Despite the bad press trade receives, it is a good thing for all kinds of reasons. From job creation to environmental protection to public policy that redistributes trade gains, this article will explore some of the benefits of trade.
Freer trade does not necessarily mean faster growth
Depending on the data set and your kilowatt budget you may be able to score a spot on the trade off for the best rated bid. The biggest challenge is weeding out the riff raff. Luckily, the sands of time are plentiful and a bit of social media will do the trick. The following table is a condensed list of my favorites. The first one has the following occupants: James, Laura and John. The last three accounted for the majority of the tidbits. For the most part I’m a bit of a slacker. The following two have been a bit more of a challenge. The last few have been the most challenging. The aforementioned occupants have all be a bit shady. The rest of the list have been pretty good.
Jobs and wages
Generally speaking, trade is a good thing for jobs and wages. This is because it allows firms to buy goods from the most efficient sources and sell them in more markets. It also reduces average costs and consumer prices. It also provides consumers with a wider range of choices.
A recent study from the OECD estimates that multilateral trade liberalisation could increase wages by up to four percent in the regions studied. While this isn’t a big deal, it is still an indication of the positive effects of trade.
However, many observers are quick to point out that globalization isn’t necessarily good for most workers. It can also impose costs on some, like low-skilled workers in the United States. Those in industries where imports are a threat may experience a decline in demand, leading to a decline in wages.
Those who lose their jobs in these industries must find other means to earn a living. These include training and support programmes. But, it is not always easy for unemployed workers to get a job.
Environment and people
Developing countries often look to trade agreements to develop economically. However, they also have concerns about the environmental provisions that are included in these agreements. These agreements can increase risks for water pollution, air pollution, oil spills, and invasive species entering new markets.
Increasing economic activity may have negative impacts on the environment, but can also create incentives for cleaner production technologies. Likewise, countries with a higher degree of democracy may be more responsive to environmental concerns. They might have more capacity to negotiate environmental issues in trade agreements.
In the United States, an executive order from President Clinton required that environmental impact studies be conducted for all future trade agreements. This order was made because of the 1992 Earth Summit, a United Nations conference on the environment and development. The event was held in Rio de Janeiro, Brazil.
Some staunch free trade advocates argue that international trade is good for the environment and people, mainly because it helps promote efficiency and innovation. But others argue that open economies create a race to the bottom in terms of environmental standards. This trend raises questions about the sustainability of future generations.
Public policies to redistribute trade gains
Depending on the country, redistributive mechanisms may be different. For example, a progressive income tax, rather than a trade-oriented tax, is one way to distribute income in a non-trade-related fashion. However, a combination of trade and redistribution maximizes social welfare.
The most common type of trade-oriented policy focuses on helping firms become winners in trade. Using this approach, governments can intervene to address market failures, or to promote equity in trade. In addition, a more progressive tax system can fund social security and labour market adjustment programs. Similarly, regulatory policies can be more harmonized and simplified. While these policies are not included in most trade agreements, it is possible to use them to spread gains from trade.
The distributional concerns regarding trade are based on the fact that efficiency gains from trade are not equally distributed. Furthermore, the impact of trade on firm productivity is evidence of the importance of this issue. While globalisation has the potential to bring economic benefits to all, it is not guaranteed that everyone will benefit fully from the process.