social development. There are numerous ways in which globalization impacts the economy, notably through economic policy changes. Although different countries adopt isolated economic policies, under globalization, evidence reveals that a nation is likely to align its policies with its counterparts to foster its economic welfare. Conventionally, globalization has been perceived as an instrument to aid worldwide economies by improving market efficiencies, enhancing competition, reducing military conflicts, and equitable wealth distribution among countries. Still, some evidence reveals that globalization can have both adverse and positive influences on a nation (Shopina et al., 2017). This paper aims to explore the impact of globalization on Trinidad and Tobago’s economy.
Economic Impact of Globalization on Trinidad and Tobago
Impact on Exports and Imports
Traditionally, most Caribbean countries, including Trinidad and Tobago, have been dependent on agricultural products as the primary source of export income. Trinidad, for instance, has been mainly reliant on sugar as its main agricultural commodity. However, due to globalization, economic policies, such as trade liberalization exemplified by the 1990s Banana wars, have significantly affected the export-import outlook of countries such as Trinidad and Tobago (Beckford & Rhiney, 2016). The economic impact of trade liberalization was felt by the twin nation through increased competition in the sugar market.
Globalization has opened the domestic markets to the influx of foreign products, both goods, and services. According to Beckford and Rhiney (2016), the impact of globalization through trade liberalizations such as agricultural tariffs have not only improved agricultural exports but also opened the T& T’s domestic market for the influx of food imports. The imports are usually cheaper than the domestically produced substitutes, effectively posing a competitive challenge for local farmers and their families. The aggregate impact has been a suppressed economic growth due to reduced and limited income for the farmers. This trend has always replicated in other manufacturing sectors, leading to an overall slow economic growth from a reduced Gross National Product.
However, the latest economic indicators revealed that the country is performing well in the export-import net off – the value or amount of money remaining following the deduction of all costs, taxes, losses, and other expenses. The 2019 economic review indicated that the economy had registered its second consecutive surplus from the balance of payments due to an increase in energy exports (“Review of the economy,” 2019). The trend was retained in the 2019 fiscal year, with the nation realizing the first-quarter balance of trade surplus totaling 486.7 million US dollars (“Review of the economy,” 2019). These indicators reveal that the Trinidadian economy is substantially benefiting from globalization due to the improved export market.
Rapid changes in technology have substantially impacted businesses in Trinidad and Tobago due to globalization. According to Small-Clouden (2016), increased interaction with foreign technology has substantially altered Trinidad and Tobago’s production methods and culture. Evidence reveals that most business organizations have devalued their technological culture and shifted to new production methods. The devaluation of the production technology models has resulted in overdependence on imported goods, which has effectively impacted the balance of trade realizable from the international exchange of products. The aggregate impact has been the demise of infant industries and small businesses resulting in slow economic growth due to reduced fiscal stimulators. As a result, globalization has undermined Trinidad’s significant economic growth due to the penetration of technologically advanced goods.
Tourism and Foreign Transactions Impacts
For the Caribbean countries like Trinidad and Tobago, tourism has continued to be a central pillar in economic growth, job creation, foreign exchange earnings, and interrelations with other economic sectors. Through unrestrictive measures, globalization has allowed Trinidad to experience an influx of visitors from other countries over the years resulting in substantial economic stimulation from income realized in this sector. The average tourist expenditure has increased yearly in Trinidad and Tobago and Barbados due to high stay lengths or periods by tourists in the two islands. Besides, these nations have experienced an inflationary spiral in the last few years, resulting in an average price increase for both goods and services. In effect, revenues from tourism have improved, yielding an aggregate improvement in the Trinidadian economy. According to “Review of the economy” (2019), Trinidad and Tobago’s total tourism visits rose to 501,088 persons in 2018, from 464,744 people in the previous year, reflecting a 7.8% increase. These figures highlight the impact of globalization on the economy through the improvement of cross-border travel.
Income from Labor Exports and Returns from Education Scholarships
Currently, global policies allow citizens to travel to other nations searching for jobs or transfers to new workstations as in the model of multinational companies. Through these frameworks, people may be able to work in better economies than their domestic countries, earning commensurately higher incomes than they would back home. Usually, the exported labor force sends back some of their income to their domestic countries, hence improving the net national product. Similarly, through globalized education programs such as scholarship, the Trinidad education market has improved significantly, with its companies importing foreign technology and skills, consequently stimulating local investments.
