The Impact of the Globalization on International Trade in Sri Lanka

1. Globalization

Globalization is a multifaceted, multidisciplinary topic in its broadest reach. It is an integration of countries and people which is made possible by the reduction of transportation and communication cost. It includes economic, political, social and cultural aspects.

For the globalization to be effective countries should open their economy, lower their barriers to trade for the capital, goods and services to flow. Without this policy shift globalization would be less effective.

The effects of Globalization are manifold, affecting various aspects of the world economy to bring about overall betterment. The IT revolution coupled with the growing embrace of free market policies in the wake of communism, have led to the incomparable amalgamation of economies and mixing of cultures around the world.

2. Globalization and International Trade

International trade is the main element of globalization. For countries this has increased access of their products to larger, international markets. This access has created new opportunities to benefit from international labor and to be competitive in world market.

An actively trading country benefits from new technologies that are open to it from its international trading partners. This helps the developing countries to be competitive with the developed country.

International trade and globalization has created risks for the infant industries and those that are less competitive. To protect these industries protectionist policies are applied which restricts the international trade and globalization.

To get the maximum utilization from international trade countries should consider the comparative advantage and specialize in the areas which they have less opportunity cost.

3. Globalization and International Trade in Srilanka

Historical evidence shows that Sri Lanka was a hub in the silk route in the early days which allowed it to benefit from international trade. The country was rich with spices, gems, and elephant which attracted the traders from Far East countries to have trade relations with the country this made Sri Lanka a core in international trade centuries ago.

To facilitate international trade Sri Lanka became a member of the World Trade Organization (WTO) in 1995. Increased integration into global economy has created both positive and negative impacts in Sri Lankan industries.