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Don’t Forget the Benefits of Trade

Posted by admin on February 16th, 2007

The benefits and costs of globalization continue to fuel controversy between those who embrace free markets and what globalization promises, and those who are concerned about the potential displacement of some workers. While we should acknowledge that globalization does have costs, it would be wrong to say that countries are unable to address them. IPC Member Robert Thompson, who holds the Gardner Chair in Agricultural Policy at the University of Illinois at Urbana-Champaign, addresses this topic in the March 2007 issue of the Chicago Fed Letter, a publication of the Federal Reserve Bank of Chicago.

His essay, “Globalization and the Benefits of Trade,” points to Trade Adjustment Assistance (TAA) as a useful tool to help with these adjustment costs of globalization. Thompson says TAA is useful to help the US realize the full benefits of trade, which include: obtaining goods and services more cheaply from other countries that enjoy a comparative advantage at producing them, raising household purchasing power, increasing countries’ GDP, and pushing up wages in poor countries, which helps create stronger export markets for US goods.

Importantly, Thompson describes trade as an engine for poverty reduction:

“The objective of the Doha Round is to create a trading environment in which broad-based economic growth can occur in the presently low-income countries.”

This growth is necessary to lift half of the world’s population that lives on less than $2 per day out of the poverty they are now in.



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“While we should acknowledge that globalization does have costs, it would be wrong to say that countries are unable to address them”

Therein lies the problem. A case in point is regards African Trade, where the powers that be, and whoever else thinks they can administer the solution, has a different opinion of how to address the costs of, and barriers to globalisation.

In Africa, we have a situation where just about everyone agrees on whats needed, but not much consensus of how to address the above question.

Having said that I should probably go off and read the essay! Oops? Interesting articles though.