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Globalization Globalization has become one of the biggest issues in the economic world today. Many people believe globalization is a good thing, and there are also many people who think it is bad. Some of the comparative advantages of free trade are that the allocation of the worlds resources are more efficient, it will lead to lower prices for consumers, and it will also provide more choice for the consumers. Even though there are these noticeable advantages of free trade, there are still people who believe globalization is a bad thing.
In the news, many of the reasons for and against free trade are examined. Here are some of the points given from those articles. On January 13, 1998, Stephen Golub, professor of economics at Swarthmore College, led the sixteenth seminar in AEIs series, Understanding Economic Inequality. His presentations sought to dispel fallacious but widespread views concerning the effects of competition from low-wage countries in international trade, including the view that such competition has significantly increased wages inequality in the U. S. The argument that low foreign wages has provided an unfair competitive advantage has been widely believed in the United States for at least 150 years.
On the question of whether competition from low-wage countries is the cause of the widening income gap in the U. S. , many agree that wage inequality reflects greater demand for skilled labor, as evidenced by the growing wage premium earned by college students. There are two possible causes of the increasing demand for more sophisticated skills: international trade and skill-biased technological change. International tra!
de does not increase the demand for relatively higher skilled labor, as would be expected from the theory of comparative advantage. But many studies of this issue conclude that trade with low-wage countries has played, at most, a secondary role in income inequality. The studies show that technological change is the main reason for the shift in demand for labor. As a result, this article points out that globalization does not affect income inequality.
Trade with low-wage countries is very small relative to the U. S. GDP. Globalization with these countries does not do what most economist report. (Labor Costs and International Trade) In the next article, Globalization: Benefits and Responsibilities, U.
S. Ambassador Richard Hecklinger reports his views on globalization. In his introduction, he states that globalization is a phenomenon that touches every one of us. This statement is true because free trade causes many things to be better for consumers. Later in the introduction, Hecklinger says that the entire society [has] a responsibility to work together to take full advantage of globalization and to minimize any negative impact[s] it might have. In the first section -- Markets, Poverty, and Globalization -- he starts off by saying that open markets and rules-based trade are the best means we know of to lift the standard of living.
He points out that international trade and investment are essential to the prosperity and well being of our citizens. He showed a statistic of among developing nation that showed that from 1970 - 1990, economic growth rates were 4. 5 % for those who were opened to! free trade, and less than one percent for those who blocked trade and investment. The second point he makes is that economic growth is the best and probably the only cure for poverty.
In studies done, out of 125 countries with relatively close relationships in overall income, 108 of them had increased income among there poor. The global economy offers countries markets for the products, lowers prices and expands choice for consumers and domestic industries alike, creates jobs, and ultimately reduces poverty despite disruption to some sectors. Of course, open markets and competition will always allow some people to become rich... [, but] disparity in income levels is less important than whether people are moving out of poverty, and whether they are given the opportunity to benefit from economic growth. The third point he makes is that globalization does not mean the end of local business, ethnic identities, or national culture. In fact, revolutionary changes in trans! portation and communications obliterate many barriers to global market entry, creating countless opportunities for micro-entrepreneurs.
These three points are the main reasons Mr. Hecklinger believes globalization is a vital part of international economics. (Globalization: Benefits and Responsibilities) Next, an article by Andrew Kohut shows the varying views Americans hold on globalization. In a Pew Research Center nationwide survey in April, 43 % of the respondents said that the future of global economics would help the average American, while 52 % said it would hurt. The survey shows that as the earnings of the families decreased, so did their belief that globalization would be beneficial. Another survey showed that, on the average, most American families are better financially now than they were a few years ago. But once again, they found that financial satisfaction is also decreasing as the family's income levels decrease.
Wages also continue to be a source of concern. Only 39 % of Americans say they earn enough money to lead the life they want. With the expansion of globalization, 67 % of Americans worry that good jobs will begin to move oversees, and that they will be left with jobs that do not pay enough. Although most Americans favor free trade, most also city! city the specific policies and agreements. To conclude his article, Mr.
Kohut states that the dissatisfaction showing in Seattle is less important than a more widespread public optimism about future economic gains. This seems to be one of the main benefits of free trade. (Americans Hold Varying Views About Benefits of Globalization) The next article, Economic Integration -- Benefits and Costs, shows two of the effects of international trade. The first effect discussed is the static effect. First, they talk about how trade is created. In earlier studies done, imposing tariff[s] results in some efficiency losses to a countrys economy. Economic integration has the opposite result -- by removing tariffs...
this loss becomes a gain. The removal of a tariff reduces the price back to the world price, which allows for cheaper prices for consumers. Removing a tariff allows both the production distortion loss and the consumption distortion loss to be restored to the economy. These two areas now become gains.
