World Economy and Globalization: A Comprehensive Analysis

This report provides a comprehensive analysis of the world economy and globalization, focusing on the world trading system, world monetary system, business strategies for US-based global corporations, and global commodity prices. It explores the impact of these factors on China, US, and European counterparts, and discusses the challenges and opportunities in the global economy.

ESSAY

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
a) The World Trading system .....................................................................................................1
b) The World Monetary System..................................................................................................2
c) Business strategy for US based global corporations and its European counterparts...............3
d) Global commodity prices.........................................................................................................4
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................7

INTRODUCTION
The present report gives details of world economy that how major drivers of
globalization helps the nation state to be more competitive global economy. It also gives
emphasis on how china is using this drivers to become the largest economy in upcoming years.
The report shows how world trading system works and in what ways its giving benefits to china
and US Business strategies for Global corporation and what are the global commodity prices.
The present report contains the details regarding the business strategies is that the US should
adopt those strategies that can help the nation to win the competitive situation arising in the
world. The report also give emphasis on how the commodity prices of different nation occur and
how exchange rate system help the countries to take advantages from the globalization.
MAIN BODY
a) The World Trading system
The world trading system advert to impermanent agreements that contains the rules and
regulation that are followed by the countries for proper international trade. Working with WTO
The US market is able to protect the interest of US and European country's business. Main aim
of this system is to avoid the global trade barriers (Bhagwati, Krishna and Panagariya, 2016).
Another goal is that rules that are made for international trade is transparent for the Countries.
The system Identifies the link up between the trade and development and especial contains that
are important for the development of Developing countries.
The World trade is governed by 164 member countries which contributes in making
major decision regarding international trade. The system have proper structure which contains
ministerial conference, general councils, appellate body and dispute settlement panels.
Ministerial conference is high decision panel that takes all top decision and aim at making
situation of free barrier trade and general body acts on behalf of MC and take care the working of
dispute settlement body and trade policy review body (Hofmann, Osnago and Ruta, 2017).
WTO main aim is to critics of globalization. If the member countries do not adhere rules than it
take actions against them. The goal of every member country to support the producers of goods
and services of their and making platform through with they can export and import without
facing any issue. As it will help the developing and under developing countries to corporate with
competitive developed economy (Kupriyanovsky and et.al., 2018).
The benefits that China will receive from WTO is that Its geographical and size benefit
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that it already have with membership of china (Meckl, 2017). The US and EU countries have
blamed the Chinese government that it is providing whole subsidies that have outcome into
excess capacity and frequently merchandising of goods. That have impacted other country's
businesses in Adverse situation. Chine's status as developing economy has given tension to
international organization as it's a strategy of it to receive special treatment. China has denied the
substance of WTO self designate their position. China has reverted to WTO by criticizing US
country that Its blocking its appointment with legal proceeding body. This division have
represented the tension between US-China relationship. China is trying to use all these disputes
in favourable manner and trying to become the world's largest economy.
Us and European country have good trading relationship which world's 3rd largest trading
partners (Payosova, Hufbauer and Schott 2018). Europe has become deeply integrated with the
global market. The development of trade is possible if the properly managed (Askar, Shirazi and
Samani, 2018). The major action that the EU should take to be on large is that it should improve
its GDP growth, increase more inbound and outbound logistic, its top on trading economy so it
can give competition to chine and become world's largest developing economy (Hoekman,
2020).
b) The World Monetary System
An international monetary trade is system that form set of rules for nations and helps the
nation to get funds from other countries currently for 189 countries (Dowd, K., 2020). It is a
platform where government of countries decide exchange rate system for cross borders trade. As
the complexity of financial market and international trade is increasing it has become important
to decide value standard currency for nations. It manages control over internal monetary trade
among countries and make sure that there is no compel against the agreement made by
government of country (SHAROV, 2020). It not only motivates the nation to improve their
balance of payment but also helps in overcoming deficit situation so it won't give adverse impact
on economic crises (Teslya and Podolskaya ,2020.). IMF classifies the activities in 3 parts like
Surveillance, technical assistance and lending. It also play important role in terrorism and money
laundering. It provides policy advice in respect to prevention from financial crises of nation.
China has world's 3rd largest foreign exchange reserve and changes in operation of
monetary system has affected the interests adversely (Shiroyama, 2020). Other developing
countries and china do not participate much in modified monetary system. China's growth is
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indicating that it can be the international current soon and can give competitive to dollar as
international currency. As the international monetary system has been established with the view
of coordinating the monetary institution, banks and economic growth related to it. The economic
power of US has been declined on large scale compared with earlier time. US has lost the ability
to maintain the stability and development of economic system on its own. Therefore, china is
giving cut throat competition to US and Eu countries. It has always blamed by developing
countries that Us or European country has used IMF as instrument to fulfil their country's
personal policy (Eichengreen, 2019). Global economy has imbalance have been serve as major
issue of instability of the world economy.
Main aim of European monetary system to stop the huge fluctuation between European
countries and inflation stabilization (Gourinchas, Rey and Sauzet, 2019). Exchange rate
fluctuation is controlled through exchange rate mechanism for pegging national exchange rate
and slightly deviation from European currency Unit (Kalmakova, 2016). Under the European
monetary system exchange rate can not be changed if both member country and European
