Question

List and evaluate three often-cited concerns over globalization.

Explain the following statement: "With international trade, there are both winners and losers."

Answer 1

1. Globalization is meant to be about free trade, where all barriers are eliminated, but there are still many barriers. For example, 161 countries have value added taxes (VATs) on imports, which are as high as 21,6 per cent in Europe. The U.S. has no VAT on it. The greatest challenge for developing countries is that jobs are lost and moved to lower-cost countries.

Workers in developing countries like the US face pay-cut requests from employers who are trying to export employment. This has created a climate of fear for many middle class employees who have little influence in this global game.

Large multinational companies have the potential to use tax havens in other countries to avoid paying taxes. Multinational companies are accused of social inequality, unequal working practices (including forced labor pay, housing and working conditions) as well as lack of respect for the environment, mismanagement of natural resources and environmental harm.

2. Economists have long argued that, while freer foreign trade increases the overall standard of living in a region, it also creates domestic winners and losers. Many who are affected by foreign trade are likely to resist more liberalization and advocate for protectionism, undermining the economic benefits of globalization to society as a whole. If the benefits of trade are widespread but the losses concentrated, disaffected workers will become a political electoral district that overturns the liberalization process.

Some claim that developing countries are winners and developed countries are losers, and that higher incomes gained by middle-class families in China come at the expense of lower wages and job losses in the United States. However, it is important to note that foreign trade produces winners and losers (at least in relative terms) in all countries.