ICC brief on globalization
22 November 2000

6. Globalization, multinationals, smaller firms, and consumers
Globalization rewards firms that are innovative and competitive, whether multinational or smaller enterprises. As global companies enter local markets, local companies enter global ones. The resulting competition increases product quality, widens the range of available goods and keeps prices low. Consumers everywhere are the big winners from the globalization process.

Even before globalization, a goodly number of multinational firms had worldwide reach, most of them American, European and Japanese in origin. They had gone global the hard way, before governments adopted the raft of measures which facilitated globalization as it is today. It is only logical that such corporations are well placed to benefit from the additional advantages of globalization.

But this is not a zero-sum game. Multinationals - defined as companies which engage in international production - will not flourish at the expense of small firms and consumers; all will flourish together. For one thing, as global companies enter local markets, local companies will move into global ones. Some of them may in turn become global players themselves. According to UNCTAD, (1999 World Investment Report, UNCTAD, Geneva, 1999) the top 50 multinational corporations from developing countries held $105 billion of foreign assets in 1997, the last year for which figures are available. There are now 60,000 multinationals of all sizes around the globe.

Technology is size-neutral. It favours small, aggressive and flexible high-tech start-ups just as much as it can add new dynamism to well-established corporations. Technology can also be transferred more easily than before, giving firms everywhere - of all sizes - a chance to take part in the global economy.

Globalization and openness make market access easier. Small firms which have been previously unable to export because their access to foreign markets was restricted, or because the cost of overcoming administrative or technical barriers was too high, can now sell their products and services abroad. The enlargement of their markets will enable them to produce more and benefit from scale economies, making them even more competitive. They will also benefit from the new market structures that are being created, entering profitable niche markets where discerning consumers are willing to pay a premium for speciality products.

In fact, consumers everywhere are unquestionably the big winners from globalization. As competition intensifies among companies of all sizes, the consumer is confronted with a wider choice of product at prices which are kept low.

Price increases for global products (cars, computers, home electronics) are systematically lower than those for local products and services (the cost of a haircut or of building a house). While consumer prices in the OECD countries increased overall by 175 percent between 1980 and 1995, prices for internationally-traded goods rose by only 40 percent. While an individual in Europe has cut the number of hours he needs to work to buy a TV set by 80 percent over the past 35 years, the cost of sending a letter, measured on the same scale, has not come down at all (Figures quoted in Globalisation of Markets - a business view, ICC corporate economists advisory group, Paris 1997).

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