Many countries around the world are supporting the notion of free trade and globalisation, which is easy access to goods and services determined by market forces on a global platform with minimal government intervention (Hill, C., 2004). Some benefits of free trade would include higher consumption of goods and services; better utilization of resources; greater economic growth and higher creation of wealth (Hill, 2004).
However, there exists strong opposition to globalisation and to the organizations promoting a freer world trade. Such opposition can come in the form of certain government intervention. There are several reasons for such opposition. First, certain jobs and industries need to be protected from foreign competition (Hill, 2004). United States gave protection to important industries such as automobile, machine tools and steel in the form of Voluntary Export Restraints (VER) in the 1980s, which protected jobs as well (Hill, 2004). However, such a move is not justified as the prices of these products turned out to be higher than the world prices by reducing foreign imports, hence diminishing its global competitiveness (Hill, 2004). Another related argument for opposition is the need to protect infant industries with appropriate tariffs, import quotas and subsidies until they have developed sufficiently to compete on the global stage (Hill, 2004). However, such protectionism usually does not make the industry more efficient, with the adverse effect of making them more complacent. The Brazilian auto industry was still highly inefficient after 30 years of protection from the government (Journal of Commerce, 1991). Krugman (2001) also mentions that interventionist policies to promote particular sectors of the industry must draw resources away from other sectors, hence rendering such policies inefficient. In fact, advocates of free trade have called for an end to all subsidies that promote the wasteful use of natural resources and to introduce pollution taxes, so that current prices can reflect the risk of global warming (Economist, 2001). Such arguments for free trade are thus justifiable in this instance.
National security is another reason for opposition to globalisation. Industries related to production of defense products, such as aerospace and semi-conductors, are considered too important and dangerous to rely upon from foreign sources (Hill, 2004). The U.S. government previously funded and protected Sematech, which is a consortium in production of semi-conductors, in the mid 1980s (World Investment Report, 2002). However, such an argument proves to be self-defeating, as semi-conductors are subsequently used for personal computers and microprocessor chips, and ultimately resulting in more efficient private funding during 1996 (World Investment Report, 2002).
Protecting consumers is another strong call for opposition to globalisation. At times, government intervention is required, with regulations in place, in order to protect consumers from products deemed to be unsafe (Hill, 2004). U.S. had banned the imports of several arms and weapons in 1998 following the rampant killings by individuals using such weapons (World Investment Report, 2002). Such an opposition is justified in this instance.
Protecting human rights have always been a popular call for opposition to globalisation. Countries like China and India have bad human rights records, with the usage of child labour and poor working conditions in rural areas (Hill, 2004). U.S. has wanted to grant the Most Favored Nation (MFN) status to China, with many critics opposing such a move. They claimed that MFN status should only be awarded when China has shown marked signs of improvement in their human rights record (Hill, 2004). However, others have argued that the best way to improve the human rights stance of a country is probably to engage them through international trade (Hill, 2004). With China’s entry to World Trade Organisation (WTO) in 2001, it remains to be seen if China can show vast improvement in their human rights and working conditions situation.
There are several criticisms of WTO in promoting freer world trade. First, the WTO is not considered politically powerful (Rugman, 2001). All of its previous rounds of tariff cuts have to be screened and implemented by the respective sovereign governments, such as U.S. and Britain. Hence the WTO has no power on its own to be actively involved in politics (Rugman, 2001).
Second, WTO lacks technical skills in dealing with non-trade and labour issues such as environmental regulations, labour standards and human rights (Rugman, 2001). This may lead to adverse effects on some of the WTO’s rulings on environmental and human rights policies. One example is how WTO has blocked a U.S. ruling whereby fishing nets are required to be fitted with a device that allows endangered sea turtles to escape (Bangkok Post, 1998). This has caused uproar among environmentalists as they found this ruling necessary to protect these endangered species (Bangkok Post, 1998).
People who oppose to WTO feel that the organization is not doing enough to prevent imports from countries whereby child labour is being abused together with poor working conditions (Hill, 2004). Globalisation also causes greater pollution to the environment (Hill, 2004). Opposition also states that such imports from these countries are ‘stealing’ jobs from developed countries as well, as such manufacturers from rich countries will shift their working bases to poorer countries (Hill, 2004). For all of the anti-globalists’ critics, developing countries have been crying for more liberalization, with China providing the major spur at the moment (Economist, 2003). Hence the rich countries are the worried ones, as the developing countries’ growth are said to ‘steal’ their markets (Economist, 2003). However advocates of free trade and WTO feel that developed countries are the ones that impose environmental and labour standards without any action from poor countries (Hill, 2004). Moreover, imposing import restrictions on developing countries will be self-defeating, as free trade can help to improve their standards of living, which will subsequently lead to proper environmental and labour laws being enacted in those countries (Hill, 2004).
