Thoughts On Trade – Part 2

Please be sure to read Part 1 before continuing.

To trade or not to trade; globally that is. [cont.]

This is not an argument against globalization, but an attempt to open eyes and say “Hey, are you cool with this being the future.” Even though the future is largely uncertain you can estimate conceivable outcomes based on current actions and states of nature. This is what the point is here. So onward we go.

Firm A can’t pay $1 a day here but can move 6000 miles and whoa $1 a day is in fact possible. All the additional costs associated with moving production to another country far far away are recouped with the $1 per day labor. An executive may say “this is cool because now these same products sold domestically will be a degree cheaper and our bottom line will be a degree fatter.”

A question here arises: why would a domestic government be so cool with this situation when in fact that same government has policies in place against another country far far away from producing far far away and dumping domestically? In fact the country far far away winds up moving production into the domestic country, production ‘which doesn’t count for quotas’, so they can sell their products freely without government grief [a great example are Japanese car manufacturers who moved production into the United States in the 1980’s due to the Reagan administrations imposing of Japanese automobile import quotas, or more commonly called “voluntary restraint agreements”]. In that same breath that same government however, will allow one of their domestic firms to move production far far away and then dump this production domestically.

Domestic government A says if you do business here you must abide by these labor laws, these environmental laws and these tax laws. Or you can move your production to another country where you don’t need to meet any of our laws or restrictions and then you can just export your production back home. Destroy jobs and tax revenue, it’s okay, because if you aren’t braking the law on our soil we don’t give a flying f, just please go across the boarder and ship all your ‘domestic law breaking’ product back home, cause we as consumers will love to buy it and wont feel guilty that we are hurting our domestic country, or your country; because hey it’s being produced in a country far far away, oh and did I mention it’s so cheap?

Yes, that’s quite a critical assessment of free trade. However, it is probably also an inaccurate assessment and in contradiction, ideal globalization interwoven with free trade does and can yield magnificent results. A compilation of nations, which allow the free flow of capital goods and ideas, should and does improve life throughout the world, while modest in some places and grand in others. The current situation is not crystal clear and won’t be for years to come. An important question to ask is: are there really good jobs, aside from low wage service jobs, available for domestic workers that loose a well paying job due to globalization? Are we really lifting people out of poverty in developing trading nations, when they make $1 per day and of which many work in conditions that would be deemed illegal domestically? I hope the answers to both of these questions are yes. In terms of both, time will be the judge, and when we have a definitive answer it will most likely be too late to do anything about it.