Globalization and the Impact on Term Paper

  • Length: 21 pages
  • Sources: 10
  • Subject: Economics
  • Type: Term Paper
  • Paper: #61296257

Excerpt from Term Paper :

For instance the World Trade Organization reports having "allowed First World countries to raise trade barriers protecting their companies, even as we have served as their forum for insisting that Third World countries lower their trade barriers more and more." (WTO,

The truth is that if richer nations were to open their markets to the LDC countries for increase opportunities of export, generated would be approximately $700 billion in additional trade for developing countries. (UNCTAD Trade and Development Report, 1999; in WTO,

The World Trade Organization relates that no known causal link exists between foreign investment and the reduction of poverty as approximately eighty percent of foreign direct investment in "in the form of mergers and acquisitions, little in the form of productive investment that creates jobs and exports."


The work entitled: "The North American Integration Regime and Its Implications for the World Trading System" states that the General Agreement on Tariffs and Trade of 1947 "was part of the Bretton Woods complex of international economic institutions to reconstitute the international economy following the Second World War." (Abbott, 1999) Embodied in the GATT were "server awl foundational principles of international trade relations. The most important of these was the unconditional and most favored national (MFN) principle embodied in Article I."Under the MFN rule, all member of GATT were obligated to extend "any tariff (or related) concession granted to one GATT member to all GATT members." (Abbott, 1999) the purpose of the MFN was that of acceleration of the process of trade barrier elimination because " it requires a wide dispersion of concessions among GATT members." (Abbott, 1999) the problem it seems was the lack of a "core political motive for adoption of an unconditional MFN rule." (Abbott, 1999)

This work goes on to relate that the legal relationship existing between the NAFTA and the WTO Agreement is one which is determined through an examination of the text of each of these treaties as well as the context of the treaties and the rules of international law governing the relationship between treaties in relation to the same and similar subject matter. It is important to note that the WTO and the NAFTA are agreements entered into between states and governed by international law therefore falling within the definition set out by the Vienna Convention on the Law of Treaties (VCLT). Abbott relates that risk are inherent in regional integration to the WTO system and the EU "has become such an important political and economic force that this exercise in regionalism may have diminished the importance of maintaining an open multilateral trading system from a European standpoint." (Abbott, 1999) Abbott holds that while economic security has resulted from NAFTA in the North American region, simultaneously this has also potentially undermined the WTO roles and multilateralism. (paraphrased, 1999)


The work of Dani Rodrik (1988) entitled: "Closing the Technology Gap: Does Trade Liberalization Really Help? States that the "relationship between trade policy and technical efficiency is an old theme in economics..." (1988) the evidence that is available, according to Rodrik appears to suggest that "increases in productivity have played an important role in the economic growth of the developing countries." However, the "contribution of productivity change relative to the growth of factor inputs has been typically not as high as in developed countries. On average, the increase in total factor productivity (TFP) accounts for about half of the growth in value added in developed economies: the comparable figure for developing countries is around a third." (Rodrik, 2003)

The work of Sporleder and Martin entitled: "Economic Perspectives on Competitiveness Under WTO, NAFTA, and FTAA" states that policy relating to agriculture has been particularly "dynamic in most developed countries for the past several years. Key economic factors influencing trade in the past ten years are stated to be "...technological progress, globalization of the food trade and rather rapid evolution of strategic partnering and vertical integration within certain commodity subsectors." (Sporleder and Martin, nd) Unification of the world is stated to be based upon the "leading factor..." Of "technological progress" and most particularly information technology, which is "responsible for everything from instantaneous news from all parts of the world to detailed information on grocery store product movement in a timely fashion through the use of universal product codes and front-end product scanning." (Sporleder, and Martin, nd) There are clearly incentives economically speaking for transnational vertical integration by business "which possess proprietary rights to commercial biotechnological products or processes." (Sporleder and Martin, nd)

