Why would free trade with low wage countries benefit their workers at our expense?

Answer 1

First of all it is important to realise that a plant will only move to a different country if the workers in low-wage-country lwc are relatively more efficient per dollar spent. That is is in a high-wage-country (hwc) is paid $10 and makes 10 widgets in an hour. A worker in lwc being paid $5 should at least make 5 widgets and hour, else the plant simply wouldn't move.

Benefit their workers
Most people would only work for a corporation if they make more money than before without that much more cost to them.
So The benefit, at least in the short run, to low-wage-country (lwc) is clear-cut.

The key is whether this is at the expense of workers in high-wage-countries (hwc).

The workers in hwc lose out if the lose their jobs. Of course they can always go find new jobs but these ar elikely to pay less than the jobs they lost, or be somehow less satisfactory (else they would have moved voluntarily).
On the other hand, as the products cost less, the workers in hwc need to spend less to maintain the same standard of living. Therefore, if the moving of less competitive industries to lwc is widespread, then overall costs of products on the market also falls. Now as costs of living fall, so should the prices of services, therefore, the overall effect on the workers in hwc isnot that easy to determine in the medium run.

But in real life, this isn't the case most of the time. A few reasons:
- Executives take a larger cust as bonuses for cost-cutting emasures, so all savings from lwc production are not passed on in terms of lowered prices
- Tariffs/Quotas ans such protect certain inefficient industries such as Agriculture in hwc, so some products never get cheaper even if tehre are foreign made alternatives at lower cost.
- Costs to retraining workers; that's a real cost and peopel can't just morph from one role into another, it takes time.

In conclusion, instead of blaming the worker in the lwc, we shoud look closer to home, to the bosses earning huge bonuses for implementing 'painful cost cutting measures', to the governemnt who bars really good deals from being offered on the markets, and to ourselves who should think of continuously retraining/upskilling before it is too late.

As usual the solution lies within us; blaming someone else is just too ocnvenient and easy.

Answer 2

Free trade or globalization has many benefits to both sides of the equation, but it also has serious costs to the wealthier side.

The difference depends on what is being outsourced. Having 5 dollar DVD players made in East Botswana, is a usually a good thing for both sides. More people in the wealthier country can now afford the product, more shippers and sales people need to be paid to handle the increased sales etc, and in general it benefits both economies.

The problem comes when you outsource non-physical goods. Say tech support for example. No one claims that the 5 dollar DVD player is better than the more expensive one, but they're willing to discard the inferior product when it breaks. With intellectual products, the only result is bad service for the customer and a poor impression of the main company as a whole. No more shippers are paid, no more sales people etc, so the end result is just a straight loss of the salaries that were paid to the tech support people. Those people aren't paying the babysitters, the hotdog salesmen, buying clothes etc, so the impact effects far more than the person who lost the job.

On the poorer side, the money they get for the job rarely means they buy more products from the weathy nation. They pay their food sellers, fortune tellers etc.

End result is a one way siphon of economic power out of the wealthy nation for a short sighted 'savings' on some companies balance sheet.

Answer 3

I guess the theoretical answer is that both sides benefit and I don't believe they could benefit at our expense. The standard example is let's say countries can produce two goods.

We can produce either 5 of X or 10 of Y or some combination inbetween. Let's say we want to produce 3 of X and 4 of Y.

Then let's say that a foreign country could produce either 2 of X or 8 of Y or some combination inbetween (because it is more efficient at producing Y than we are). They want to produce 1 of X and 4 of Y.

Now consider trading. In this example we should produce 5 of X and the foreign country should produce 8 of Y. We could then trade some of our X for Y. Imagine we traded 1.33 of our X for 4 of their Y. In which case we would have 3.67 of X and 4 of Y (i.e. 0.67 more X than we had without trade). And the foreign country would have 1.33 of X and 4 of Y (i.e. 0.33 more X than they would have without trade).

So efficiencies / inefficiencies between countries create opportunties for trade. Even though we might be able to produce more X and Y than a foreign country we still benefit from specialisation and trading.

So does this theory work in practice? It may not be perfect but it does work. Britain has been part of the common market for a number of years and has done well from free trade with what were some very poor countries in Europe and still maintaining competitiveness with new members in Eastern Europe. We still have products and services to sell.

Answer 4

if people working in third world countries were paid a decent wage that country would become an expanding market to sell goods in that country.

Do you really think they pay poor wages to keep prices down, Nike trainers can cost £80 but cost less than a £1 to make the profit is going to the directors and shareholders never the customers.

Answer 5

There are actually many scholars who disagree that low wage countries benefit their workers at all! One of the appeals of transnational corporations is the idea of "technology transfer," meaning that a country will create some sort of infrastructure of technological advancement and know-how by allowing a Multi- or TNC to move productions to their country. The other reasoning behind low-wage workers in third world countries is that if they're working in a facility for such a low wage, then it must benefit them or they wouldn't be working there.
In reality, these appeals are myths.
What actually happens is that workers in low-wage countries are screwed from both ends. This trend is characterized by William Greider in "One World, Ready or Not: The Manic Logic of Global Capitalism" as a "race to the bottom." Third world countries are competing for the business of TNCs -- this is true.
To attract these TNCs, they 'race to the bottom' by throwing out environmental regulations, taxes, promise to break up attempts for workers to unionize, repeal worker safety standards, etc.
The governments of these countries and the TNCs are actually pairing up and keeping the workers themselves without rights or living wages.
In many of these environments, the work is hard and dangerous and turnover is extremely high due to death and/or injury.
In Columbia, workers' attempts to self-unionize in a Coca-Cola plant resulted in death for union leaders.
According to www.williamgreider.com:
"Multinationals do not hesitate to shift production to low-wage countries, and even the most powerful governments can only look on helplessly or offer incentives to attract them, often by dismantling welfare benefits and workers' rights."
As for who is benefiting at whose expense? It depends on who you're asking. The products are manufactured at a cheaper price, the pockets of those at the top of the TNC pyramids are ever richer, the TNCs themselves do not have to obey any single government's laws, third world countries are losing big-time and even 'racing to the bottom,' wage workers in industrial countries are losing their jobs, industrialized countries are losing substantial potential tax revenues from corporations as well as thousands of jobs, and we completely lose touch with the products we consume.

Answer 6

if you can buy british brand A at £2.00
and equivalent foreign brand B at £1.00,
which would you choose?

british brand is paying their workers a living wage for a western country... also they are paying for london weighting/national insurance/pensions/heating/statutory health and safety gear/ etc, etc.

the foreign brand is paying for a basic living wage (maybe in a third world country) and nothing else

so, is it fair - on british workers - to allow free trade for this product

Answer 7

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