Deficit in the UK economy
Furthermore environmental factors are not as much an issue abroad and cheap production can often be at the extent of other negative externalities. Increasingly now interference from the WTO organisation and other pressure groups have meant an increase in working standards throughout the world as well as better environmental controls, and an ever increasing number of consumers are buying fair-trade goods which are monitored to ensure there is no exploitation.
Furthermore we have seen increasingly a number of industries such as call centres more abroad to India, these are in no way the cramped conditions that one would expect but comfortable office where the staff are well paid and even receive benefits such as health insurance. Although exploitation can be a problem if trade is unregulated, the extent to which it occurs is decreasing over time. It is important to note that the WTO is dominated by the US, EU, Japan and Canada and these economies have a great amount of power in making the WTO take actions that may not be of benefit to the world in general but will be selfishly motivated.
The increase in competition means that firms in developing countries have to research and develop more advanced methods of production to reduce costs. Research and development in its self an industry that requires a workforce, and as I have mentioned this type of service based industry is often greatly suited to Western countries. Therefore an increase in output for developing countries in manufacturing will lead to a greater output in more developed countries in research and development.
There is a huge advantage in having a globalised economy, in the way where countries like China enter the worldwide market and the WTO (as they did in 2001) and provide the world with a huge amount of consumers. When China joined 1. 3 billion more consumers were introduced to the world. However when big well developed countries allow their consumers to buy abroad this can lead to problems with the balance of payments as we have seen recently with a noticeable deficit in the UK economy. Opening up world markets in some areas is not always in the interest of all countries.
For instance the EU sees globalisation as a huge threat to its agriculture sector, as if there weren’t huge subsidies and the presence of CAP provided for European farmers, then we would start buying goods such as lamb from countries such as New Zealand. Although this is beneficial for New Zealand and the consumer because agricultural skills are not very transferable, if globalisation and free trade was allowed to occur completely there would be huge unemployment in the European agricultural sector. Globalisation and the ability mobility of capital have caused considerable problems in many countries.
For example when it appeared to Dyson that his UK based corporation was not a efficient as it could be, he quickly relocated outside the UK leaving us with a great amount of regional unemployment in that area. Furthermore footloose capital in developing countries can mean that after a firm uses countries resources and exploits its labour, it then moves on to another country which seems better suited and leaves behind a huge number of unemployed who may have relocated in order to do the job in the first place.
Globalisation is undoubtedly of benefit to the consumer. Comparative advantage, competition and economies of scale will push prices down to the world market. However the extent to which it is good for the producer and countries as a whole is debatable. Although developing countries may experience increased FDI and output in general, this does not necessarily reflect upon what the producer and workers are receiving and often if not protected people can be exploited.
Furthermore a country may experience a huge amount of unemployment if an inefficient industry is opened up to the world market and moves abroad. Globalisation will lead to increased efficiency and if properly regulated will develop third world countries. In general if it happens in a sensible and responsible way and corporations act to not exploit workers, then globalisation is of economic benefit to the world.