Economic integration can also lead to trade diversion. This is not in the best interest of all member countries. Trade diversion occurs when member countries are not the most efficient producers of a good. Member countries will still trade with the countries offering the best price, but the eco! nomic block can distort these prices. By buying goods from member countries with a lower price, the importing country might get a less efficient product.
The country with the higher price might produce those goods at a better quality, but others will not buy from them because of their price. There is also a dynamic effect of International trade. In this effect, integration leads to a larger market within the block, allowing countries to take advantage of economies of scale to reduce prices. Integration also allows for specialization by member countries. Rather than having all member countries producing a large variety of goods, they can agree to allocate production of certain goods to certain member countries. This, again, means they can take advantage of economies of scale.
All of this leads to the question of whether economic integration is best type of free trade. Although conventional free trade gives maximum benefits to the entire world, economic integration! n inhibits this because it combines countries into groups with their own special privileges. This idea seems to be interesting. (Economic Integration -- Benefits and Costs) The next article researched gave some statistics on globalization. First, the corporate power shows that 2 / 3 of international trade is accounted for by just 500 corporations. This said it shows that transnational corporations have reached the greatest control over the process of globalization.
This article complains that the control of globalization causes the larger industrial countries to have much more power than the smaller developing countries. To explain, the turnover of the 200 leading corporations has increased from 3, 000 to 7, 000 billion since 1982. These corporations are dominating international trade. At the current moment international trade is expanding faster than the worlds economy.
This being said, trade is argued to be one of the main engines in economic growth. Even with this, developing countries are still having trouble competing with other nations. With all of this being stated in this article, I would have to disagree with them. Even tho! ugh these developing countries cannot compete with the larger ones, globalization is still making it better for them. This article does not show a stat that states the increased GDP in these developing countries.
I think they completely missed that stat. (Statistic Globalization) Recently Canada had a trade summit meeting in Ottawa to determine whether they should join the FTAA. One reason given was the implemented democratic clause. This stated that only democratic countries could be a part of the free-trade zone. A Canadian representative said this would undermine Canadas health and environmental laws, and would open up Canadian services to U. S. corporations (Canada: Summit... ).
During these trade talks, the Canadian government had to set up its largest security operation in its nations history. This was because most of the Canadian citizens did not approve of the new trade agreement being discussed. To break up the skirmishes caused by the people, the police fired rubber bullets and water cannons at them. These action brought to the attention of many involved, whether this type of attention helps or hurts the movement towards or against corporate globalization and how to best handle relations between protesters with diverse tactics (!
Quebec: One... ). One way for them to try to stop this madness is for governments to allow the citizens... to vote directly on the proposed deal (Canada: Summit... ). Prime Minister Jean Chretien came up with this idea because of the profound impact the FTAA will have on democracies throughout the hemisphere (Canada: Summit... ). A lot of the Canadian representatives called the meeting a bit wishy-washy. They were claiming that they did not believe they were receiving all the necessary information they needed.
In another article, Dustin Cameron gave his ten reasons why to oppose the FTAA. First, he stated that promoting the FTAA [will mean] Canada is doing American bidding. After the U. S.
Congress blocked fast track negotiating authority, Canada has began taking the lead in promoting the FTAA. Next, accepting the FTAA means facilitating the U. S. dominance.
Mr. Cameron says the FTAA is linking the rate of exploitation of natural resources to the needs of American consumers. Capital flows currently run from poor countries to the rich. This reflects unequal power in relations in the Americas, not sound economic principles. He argues that they should just build stronger national economies.
The third reason is that the exchange rate may become higher for them. The exchange rate has everything to do with what happens under the trade deals. Fourth, the FTAA is not mainly about lower tariffs for exports or cost savings for consumers. The reduction of tariffs has little t! o do with the FTAA negotiations. Next, Latin American and Caribbean islands need more help with their debts.
These countries cannot afford the new, increased debt levels caused by foreign investment. Sixth, the FTAA will promote the international capital model of development. This model consists of the rate of interest on foreign loans, the exchange rate, and the rate of growth in export markets. In the FTAA, the U. S.
gets most of the benefits from these areas. Another reason the Mr. Cameron opposes the FTAA is that the U. S.
corporations want the right to be treated as a corporate citizen of every other FTAA country. Of the 34 FTAA countries, the U. S. is the only one who would benefit if this were to happen. The eighth reason is that the FTAA will incorporate American protectionist measures. This gives the U.
