The term ‘globalization’ refers to the merging of national economies into a single worldwide system. Globalization has opened the markets, competition and the free flow of goods, services, capital and knowledge. Globalization has brought faster growth, easier access to new technologies, cheaper imports and greater competition. Globalization has shaped the world economy more efficiently and has created millions of jobs, as in the case of China and India. At the same time, globalization has left many countries behind, and this has affected developing countries as well as developed countries.
For instance, because of globalization, China’s real GDP has increased by approximately 400% while India has achieved approximately a 100% increase in real GDP. On the contrary, it is argued by critics that globalization denies food to those who are suffering from hunger and arms them with weapons. Globalization has generated wage inequality, high unemployment rates, has weakened educational and health programs in poor and underdeveloped countries [Suarez-Orozco, M. M. , Qin-Hilliard, D. B, 2004]. Globalization has made a yawning gap between rich and poor countries.
Due to globalization, the rich are becoming richer and the poor are becoming poorer. Under globalization, rich countries tend to control the world economic scenario through the global economic system. It is a pity to note that poor countries are finding it difficult to function even at a bare minimum standard of basic competence in the globalized economy [Mittelman, J. H. 2002]. Economic indicators show that West Africa has in fact has attracted a good share of FDI flow and is able to achieve good GDP growth mainly by opening their economies.
However, its long-term debt has increased to $4 billion in 2006 as compared to year 2000 and its debt servicing capacity has decreased to 8. 8 in 2006 from that of 11. 4 in the year 2000. This indicates that the West African economy is reeling under the debt trap, since it is importing heavily to cater its internal needs rather than concentrating on manufacturing or producing the same. The new global economy has pushed Third World countries into a quagmire of uncontrollable debt traps.
It is alleged that the World Bank and the IMF have precipitated the crisis by advancing loans of billion of dollars to Third World governments for ill-conceived projects and many countries have been compelled to borrow additional loans from the IMF mainly to service their massive debts [Michalopoulos, Constantine, 2001]. The U. S. , by employing inventive calculations and elucidations of WTO agreements on agriculture, has institutionalized subsidies to U. S. agro-exporters while dissuading developing countries from implementing new fiscal support for their detrimental farmers [Murphy, Sophia. 2002].
The principal aim of the WTO is to attain a laissez-faire trade system. Hence, it works towards the lowering of obstacles to trade. While the WTO has been called a democratic institution, in reality it is dictated to by the advanced industrialized nations and by the powerful transnational corporations of these rich countries. Developing countries have little say within the WTO framework. Cotton-producing West African countries argue that the EU as well as U. S. and Chinese subsidies to the agriculture segment are anti-competitive and are ruining West African economies.
Small and poor countries are not benefited by opening their economies and do not have the market access benefit, because their product offers may not look more attractive to other trading partners. It is a pity to note that small and poor countries individually account for less than 0. 05% of world trade, and collectively for about 1% of international trade. Hence, these countries are structurally at a disadvantage in terms of negotiating market access [Aaditya Mattoo & Arvin Subramanian, 2004].