Nobody seriously expects a reversal of globalisation, and despite the financial crisis and subsequent recession, the pace of globalisation looks set to continue, with rising incomes and increased consumption in emerging economies round the world being key drivers.
So what determines whether a country will be a winner in globalisation? Can governments play a role in helping their companies to develop fruitful relationships with customers across national boundaries?
Domestic regulations form a key part in determining how successful an economy is in encouraging new business creation and creating wealth. However, businesses that are looking to expand or export overseas will also need to consider whether a particular location makes a suitable base for internationalisation.
Similarly, when an economy is already well exposed to internationalisation, with a high trade to GDP ratio, international competition forces it to focus on areas of comparative advantage. This helps ensure that scarce skills and resources are deployed where they are most productive, which should create a virtuous circle.
UHY has looked at some of the factors that reveal which economies are best placed to take advantage of the expected growth in global trade.
Some major economies, such as the USA and Japan are falling behind in the race to capitalise on globalisation and could miss out on future economic growth as a result. The USA and Japan with scores of 3.7 and 3.0 respectively were surprisingly far behind both China in, with its score of 4.6, and the EU member states, with an average score of 5.2 out of a maximum of 10.
While Jamaica was not included in the 27 countries in the current survey, we would fall at the bottom end of the scale. However recent changes in our Tax laws will go a far way in improving our ranking.
The easiest way for national governments to increase the benefits that their country reaps from globalisation is through the weapon of taxation. Tax policy is crucial to ensuring that a country remains globally competitive.
Some countries impose taxes on profits ‘repatriated’ from overseas operations, which can be a disincentive for businesses contemplating expanding their operations. In the USA, one of the last few countries still operating such a system, this has been a hot topic of debate. China too imposes a high tax on repatriated profits.
While creating the right tax environment is no guarantee of global success, putting the right incentives in place for companies to compete overseas, and ensuring that these incentives remain attractive, is a good first step. Full report. In-depth study on ‘How well placed are rival economies to take advantage of growing globalisation’db
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