Why We Should Embrace Globalization

• Author: Peter D. Sutherland
• Position: Director-General of the World Trade Organization and the General Agreement on Tariffs and Trade, is Chairman of Goldman Sachs International

The key difference between our era of globalization and the last one, which ended with the Great Depression, is that, for the first time, many companies are operating on a global basis. Although this change has raised fears among some people in both industrial and developing countries, it offers new and exciting opportunities for raising living standards worldwide.

The dramatic growth in cross-border investment and international trade over the past two decades, combined with the explosive growth in global communications and technology, is what most people think of when they think of globalization. Foreign direct investment (FDI) flows, which totaled $160 billion in 1991, soared to $1.1 trillion in 2000. And, while the volume of international trade also expanded dramatically (16-fold over the past 50 years), trade in components has grown even faster than trade in finished goods-components now make up about a third of world exports of manufactured goods, as firms increasingly outsource the parts they used to produce at home to subsidiaries or firms overseas.

Antiglobalization myths

Some antiglobalization campaigners find something intrinsically sinister in corporations' operating across borders. They seem to believe that, in general, multinational corporations care about nothing more than paying exploitation wages and avoiding taxes. The evidence, however, contradicts these generalizations: real wages have risen in the countries that are attracting FDI, and corporate tax revenues have been rising, not falling. Moreover, the local presence of internationally active companies creates strong pressures to raise local standards rapidly in the key areas of management, technology, and environmental quality and thus enables the host country to participate more effectively in globalization. I am convinced that the vast majority of multinationals conduct their affairs properly. (There are exceptions, of course, but that is what they are.)

The real problem with globalization, contrary to the myths dear to its staunchest opponents, is that the richest countries account for the lion's share of the increase in cross-border investment and trade. All of the developing countries taken together-including the six big Southeast Asian exporters-attracted just over 20 percent of last year's total FDI and accounted for only 27 percent of world exports of...