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International Trade Policy and Economic Growth Realization Research Paper

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Updated: Aug 20th, 2019

International trade entails the conduct of business by all countries in a similar platform with no preference for the mutual benefit of all players. In this regard, the relevant bodies regulate all players ensuring the proper handling of all the factors of production. The entrepreneurship factor, which plays crucial role in the process, requires proper management or regulation to achieve the desired outcome.

Similarly, the labor, which is the human asset employed in the realization of this output of cooperation, will necessitate the international bodies to observe and regulate all the players in the international trade. Regardless of how the imposed conditions could be punitive or lenient, all countries must comply.

This leads to realization of the desired outcome in the long run (Belkaoui 7). The main players of international trade would consider in this case the role of labor standards towards the trade enhanced by globalization. Labor standards are crucial element, which dictates the convenience of trade by globalization.

Labor standards refer to the codes of conduct, which guide in defining the means of regulating how employees are treated. Some of the critical elements that the labor standards seek to address include age, working conditions, number of hours per day, gender equity, and remuneration.

Most of these components of labor standards have been address considerably in the developed countries. However, concerning the developing countries, multiple gaps exist that require sealing in order to realize labor standards effectiveness (Fransen 21). The inclusion of the need to enforce labor standards in the international trade policies will be magnificent.

This implies that the policy subjects all countries to the same platform. Therefore, crucial production factors, which play major roles, require consideration. Similarly, the policy will seek to address equity and the improvement of employees’ living standards in the poorer countries. This is because multinational firms across the nations of their investments should regard all employees as equal and subject them to equal working conditions. Although there might be variations in the employees’ aggressiveness from one geographical point to the other, it is essential to maintain the same standards.

The existence of the International labor organization (ILO) plays a critical role in setting the labor standards. This organization formulates universal labor standards that any country, which engages in international trade, must adopt. With the difference in the governance and geographical location of various countries, it will be appropriate for countries to set up individual labor standards in relation to the international labor standards (Siebert 15).

This form of initiative will guide the poorer countries in the realization of equity and higher standards of employee treatment. As a result, the employees will be uniform universally and this will encourage labor mobility. The fact that employees would have similar characteristic and abilities based on the same fringe benefits they expect from servicing will facilitate this cause.

Thus in the end, labor will become universally available with the appropriate employee treatment. In addition, poorer countries will gain from the fact that the international trade policy will assist them to realize economic growth through labor force improvement.

Since slave and prison labor is a form of labor force, which dehumanizes the victims, it is essential to restrict its usage. Slave labor entails the utilization of free labor from individuals kidnapped and sold as commodities for service provision. Since this form of trade is punitive to the victims, it also indicates that utilizing their abilities in labor provision will worsen their conditions.

Some of the crucial elements that require consideration are that slave labor does not consider labor standards like working conditions, number of hours and remuneration. This implies slave labor is unacceptable to those who observe labor standards. Similarly, prison labor should be restricted because it exploits those held for various crimes (Fransen 115).

In this regard, the sole application of prison labor should be in the dissemination of knowledge and skills to the convicts, which can later assist them after completing their jail term. In this regard, prisons would become rehabilitation centers rather than centers for human exploitation and torture. Additionally, these centers would exhibit the need to condemn human labor violation.

Because of restricting trade on the goods produced by prisoners or slaves, there would be considerable repercussion on trade. Initially, there would a lot of negative outcome since the supervisors of slaves or prison wardens would feel that their power is being derelict while that of minors is considered.

The goods produced through this form human violation would experience rampant losses due to reduced demand. The consumers of such goods would be subjected to difficulties and alter the normal way of operation. Generally, the markets would experience shocks for a short-term, but in the long run the adoption of labor standards and minimized human exploitation would facilitate an equilibrium.

Globalization refers to the continuous increase in universal relationship of people, economic activities, and culture. Essentially, it entails the economic globalization, which necessitates the global distribution of produced goods and services. The removal of trade barriers by countries and maximum support to international trade facilitates this occurrence.

As a result, it will allow the movement of capital and labor thus enhancing investments. This implies that globalization significantly contributes to the economic growth of both the developed and developing nations (Elliott 10). The adoption of economic principles like specialization and comparative advantage principle facilitates such a concept.

International agreements facilitated by the World Trade Organization (WTO) in most instances limit national sovereignty, which could be either a bad or a good thing. Since the internal agreements play a crucial role in enhancing global economic integration, there must be situations where the WTO has to interfere with countries’ economic policies.

The need to seek mutual relationship and encourage interdependency necessitates this undertaking (Stiglitz 87). Thus, countries are subject to the discretion of the organization on economic factors. This implies that the countries lose their own sovereignty, but gain from the international trade outcomes.

In certain extreme conditions when there is serious economic recession, countries endure numerous problems due to the high dependency level created by economic globalization. As a result, countries would encounter the disadvantages of losing their sovereignty to the third party.

In some instances, it is essential to allow countries to protect certain industries specifically those that are central to the national culture. Despite the advocacy for international trade through globalization, certain elements of the countries should be unhindered. These elements ensure that the sovereignty of a country remains unaffected.

Additionally, the upholding of the national culture would be possible without the third parties’ influence. Regardless of the need to engage in specialization by adopting the principle of comparative advantage, it is magnificent to allow this form of exception to occur (Sjursen 45).

Specifically, such an exception would be crucial during adverse economic conditions and would facilitate the reduction of the total influence from external countries. In this regard, the participating countries would have a chance to simulate the occurrence of various economic processes in other countries. This will facilitate the sharing of new knowledge and its application in areas deemed fit within the country.

Since it is crucial to define clearly various aspects of the goods, the national culture of specific countries require cautious and relevant identification. Depending on a country’s location and its core activities before the acceptance of the international policy, there are vital forms of trade considered inevitable as they promote the national growth of its economy.

