Globalization

October 16, 2008

By Padmini Arhant

The twenty first century paved way to a new era in trade and commerce.

In the economic sector, the twentieth century policies such as NAFTA, CAFTA, and MFN… implemented to benefit the trading nations.

The economic model carried out on trial and error basis with deficiencies within yielded the net outcome.

The long-term strategy was to promote mutual economic growth and development.

There are different views and opinions on these trade policies.

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Source: http://news.thomasnet.com/IMT/archives/2004/01/the_pros_and_co_1.html – Thank you.

The Pros and Cons of NAFTA

By Katrina C. Arabe -Thank you.

Here are both sides of this raging debate:

Supporters say:

? The accord has stimulated democratic reform and opened markets in Mexico.

? According to the Bush administration, the agreement has been “improving lives and reducing poverty in Mexico.”

? The administration also claims that NAFTA has led to income gains and tax cuts amounting to about $930 each year for the average U.S. household of four.

? Many of the 20 million new jobs the U.S. generated from 1993 to 2000 can be attributed to the free-trade bloc that NAFTA created, the administration continues.

And negatives such as the escalating U.S. trade deficit and three years of dwindling factory jobs should be pinned on feeble demand abroad and the U.S. recession, certainly not on NAFTA, the administration contends.

? NAFTA brought in a flood of foreign investment and contributed to a 24% rise in Mexico’s per capita income. “NAFTA gave us a big push,” Vicente Fox, President of Mexico, tells Business Week. “It gave us jobs. It gave us knowledge, experience, technological transfer.”

Detractors contend:

? The agreement has taken a toll on both U.S. and Mexican jobs, according to the Institute for Policy Studies (IPS). While real wages for Mexican manufacturing workers declined 13.5%, more than half a million U.S. employees have entered government retraining programs after their companies moved production south or north of the border, says IPS.

? NAFTA has wiped out Canadian social programs, purports IPS.

? The pact has also destroyed Mexico’s small farmers, says IPS, bringing in an influx of subsidized U.S. food imports. In fact, about 1.3 million farm jobs have been lost since 1993, indicates a recent report by the Carnegie Endowment for International Peace. “NAFTA has been a disaster for us,” remarks pig farmer Julian Aguilera to Business Week.

? The Carnegie report also concluded that the pact has generated few new jobs in Mexico and might only be credited for a “very small net gain” in jobs in the U.S.

? The new study also found that NAFTA has been ineffective in stemming the tide of illegal Mexican immigrants entering the U.S. to find jobs. In fact, according to most estimates, the number of Mexicans working illegally in the U.S. surged to 4.8 million in 2000, more than twice the 1990 total.

What’s the Verdict?

So is NAFTA a success or a failure? While its backers and bashers continue to take impassioned positions, many choose the middle ground. In a recent Business Week article, Jeffrey Garten writes,

“When it came to job generation vs. destruction in the U.S., NAFTA’s impact has been pretty much a wash.” And the Carnegie Endowment for International Peace comes to the same conclusion, calling the pact “neither the disaster its opponents predicted nor the savior hailed by supporters.”

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The Pros and Cons of CAFTA –

Source: http://www.allbusiness.com/north-america/united-states-new-york/1057929-1.html
Thank you.

By Cantor, Martin – Thank you.

Publication: Long Island Business News

Now that the Central American Free Trade Agreement-Dominican Republic is law, the question that lingers is whether it benefits Long Islanders.

For certain, CAFTA benefited President George W. Bush and congressional Republicans, who are trying make the GOP the place for the growing and politically influential Hispanic community. This strategy has helped Bush with the regional Hispanic population, who believe that great economic and job growth will result from CAFTA.

There is no doubt that eliminating tariffs and removing trade barriers makes commerce efficient, less costly and more profitable while also bringing hope that the profits would result in better working conditions and higher worker wages. CAFTA will succeed for global businesses, many of which call Long Island home.

But it may not live up to the hype of creating jobs and safer workplaces.

