Trade Wars: The Exaggerated Impact of Trade in Economic Debate

35 Pages Posted: 28 Sep 2003  

Richard B. Freeman

National Bureau of Economic Research (NBER); University of Edinburgh - School of Social and Political Studies; Harvard University; London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP)

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Date Written: October 2003

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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Suggested Citation

Freeman, Richard B., Trade Wars: The Exaggerated Impact of Trade in Economic Debate (October 2003). NBER Working Paper Series, Vol. w10000, pp. -, 2003. Available at SSRN: https://ssrn.com/abstract=450881

Richard B. Freeman (Contact Author)

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