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| Skema |
Today we are living in the era of globalization, the globalization that radically transformed us. What would be the final decision of the US Federal Reserve Bank on interest rates that impact people living thousands of kilometers away in this world? If China invades Taiwan, why America or India is concerned? Why in China or in South Africa, if a new virus is discovered, does it shackle the whole world? It matters because the change in interest rates in the US will affect FDI in the whole world; an attack by China on Taiwan could adversely affect the whole world's semiconductor supply chain, and a virus could pervade so quickly that it could endanger the lives of Homo sapiens and puts them at the risk of extinction. This is because of globalization which is a phenomenon that connects the whole world in such a way that the life of a patient in a government hospital in India may depend on the policies of the Chinese government because paracetamol like basic medicine comes from API China. You may be aware of the social transformations that have taken place in the decades of Globalization. Whether it's McDonald's chain in the whole world or America's Silicon Valley where the world's engineers are proving their capabilities has played a crucial role in globalization.
Globalization has also helped the US, Europe, and China to develop and grow. In the face of colonialism and imperialism, the lives of millions of people drastically changed, their living standard rates improved. The Wealth of many countries has also improved. And the small country today is so dependent on the global supply chain that even the world economy cannot thrive without it. But globalization is probably a double-edged sword, which has many disadvantages also. And perhaps his disadvantages are so great today that the whole world is constantly fighting against globalization. Today, globalization and free trade are the main topics of discussion in the world. Thus, we are going to discuss why the social and political backlash is emerging against free trade and globalization and what are the reasons behind it.
Let’s start with free trade ideas and some facts for its support and opposition. The simple meaning of free trade is that the countries of the whole world can do business with each other without any restrictions and barriers. The free flow of goods beyond territorial boundaries gives rise to globalization which is a wider socio-economic process. Its supporters believe that there if will be fewer economic barriers, more and more each country will integrate itself into the international market. The idea of free trade goes against protectionism. Protectionism aims at discouraging imports in the country. The taxes levied on foreign goods will make them too expensive in any country that homemade goods can be sold in the domestic market and thus, a country may become economically self-sufficient. Under this idea, many Industries are reserved for indigenous people only, and thus, countries avoid integrating their own economy into foreign markets.
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Anti-Globalisation sentiments:
However, at present free trade and globalization are losing support in wealthy countries. For example, between 2002 and 2018, Japan, the US, and many European countries saw a significant decline in support for free trade. Opposition to free trade among low-skilled workers in Italy increased from 9% to 28%; it increased 3pc in France and 2pc in Japan and the US. Opposition to free trade has also had an impact on politics. Many leaders have risen to blame globalization, free trade, and immigrants for the country's economic problems and workers' joblessness. Trump's rise in American politics or Boris Johnson's in the UK was the result of this political churning.
The main political narrative of hatred for free trade is that only workers from poor countries benefit from globalization at the cost of workers in rich countries. For example, Trump's main political slogan for the 2016 presidential race is that Chinese, Indian and Mexican are stealing Americans’ jobs. French leader Marine Le Pen also said in election campaigns that free trade with developing countries had a devastating effect on French and European industries as millions of Europeans became jobless.
Is this true
Free trade allows businesses to move their production in poor states to access cheap labor. After decades of growth and development in rich countries, there is a significant working population with a better lifestyle that demands higher wages. The major US brands or MNCs shift their production houses to China, Vietnam, Bangladesh, and India where they access cheaper labor. And this is believed that free trade allows all this. Hence, there is an argument that workers in the US and other developed countries are becoming jobless. In the wake of globalization, workers from developing countries themselves may be doing jobs in Europe and the US because the wage demand is much less than the workers of developed countries.
Impact on poor states workers:
In addition, free trade can harm jobs in another way also. Many foreign companies are trying to sell their goods cheaply by using their capital in a new market. In this way, the demand will be less for the products of local industries. Local industries do not have the budget to compete with rich MNCs and they have to close their business. Productions in these small companies are also largely manual where low-skill laborers work, so if the small industries are closed, there may be millions of job losses. Further, the big MNCs use automated production processes for their products. Hence, there is a demand for high-skilled workers, and jobs are not created for low-skilled workers.
One of the other disadvantages of free trade is that low-skilled workers do jobs in poor working conditions and some MNCs exploit them. MNCs exploit weak labor laws in less developed countries for their production, which also exploits labor. Labor laws have social security benefits for permanent workers that cost MNCs dearly. The use of techniques such as contract-based labor or production outsourcing instead of permanent employment, helps them bypass the labor laws. This is the reason why the clothes of Big Brands are made in small industries today, which these companies sell after branding. Laborers working in these small industries have no social security and their lives are in perpetually poor condition. In many cases, local workers are at risk of life. The collapse of the Bangladesh Garments Factory in 2013 is the most striking example of this. This garment factory was designed for European companies. But is the free-trade responsible for everything? Can the rich countries blame the poor countries for all their unemployment problems? Let's understand this.
