What is globalization? According to Hill (2011), globalization is a trend which makes a world economy become more integrated and interdependent. There are two types of globalization—globalization of markets and globalization of production. More specifically, globalization of markets refers to seeing different markets as one huge global marketplace, while globalization of production means that use national differences in the cost and quality of factors of production (such as labor, energy, land and capital) to take advantages. This essay will identify the drivers of globalization as well as the effects of the trend towards globalization.

Chief among the causes of globalization is that barriers to cross-border trade and investment are declining which have been driving both the globalization of markets and the globalization of production. For example, tariffs are cutting down on industrial goods, services and agricultural products and the use of antidumping laws is limited. According to WTO data (2009), average tariff rates have fallen significantly since 1950 and now stand at about 4%. As a result, from 1970 to 2008, the volume of world goods trade expanded more than 30 fold and the expansion of world production grew close to 10 times.

Another contributing factor is technology change, particular in communication, information processing and transportation technologies. For instance, the development of the microprocessor makes global communication more convenient and cheaper; the World Wide Web makes easier for buyers and sellers to find each other and allows business to expand at a lower cost; and the introduction of containerization significantly lowering the cost of shipping goods around the globe, thereby helping to drive the globalization of markets and production.

In addition, according to Daniels (2011), there are also some other facilitators of globalization such as the collapse of Communism, increased global competition and development of services that support international business.

When talking about the impacts of globalization, the results are mixed so far.