Today if you walk into a supermarket, you will be able to buy furniture from Europe, coffee from Brazil and bananas from South America. This is possible because of international trade and with it comes effects that people interpret differently. International trade allows businesses to expand the markets for their goods and services that would have otherwise not been available to them. It is for the same reason that the consumers have the chance of selecting a car from France, Germany, Japan or America depending on their taste. In essence, international trade increases market competition, leading to competitive pricing that is beneficial to the final consumers.
Smith (2005) defines International trade as the exchange of goods and services between countries. This gives rise to global economy where prices, supply and demand become functions of global events. Global trading enables households and countries to access goods and services that are not available in their own countries. International trade creates and eliminates jobs all the time. The jobs lost in one country often reappear again in a different country based on its competitive advantage. This creates the impression that global trade worsens the unemployment problem, leads to lower wages and makes jobs less secure. Open economies often achieve higher levels of wages and economic growth although trade is only one factor at play (Ghauri, & Powell, 2008). For an economy to be able to enjoy the benefits of international trade, it must enact good policies on education, innovation and infrastructure. The labor market policies must be sound and effective in order to ensure equitable sharing of the benefits.
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"Globalization and Employment".
The current job market is very dynamic because of the effects of international trade. The old static job market where people could do the same jobs for decades is no longer there. The creation of new jobs occurs every week in different industries because of the growing competitiveness and innovation. On the same note, jobs are also lost in firms that are less competitive. Job change also occurs because some people leave their jobs voluntarily in search of new challenges, better wages, more free time and other personal reasons (Ghauri, & Powell, 2008). A dynamic job market comes with many benefits to both households and economies alike as it enables them to adjust, adapt and be responsive to consumer demand patterns and technological advancements.
The dynamic job market comes with challenges because it dictates that some people have to switch jobs in order to survive. For instance, when a company establishes a call center in Bangalore, the position goes to a new worker or someone wishing to switch jobs in India. An individual is better of changing jobs and this is good to him/her, the organization and the country as a whole. Now if the creation of the new job in India happened because India developed a comparative advantage for the call center, another country (say X) will have developed a comparative disadvantage on the same. Country X may have never hosted this type of call center in which case therefore no job will be lost. Alternatively, this type of call center may be present in country X but the number of jobs is on the decrease because India can provide the service in a more effective way. This may therefore lead to layoffs in country X as the organization positions itself to outsource its operations to India.
There may still be an additional job in the world because the call center in Bangalore may be cheap and efficient enough to stimulate the demand for such services globally. This means that the companies that were previously unable to afford such services can now do so thus leading to the growth in employment and the global call center industry. Therefore, the adjustments in the labor market require constant attention from the policy makers. A nation can gain from international trade even though not everyone is better off as long as it enacts sound policies to regulate trade and the labor market. It is advisable to fix the labor market adjustment and /or the regional development programs.
Using trade policies like export taxes or enacting limits on imports to address the problem only leads to higher costs, fewer jobs, outmoded technology, less efficient firms and more expensive consumer services. Streeten (2001) asserts that in the developed countries, the worry of losing jobs is always there because of the perception that outsourcing is leading to job losses. The fear is justified although good domestic policies can ensure that the workers are able to receive their fare share of gains from the international trade. The policies should ensure that the workers are able to respond to the dynamic nature of the job market and be able to switch jobs whenever it is necessary to do so. In conclusion, international trade leads to gains and as such, households and economies should position themselves strategically in order to be able to reap its full benefits. Offshoring can compensate for the employment loses caused by outsourcing within an industry. The gains in productivity and sales that come with offshoring are enough to generate as many jobs as the ones lost because of outsourcing.
- Ghauri, P. N., & Powell, S. (2008). Globalisation. London: Dorling Kindersley.
- Smith, N. J.-A. (2005). Showcasing globalisation?: The political economy of the Irish Republic. Manchester: Manchester Univ. Press.
- Streeten, P. (2001). Globalisation: Threat or opportunity?. Copenhagen: Copenhagen Business School Press.