country is in agreements (Sharov, 2018).
c) Business strategy for US based global corporations and its European counterparts
The US based global corporations and its European counterparts have to design its
business strategy effectively to develop the US economy into tightly integrated global economy.
They need to compete with China in terms of the business strategy formulation so that China
does not become world's largest economy. With the evolution of globalization the business
strategy for US multinationals shall be- Limit the China exposure- The most prominent business strategy for US global
companies can be to limit the exposure in China (De Graaff and Van Apeldoorn, 2018).
Many businesses with a gold rush mentality have expanded their businesses in China, but
the experience shows that many of such have had hard times generating the profitability
with its business operations. The US multinational companies are not able to position the
brand in Chinese markets and so the operational efficiency is very low leading to further
lowering down the margins of the company. Corporate Patriotism- The practice of corporate patriotism is very important for the US
MNC's and its European counterparts as millions of jobs have been exported from US to
China. These jobs were exported for availing the cheap labour of China but now since the
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wages are rising and also more spendings are made for the social benefits of the society,
the labour is no cheaper (Jacks, 2019). And if the US companies wishes to move out of
China they risk the disruption of their supply chain by the Chinese by retaliating to their
actions. Global supply chain- China holds control over the global supply chain in the
international markets. This is the main barrier to the growth of the US global business
arena. The US global companies should design their business strategies to assume control
over the supply chain either by taking various manufacturing initiatives or develop such
supply chain with other Asian countries (Jadidzadeh and Serletis, 2018). The main threat
of moving out of the Chinese market is that they shall disrupt the supply chain of the
businesses which can be cured only by generating efficiency in the distribution of the
supply chain. Research and Development expenditure- The research and development spendings can
be increased by the global companies of the US markets so that they can develop a
competitive edge over China. In order to develop into a tightly integrated global economy
it has to allocate higher budget to the research department (Lasserre, 2017). This shall
help in taking initiatives in the newly developed technology, product diversifications and
the building up of efficient supply chain.
 Free market competition- The free market competition for boosting the efficiency,
availing cheaper resources from China is threatening the international markets of US as
in that the laying down of prices is taking place and so it is ultimately affecting the
profitability margins of the companies (Shambaugh, 2018). The business should
recognize and utilize their home advantages.
d) Global commodity prices
The global commodity prices denotes that the quantity of goods and services can be
exchanged at the prevailing price. Some indices have been formed internationally against which
the price level changes are seen (Wang and Lu, 2016). With these indices the price transparency
and easy comparability have been established across the geographical boundaries. Consumers of
the goods are now able to choose the most profitable deal by comparing the prices of the
commodities. The most commonly used indices in the US market are the Consumer price index
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(CPI) and the Producer price index (PPI). The CPI primarily measures the rate of inflation which
is key factor in taking various financial decisions.
Some of the critically considered global commodity prices has been of oil which is the most
volatile in the commodity market. The price change in oil shall alter all the processes price and
finally changing the consumer price at which it is exchanged. Apart from oil the second most
essential commodity price shall be of gold. The comparison of gold prices across geographical
boundaries is most prominent and also gold reserves are maintained by the country as assets.
China is the key player in the global commodity market and impacts its prices a lot. Over the
years China has rapidly increased its consumption and the demand as compared to the US
markets (Ward, 2019). Since China is having huge demand of some of the global commodities
like soya bean, iron ore, copper, nickel and lead, it shall unnecessarily hike the prices of the
commodities.
Such an instability in the commodity prices shall lead to negative impact on the economy's
growth, income distribution, financial resources and poverty etc. These price level changes can
impact the rate of inflation of the country and sometimes the relative strength of dollar. In order
to succeed in the global markets US shall have to lower down the impact of China on the
commodity market. Apart from that the commodity prices can also respond to the natural
disasters in the country (Yip and McKern, 2016).
By the end of 2020 the commodity market is gaining the momentum due to shortfall in the
supply and rise in the demands of the commodity.
CONCLUSION
This project highlights the era of globalization where countries are striving to become a tightly
integrated global economy. The US global corporations and its European counterparts are
competing to become the world's largest global economy. The project report shall be reflecting
the world trade system and how the US multinationals can improvise the system to generate the
competitive edge over China. The project also includes the world monetary system and its
objectives. It explains how the monetary system of China is different from that of the US and
what advantages it provides to the businesses and its operations. Another part of the report
covers the detailed analysis of the business strategies that are to be adopted by the US global
companies to win over Chinese companies. Some key business strategies include the limiting the
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exposure in China, taking initiatives to build the supply chain and newer technologies. Lastly it
demonstrates the global commodity prices and how US can improve these prices to compete
internationally and develop the global footprint.
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REFERENCES
Books and Journals
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Challenges. MIT Press.
De Graaff, N. and Van Apeldoorn, B., 2018. US–China relations and the liberal world order:
contending elites, colliding visions?. International affairs. 94(1). pp.113-131.
Dowd, K., 2020. Money and the nation state: the financial revolution, government and the world
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Eichengreen, B., 2019. Globalizing capital: a history of the international monetary system.
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Jadidzadeh, A. and Serletis, A., 2018. The global crude oil market and biofuel agricultural
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Wang, H. and Lu, M., 2016. China goes global: The impact of Chinese overseas investment on
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Ward, J., 2019. China's Vision of Victory. Atlas Publishing and Media Company.
Yip, G. S. and McKern, B., 2016. China's next strategic advantage: From imitation to
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