Term Paper: Global Community Free Trade Impacts Every Level

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Global Community

Free trade impacts every level of the global economy and has a particularly strong impact on the economies of developing nations and small communities. However, the wealthiest nations in the world stand to gain as much if not more so than their poorer counterparts. Wealthy nations control vast amounts of wealth, political power, and natural resources. The G8's clout ensures that free trade is not an egalitarian or just global economic system. If it were, small independent businesses and entrepreneurs around the world would have greater access to foreign markets and foreign direct investment. As it stands, free trade benefits mainly those corporations that already control a substantial portion of the global market. Moreover, larger corporations can take advantage of international and regional free trade agreements in ways smaller firms cannot: through the mobilization of people, goods and services. Free trade therefore tends to benefit those who are already wealthy and in many cases threatens to increase income disparity not just in developing countries but in wealthy ones. In fact, nations like the United States and Canada are exhibiting increased income disparity even while a middle class is growing in nations like India.

However, free trade has had some positive impact on the global economy in terms of equalizing overall rates of GDP growth and domestic per capital income ("Free Trade, Growth and Convergence"). The World Trade Organization (WTO) claims that free trade "helps reduce poverty" even while acknowledging that "some people do lose in the short run from trade liberalization." One way citizens can lose in the short run is by reducing dependence on local economies and shifting labor pools to large multinational corporations. When labor pools migrate, physically or not, to large multinational corporations job security and community integrity are at stake. Dependence on a multinational corporation means that at any time the company can close a local factory or office, displacing huge numbers of people and leaving them without sources of income or subsistence. Moreover, local workers rarely have labor unions or other legal recourses to protect against job loss or to demand better pay.

Another way that citizens can lose to free trade in the short or long run is the low wage rate paid to workers in developing nations. Multinational corporations depend on low wage labor to sustain their foreign investments, and their actions amount to little more than indentured servitude. The impact this model has on the global economy is tremendous: leaving millions of workers dependent on low-wage jobs with little to no opportunities for upward social or economic mobility. Moreover, dependence on foreign or multinational corporations for a community's income can destroy local economies. In some cases, the majority population of a town migrates to the facility of a multinational company and leaves behind a dearth of infrastructure. Traditionally agricultural communities may suffer the most, because if the labor force fails to meet the sustenance needs of its citizens it can no longer rely on previous forms of income such as local small markets or subsistence agriculture.

However, free trade can stimulate businesses in countries like China and India leading to flourishing local economies. If nations like China and India eventually pass domestic laws that protect domestic interests then it is possible that small businesses in those countries can thrive and leave local economies intact while still supporting free trade. Few who support free trade also support protectionism even though the two can peacefully coexist and not threaten the underlying principles of free trade. It may be essential to encourage the development of small to mid-sized local businesses to prevent some of the problems most associated… [END OF PREVIEW]

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Global Community Free Trade Impacts Every Level.  (2008, February 25).  Retrieved September 20, 2019, from https://www.essaytown.com/subjects/paper/global-community-free-trade-impacts/67158

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"Global Community Free Trade Impacts Every Level."  25 February 2008.  Web.  20 September 2019. <https://www.essaytown.com/subjects/paper/global-community-free-trade-impacts/67158>.

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"Global Community Free Trade Impacts Every Level."  Essaytown.com.  February 25, 2008.  Accessed September 20, 2019.