Global Free Trade Is Raising the Standard of Living in Developing Countries.

Topics: Developed country, Free trade, Developing country Pages: 7 (1986 words) Published: August 18, 2012
Global free trade is raising the standard of living in developing countries.

International business not restrained by government interference or regulation, such as duties and tariffs is identified as Global Free Trade. Global Free Trade emerged gradually and through negotiations, where all the parties involved identified that lowering trade barriers is one of the most obvious means of encouraging trade.

“The World Trade Organization, (WTO), is the primary international body to help promote free trade, by drawing up the rules of international trade. However, it has been mired in controversy and seen to be hijacked by rich country interests, thus worsening the lot of the poor and inviting protest and intense criticism.”

There are some 64,000 TNCs controlling 870,000 foreign affiliates. Globalization, particularly the dismantling of trade barriers (free trade), has allowed companies to spread widely in search of cost efficiency and to implement integrated production strategies across regions and even continents. Unquestionably, they bring resources of great potential benefit to develop and developing countries. Such us: advance technology to combine with raw material and cheap labour to a great effect, business management expertise, tried and tested methods of conducting certain task and much more.

However, despite this positive potential, the TNCs phenomenon also carries some negative potential such as ethical, crimes and abuses, as human and worker rights violations, private or public corruption. Instances, in 2000, DE BEERS in Angola were buying “blood diamonds”, allowing a group of rebels to finance civil war. Obviously they were not keeping the impositions made by the local government. On the other hand, Nike had located its manufacturing operations overseas, mainly in Southeast Asia, in search of low wages, but the hundreds of thousands of workers were young and mostly Asian women. Moreover, the working conditions and living standards were really unacceptable, “as chemicals used in the production process were known to cause eye, skin and throat irritations; damage to liver and kidneys; nausea, anorexia, and reproductive health hazards through inhalation or in some cases through absorption through the skin”. “In 1990 when Nike shifted production to Indonesia, daily wages there hovered around $1 a day, compared to wages in the US shoes industry at that time of around $8 an hour” (Rebecca J. Morris and Anne T. Lawrence).

Specific instances of serious problems with TNC practices - frequently related to environmental despoilment - have created civil unrest and a backlash against the presence of multinational companies, especially large and politically well-connected ones. Shell Oil Company in Nigeria, Sinopec(China Petroleum and Chemical Corporation) in Angola, Bechtel in Bolivia, Union Carbide in India, Chevron Texaco in Ecuador are cases of major TNCs presence that has generated major problems.

Transnational Corporations (TNCs) sometimes referred to as multinational companies, are enterprises that control economic assets in other countries - generally this means controlling at least 10% share of such an asset, these companies command enormous financial resources, possess vast technical resources and have extensive global reach. In 2002, the most recent year for which full data are available, FDI (foreign direct investment) made throughout the world totalled about $651billion. While most FDI goes to developed countries; for developing countries it is by far the largest source of external finance.

Despite their impact in developing economies, however, TNCs are not development agencies. They are profit-seeking organizations. These dual roles of funding source and profit seeker - unrelated roles that are neither conflicting nor complementary - have made TNCs object of great controversy. So consequently some questions rise, such as Do...
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Essay about Free trade
  • Global Agricultural Trade and Developing Countries Essay
  • Free Trade and Poor Countries Essay
  • Problems of Developing Countries in International Trade Essay
  • Essay on International Trade and Developing Countries
  • Essay about Global Exchange: Free Trade and Protectionism
  • Free Trade Essay
  • Free Trade Benefits Workers in Developing Countries Essay

Become a StudyMode Member

Sign Up - It's Free