Globalization, Trade and Labor

Labour Market 

The labour system and market has been changed a lot thought time. Due to globalization, technology, and agreements between counties and cities, the globe now has a new face. Globalization brings relocation for manufacturing companies who seek to minimize labor costs. This would not have happened without the help of the North American Free Trade Agreement (NAFTA), an accord between Canada, United States, and Mexico. This agreement has streamlined the movement of goods from one country to another. This will have a big impact on the labour market in high cost labour counties. Top goal of a company is to make profits, and minimize costs. NAFTA has also eliminated trade barriers. 

The technologies that have resulted from globalization have had a tremendous impact on the resource market. Without such innovations as cargo ships, firms would face hardships in their efforts to move commodities to the market. Moreover, these technologies have made it possible for individuals to travel with ease. As they facilitate labor movement, the technologies enhance the labor market. Workers can easily move from their homes to their workplaces. Furthermore, the technologies have spurred local demand for labor. Essentially, technology allows for the relocation of labor due to space-time compression. Another benefit that technologies have delivered concerns cost reductions. Firms are able to operate efficiently as they minimize cost. 

Globalization, outsourcing labour, and NAFTA, all depend on each other in order to work. Globalization and such agreements as the NAFTA facilitate the transportation of commodities. These phenomena have also lowered the cost of conducting business as firms are able to transport commodities cheaply. While NAFTA and globalization have benefited companies, these issues have had negative impacts on the labor market. The environment has also suffered as the globe becomes smaller and nations enter into trade agreements. 

The introduction above has shed light on the basics of globalization. To fully understand how globalization has shaped trade and labor, a more in-depth discussion is needed. This discussion is provided in the following section. Among other things, the discussion addresses the role that technology has played in redefining labor and trade dynamics. Particular focus is also given to such trade agreements as the (NAFTA) and its effects on trade relations and labor. 

Globalization and Shared Technology 

One of the defining features of the 21 st century is the prominent role that technology plays in production. Today, millions of firms in different parts of the world rely on modern technologies for production. In addition to enhancing the production process, the technologies have also redefined labor relations and how the firms engage in trade. The following discussion examines how shared technology has facilitated the transfer of commodities. The replacement of human labor with machine effort is also examined in the discussion. 

Transfer of Commodities 

In past centuries, firms, households and countries relied on traditional systems to move products and labor. Technology and globalization have changed this. Today, thanks to globalization, the world has shrunk. Firms incur lower costs and spend less time as they move their products from the manufacturing site to the markets. The world has committed huge amounts to the development of infrastructure that facilitates the movement of commodities. From airports to seaports and roads, the infrastructure has streamlined the transfer of commodities. To understand how transport has enhanced the movement of commodities, it is helpful to consider key transport projects. The Panama Canal is one of the most important trade routes. It is estimated that goods worth as much as $270 billion cross this canal every year ( “ Panama Canal Expansion ”, 2016). The canal serves over 80 countries and is the backbone of the economies of many nations. Apart from allowing for the movement of massive volumes of cargo, the Panama Canal has also led to a reduction in the cost of transportation. In such regions as Central America, the logistic costs that firms incur can account for as much as half of the price of the product being transported. Thanks to the Panama Canal, these firms incur much lower costs. In recognition of the role that the Panama Canal plays in facilitating global trade, a number of nations joined forces and expanded the canal. The larger canal will be able to handle more cargo. The example of the Panama Canal underscores the importance of globalization and technology. As the world becomes smaller and technological advancements take place, a boost in global trade will be witnessed. 

Canada is among the biggest players in global trade. As one explores how this nation joins other countries in trade, it becomes clear that globalization and technology have facilitated the exchange of goods and services. The robust infrastructure that the country has developed has allowed it to participate competitively in global trade. For instance, the Port of Montreal handles huge amounts of cargo every year. This port primarily serves the North American market. Thanks to this port, 40 million consumers gain access to vital goods and services (Dion, 2017). In the recent past, there have been efforts to expand the markets that the port serves. Today, Asia makes up a significant proportion of the market that the port serves. This region accounts for 23% of the market (Dion, 2017). The Middle East is yet another market that receives goods thanks to the Port of Montreal. The critical role that the port plays highlights the impact of technology and globalization on global trade. As a result of the port, Canada is able to move its goods to dozens of other countries seamlessly and in a cost-effective fashion. 

