Free Trade, Trade Liberalization, and Globalization Debates

Subject: Globalization
Pages: 4
Words: 962
Reading time:
4 min

In the 21st century, there is no doubt that the world is interconnected thanks to the new era of globalization. Many countries trade goods and services for their own benefit. Vast capital flows can transfer anywhere around the world. A connection exists between globalization, free trade, and trade liberalization. Global integration brings the result of trade liberation and free trade under the justification of mutual gain or benefit for each country. However, are globalization and trade liberalization fair to everybody? Do globalization and free trade/trade liberalization also work for the world’s poor? There is a difference between the two. Being a global player does not mean that free trade should exist in a country (Examples India and China), which will be made clear by the end of this paper. This is also the key point in the economic development of the poorer countries with respect to globalization and free trade/trade liberalization. Free trade and trade liberalization are taken to be synonymous for the sake of convenience.

Pilger points out that globalization is defined as capital and trade that can be transferred anywhere. Of course, free trade can boost investment and trade. Enormous amounts of trade and investments can bring about economic growth in every country. Jones argues that more trade is better than less. Trade liberalization improves overall economic welfare and also allows governments to overcome political opposition to trade liberalization and garner gains from trade. Rodrik states that world markets are a source of technology and capital, which does not apply to the developing world because they are not ready to utilize these opportunities. The argument is that unless a nation’s domestic economy, politics, and social cohesion have not yet reached the level of that of the developed countries, it would not be possible for economic development through globalization and free trade. In fact, according to the author, the fault lies in free trade rather than globalization. An example of negative growth given by the author is Argentina.

Along with globalization, free trade was also promoted, and the result was a disaster. They succeeded in achieving economic growth at first, but then they digressed into poverty, inequality of income, huge volatilities, and human rights violations. In contrast, Southeast Asia has achieved integration with the world economy. During the 1970s and ’80s, most of the countries in the region began to liberalize their trade regime. Some opted for totally free trade, while others were more cautious. Even with the condition of high tariffs, non-trade barriers, and closed financial markets, the cautious ones managed to get out of poverty at the same time reaping the benefits of globalization. To rescue nations from the yoke of poverty, standards of living must be reformed, and advancements must be made in areas such as labor and human rights, foreign inflow, sweatshops, and education.

Special Report strongly argues that trade and inflows of capital are still essential to achieving strong, sustainable growth and to reducing poverty, but the problem is that the rule of law in developing countries is too weak to protect poor citizens.

To gain from trade liberalization, the role of government is significant. Political and economic management is urgently needed. Governments of developing nations must commit to making guidelines work so that everyone can prosper. These guidelines can bring about improvements in such areas as worker education, labor rights, and environment, public health, and human rights. The article Foreign Policy mentions that strong controls are needed in the area to ensure that trade and investment support social goals rather than the narrow interests of large corporations. In the case of the North American Free Trade Agreement (NAFTA) between Mexico and the United States, the pact the economies of both countries, but many problems remain in Mexico, such as poverty, environment, and sweatshop labor. Mexicans still get lower wages, small farmers are being devastated, and the border between the two countries raises environmental issues. In his film, Pilger mentions the serious trade situation in Indonesia. The government of Indonesia encourages cheap labor and attracts foreign investment due to global markets. They export goods to the U.S, Great Britain, and many multinational corporations, but the standard of living in Indonesia is poor. Even though factories are in operation 24 hours a day, the workers get very low wages, and they do not get any benefits from the government, such as health care and education.

The key point that emerges from the above reviews is the differentiation between globalization and free trade. India and China have shown that it is possible to be a part of globalization even with low levels of free trade. Both these countries, especially China, still have strong anti-free trade policies, and their markets are highly protected. But these are some of the few countries that have benefited from globalization. Their success lies in the fact that they did not blindly implement the directions of the IMF, WTO, and other developed nations. They had a policy mix that was suited for their growth. Those nations that suffered were seen to have followed the free market policy along with globalization. All the papers directly or indirectly indict free trade as the culprit and not globalization. Unless an economy is ready for free trade and certain other policies, implementing it would be disastrous. It is of the opinion that globalization is done the way Indian and China followed if the good of the economy is to be considered. Mexico, Indonesia, and the other Asian and African countries which opted for full trade suffered. What is required is a gradual opening up to free trade. Once the economy starts to pick up, trade barriers can be removed one by one.