Free trade creates larger markets which inevitably leads to better economies of scale (the proportionate savings in cost from an increased level in production). Open markets allow for the most efficient use of productive resources and foster competition. Free trade thus leads to higher production, higher consumption and higher per-capita income (Rogowski, 2006, p. 2). One reason for this, and the one most often cited as the main reason why free trade is positive is comparative advantage. The Heckscher-Ohlin model of international trade argues that comparative advantage arises from differences in factor endowments (Rogowski, p. 3).
It would encourage greater competition among firms from all over the world. It acts as a spur to the firms to increase the efficiency and shift their resources into new industries to remain competitive in the market. For example, trade liberalisation has been a factor in encouraging the United Kingdom to concentrate less on manufacturing and more on the service sector . Hence, trade liberalisation can boost the economic activity by encouraging competition, investment and productivity among the entrepreneurs from different regions. As a result of that the GDP (Gross Domestic Product) of the member States could be increased and ultimately the welfare of the citizens can be safeguarded.
In addition to that, free trade also improves the efficiency of resources as countries can allocate or trade in resources with each other freely. That being the case, countries can exchange and buy raw materials or resources they need easily, which improve production rate as they can focus on making products of their best. Moreover, the high production rate would also improve countries economy and lead to economic development. Economic growth can happen easily as free trade allows people to trade internationally, which means people would have more opportunities to engage in trade rather than solely relies on trade in their domestic area. Lastly, free trade strengthens international relation, making countries cooperate more through common benefit.
In a free trade system, both economies can technically experience accelerated growth rates. Free trade facilitates the concentration of goods and services by domestic workers, giving them a clear advantage. By broadening the economy’s diversity of products and proficiency, free trade also encourages specialization and the division of employment. Economists who advocate for free trade believe that it is the reason why certain civilizations even prospered economically in the first place. Adam Smith, for example, who is mentioned as being one of the fathers of free trade, pointed to expanded trading as being the
Among others, is the condition of the internal stability of the State and the political and legal aspects of the law that can guarantee the sustainability of an industry empirical .The research of Bhagwati also proves that the US investment will be more widely available in countries that have ratified the convention on the rights of workers put forward by Labor Organization international (ILO). Analysts at ILO also found that the level of the higher union is directly proportional to the inflow of investment . In short it can be concluded that multinational companies will not invest to countries that ignore or violate labor rights .View from my explanation above , I strongly believe that globalization has increased the competitiveness of the workforce . This occurs because of increased competition each company gradually began to improve the competitiveness of the goods and services they produce in order to survive in an increasingly open competition due to globalization and the free market. Thus there is a strong correlation between improved standards set by the company with the skills possessed by labor.
The global economy has been in a rapid growth in the last decades, although there has been periods of recessions, nonetheless it is undeniable that the produce and goods we enjoy today are only possible due to an intricate system of international commerce as well as the manufacturing capabilities of recently industrialized nations. However if we view the state of affairs a hundred years ago we recognize that there were significant developments in the early 20th leading till today. Colonialism and protectionism are the key traits of the global economy in early 20th century. Thanks to the increase in foreign investments, as well as the decrease in transportation costs, the European colonial powers shifted progressively towards its colonies to
Interests Affected Globalization as a process carries its value that has been promoted by the United States since the postwar period. Broad consensus has been reached among policy-makers and scholars to establish neoliberal international trade policies for the promotion of open world market and the determination of the dollar value through the market. America received striking benefits soon. Domestic industries began to compete with foreign ones in the result of significant reduction in cost and rise in financial flow. For example, the US World merchandise has increased from less than 10% of the world GDP to nearly 20% of it from 1950s to 1990s.
Globalization has contributed in important ways to the worldwide growth of economy, politics, technology, social and culture of various countries. Globalization is a relative new term used to describe a very old process. Therefore, globalization is the simply the integration and development of the globe. This short literature consist of three parts; the benefits of globalization, the effects of globalization on government and the people of the pacific and finally the ways in which the adverse effects can be mitigated or solved. I.
Hence the economic justifications of protectionism are very limited. Therefore, given the negative impact on efficiency in the short term, and macro objectives in the long term, there is no compelling reason to engage in protectionism. In comparison, free trade brings about benefits and drawbacks. Nevertheless, the long run advantages tend to offset the short run detriments it poses. Consumer welfare increases as consumers can obtain lower cost goods with better quality.
Liberalization of trade entails the removal of tariff and non-tariff barriers to imported goods (Lewis, 1996). Regulations that discriminate against foreign investment are also to be eliminated. It has become a standard refrain in policy circles that expanded trade holds the key to prosperity for developing countries. According to this school, if the industrialized countries would eliminate their trade barriers, especially in apparel and agriculture, this would provide a basis for growth in developing countries, pulling hundreds of millions of people out of poverty. For the monetarists, the ensuing free interplay of market forces was expected to eliminate waste, generate productive forces and foster efficiency and growth (Greenaway, 1998; Greenaway, Morgan, & Wright, 2002).