Machine Replacing Human Labor 

For the most part, globalization has presented positive impacts. However, this phenomenon is also to blame for a number of negative realities being witnessed today. Millions of people are being rendered jobless as companies replace human labor with machines (Accetturo, Dalmazzo & De Blassio, 2014). Machines tend to be faster and are capable of creating products that are of higher quality. Furthermore, the adoption of mechanization enables companies to slash the cost of doing business. As they let go of their employees in favor of machines, firms cut down labor costs. However, the increasing adoption of machines does not augur well for employees. For one to understand the real threat that machines pose, they simply need to examine current trends. More and more companies are opting for technology and machines instead of hiring employees. For example, employees working at federal agencies in Canada have been warned that their jobs are not guaranteed. As the agencies adopt machines and technologies, they will be forced to reduce the size of their workforce. The replacement of human labor with machines is not a Canadian phenomenon; it is being witnessed across the globe. For example, the World Economic Forum reported about a Chinese company that replaced 90% of its employees with machines (Javelosa & Houser, 2017). Workers whose jobs can be automated should be concerned. The adoption of machines will only accelerate. The implication of this is that millions of jobs will be lost. 

Globalization and Outsourcing 

Outsourcing is one of the outcomes of globalization. Basically, outsourcing involves the shifting of certain processes to other markets. For example, a firm may relocate its manufacturing plant from Canada to such other markets as China or Bangladesh. The low cost of labor in certain markets is the main factor that promotes outsourcing. The cost of labor in Western markets tends to be high. In an effort to cut down on this cost, firms move their operations to Asian markets where labor costs are significantly lower. In the section below, a deeper analysis of how globalization and outsourcing affect labor is offered. 

Wage Drops 

Wage is closely linked to labor. Higher wages tend to attract qualified and competent workers. On the other hand, low wages tend to discourage employee engagement. Research suggests that outsourcing has the effect of depressing wages. For example, after carrying out an analysis, Johannes Schmieder and Deborah Goldschmidt (2016) established that outsourcing has led to a decline in wages. They explain that firms usually outsource manufacturing functions to subcontractors who promise competitive charges. To win bids, the subcontractors pay their employees very low wages. Schmieder and Goldschmidt add that the low wages for which outsourcing is responsible compounds economic inequalities. It is nearly impossible for lowly-paid workers to achieve higher living standards. Schmieder and Goldschmidt are not alone in their observation that outsourcing is responsible for reduced wages. Citing a report, NBC News confirmed that outsourcing depresses wages ( “ Workers’ Wages Sink ”, 2014). An interesting explanation is offered. The report found that outsourcing hampers the efforts of employees to form and join labor unions ( “ Workers’ Wages Sink ”, 2014). Consequently, the employees are unable to demand better pay. In addition to being offered lower wages, the employees have also been stripped of such benefits as vacation. While outsourcing enables firms to lower costs, it presents adverse impacts for employees. Unless action is taken, workers will continue to endure hardship as more and more companies outsource their operations. 

Oversupply of Labor 

Labor and wages are subject to the forces of supply and demand. Today, the labor market has witnessed a massive influx of workers who are willing to work for very low wages. This has particularly been witnessed in such Asian markets as China. Benjamin Landy (2013) offers a thought-provoking discussion on how the oversupply of labor is shaping labor dynamics. He notes that between 1980 and 2010, the over 1.7 billion workers in Asia have been competing for jobs with workers in the Western world. The oversupply of labor has conspired with such practices as outsourcing to drive down wages. In his article, Landy adds that today, shareholders and investors are taking home the bulk of profits that companies make. This situation contrasts with the state of affairs in the past. In the early to mid-20 th century, employees took home about a third of the profits that their firms earned. The oversupply of labor has given employers greater control. Since they have the option of hiring cheap labor in Asian markets, the employers can and do indeed offer their employees meager wages. Camilo Vargas and Martha Monsalve (2016) acknowledge how outsourcing is linked to the oversupply of labor. They observe that outsourcing is a “ vehicle for lack of minimum labor standards” (Vargas & Monsalve, 2016, p. 3). Essentially, these authors suggest that outsourcing has provided employers with so much power that they disregard labor requirements and standards. Coupled with the oversupply of labor, outsourcing erodes the progress made in championing for the rights of workers. The original purpose of outsourcing was to allow firms to conduct their operation without incurring huge costs. While outsourcing has fulfilled this purpose, it has also adversely affected employees. If firms wish to derive the full benefits of outsourcing, they must remember not to neglect the welfare of their employees. The observations that have been made regarding outsourcing are in line with the arguments that James Baron and Michael Hannan (2001) present in their article. They note that when the management of a firm embraces a new model, the organization witnesses high turnover (Baron & Hannan, 2001). Applying this argument, one can argue that as more firms embrace outsourcing, there will be an increase in turnover. 

