ABSTRACT
Economic globalisation means that the international networks of trade, foreign direct investment (FDI), portfolio investment and information have intensified to such an extent that strong worldwide economic interdependence has resulted. The major driving force of economic globalisation is the reduction of the transport costs in the private sector, due basically to the fact that technological progress and innovation has reduced the costs of transport and communication. Another driving force is the reduction of policy barriers to trade and investment. In addition, the enormous advances made in computer technologies, the fall in computer prices and recent technical progress in telecommunications facilitate access to information and reduce the price of communication, especially in those countries where deregulation and privatisation has taken place. Similarly, the World Wide Web is reducing cross border barriers to zero. However, distance is still an important barrier to trade, not only due to the existence of transport costs but also due to the role of what is called social distance. International interdependence stemming from globalisation could be asymmetric, causing some disparities, which would explain why small countries are generally less exposed to the international economy than large countries.
