Globalization of production and trade
In the last twenty years, opportunities in worldwide and commercial trade have increased leaps and bounds:
- Firstly, this has been helped by the toppling of old political, ideological and customs boundaries between countries and regions: the parting of the Iron Curtain; the collapse of the Socialist economic regime; the progress made in the integration of Europe and other regions such as South America (MERCOSUR), North America (NAFTA) and the Pacific (ASEAN). Worldwide efforts to dismantle trade barriers via the General Agreement on Tariffs and Trade (GATT) and the Organization for Economic Cooperation and Development (OECD) are also making slow but steady progress.
- Secondly, advances in information and communications technology since the 1990s have helped reduce time and costs involved in both everyday business transactions and sourcing new business partners to a fraction of what they were in the 1980s. This has been achieved by the "networking" of all corners of the world with a low-cost internet service as well as the development of other accepted global standards such as Windows-based PC systems, EDIFACT and EAN coding - all connected by English as the global business language for communication.
- In the field of logistics, the above advances have been enhanced and supported by progressive standardization in the field of packaging and containers thanks to the International Standards Organization (ISO). The result has been reduced transaction costs for worldwide commercial trade.
- Expanding the network of suppliers and customers until it covers the entire globe has therefore become of greater interest to industrial and commercial enterprises. They have free choice of materials, workers, expertise and underlying conditions for their activities in those countries and regions that promise the best value for the least money - and they are exercising this choice ever more frequently and with ever greater boldness. The transaction costs for such extensive shifts in value-creation activities (known as "dislocation" in logistics terminology) are now much less of a barrier to international business than they were in the past when high customs duties, complex document processing as well as expensive, slow and unreliable modes of communication and transport were typical.