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Trade Wars: The Exaggerated Impact of Trade in Economic Debate

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Richard B. Freeman

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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: Sep 2003
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Handle: RePEc:nbr:nberwo:10000

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J0 - Labor and Demographic Economics - - General
J5 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining

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  1. Robbins, Donald & Gindling, T H, 1999. "Trade Liberalization and the Relative Wages for More-Skilled Workers in Costa Rica," Review of Development Economics, Blackwell Publishing, vol. 3(2), pages 140-54, June. [Downloadable!] (restricted)
  2. Francis Green & Andy Dickerson & Jorge Saba Arbache, 2000. "A Picture of Wage Inequality and the Allocation of Labour Through a Period of Trade Liberalisation: The Case of Brazil," Studies in Economics 0013, Department of Economics, University of Kent. [Downloadable!]
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  3. Drusilla K. Brown & Alan V. Deardorff & Robert M. Stern, 2003. "The Effects of Multinational Production on Wages and Working Conditions in Developing Countries," NBER Working Papers 9669, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Jai S. Mah, 1997. "Core Labour Standards and Export Performance in Developing Countries," The World Economy, Blackwell Publishing, vol. 20(6), pages 773-785, 09. [Downloadable!] (restricted)
  5. Joshua Aizenman, 2002. "Financial Opening: Evidence and Policy Options," NBER Working Papers 8900, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  6. Goldberg, Pinelopi Koujianou & Pavcnik, Nina, 2003. "The Response of the Informal Sector to Trade Liberalization," CEPR Discussion Papers 3874, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  7. Dollar, David & Kraay, Aart, 2001. "Growth is good for the poor," Policy Research Working Paper Series 2587, The World Bank. [Downloadable!]
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  8. Kenneth Rogoff & M. Ayhan Kose & Eswar Prasad & Shang-Jin Wei, 2004. "Effects on Financial Globalization on Developing Countries: Some Empirical Evidence," IMF Occasional Papers 220, International Monetary Fund.
  9. Jeffrey A. Frankel & David Romer, 1999. "Does Trade Cause Growth?," American Economic Review, American Economic Association, vol. 89(3), pages 379-399, June. [Downloadable!] (restricted)
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  11. Yanikkaya, Halit, 2003. "Trade openness and economic growth: a cross-country empirical investigation," Journal of Development Economics, Elsevier, vol. 72(1), pages 57-89, October. [Downloadable!] (restricted)
  12. Daniel Trefler, 2004. "The Long and Short of the Canada-U. S. Free Trade Agreement," American Economic Review, American Economic Association, vol. 94(4), pages 870-895, September. [Downloadable!]
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  13. Eric Edmonds & Nina Pavcnik, 2002. "Does Globalization Increase Child Labor? Evidence from Vietnam," NBER Working Papers 8760, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  14. repec:rus:hseeco:121599 is not listed on IDEAS
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  16. Kala Krishna & Abhiroop Mukhopadhyay & Cemile Yavas, 2002. "Trade with Labor Market Distortions and Heterogeneous Labor: Why Trade Can Hurt," NBER Working Papers 9086, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  18. Martin, Will & Maskus, Keith E, 2001. "Core Labor Standards and Competitiveness: Implications for Global Trade Policy," Review of International Economics, Blackwell Publishing, vol. 9(2), pages 317-28, May. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Gordon H. Hanson, 2005. "Globalization, Labor Income, and Poverty in Mexico," NBER Working Papers 11027, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. 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. [Downloadable!] (restricted)
  3. Subhayu Bandyopadhyay & Howard J. Wall, 2007. "Is There Too Little Immigration?," IZA Discussion Papers 2825, Institute for the Study of Labor (IZA). [Downloadable!]
  4. Dumont M., 2006. "The Social Consequences of Economic Globalization," Working Papers 2006025, University of Antwerp, Faculty of Applied Economics. [Downloadable!]
  5. 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. [Downloadable!]
    Other versions:
  6. Richard Kozul-Wright & Paul Rayment, 2004. "Globalization Reloaded: An Unctad Perspective," UNCTAD Discussion Papers 167, United Nations Conference on Trade and Development. [Downloadable!]
  7. Guy Michaels, 2006. "The Effect of Trade on the Demand for Skill - Evidence from the Interstate Highway System," CEP Discussion Papers dp0772, Centre for Economic Performance, LSE. [Downloadable!]
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