For Hispanics, who are Long Island’s fastest growing minority group, the hope was that the savings generated from eliminating trade barriers would be reinvested in plant and equipment in their countries of birth. The belief was that this reinvestment would expand manufacturing capacity and create a demand for jobs, thus improving living standards for the families and friends left behind.

Supporters of CAFTA say jobs and higher wages would reduce the flow of the undocumented workers because there would be little reason to come to this region in search of better salaries. Additionally, since many of these individuals work on Long Island to send money back home, some of the wages earned on Long Island could now remain here and help the local economy.

However, the reality is that there’s skilled labor at lower costs in the Far East. All of those locations present stiff competition.

With Long Island’s growing Hispanic community becoming an important regional economic segment that desires goods from Central America, one benefit may be that regional Hispanic entrepreneurs can use free trade to import lower cost goods for this expanding consumer market.

This may be the lasting legacy of CAFTA. That the United States, Canada, Central America, Mexico and the Dominican Republic have united in a trading bloc offering Long Island and its Hispanic entrepreneurs an opportunity for new economic growth.

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Source: http://www.fas.org/man/crs/92-094.htm#back – Vladimir N. Pregelj, Economics Division. –

CRS – Issue Brief – Thank you.

Most-Favored-Nation Status of the People’s Republic of China.

On May 31, 1996, President Clinton issued his determination to extend China’s waiver and most-favored-nation (MFN) status for another year; and, on June 21, 1996, he issued a determination renewing the trade agreement with China for another 3-year term (through January 31, 1998).

On June 27, 1996, the House failed to pass H.J.Res. 182, which would have disapproved the extension of China’s waiver and MFN status, thus allowing both to remain in force through July 2, 1997. The House did, however, adopt a resolution (H.Res. 461) calling on various committees to hold hearings and report out appropriate legislation to deal with China on a variety of issues, including trade, weapons proliferation, human rights, and military policy.

Effects of Withdrawing China’s MFN Status —

Termination of China’s MFN status would result in duty increases on about 95% of U.S. imports from China. The cost effect of the increases would vary among the various product groups, but would on the whole be substantial.

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Source: http://www.cyfuture.com/pro-and-cons-of-outsourcing.htm – Thank you.

Pro and Cons of Outsourcing

Outsourcing has many advantages but at the same time it has some disadvantages that cannot be ignored. So let us look at some outsourcing pros and cons.

Pros of Outsourcing

Outsourcing as a trend has come into major scrutiny by the workers and media alike in the developed countries.

But most economists are sure that this condition is just a temporary one and will die down as conditions develop and people start taking a mature outlook towards outsourcing.

The Outsourcing advantage lies in the fact that it helps companies cut costs and stay ahead in the competition.

Outsourcing also benefits the citizens in developed counties as it provides high quality products at a cheaper rate also with better customer service.

Advantages of Outsourcing

• Companies can save up on operational costs. In fact most companies can cut their operating costs to half by outsourcing

• Get access to cheaper and more efficient labor

• Cut up on labor training cost

• Get access to better technologies at a cheaper cost

• Increase productivity

• Concentrate on core competencies

Companies today want to make use of the outsourcing advantage in order to progress and stay abreast of the competition.

This is the reason why more and more companies irrespective of certain failures are entering the race of outsourcing.

Cons of Outsourcing

Outsourcing is seen by companies in developed countries and workers in developing countries as a boon. But is the situation really that green? Let us look at some disadvantage of outsourcing.

Disadvantages of Outsourcing

• The company that outsourcers can get into serious trouble if the service provider refuses to provide business due to bankruptcy, lack of funds, labor etc

• Outsourcing requires the control of the process being outsourced by transferred to the service provider. Thus the company may loose control over its process

• The service provider in developing countries generally services many companies. So there are many chances of partiality owing to more payment by other parties

• The current employees in the company that outsourcers may feel threat due to outsourcing and may not work properly

• The attitude of people in the developed countries against companies that outsource is generally bad

These disadvantages are the reasons why companies should think twice before outsourcing.
Companies should adopt a planned approach towards outsourcing taking into account the interests of employees and customers alike and come up with a balanced advance.

