Free and Unrestricted Global Trade Benefits the Majority of the World’s Population, Reducing Poverty and Improving Human Rights’

Topics: Globalization, Economics, International trade Pages: 6 (1897 words) Published: November 2, 2008

Free and unrestricted global trade permits economic freedom and independence, facilitates economic development and protects and promotes human rights and freedoms. Strategic co-operation among global firms facilitates the effective processing of novel business information, thereby enhancing innovation. A change in the perception of the costs and benefits of co-operation can induce an increase in co-operative links between producers and traders. Free and unrestricted trade is based on co-operation between global companies which increase the transaction costs of co-operation and fasten integration processes. Whether or not global corporations co-operate, depends, in this view, on the perceived balance of the costs and benefits of inter-firm cooperation. This is in turn influenced by the historical lessons learnt in a cluster, expressed in a collective mental model of how to run a business successfully.

Free trade promotes cooperation and integration between global companies. Over time, the traditional advantages of free and unrestricted trade become tacit components of globalization. Hence, the type of free trade is crucial for how producers reflect upon past experiences. For instance, the feasibility of vertical division of labor between firms depends on the trade-off between market incentives and transaction costs, the outcome of which varies across different market situations and institutional settings (Hirst and Thompson 1999). In addition, subcontracting occurs in varied forms depending on the characteristics of the relevant market and the technological environment. A third point is that a process of spatial integration of global corporations in developing countries may be largely a defensive and local phenomenon, and the business information available to firms of local origin. Producers' perceptions are then mostly based on local business experiences. Under these circumstances, path and context dependence may produce the 'entropic death' of the local entrepreneurial milieu (Asgary and Walle 2002). Following Bhagwati (2004), free trade is a dynamic process and therefore, it is necessary to assess the dynamic capabilities of clustered producers, preferably through repeated observation. In addition, a range of driving forces can stimulate a process of spatial clustering, resulting in different sources of national competitiveness. However, there are two main models of clustering processes. On the one hand, clustering can be due to a few common denominators behind the once-only location decisions of entrepreneurs. This is the case where the principal goal of locating in the cluster area is to passively benefit from. The presence of a multitude of competitors implicitly influencing each other in investment and commercial decisions (and thus reducing short-term commercial risks as well as long-term uncertainty associated with investments in fixed capital) is another example. National producers automatically enjoy these advantages, that is technological externalities and pecuniary effects (Brown and Lauder 2001). According to Hirst and Thompson (1999), free and unrestricted trade may also result from a collective process including the developing of complementary and co-operative linkages with other nations. Free and unrestricted trade promotes competition between international companies. Competition compels producers to upgrade their ties with suppliers, clients, competitors, banks and research centers in order to offset the disadvantages that characterize most small- and medium-sized enterprises, e.g. high cost of information and cognitive constraints to innovation. In other words, producers aim at finding solutions to competitive problems on the basis of co‐ operative learning (technical, managerial and entrepreneurial) and innovation (with regard to products, processes and organization)....

References: * Asgary, N, & Walle, A. 2002, Cultural impact of globalisation: economic activity and
social change’, Cross Cultural Management, 9 (3), pp
* Bhagwati, J. 2004, In Defense of Globalization. Oxford: Oxford University Press.
* Brown, P
* Ohmae, Kenichi. 1985, Triad Power - The Coming Shape of Global Competition.
New York: Freepress.
* Stiglitz, J. 2002, Globalization and its Discontents, London: Allen Lane.
* Wade, R., Kambhampati, U. S., Guista, M. D. 2006, Critical Perspectives on
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