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Trade Wars: The Exaggerated Impact of Trade in Economic Debate

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  • Richard B. Freeman

Abstract

The rules governing trade and capital flows have been at the center of controversy as globalization has proceeded. One reason is the belief that trade and capital flows have massive effects on the labor market -- either positive, per the claims of international financial institutions and free trade enthusiasts, or negative, per the ubiquitous protestors at WTO, IMF, and World Bank meetings demanding global labor standards. Comparing the claims made in this debate with the outcomes of trade agreements, this paper finds that the debate has exaggerated the effects of trade on economies and the labor market. Changes in trade policy have had modest impacts on labour market. Other aspects of globalization -- immigration, capital flows, and technology transfer -- have greater impacts, with volatile capital flows creating great risk for the well-being of workers. As for labor standards, global standards do not threaten the comparative advantage of developing countries nor do poor labor standards create a race to the bottom'.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10000.

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Date of creation: Oct 2003
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Publication status: published as Richard B. Freeman, 2004. "Trade Wars: The Exaggerated Impact of Trade in Economic Debate," The World Economy, Blackwell Publishing, vol. 27(1), pages 1-23, 01.
Handle: RePEc:nbr:nberwo:10000

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  1. Daniel Trefler, 2001. "The Long and Short of the Canada-U.S. Free Trade Agreement," NBER Working Papers 8293, National Bureau of Economic Research, Inc.
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Cited by:
  1. Gordon H. Hanson, 2005. "Globalization, Labor Income, and Poverty in Mexico," NBER Working Papers 11027, National Bureau of Economic Research, Inc.
  2. Bill Pritchard, 2009. "The long hangover from the second food regime: a world-historical interpretation of the collapse of the WTO Doha Round," Agriculture and Human Values, Springer, vol. 26(4), pages 297-307, December.
  3. Michaels, Guy, 2007. "The Effect of Trade on the Demand for Skill - Evidence from the Interstate Highway System," CEPR Discussion Papers 6056, C.E.P.R. Discussion Papers.
  4. Subhayu Bandyopadhyay & Howard J. Wall, 2007. "Is there too little immigration? an analysis of temporary skilled migration," Working Papers 2006-062, Federal Reserve Bank of St. Louis.
  5. Bandyopadhyay, Subhayu & Wall, Howard J., 2007. "Is There Too Little Immigration?," IZA Discussion Papers 2825, Institute for the Study of Labor (IZA).
  6. Guerriero, Marta & Sen, Kunal, 2012. "What Determines the Share of Labour in National Income? A Cross-Country Analysis," IZA Discussion Papers 6643, Institute for the Study of Labor (IZA).
  7. DUMONT, Michel, . "The social consequences of economic globalization," Working Papers 2006025, University of Antwerp, Faculty of Applied Economics.
  8. Viju, Crina & Yeung, May T. & Kerr, William A., 2011. "Post-Moratorium EU Regulation of Genetically Modified Products: Trade Concerns," Commissioned Papers 116848, Canadian Agricultural Trade Policy Research Network.
  9. Ariell Reshef, 2013. "Is Technological Change Biased Towards the Unskilled in Services? An Empirical Investigation," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(2), pages 312-331, April.
  10. Michel Dumont & Nikolina Stojanovska & Ludo Cuyvers, 2011. "World inequality, globalisation, technology and labour market institutions," International Journal of Manpower, Emerald Group Publishing, vol. 32(3), pages 257-272, July.
  11. Rolph van der Hoeven, 2010. "Labour Markets Trends, Financial Globalization and the current crisis in Developing Countries," Working Papers 99, United Nations, Department of Economics and Social Affairs.
  12. Richard Kozul-Wright & Paul Rayment, 2004. "Globalization Reloaded: An Unctad Perspective," UNCTAD Discussion Papers 167, United Nations Conference on Trade and Development.
  13. Thierry Verdier, 2005. "Intégration commerciale « socialement responsable » : une approche en termes d'économie politique," Revue d’économie du développement, De Boeck Université, vol. 19(4), pages 55-121.
  14. Brown, Clair & Linden, Greg, 2007. "Semiconductor Engineers in a Global Economy," Institute for Research on Labor and Employment, Working Paper Series qt6fr9b2p9, Institute of Industrial Relations, UC Berkeley.
  15. Pangarkar, Nitin & Wu, Jie, 2012. "Industry globalization and the performance of emerging market firms: Evidence from China," International Business Review, Elsevier, vol. 21(2), pages 196-209.

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