Professional Documents
Culture Documents
Scott Waddell especially those with small home markets, can benefit greatly from liberalisation in low-skilled and agricultural areas, which are likely to be more prevalent in developing countries. Liberalisation tends to benefit the poor in a country to at least some degree, previous research has shown that on average the income of the poor generally tends to increase on par with that of the more wealthy meaning the income distribution does not change. (Berg & Krueger, 2002) This is not always the case however; take for example China which was mentioned earlier. While the overall poverty rate has decreased, the inequality has increased. Chinas Gini coefficient (a measure of income inequality, with 0 being perfect and 1 being complete inequality) has been reasonably steady in its increase from 1981 through to 2001, starting around 0.32 in 1981 and increasing to 0.412 in 2000 (United Nations Development Program, 2008). Since this figure was released in 2001, there have been no more official reports of Chinas Gini coefficient from the Chinese Government. The government insists that this is due to incomplete data on high income groups, however many experts have criticized this saying that they are trying to de-emphasize the significant wealth gap (Xuyan & Yu, 2012). On January 1 1994 a major step forward was taken in free trade with the North American Free Trade Agreement (NAFTA) coming in to effect. The NAFTA area represents about one-third of the worlds total GDP (United States, Canada, Mexico) making it the biggest FTA in the world. Since this agreement has come into place, there have been major economic advances for all partners involved. Total volume of trade between the NAFTA partners increased from $289.3 billion in 1993 to $623.1 billion in 2003. Throughout the first decade of NAFTA U.S. employment, wages and manufacturing output rose, wages in export-related industries in Mexico have become 37% higher than in other industries, agricultural trade has increased 125% between Mexico and U.S., and merchandise exports from Canada to the U.S. have soared by 250%. (Executive Office of the President, 2004) Despite all these positive figures NAFTA is constantly under criticism for the effect it is having on Mexico and U.S. markets, including job losses, supressed wages, and rising income equality. Based on a report published by Dr. Robert E Scott in November of 2003, the rise in the trade deficit since NAFTA was signed had resulted in the loss of 879,280 U.S. based jobs mainly in the manufacturing industry, and has promoted a move of factories away from the U.S. and into Canada and Mexico (Scott, 2003). Even though the workers displaced in the U.S. are generally able to find work again their earnings often decrease by as much as 13%. (Mishel, Bernstein, & Schmitt, 2001) The debate about free trade has been around for many years and will continue to exist for years to come. Due to the number of different interested parties and countries involved with trade, it is impossible to conclude that Everyone is better off with free trade as there are always some people who will do better than average, and some who will do worse. (Berg & Krueger, 2002) However, if there is a point on which most economist can agree it is that trade among nations makes the world better off (McDonald, December 2009).
Scott Waddell
Bibliography
Berg, A., & Krueger, A. (2002, September). Lifting All Boats. Finance & Development, 39(3), 16-21. Bhagwati, J. (2004). In Defense of Globalization. New York: Oxford University Press. Executive Office of the President. (2004, July). NAFTA: A Decade of Success. Retrieved April 03, 2012, from Office of the United States Trade Representitive: http://www.ustr.gov/about-us/pressoffice/fact-sheets/archives/2004/july/nafta-decade-success IMF Center. (2005, September 21). International Monetary Fund. Retrieved April 05, 2012, from http://www.imf.org/external/np/exr/center/students/hs/think/lesson3.pdf Leamer, E. E. (1997). The Heckscher-Ohlin Model in theory and practice. Princeton Studies in International Finance, 1. McDonald, B. (December 2009). Why Countries Trade. Finance & Development, 48-49. Mishel, L., Bernstein, J., & Schmitt, J. (2001). State of Working America: 2000-01. Ithaca, N.Y.: ILR Press, an imprint of Cornell University Press. Scott, R. E. (2003, November 17). The high price of free trade. Retrieved April 3, 2012, from Economic Policy Institute: http://www.epi.org/publication/briefingpapers_bp147/ Smith, A. (2005). An Inquiry Into the Nature and Causes of the Wealth of Nations. Pennsylvania: The Pennsylvania State University. United Nations Development Program. (2008). China Human Development Report. 2007-2008: Basic Public Services Benefiting 1.3 Billion Chinese People: English. Beijing: China Translation and Publishing Corporation. Xuyan, F., & Yu, L. (2012, January 19). China refuses to release Gini coefficient. Retrieved April 2, 2012, from Market Watch: http://articles.marketwatch.com/2012-0119/economy/30788275_1_income-gap-china-reform-foundation-gini-coefficient