Sporleder and Martin further relate that the North American Free Trade Agreement (NAFTA) served to bolster the Western Hemisphere free trade through a reduction and elimination of barriers to trade. The Free Trade of the Americas (FTAA) negotiations started in 2005 and soon thereafter NAFTA was passed and the Uruguay Round under the General Agreement on Tariffs and Trade (GATT) was ratified by 125 member nations. The GATT is a "world agreement that reduces trade barriers..." while the NAFTA is a "free trade agreement that seeks to remove barriers to trade among the United States, Mexico and Canada over a 15-year time frame." (Sporleder and Martin, nd) Sporleder and Martin state that thirty-two countries in the Western Hemisphere have been established and include the following:

Latin American Integration Association (ALADI) Central American Common Market;

Bolivia, Columbia, Ecuador, Peru, Venezuela); Caribbean Community and Common Market (CARICOM);

Group of Three (Colombia, Mexico, Venezuela); and Southern Cone Common Market (MERCOSUR -Argentina, Brazil, Paraguay, and Uruguay). (Sporleder and Martin, nd)

Sporleder and Martin relate that Chile was in the midst of negotiation in the middle of 1995 for an inclusion into NAFTA however, "incorporating established trading blocs into NAFTA is considered simpler than adding some 35 independent countries individually." (Sporleder and Martin, nd)

The influence of NAFTA on trade has been the source of much debate as those opposed to NAFTA state the argument "that an expansion of freer trade to developing countries, such as Mexico" will result in the United States losing jobs. However, it is posited by others that "NAFTA is a boon and actually increases U.S. employment through increased trade and investment opportunities." (Sporleder and Martin, nd) Stated to be an issue that has empirical importance is "the changes in the trade patterns caused by lessening trade barriers, which is the primary mechanism through which number of jobs and living standards are influenced." (Sporleder and Martin, nd)

The World Trade Organization states that a key factor "in the industrial take-off of FW and industrializing countries was easy access to new technology" such as the United States copying British and Japan copying the United States and in turn, Korea copying Japan. According to the World Trade Organization, that which is "technological diffusion to the country developing is piracy to the country leading." (2008)


The work entitled: "Of Course WTO Talks Are Stalled" relates that conclusive data exists to show that "a decade of WTO implementation has left the majority in worse conditions n poor and rich countries alike." (Public Citizen, nd) Additionally stated is that the $700 billion trade deficit in the United States "threatens global economic stability as imports boom amidst three million U.S. manufacturing job loss and stagnant real wages in WTO decade." (Public Citizen, nd) it is related that during the WTO era the trade deficit for the United States "has risen to historic levels and approaches six percent of national income - a figure widely agreed to be unsustainable, putting the U.S. And global economy at risk. Soaring U.S. imports during the WTO decade have contributed to the loss of nearly one in six U.S. manufacturing jobs." (Public Citizen, nd) Finally the median wages in the U.S. have risen only "scarcely above their 1970 level, while productivity has soared 82% over the same period, resulting in declining or stagnant standards of living for the nearly 70% of the U.S. population that does not have a college degree." (Public Citizen, nd)

The work entitled: "Policy Matters Ohio: International Trade and Job Loss in Ohio" (2004) states Total nonagricultural employment in Ohio declined by 244,000 jobs between November 1999 and November 2003. The vast majority of this decline was due to the loss of 191,000 jobs in Ohio's high-paying manufacturing sector. There are many causes for job losses in manufacturing, including relocation of production facilities to other states or foreign countries, rising imports of foreign goods, fluctuations in the business cycle, and changes in productivity levels." (Honeck, 2004) Honeck states findings include the following:

1) TAA and NAFTA-TAA program data identified 45,734 jobs that were lost in Ohio between 1995 and October, 2003, directly due to international trade. Three-fourths (76.1%) of the job losses occurred in the 1999 to 2003 time period. The year with the highest total was 2002, during which 13,093 jobs were lost;

2) Job…

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