How can free trade have negative impact? What groups may be harmed by it? Free m

Question

How can free trade have negative impact?

What groups may be harmed by it?

Free movement of financtial capital in the system of modern floating exchange rates. WHo might be harmed? How might policy makers respond? What is the result?

Nationalist movements are so often anti-immigration, what groups are harmed by immigration?

Movements we are witnessing call for immigration restrictions, tariffs and agressive actions and currency mannipulations. Evaluate each policy how will it impact a country that undertakes what is the effect on overall efficiency.

What would be better policies to deal with negative impacts of globalization

Explanation / Answer

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Free trade often harms nations scare resources like labour of USA as predicted by stopler samulson theorem. But if followed by appropriate distribution policy there is no harm in trade. Also in developing countries free trade can damage local industries as they are in infancy and have neither technical nor financial resources that match those of MNCs. Some Economists like presbich singer have maintained that terms of trade have moved in favour of developing countries and against developing countries. This has resulted in loss for developing countries. Also dependency theory considers developing countries serve as periphery for the core - the developed countries. Resources flow from periphery to core at the loss of periphery

Free movement of financial capital can be damaging for countries due to speculation as happened during South East Asia crises. The country from which capital moves is harmed in general. It exposes the country to the volatility of global markets and hence if anything happens in other countries it has repercussions to the domestic economy. It also may lead to inflation in country which may harm poor. It results also in crisis like housing bubble in USA where Asian capital led to housing bubble.This is back breaking for poor. It may led to access to hawala money..As a result policy makers may restrict restrict conversion of currency. This policy could led to less flow in short run but investors will start worrying more about their investments in the country (which they can not freely convert into their currency now). This will led to less investment and more speculation against domestic currency. Ultimately the country may have to devalue its currency as happened during South East Asia crisis.

Immigration usually harms domestic labour who fear more Competition and less wages due to greater labour supply. In other words as in part first it is alternative to free trade and thus affects badly nations scare resource( labour in western developed countries) as predicted by stopler samuelson theorem.

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