OPINION: 3 negative impacts of globalization on the United States

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In late November of 1999, about 35,000 people showed up in Seattle to protest the World Trade Organization’s Ministerial Conference. Known as the Battle of Seattle, protesters were met with tear gas, concussion bombs and rubber bullets as police tried to disperse the crowds.

The anti-globalization protest was one of the largest of its kind, with different groups condemning the WTO over concerns about United States’ unemployment, sovereignty and unsafe imported goods.

As history has shown, their fears may have been well-founded. While globalization isn’t as nearly as bad as it’s made out to be, there are some negative aspects that should be held in consideration moving forward.

1. Rising U.S. unemployment amid a global workforce

In 1960, 24 percent of all U.S. workers were employed in manufacturing, according to the Bureau of Labor Statistics. Today, it’s only 8 percent. After the passage of the North American Free Trade Agreement in 1994, the U.S. has lost 5 million manufacturing jobs.

Open and free trade was worked wonders for China. Since the open-market reforms of the late 1970s, China has turned around its fortunes and become the second largest economy in the world.

For a long time, China was the cheapest place to manufacture goods due to the unbelievably low labor costs. Labor costs in China are now only 4 percent lower than the U.S. thanks to wage increases not matching productivity increases. The result is that companies are now moving to places like Vietnam and Cambodia where labor costs remain low.

While unemployment is currently just below the 5 percent mark, economists are concerned it doesn’t tell the whole story as the labor force participation rate in the U.S. is about 62 percent. That means more than 94 million Americans have dropped out of the workforce.

As long as companies have the option of manufacturing products in countries with lower wages, they have no reason to bring those jobs to the U.S.

2. It affects national sovereignty

The often discussed Trans-Pacific Partnership is a potential trade agreement between several countries in North and South America, Southeast Asia and Australia and New Zealand.

One of the flaws of the TPP is its proposed method in solving trade disputes among members. Known as an investor-state dispute settlement, the ISDS acts as a judicial review among the governments in the TPP.

While an ISDS is common in many trade agreements, what makes it contentious is that it allows corporations to sue governments in a special tribunal. This gives multinational corporations their own legal system, which they have previously used to either delay or stop legislation.

In 2012, the French utility company, Veolia, sued Egypt because its government introduced a minimum wage, leading to higher labor costs for the company. U.S. oil company Chevron sued Ecuador after courts there found the company to be responsible for $9.5 billion in environmental pollution to indigenous communities.

These weighted trade agreements often give far too much power to corporations. While the U.S. has yet to lose an ISDS case, there is no guarantee it won’t happen in the future. Under these trade agreements, foreign corporations can dictate what kind of laws our country passes.

3. Unsafe products making their way into the U.S.

In 2007, toy making company, Mattel, recalled about 7 million toys after they were found to be coated in lead paint at a manufacturing plant in China. Earlier this year, nearly 26,000 pounds of fish from Vietnam were recalled by the United States Department of Agriculture. Faulty airbags that could lead to potential death were discovered in Honda vehicles, forcing the Japanese company to do service recalls on more than 10 million cars.

While many countries have their own safety standards, oftentimes they do not match those of the U.S. Recalls are costly and no business wants to undergo the hit to profits or reputation that they bring. It’s important, however, that open markets don’t mean open season on consumer safety.

Even with standards set up by the International Organization for Standardization, increased trade means there’s an increased chance of mistakes being made due to the sheer volume of products moving between countries.

Globalization is not a bad word. While protectionist policies are not the answer in every case, it’s important to question whether a particular trade agreement, viewed holistically, will do more harm than good.

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  • Craig Welch

    Let’s take one example. “In 2012, the French utility company, Veolia, sued Egypt because its government introduced a minimum wage, leading to higher labor costs for the company”.

    You forgot to mention that Veolia had a contract with the Alexandria government that specified that Veolia would be indemnified if the costs of doing business increased. This included wage increases.

    So costs increased, and Veolia sued in the domestic courts, for breach of contract, and lost. So they took it to arbitration. Normal practice with contract disputes. Where is the problem? Veolia did not, as is so often stated, try to ‘prevent the minimum wage increase’. They had a contract dispute.