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| Credit:blogs.reuters.com |
It is true that international free trade agreements gave birth to economic opportunities in poor or developing countries and increased the economic losses in the developed world. But the claim by the leaders of the developed world that globalization has helped poor countries does not paint a complete picture.
Anger in the developed world:
If we fully analyze the opposition to globalization, we will see that the developing world today is just as angry as the developed world. But the reason why this is happening in the developing world is that even in the developing world, globalization has benefited the highly skilled employees disproportionately while the low-working class has suffered losses. When globalization reached developing countries, workers expected to increase their income and living standards, but this could be realized by the fraction of low-skilled workers. This disparity is the reason why workers are dissatisfied and rising against global free trade.
In addition, economists say that although leaders like Trump and Le Pen in the West blame poor countries for their economic problems, in the last eight decades globalization has increased the wages of American workers. And that is what made America a global hegemon. It also helped European powers rebuild their economies after World War II.
The global economic system did not benefit the developing world:
It is also wrong to blame the problems of free trade on the developing world because the current global economic system has failed to benefit the poor and developing countries. Hence, in the wake of decolonization, independent states in Asia and Africa adopted protectionist policies and kept themselves away from the western dominated international economic system. It was first seen in Latin America in the 1960s and 1970s. However, in order to cope with the economic crisis, many developing countries had to accept the conditions imposed by the IMF. The IMF, dominated by America, shapes its terms or conditions aimed at benefitting developed countries the most.
Read: India-China war: India's Economic plans to counter China:
There is no free-trade, in fact:
Another reason for the problem of globalization is that free trade is not really free trade. We know that despite the WTO guidelines, developed countries use protectionist measures in their own countries and do not allow industries and products from the developing world to enter their markets. For example, protectionism in agriculture has been shown for decades in rich countries. In Europe, this is reflected under the guise of quality checks and in the US in the form of agricultural subsidies. In pharmaceuticals, harsh intellectual property rights allow pharma companies to run monopolies, to the detriment of pharmacies in the developing world. These restrictions can also be seen in the digital sphere. Developing countries today are actively innovating in digital services and if free trade really becomes free then these companies can provide jobs to millions of people.
Apart from this, there are many problems at the regional level for example China dumps its goods in countries like India but does not give market access to industries in its country.
Further, If globalization had benefited the developing world, there would be no anger against free trade. Support for free trade in South Africa has declined from 88% to 76% between 2002 and 2018; in Brazil from 68% to 84%, and in Mexico from 89% to 69%. This disillusionment for globalization in the developing world has many reasons. There are so many industries in Middle America left the country; In Brazil and Nigeria, the reason for this anger is that there is no development of factories promised in the face of globalization. However, in both poles of the world, the low-skilled workers suffered.
Protectionism:
There is an emerging trend that the developing world is planning to impose sanctions on the market. For example, there is a discussion about the localization of digital space. The rise of protectionism is highly likely as discussed earlier.
Can we move to de-globalization?
However, the rising anti-globalization sentiment is a threat to the world. The sentiments against globalization will give birth to barriers to the international flow of capital goods and services which will undermine the ultimate economic growth.
Supply chain disruption:
One of the biggest dangers of withdrawal from a globalized economy is supply chain disruption. We know that no country is completely self-sufficient. Some countries provide capital and some cheap labor And the production of any product is not limited to any one country. For example, today a chip is designed in the US, but it is manufactured in Taiwan and Japan and is assembled in China. In this way, an anti-globalization sentiment will disrupt the entire supply chain, leading to many problems.
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| Credit: MDPI |
Anti-globalization sentiments will create such a shortage in every sector which will lead to higher national inflation. In this way, the withdrawal of countries from the world economy will also hamper job growth and will also prevent businesses from being capitalized which will also hamper economic growth. From productivity to Innovation everything will be affected. In such a situation, policymakers should not make any decision without proper and well-thought-out analysis.
Way out:
It is imperative that the world's governments first try to bring the benefits of globalized free trade to low-skilled workers. The Discussion to minimize global corporate tax is a positive step. Trade policies should also be reconsidered while keeping in mind the developing countries and their low-skilled workers. In addition to this, free trade for the developed country should be free trade-trade for the rest of the world.
The measures like the US' agricultural subsidies or China’s dumping acts should be discouraged. Developing or poor countries should also take some measures. It is important to ensure that such policies are adopted that ensure the employee rights and social security of low-skilled workers. And penalize foreign companies that do not fulfill their social obligations. Skill development is also an important step. Fixing globalization is an international responsibility that requires international collaboration. Today, countries will have to make rational decisions based on sound economic logic that focuses on larger interests rather than the vested interests of pharma or farm lobbies.
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