Some people do not see international trade favourably: here a child protests against the WTO in... [+]
The world economy is shifting to a lower gear, according to World Trade Organization. Trade expanded in 2011 by 5.0%, a sharp decline from the 2010 rebound of 13.8%, and growth is expected to slow further still to 3.7% in 2012, due to a number of shocks, including the European sovereign debt crisis, oil disruptions, and the Arab spring.
A slow-down in international trade puts globalization and the efficiencies and opportunities open markets create at risk. Corporations that previously have been enjoying the benefits of globalization, now face unstable and unpredictable demand and business opportunities; and their products quickly become commodities, leaving them little or no pricing power that undermines profitability. Just take a look at the stock of large US export companies after China released data that showed a slow down in their economies last week: Toyota Motor Company (NYSE:TM) down 1.92%, Honda (NYSE:HMC) down 2.12%, GM (NYSE:GM) down 2.09%, Ford (NYSE:F) down 1.24%, Caterpillar (NYSE:CAT) down 0.52%, Sony Corporation (NYSE:SNE) down 7.30%, Microsoft (NASDAQ:MSFT) down .20%, Intel (NASDAQ:INTC) down 1.37%, Apple (NASDAQ:AAPL) down 2.82%, Cisco Systems (NASDAQ:CSCO) down 1.21 %, and 3M (NYSE:MMM) down 1.35 percent.
The bottom line: Investors in the world’s largest corporations must be prepared to assume both the high yields and the high risks associated with a global economy.
Also read The Good, the Bad, and the Ugly Side of Globalization