At the same time, jobs are not ‘stolen’ but rather there are greater unskilled workers in the market (Hill, 2004). Hence one solution should be an investment in education by the respective governments in order to reduce the supply of unskilled workers (Hill, 2004). Advocates of free trade also maintain that free trade through comparative advantage brings about wealth creation and economic growth, hence allowing even poorer countries to cope with problems of pollution and population growth (Hill, 2004).
With regards to the two points mentioned above, such opposition to WTO’s style of management may be justified, as the organization needs to be better equipped in politics and technical skills to deal with problems facing world trade. However, WTO’s stance on freer trade is still justifiable, as this will lead to lower prices to consumers with greater efficiency in resource allocation on a global basis (Hill, 2004).
Third, the WTO has to be more discreet in their decisions with regards to free trade in agricultural products. Environmentalists have been concerned with how the lowering of tariffs on imports of lumber from developing countries will lead to more logs of trees being cut from places like Indonesia and Myanmar (Hill, 2004). This will lead to greater global deforestation (Hill, 2004). At the same time, WTO also has to deal with high protectionism in agricultural products. This is reflected by high tariff rates in countries such as U.S. (4.7%) and Japan (4%), coupled with high subsidies, in year 2000 (Hill, 2004). Such high tariffs and subsidies are implemented by developed countries, which want to protect their industries from competition by low-cost developing nations (Hill, 2004). Such actions are not encouraged by developing countries and the WTO, who feel that such tariffs and subsidies will only lower trade, increase prices to consumers and lead to inefficient use of resources (Hill, 2004). In this instance, protectionism in agriculture is not justified.
Globalisation should not ignore the need for protection of intellectual property. Without proper protections for intellectual property, there will be fewer incentives for greater innovation. The Trade Related Aspects of Intellectual Property Rights agreement (TRIPS agreement) has given varying grace periods to WTO members on compliance with patent and copyright regulations (Hill, 2004). WTO will have to take extra care with certain countries such as China and India, whereby piracy of softwares is rampant (Hill, 2004). The decrease of piracy will help boast economic and social welfare (Hill, 2004). Such action on the part of WTO is considered justifiable and should not be opposed by any special interests groups.
WTO also came under criticisms for the way they allow countries to impose anti-dumping policies on foreign imports if they can prove they are “victims” to excess capacity and cheap prices by low-cost countries (Hill, 2004). Some 2,160 anti-dumping policies have been implemented since 2002, with India having the largest number of anti-dumping policies (331 cases) (Hill, 2004). However, some of the anti-dumping actions brought up by the respective governments may constitute political rather than economic well-being, as government officials may be pressurized the need for more votes for future elections by huge manufacturers to provide protection from foreign imports (Hill, 2004). Such irresponsible actions should be abolished by WTO and the organization should keep regulations for anti-dumping actions in check (Hill, 2004). Meanwhile, Bhagwati (2002) also argued that multinational corporations must also be socially responsible with regards to their policies and the environment in general. The governments must also take active steps to enhance the openness and accountability of their own actions and policy making (McLaren, 2001). An example would be the implementation of the spirit of the Arhus Convention in terms of rights to access of information, participation and access to justice (McLaren, 2001). Hence in this case, globalisation instead of protectionism is more justified.
In summary, there are mixed reviews to the opposition for globalisation. In the end, the need for greater liberalization will hugely depends on how the advocates for free trade are able to convince the anti-globalists that globalisation is often the best way in providing better labour standards, providing more jobs in the market and protecting the environment as a whole (Hill, 2004).
Reference List
Bangkok Post. (1998) ‘WTO Ruling in Turtle Protection Dispute’. March 18, 1998.
Bhagwati, J. (2002) ‘Coping with Gobalisation: A Trilogy of Discontents’. Foreign Affairs. Vol. 81. February 2002.
Economist. (2001) ‘A Different Manifesto’. Vol. 360. Issue 8241. September 29, 2001.
Economist. (2003) ‘Liberty’s Great Advance’. Vol. 367. Issue 8330. June 28, 2003.
Hill, C. (2004) International Business. 5th Ed. McGraw Hill International.
Journal of Commerce. (1991) ‘Brazil’s Auto Industry Struggles to Boast Global Competitiveness’. October 10, 1991.
Krugman, P.R. (2001) ‘Is Free Trade Passe?’. Economic Perspectives. Vol 1.
McLaren, D. (2001) ‘From Seattle to Johannesburg: Anti-globalisation or Inter-localism?’. Local Environment. Vol. 6. No. 4.
Rugman, A. (2001) ‘The End of Globalisation: Why Global Strategy Is A Myth and How to Profit From the Realities of Regional Markets’. Amazon.
United Nations. (2002) ‘UNCTAD Predicts 27% Drop in FDI Flows This Year’. World Investment Report.