Globalization also plays a crucial role in improving a country’s job availability and human resource development. Concerning these aspects, T&T recorded a surge in the labor force involvement rate from 58.30% in the 2017 fourth quarter to 59.80% in the 2018 fourth quarter (“Trinidad And Tobago,” 2020, 1a). T&T also recorded a 0.19% increase in the unemployment rate during the year 2019 (2.69%). However, between the years 2017 and 2018, Trinidad and Tobago reported a 0.21 decrease in the number of unemployed individuals (“Trinidad and Tobago,” 2020, 1b). Regarding the human development index (HDI), this nation ranked 69 among 189 countries with 0.784 points in 2017 (“Human development indices,” 2019). Trinidad and Tobago further ranks 105 under the “Doing Business” hierarchy. This indicates the efficacy of globalization in improving the nation’s job availability rate as well as enhancing the efficiency of starting a business.
Through economic policies, globalization has allowed economies to borrow finances in the form of Euro notes and Eurobonds from syndicates to fund their domestic budget to improve their economic development status. As with many economies, the T&T government has substantially benefitted from external borrowing to finance its budgetary deficits or improve its fiscal performance. As of 2019, the external governmental debt was projected to grow by 6.8 percent from $24,710.1 million in 2018 to $26,394.7 million (“Review of the economy,” 2019). Due to these funding methods, there has been an improvement in global interaction by nations, which triggers better economic welfare, especially for developing countries such as Trinidad and Tobago.
Overall Negative and Positive Impacts of Economic Globalization on Trinidad and Tobago
Over the last two decades, the Trinidad economy has enjoyed increased cross-border trade, global partnerships, and foreign direct investment (FDI), especially with China. Through the bilateral partnerships, the country has attained infrastructural improvements, and income boosts through investment stimulations (Bernal, 2016; Gajadhar, 2018). T&T through the World Bank aid, evaluated its investment capacities to improve its productive sectors (“Trinidad and Tobago,” 2014). Due to this partnership, the country was able to boost its manufacturing and energy sectors, resulting in an upward economic spiral.
As with many economies, the Trinidadian government has substantially profited from external borrowing to finance its budgetary deficits or improve its fiscal performance. As of 2019, the external governmental debt was projected to grow by 6.8 percent from 24,710.1 million USD in 2018 to 26,394.7 million USD in 2019 (“Review of the economy,” 2019). T&T has had several domestic and foreign-based banks, as well as diverse ownership and investment in insurance, combined with incidences of conglomerates integrating a portfolio of financial services and other products (“Aspects of Trinidad and Tobago,” 2016). The increased global interconnectivity facilitates mergers and acquisitions, which are deemed healthy for economic growth.
The Trinidadian economic outlook has also greatly improved due to foreign exchange. Between October 2018 and September 2019, foreign currency sales in the domestic market amounted to 6,084 million US dollars, reflecting an 11.4% rise compared to the previous year for the same period (“Review of the economy,” 2019). As cited by “Review of the economy” (2019), dealers reported that the main customers for foreign currency sales above 20,000 USD in one year were distribution, settlement, and energy companies indicating an improved economic activity in these sectors. It was indicative of the stimulus influence of globalization in the capital markets of T&T.
However, global economic policies have also had a significant impact on this economy. For instance, the suppression of global oil and natural gas prices has impaired revenues generated from the country’s petrochemical industry (Khan & Khan, 2017). International impositions and primary barriers to renewable energy have also curtailed Trinidad’s economic growth from the energy sector. For decades, this country’s government prioritized economic diversification, an approach that is deemed as highly vulnerable due to the twin nation’s dependence on the oil and gas sector. Nonetheless, according to “Trinidad and Tobago” (2014), attaining this diversification has been difficult or elusive. Irrespective of the attempts to reinforce the enabling surrounding for the development of the private sector, the oil and gas domain’s contribution to the state’s GDP increased significantly from 31.3% to 43.6% from 2000 to 2012, respectively (“Trinidad and Tobago,” 2014). This consequently inspired the government to concentrate on economic diversification within the non-energy sector, especially by attracting FDI to trigger sustainable economic growth. The nation’s attempt to attract non-petroleum FDI, however, has been crucially weakened.
Traditionally globalization has been seen as an economic stimulator; however, through its largely non-restrictive economic policies, globalization can also pose a substantial economic challenge for countries. Through such items as trade liberalization and unrestricted travel, globalization can flood domestic markets with cheaper, high-quality imports or a skilled technically superior workforce that can greatly undermine domestic resourcefulness. In effect, domestic economies can begin experiencing downturns due to declining income from productivity aggregating a low gross domestic product. Globalization may also stimulate economic growth through improved exportation, which may yield a superior balance of trade as witnessed for the Trinidadian economy in 2018 and 2019. Through unrestrictive travels, globalization can also improve revenues realizable from sectors such as tourism. Analyzing Trinidad and Tobago’s case, it is arguable that globalization can significantly improve or diminish economic welfare.
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