International Trade has been touted as a great opportunity for workers because of the fact that it opens trade to new markets. By increasing the market reach, international trade encourages higher production and more employment for workers. In certain cases, due to demand, it may even lead to higher wages in a particular industry to the success of such. The increase in sales, without technological advances that reduce use of labor, leads to better opportunities for workers. (Hoekman, 2001)
There is a downside, however, to international trade when a country is not able to become competitive or utilize its advantage in the production of goods. When this happens, opportunities for workers decrease and it becomes a threat since there are other firms and countries that can produce such items more efficiently. The capital flight and the competition that comes from other markets due to international trade is a threat to the job security of not only the workers but also the company (Hoekman, 2001).
2. What are some of the major challenges confronting the international trading system? Presently, the biggest challenge to international trade is the China syndrome wherein China gathers all the raw materials and resources of other countries and then
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The concept of globalization as the connectivity, interdependence and integration of the different social, economic, cultural and political spheres in the world does not allow for the traditional nation state concept as a bastion against the entire world to exist (Bhagwati 1991). As such, the international trading system must prevent imbalances of trade to ensure that all countries benefit. One of the major challenges that confront the international trading system is ensuring that all countries are able to benefit from this.
The old theory of mercantilism was a closed door policy that did not encourage international trade. The belief here was that international trade siphoned the resources of another country without much in return (Bhagwati 1991). The teachings of David Ricardo, however, revolutionized this by arguing that all countries engaged in international trade can benefit if the optimize the use of their resources to produce goods wherein they enjoy a competitive advantage.
It is from this teaching that the international trading system must learn to adapt from (Bhagwati 1991). The international trading system must ensure that while trade is flowing between certain countries there must also be an exchange of goods.
References: Bhagwati, J. (1991) The World Trading System at Risk Princeton University Press, Princeton University Hoekman, B. and Kostecki, M. (2001) The Political Economy of the World Trading System: The WTO and Beyond Oxford University Press, USA; 2 edition