S. the right to retaliate, to take measures of equal commercial effect against any industry it wants. This causes other countries not to try anything new because if they do, the Americans can take it and make it better. The ninth reason to oppose the trade agreement is that international agreements like the FTAA are instruments of U. S. policy.
The U. S. is the worlds strongest power, and it has no plans of giving up any advantages that status brings. The policies all benefit the U.
S. more than any other country. They are set up to make products cheaper for the American consumers. The number one reason Mr. Cameron opposes the agreement is that the FTAA will not be a free trade agreement. The U.
S. will still act against successful foreign exporters. The agreement has become a profit opportunity for American companies to initiate protectionist trade actions. These ten reasons given are not only reasons Canadians should oppose the FTAA. All member countries will have the same disadvantages.
From these reasons, I do not see why any country would want to join this. It seems like the U. S. has all the power in this agreement.
That does not seem to be fair. (Ten Reasons to Oppose the FTAA) In the next article, Globalization and the Poor Countries: Viewpoint of the IMF, many more ideas about globalization are brought up. In studying the effects of international trade, the IMF found out that even though living standards and the quality of life [is] steadily on the rise in industrial countries... it is also stagnating in a number of the poorest countries, in particular in Africa. Some of these African countries are even regressing. Also the income gap between the rich and poor countries has never been so high.
There are three reasons the IMF sees that might be the reason for this occurrence. First, the absence of associated measures essential to the viability of public and private investment projects is one reason. The second reason is that the tendency of donor countries to favor projects more in keeping with their own exporters' interests than with the needs of the countries receiving aid. The last reason is the propensity of recipient countries to give precedence to military spending or wasteful projects and, all too often as well, shortcomings in public administration or corruption.
The poorest countries are frequently left behind by globalization. These countries receive little investment or private capital. With this, they are unable to remain competitive in the export markets. Even with these problems, the most outspoken critics tend instead to come from the most advanced countries, and dub themselves defenders of the poor countries' interests.
These critics believe that the low income received by unskilled labor and high unemployment rates is the reason for the income gap. Still others believe that the technical progress and differences in education are much more at the root of the income gaps and unemployment problems in these countries. Even with these problems, international trade is crucial for growth of the global economy. The IMF sees the problems with international trade, but believe it is! very necessary for the improvement of the worlds growth. (Globalization and the Poor Countries: Viewpoint of the IMF) To conclude, I see many reasons for and against international trade. I believe international trade is a good thing, but there are many problems associated with it.
I think these trade agreements should have a section in them that states the a certain number of representatives from developed industrial countries should be placed in the poorest countries to help guide their corporations. Until this happens, I do not see globalization really improving these countries. They just do not have the technical advantages to keep up with the rest of the world. In contrast, I think globalization is a great thing for the rest of the world. As Colin Powell, U. S.
Secretary of State, says, trade and investment are the engines for ending poverty (Powell Promotes Globalization). All the studies I looked at showed globalization improving almost all areas. I think globalization should continue being explored and improved. Once a perfect trade agreement is reached, I think the worlds economy would take off and benefit all people to a great extent.
Bibliography Anderson, Sarah. Quebec: One More Crack in the Wall. web Cameron, Duncan. Ten Reasons to Oppose the FTAA. web Economic Integration -- Benefits and Costs.
web Globalization and the Poor Countries: Viewpoint of the IMF. web Hecklinger, Richard. Globalization: Benefits and Responsibilities. web Kohut, Andrew. Americans Hold Varying Views About Benefits of Globalization. seattle-i.
nwsource. com / opinion /kohut. Labor Costs and International Trade. web Powell Promotes Globalization. daily news. yahoo.
com / h /ap/ 20010427 /pl / powell global ization 1. Seal, Melanie. Canada: Summit Called Sham, Wishy Washy. web Statistic Globalization.
web OTHERS READ Delong, Bradford. Globalization and Neoliberalism. econ 161. berkley. edu / econ articles /reviews / alexkafk a. Dunphy, Harry.
Officials Discuss Global Slowdown. daily news. yahoo. com / h /ap/ 20010429 /bs / world economy 24. International Visitors Boost U.
S. Economy. web McIntyre, Kevin. Seattle, Round 2. web
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