Totalization Agreement has the tendency of investment funds and businesses to move beyond domestic and national markets to other markets around the globe, thereby increasing the interconnectedness of different markets. Globalization better said is the shift in the direction of a more incorporated and interdependent World economy. Globalization has had the effect of markedly increasing not only international trade, but also cultural exchange.
some intellectual define globalization as convergence of prototypes of manufacture and expenditure and a consequential homogenization of customs, while others strain that globalization has the prospective to take countless miscellaneous appearances. In economics, a wide description is that globalization is the union of prices, wages, products, profits and rates of interest in synchronization with developed nation norms. Globalization of the financial system depends on the position of international business, human migration, incorporation of pecuniary markets, and mobility of capital.
The International Monetary Fund observes the increasing financial interdependence of countries all over the world through rising quantity and multiplicity of cross-border dealings, gratis international capital flow, and comparatively faster and extensive dissemination of technology. In contemporary economic scenario the prevailing trend is expansion in the global market. Global market expansion is nothing but a concept of serving customers beyond the limits of domestic market and in economic scenario considered a key growth strategy.
Global market expansion is a business reality that every company encounters at some point in its evolution. Under such circumstances every business venture must balance risk with rewards, the risks when expanding internationally can be less predictable and in the same way the rewards can be more elusive. The companies, which are looking for sustainable ways to grow and diversify their revenue streams, consider global expansion as a strategic option.
There are several factors behind the trend toward expansion in the global market. Companies require a global presence. For both offensive and defensive causes, companies cannot overlook opportunities outside their home markets. A companys requirement for a global presence arises from two factors, their capability of leveraging domestic relationships outside their country and a requirement from domestic customers to support the companys products internationally.
A global expansion allows companies to replicate successful domestic strategies in international markets, potentially in markets with lower competitive intensity. Additionally Global market expansion provide the companies large untapped markets, advantages of low labor costs, savings of shipping costs, speed and efficiency of delivery system, etc. These factors make the Totalization Agreement between the US and Mexico more important. (Fletcher, 2006) The Totalization Agreement between the US and Mexico could be better understood in the light of the history behind it.
For more than thirty years US has been establishing agreements relating to social agreement internationally keeping in mind that these agreements should coordinate with the program by the Social Security of the US. These agreements based on the aspects of programs related to Social Security of the US are cumulatively pronounced as totalization agreements. Under these agreements there are certain advantages. However, from the point of view of the US these advantages can broadly be divided into two parts. The first objective is to eradicate double taxation for workers employed in foreign nations.
Without the agreement an individual would have to pay two times as tax on the earnings. The current report suggests that the benefit of Totalization Agreement between the US and other countries has help US workers working abroad at lot. The cumulative savings are estimated at $800 million per year. The second objective of Totalization Agreement between the US and other countries is to provide an individual who is part timer as a worker in either in the US or the foreign country the proportional tax benefit that is so important for the worker.
In this context the agreement between US and Mexico becomes very important in the context of financial benefits. It has been estimated that once the agreement of Totalization is signed between the US and Mexico the workers from the United States in Mexico would be able to save about an estimated $140 million. These savings would be made in the parameters of Mexican taxes relating to health insurance and social security measures. However, it should be mentioned that this estimation is calculated on the basis of a 5 year term of computation.
Again, in the perspective of humane benefit it would immensely help the workers who have been working in Mexico for a shorter period of time in both US and Mexico as because this agreement would help them to receive the benefits. (King, 2006) It could well be stated that Mexico is a prominent partner of the US in terms of trading. In fact it is the second largest after Canada. This way it becomes important for the US to indulge in Totalization Agreement with Mexico. As it is Mexico is already under the Totalization Agreement with Canada making it mutually beneficial for both countries.
The advantages and disadvantages of Totalization Agreement with Mexico have been heavily scrutinized and debated in recent years. Proponents of Totalization Agreement with Mexico say that it helps developing economies catch up to highly developed industrialized economies much faster through increased employment and technological advances. Critics of Totalization Agreement argue that it weakens national sovereignty and allows rich nations to ship domestic jobs overseas where labor is much cheaper.
The main advantages of Totalization Agreement are as such, increased free trade between the two nations, increased liquidity of capital allowing investors in developed nations to invest in developing nations, conglomerates are having greater flexibility to operate across borders, global mass media binding the world together, increased flow of communications allowing vital information to be shared between individuals and conglomerates through out the globe, greater facility and speed of transportation for goods and people, reduction of cultural barriers increases the global village effect, spread of democratic ideals to developed nations, greater interdependence of nation-states, reduction of likelihood of war between developed nations , increases in environmental protection in developed nations.
Along with the advantages there are also several disadvantages of Totalization Agreement, such as increased flow of skilled and non-skilled jobs from developed to developing nations as companies look for the cheapest labor, increased probability of economic disturbances in one nation effecting all nations, business influence of nation-states far exceeds that of civil society organizations and average individuals, apprehension that control of world media by a handful of conglomerates will limit cultural expression, greater possibility of reactions for globalization being violent in an attempt to conserve cultural heritage, greater danger of diseases being transported inadvertently between nations, spread of a materialistic lifestyle and outlooks that sees consumption as the path to affluence, international bodies like the World Trade Organization interfere with national and individual sovereignty, increase in the probabilities of civil war within developing countries and open war between developing countries as they compete for resources, decrease in environmental integrity as polluting corporations take advantage of weak regulatory rules in developing countries like Mexico. It could well be stated that in this competition organizations are gradually loosing their ethnic values and morals. Today competence of an individual or a corporate is judged by his or her ability to cope up with constant fundamental changes in the organizational structure. All over the world, organizations aligning new products engineering teams around pit crew model.
Cross functional teams to design, manufacturing sales and service engineers work along with the workers, who at some point of time have stake in the product. This ensures manufacturing and sales people having their say all through the design process and building up the manufacturing capability early on that is currant engineering. The goals are simple, such as speed, equality and competitive price. Commodities have become international for most industries and the impact of engineering is significant. In many organizations, the learning curve in engineering has become an unaffordable luxury. Competitive pressures mandate finding ways to reduce the total time required to introduce new products in the market.
Competition along with more complex production and distribution environments requires identifying and reducing necessary costs, such as costs associated with development, manufacturing, distribution and service. However, it can be stated that totalization agreement would have a distinct effect on the Trust Funds but it would be a long termed and virtually negligible effect. It has been estimated that the social security of US bears a cost of about $100 million yearly. This has been the trend for the last 5 years. Thus the totalization agreement would enable the workers of both the US and Mexico to enjoy the advantage of cost benefit as the dual taxation would be eradicated.
It should be mentioned in this perspective that the cost benefit of US during the year 2002 was around $198 million with Canada alone under the parameters of the totalization agreement. (Lamb, 2004) Thus in the conclusion it could be stated that there are both advantages and disadvantages in coming into a condition of totalization agreement with Mexico. However, when an international agreement is signed there are multiple aspects to be looked after and these are done keeping in mind the mutual benefits of the nations.
Fletcher, R; (2006); Beliefs and Knowledge: Believing and Knowing; Howard & Price King, H; (2006); Social Security Today; HBT & Brooks Ltd Lamb, Davis; (2004); Cult to Culture: The Development of Civilization on the Strategic Strata; National Book Trust.