Economists generally agree that free trade is a good thing for the economy. It provides producers with access to global markets (and therefore potential to become more efficient by specialising and seeking economies of scale in their operations). It provide consumers with greater choice, including access to new types of products and new varieties of existing product types. It increases competition, which spurs innovation and productivity increases and limits growth in prices. In addition, market openness can provide access to world-class imported inputs, which in turn can improve the economic performance — including export performance — of domestic industries.
But, trade has taken a few hits in recent years, as it is sometimes viewed mainly as a source of economic disruption. Spurred by trade, economies adjust and that may mean that some folks in import-competing sectors may face economic hardship as a result. At the same time, such adjustment can be a good thing, promoting a better deployment and use of resources (hence rising productivity, which helps enable wages to rise). Here, there is a role for government to ensure the right conditions exist for business and workers to capitalise on the new economic opportunities arising from trade. In other words, for market openness to deliver the expected benefits, complementary policies are required.
For workers, this means government has a role in providing a social safety net to ensure that those facing adjustment can get the assistance they may require to find a new job, get training they may need to adapt, and get income during the adjustment period. For business, this means government policies to promote infrastructure development, keep the overall economic framework sound (e.g., avoiding undue inflation), limit red tape, and maintain sensible regulation, as well as provide a supply of labour with appropriate skills. And, to tie it all together, there is a need for clear rules of the game and standards for business and labour, as well as channels for frank and open discussion and social dialogue.
This is not just abstract theory. A new and substantial round of work by the OECD and other international organisations has looked at how some of these processes operate in the real world. The findings document the benefits of market openness and the importance of the complementary policies. Above all, experience demonstrates that protectionism is not the answer to the challenges of free trade. The economy as a whole is made much better off through a strategy to promote free trade while addressing the challenges that such a policy will entail.
You can find out more via the OECD website:
1) Trade, Growth and Jobs (in a nutshell, 4 pages)
2) Policy Priorities for International Trade and Jobs (the full story, 450 pages)
WOW!!! Great food for thought…woof!
Thanks! :0)
Hi Doug – as a French teacher in a US high school, I was wondering what your take on the importance of learning foreign languages in general, and French specifically, was? It is hard to convince certain constituencies of the importance of any foreign language (it’s not a “core” subject!?) and French is less popular than Spanish.
Thoughts?
Michelle
Hi, I think it is very important for children to have exposure to teaching in foreign languages from a young age. It changes and broadens the way one learns and views others. There are scientific studies that show this is more than just subjective conjecture. E.g., http://www.scientificamerican.com/article.cfm?id=bilingual-brains. Being bilingual helps with the way the brain processes information. Plus, learning a foreign language encourages taking time to learn about another culture and I think this probably tends to promote tolerance or at least understanding that there are multiple ways of looking at the world around us. French is clearly of direct importance, depending on where you are in the world. Yesterday, I was at the French employers association — Medef — to attend a conference. The US and Japanese speakers chose to give their talks in French, even though they were offered the opportunity to speak in English. This French-language delivery helped to improve understanding of their remarks among participants and helped the speakers to connect cross-culturally as well, which was greatly appreciated by the audience. It made them more effective speakers. Bottom line: I think that such skills will certainly add value in the job market going forward. Cheers, Doug