From Old World to Real World

Advocates of globalization, free trade and outsourcing admit that jobs shift to low-wage developing nations, but promise eventual benefits for the developed world. Producing goods at a lower cost abroad reduces prices, translating into more money for Western consumers to purchase more products. A common strategy for keeping jobs in the developed world is to provide high levels of education and reduce restrictions on trade. However, the theory of free trade breaks down when some countries practice what is called "strategic trade." For example, subsidies and tax-breaks rather than low wages prompt computer-chip manufacturers like Intel to relocate in nations like China. "Trade has morphed into something more complex called globalization and we need mechanisms to ensure the benefits are well distributed, not only between countries but within them," writes Steven Pearlstein in "The Washington Post." He suggests that international trade bodies, like the World Trade Organization, could regulate such strategic-trade practices. Or, developed countries could respond with tax and other policies, as effective as those in China, to spread benefits of globalization among citizens rather than corporations. – YaleGlobal