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THE CHALLENGE OF GLOBALIZATION
Underlying the Asian crisis was a widespread lack of understanding of the extent to which
globalization has changed the world. Asian countries that took advantage of the easier
access to foreign capital afforded by the emergence of highly liquid global money markets
neglected to put in place the safeguards needed to integrate these new capital flows
into their financial systems. The message for Canadians in the Asian crisis is not that
globalization is a threat, rather it requires reworked rules for trade and investment that
recognize the benefits of free markets while ensuring the access to information that
free markets require to avoid destabilizing shocks. In other words, markets must be
structured so they can operate smoothly. Internationally, Finance Minister Paul Martin is
heading up the Group of 20, which is attempting to devise new architecture for the
global financial system. However, this is only one, albeit important, part of the
equation. In essence, “globalization” describes the process that is changing the entire
international economic system at the start of the 21st century. It has to be kept in mind
in developing almost all economic policies, domestic or international. Canada has been at
the forefront in adapting to globalization: our entry into NAFTA was both a recognition of
the inevitable integration of the North American economy and a bold — though
perhaps unintentional — move to force on Canadian industry the type of rationalization
required to compete in global markets. 2 As already noted, the result has been a rapid
integration of our economy with that of the US. Since the advent of the Canada-US
Free Trade Agreement, Canadian investment in the US has risen almost 150%; exports are
up even more. The process of integration has in many cases been painful, and is far from
complete. But it has left important parts of Canadian industry in a strong position to
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services. By 1980, 74% of Malaysia’s manufactured exports came from its EPZs. 2 The seeds of
transnational manufacturing in Asia had been planted.
At around the same time, a revolution was taking place in global transportation. Containerization of
cargoes increased speed and efficiency and reduced worldwide shipping costs. Asian exporters quickly
took to containerization with the result that by the 1980s, Hong Kong and Singapore boasted the
two busiest containerports in the world. While containerships were cutting shipment times across
oceans, the movement of goods and people by air also took a huge step forward with the introduction
of the jumbo jet — Boeing’s 747 in 1969 and the McDonnell Douglas DC-10 the following year. These
two giant aircraft brought down the cost of international air travel dramatically, and made it possible
to move perishable cargoes faster and more economically than ever before. It also meant professional
staff could travel from their head offices to offshore plants with relative ease and at reasonable expense.
While the movement of physical goods was becoming more efficient, the transmission of information
was on the threshold of a revolution. The introduction of high-capacity transoceanic co-axial cables,
then satellite communications and fibre-optic links made communications across oceans or continents
as easy as a call across a city. By the 1980s, conversations and data could be exchanged almost
instantaneously. The advent of computer-based communications and, in 1992, the World Wide Web,
forever removed distance as a barrier to the flow of information. Today an office in North America can
monitor and manage the inventory or product flow of a plant in Penang or Shenzhen.
The new ease of communications has had its most dramatic effect in financial services. Funds can be
moved internationally with a few keystrokes of a computer keyboard. Buy or sell orders can be executed
in a network of stock markets around the world, 24 hours a day. Whole new markets have emerged