If a country posses multiple resources, this becomes another factor, which requires consideration in making exemptions on the level of subjection to the international trade terms. For countries with a significant level of human capital, it is essential to consider how the international trade policy terms apply due to the nature of providing sufficiently for its population without the full dependence on other countries.

Thus, so long as other countries do not feel that their counterparts are taking them for granted in complying with the international trade policy terms, a country should engage in activities that promote its economic growth. In instances where the country is engaged in explorative technology, such forms of exemptions are crucial in the search for economic integration (Elliott 75).

Multinational companies (MNC) refer to huge business organizations with wide a network of branches and subsidiaries spread across the world. The main characteristic of these organizations is that they are large and each has a holding company based in its original country, which controls the other subsidiaries (Belkaoui 14).

In some instances, the holding company could enter into joint ventures with other companies in the country of investment. Their main motive is to provide goods and services at competitive prices while generating sufficient revenue to sustain the business growth. As a result, many MNCs general annual revenue exceed the whole GNPs of the developing countries where they undertaken their investments. Nevertheless, they contribute significantly towards these countries economic growth.

Based on their contribution in the underdeveloped countries, MNCs play a crucial role in world economy. They introduce new investment and technologies into the host countries thus enhancing the rate of economic growth. In this regard, they engage in educating and training the local labor with sophisticated techniques, which add long-term benefits to the host countries’ human capital as the same techniques are replicable in all the sectors of the economy.

Definitely, competition will emerge between the local companies and the MNCs in a country and this will lead to better service delivery to the consumers at considerably lower prices (Navaretti 62). In order to withstand this form of challenge, the local companies would have to adopt superior technologies, which will boost their innovativeness and competitive levels.

The growth of these industries will lead to the development of supporting or complementary industries in the countries of investment thus boosting the general economic growth. The governments in charge will impose taxation on them, and thus contribute to the foreign exchange earnings. This could help solve the problems of balance of payments.

Multinational companies contribute an estimated 60 percent of the world’s investment. This proportion, although significantly small, plays a major role in enhancing international trade growth, which boosts the nature of international relations. Considering the multinational companies large size, they exhibit both positive and negative influences on the host countries.

Some of their important benefits to the host countries are that they fill trade, revenue, technological or management and savings gaps. As a result, they benefit a country in the provision of goods and services that the local industries could not offer (Dunning 26). At times, these firms could offer complementary products to those of the local companies at relatively lower prices an undertaking that considerably benefits the consumers.

Despite the multinational firms’ beneficial values, they pose other detrimental effects to the local industrialization. First, multinational firms are large establishments with high competitive advantages compared to the local firms. This could hamper the local competition instead of promoting it.

In cases where MNCs use subsidiaries in the host countries, they may adopt market policies that lead to the distortion of the local market. MNCs that engage merely in production may cause harm to the environment since the environmental laws in most developing countries are less stringent.

As a result, this leads to long-run interference in the natural environment. Similarly, MNCs could create market uncertainty due to their influence in the markets thus causing negative impacts to the consumers and forcing the local producers out of business in the host country (Belkaoui 8). Meanwhile, the MNCs may be tactical in the manner of complying with the host country’s taxation laws by employing transfer pricing. This will reduce the taxation levels of the country.

The capability of MNCs to move anywhere in the world does not restrict individual governments’ policies. Since these business institutions prefer countries with economic condition that favor them to flourish while offering their services, they least affect the sovereignty of a country. Though they could influence the host country’s economic legislation, they lack control considering that their investments operate within the set jurisdiction of a country. Moreover, since the economic laws are stringent, they have the flexibility to halt their operations in the host country without any interference.

Since the multinational firms’ expansion is flexible, there is the need to regulate this occurrence. Concerning the negative impacts that they sometimes impose on the host’s countries, the adoption of various appropriate measures is vital to counter such vulnerability. In this regard, the regulation would consider the nature of investments that the companies undertake in various countries with the need to reduce the harm that they cause to the environment.

Some other critical elements are their control on markets, which make the host country dependent on the foreign markets, and taxation techniques, which reduce the host country’s level of foreign exchange (Dunning 114). As a result, it necessitates the international trade governing body, the World Trade Organization, to adopt measures to govern the institutions.

To achieve the international trade needs by adopting the right labor standards enhanced by globalization will foster the growth of several countries. Many participant countries, especially the underdeveloped countries, will gain from the developed countries in the search for economic development. The standardization of the human capital across the globe will be realized thus facilitating labor mobility and boosting the standards of living.

Works Cited

Belkaoui, Ahmed. The role of corporate reputation for multinational firms: accounting, organizational, and market considerations. Westport, CT: Quorum Books, 2001. Print.

Dunning, John H., and Jean Louis Mucchielli. Multinational firms: the global-local dilemma. London: Routledge, 2002. Print.

Elliott, Kimberly Ann, and Richard B. Freeman. Can labor standards improve under globalization?. Washington, DC: Institute for International Economics, 2003. Print.

Fransen, Luc. Corporate social responsibility and global labor standards: firms and activists in the making of private regulation. New York: Routledge, 2012. Print.

Navaretti, Giorgio, Anthony Venables, and Frank Barry. Multinational firms in the world economy. Princeton, N.J.: Princeton University Press, 2004. Print.

Siebert, J. Monitoring international labor standards techniques and sources of information. Washington, DC: National Academies Press, 2004. Print.

Sjursen, Katrin. Globalization. Bronx, N.Y.: H.W. Wilson Co., 2000. Print.

Stiglitz, Joseph E.. Globalization and its discontents. New York: W.W. Norton, 2002. Print.

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