Outsourcing services simply to beat competition or to follow your competitors can lead to problems in the future.
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Source:http://econpapers.repec.org/article/eeejpolmo/v_3A30_3Ay_3A2008_3Ai_3A5_3Ap_3A725-735.htm

GLOBALIZATION AND INCOME INEQUALITY: IMPLICATIONS FOR INTELLECTUAL PROPERTY RIGHTS

Samuel Adams – Thank you.

Journal of Policy Modeling, 2008, vol. 30, issue 5, pages 725-735

Abstract: This paper examines the impact of globalization on income inequality for a cross-section of 62 developing countries over a period of 17 years (1985-2001).

The results of the study indicate that globalization explains only 15% of the variance in income inequality.

More specifically, the results show that (1) strengthening intellectual property rights and openness are positively correlated with income inequality; (2) foreign direct investment is negative and significantly correlated with income inequality but this is not robust to different model specifications; (3) the institutional infrastructure is negatively correlated with income inequality.

The study’s findings and the review of the literature suggest that globalization has both costs and benefits and that the opportunity for economic gains can be best realized within an environment that supports and promotes sound and credible government institutions, education and technological development.
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Review and Analysis: By Padmini Arhant

The current unemployment rate in the United States is 6.1 percent.

All of the above factors combined with the serious financial crises contribute to the decline in the job market.

The current Stock Market volatility is a reaction to the multifaceted problems surrounding the economic infrastructure.

With the interventional policies by the governments and the monetary authorities worldwide, the U.S. and global markets should stabilize slowly but steadily.

Meanwhile, the equity and liquidity markets with cash and lending instruments should facilitate the required rebound in the market.

It was determined that the credit markets’ resistance is from the weak sales projection by the Retail industry, which is related to reduced consumer spending resulting from high unemployment rate.

It is imperative for the business groups to focus on the employment situation now, hurting their operation and survival in the global economy. The depletion of capital resources and credit crunch is one of the factors for the massive layoffs at present.

Restoration of American jobs is paramount to the revival of the U.S economy.

The stabilizing of the U.S. economy will boost market confidence and the performance level.

This would also contribute to the strengthening of the U.S. dollar much required to offset Trade deficits.

The Corporations and the governments must coordinate their efforts to review,

1. Policies like NAFTA, CAFTA, MFN, Outsourcing … with fundamental flaws and reestablish a renewed structure to benefit the American workforce and the international competitive labor.

2. Renegotiate treaties and agreements with WTO members and other agencies…ILO at home and overseas to redesign models with fair trade policies, employment practices and environment laws.

3. Prioritize and protect American jobs and labor laws over shareholders interests and corporate profits. By doing so, the increased productivity would yield the desired stock value for the Corporations.

4. International labor force is equally important in the equation. Appropriate measures … required to curb the exploitation of cheap labor in poorer and under developed nations by the multinational corporations.

5. The developing nations currently benefiting from U.S corporate investments through outsourcing should reciprocate with return investments on U.S. goods and services. The general options are to purchase high-end products and engage U.S. companies for infrastructure projects.

The concern for the loss of American jobs is legitimate. Any frustration and anxiety by the American work force is also normal.

Since, U.S. economy is the foundation of the global economy; idle American work force is counter-productive for Corporations shipping jobs overseas in pursuit of market share of the emerging economies.

The sluggish U.S. economy will not serve well for the global economies dependent on U.S. trade.

On another serious note, the print press and media have an ethical and moral responsibility to portray the global economic environment and the activities in a fair and responsible manner.

Any rhetoric diminishing the economic progress/status and professional talent of other nations such as the one recently cited by the researcher specializing in globalization in San Jose Mercury News article, will hinder the new world order effort — aimed at providing prosperity for all.

Ironically, both the news organization and the consultants fail to identify the real beneficiary i.e. the Corporations in the outsourcing deals and other trade policies.

It would be more appropriate for these individuals to be part of the solutions rather than a problem.

Inevitably, U.S. prosperity is vital for global progress.

Thank you.

Padmini Arhant

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