More explicitly, economic globalization, in its most recent form, has been limiting the capacity of states to determine their own policy outcomes in three main ways: through trade and economic integration; financial markets; and the competition for employment. Due to the increasing pressure of international competition in trade markets as well as the increased mobility of capital and multi-national corporations, states are incentivized to cut labour costs, to reduce the price of goods and services, reduce taxation to make their domestic market more competitive, and to decrease the size and scope of the welfare state....
The human world is complex and there are likely to be a variety of causes of the retrenchment of welfare policies in developed states, like the UK. Ideological commitment to welfare provision, domestic institutional frameworks, and the local specificities of each economy, mediate the extent to which globalization impacts on the extent of policy making autonomy within nation-states. Nevertheless, the root cause of this shift has a global economic foundation. Without increased economic integration and dependency, without the opening of capital markets, without competition for employment and specialization it is unlikely that states would be forced to choose between economic growth and social welfare provision. In an era of new economic, social and political challenges, when welfare services and support needs to expand to meet need and demand, globalization is limiting the range of policy options available to states, limiting state sovereignty, entailing a retrenchment of the welfare state in developed nations. If the state no-longer has the capacity to provide the economic and social rights its citizens demand, the question is, what or who will?"
Is the international economic order that restrictive? Many feel that the nation state has not lost its relevance even though globalization has gained prominence. Other international trade law experts feel that there is sufficient scope within international trade law to exercise domestic policy space. Thus, this pitting globalization against domestic sovereignty would not entirely be true. We also notice that inspite of reduction of trade barriers and protectionism, States do play an active role in national discourse. Globalization has not impacted many areas of domestic discourse. The State is at liberty to pursue its national agenda based on democratic decision making in almost all areas of governance. International trade rules do not proscribe the role of the State in providing benefits. Neither does it prescribe an economic model to be followed by the State to engage with its citizens. An active "State" is not necessarily an anathema to globalization subject to the restrictions that WTO law places on every State.
Ofcourse, it cannot be blatantly protectionist or discriminatory.There are limits to State sovereignty but it does not imply that the role of the State in disbursing welfare and providing for its citizens is impacted drastically.One normally takes extreme positions in the debate on globalization - either that State sovereignty is completely eroded and a state of doom is in store or that globalization offers all the answers that the State cannot. the truth, like everywhere else, is somewhere in the middle. It is the constant endeavor to find that middle ground that must engage policy experts and administrators.