Making them an offer they cannot refuse

Perhaps the most interesting aspect of the Wolf and Singer readings for me was the issue of lost sovereignty resulting from free trade agreements and membership to the WTO. Although both point out that because a nation will always have a basic sense of sovereignty in that they can always opt out of these free trade agreements and withdraw from the WTO, this seems somewhat a false freedom. What comes to mind is how many companies, say the makers of Crest toothpaste, have the freedom to not sell their product in Wal-Mart. Well, this is true, but the consequences of not selling their product in the largest retailer in the U.S. can be a fatal blow to the company. It is this very basic reality that companies, especially smaller ones, often cite when explaining how they were put into a position with such little bargaining power that they reduce their profit margins tremendously. It is worth pointing out, for the sake of fairness, that this very pressure can lead to greater efficiency and lower cost for American consumer thereby lowering the cost of living. My point is this: when economically weaker countries are dealing with powerhouses such as the U.S. and EU, it is worth appreciating how little bargaining power they have coupled with how much they have to lose.
Another interesting topic brought up in the readings was the idea of trading with somewhat disagreeable governments (dictatorships, oppressive regimes, etc). Watching Gen. Wesley Clark in an interview back when he was running for President, I was struck by something he said with an almost matter-of-fact tone: embargos and trade barriers strengthen the very regimes one set out to weaken. While Wolf explains that the mercantilist understanding of trade as economic war is fundamentally flawed, perhaps trade can serve a purpose that normally is reserved for armed conflict. For example, Castro has long blamed hardships of Cubans on the U.S., with some success, because of the trade embargo. Furthermore, because the U.S. has nothing it can take away or restrict, it has given up much influence on policy in Cuba. If, on the other hand, we were to increase trade with Cuba, the people of Cuba would enjoy an increase in products and services from the U.S. and would put pressure on the government to avoid any policy actions that may disrupt this beneficial trade relationship. Moreover, Cubans would have a tremendous new market for their goods and services (cigars would top a long list) which would further increase the welfare of the Cuban people (comparative advantage). While Singer and Wolf may see globalization in different lights, the truth is that when the picture is not clear, data is not obvious or incomplete, and there is no consensus among experts (given the credentials of both Wolf and Stiglitz and simply the title of their respective books, this seems a reasonable assertion), we should focus on trade related policies that seem to have proven ineffective. The embargo of Cuba seems a particularly compelling argument for review, however there are others (North Korea, and to a certain degree Venezuela)

**Computer: friend or foe?

As Freeman’s analysis indicates, the theory of factor price equalization fails to perfectly explain the decline in wages of low-skilled workers in the U.S. and the decrease in low-skilled employment in Europe. Acting as a debate-referee, Freeman eventually calls the winner as only a partial, and not even primary causal role for the factor price equalizationists. What really struck me was the idea presented by Wood in the article on how a possible factor in all this is how “trade with less-developed countries induced substantial labor-saving innovation”. Having previously read this paper in Prof. Goldsmith’s social issues class, we discussed at length the relationship people may have with new technologies. Specifically, is it a substitute or a compliment to a given worker? In other words, does the computer help you do your job better, or does it simply do your job? It seems likely that most who find themselves being replaced with technologies would be the low-skilled laborers the article focuses on. Sure, one can point out that X-rays are sent to India and isn’t that replacing a doctor which would be considered a high skilled laborer, and there is some truth in that. However, these are the novel exceptions to the much more prominent issue of the many low-skilled laborers in which we could come up with a much longer list of examples (low-end textiles immediately comes to my mind).
Thomas Friedman, in discussing the concept of globalization and the debates regarding it, once wrote that debating globalization was like debating the sun rising: its going to happen regardless of opinion. One may retort that ‘well, the option of tarrifs and trade barriers makes globalization less inevitable than the sun rising’. Maybe. But as Freeman points out, there is a considerable portion of the public that is firmly in support of free trade and implementing protectionist policies would be difficult.
I also found interesting Freeman’s point about States: even in neighboring states in the U.S. opportunities and wages for low-skilled laborers have varied, which certainly casts doubt on the factor price equalization theory. I suppose my feeling towards the idea of factor price equalization would be that it a based on sound reasoning but as Freeman’s analysis points out, the data just isn’t there to confirm that this is what is happening. Perhaps the complex role of new technologies may provide better insight into the increasing hardship of low-skilled laborers.

Opening initial post for the first time ever to have been done

More genius insight to come...

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