Trade Agreements 

Today, nearly all nations recognize that they are not self-sufficient. They understand that they need to work with their trade partners to pursue shared interests. Trade agreements provide the countries with frameworks for collaboration. There exist dozens of such agreements. The agreement offer the partners favorable terms that encourage trade. For example, it is common for trade agreements to contain provisions which offer tax incentives and exemptions to trading partners. NAFTA is one of the main trade agreements. This accord brings together the United States, Canada and Mexico (McBride & Sergie, 2017). As its name suggests, NAFTA was designed to facilitate free trade. This agreement eliminates barriers that would otherwise hamper free trade. The following discussion focuses on the impact NAFTA has had on the operations of companies and the environment. It should be understood that NAFTA serves as a representation of other trade agreements. The observations made about NAFTA can be extended to the other agreements. 

Impacts on Companies 

There is a debate regarding the impact that NAFTA has had on the economies of the US, Canada and Mexico. On the one hand, there are those who believe that this agreement has spurred economic growth in the three countries. As it has eliminated barriers, NAFTA has allowed the partners to trade without undue restrictions. The US is perhaps the greatest beneficiary of NAFTA. One of the benefits that it has witnessed concerns growth in trade volume. Since NAFTA came into force in 1994, trade volume between the US, Canada and Mexico has trebled (McBride & Sergie, 2017). Another positive impact of NAFTA involves the creation of employment opportunities. It is estimated that as many as 14 million jobs are linked to the trade between US, Mexico and Canada. Every year, 200,000 job opportunities are created through NAFTA (McBride & Sergie, 2017). On the other hand, there is a camp that is convinced that NAFTA’s overall impact has been negative. This group notes that NAFTA threatens jobs in certain industries. In the section below, the impact of NAFTA on Canadian companies is investigated. 

Firms in such industries as agriculture, automotive and energy are among the biggest beneficiaries of NAFTA. The benefits that these companies enjoy have come mainly in the form of tariff exemptions. The US and Mexico do not apply tariffs on certain products from Canada. As a result, the Canadian companies are able to sell their products at competitive prices. Another impact that NAFTA has had on Canadian firms is that it has introduced new regulations and standards. These standards are intended to enhance safety and promote fair play. Moreover, NAFTA has generated opportunities for increased trade between Canadian firms and those in Mexico and the United States. It is important to note that not all impacts of NAFTA have been positive. Job losses is one of the negative impacts. In his analysis of the impact of NAFTA, Jerry Dias (2017) notes that “ since 1993, employment in Canada at the Detroit Three has dropped by more than half, from 52,000 in 1993 to just 23,000 last year”. Manufacturers have offshored their operations to Mexico where desperate workers accepted very low wages. Essentially, NAFTA has fueled economic and social inequalities. Despite its negative impacts, overall, NAFTA has been an effective and beneficial agreement. 

Metabolic Relationship 

The drafters of NAFTA understood that this agreement would raise environmental concerns. It is for this reason that they included provisions which committed the three partners to safeguard the environment. In an effort to boost investment and trade, the Canadian government has historically adopted policies which set the stage for environmental damage. For example, under the leadership of Stephen Harper, Canada withdrew from the Kyoto Protocol (Duncan & Garver, 2017). The withdrawal was intended to encourage investment. Harper’s government also passed budget bills which sabotaged the laws and measures that were instituted to protect the environment (Duncan & Garver, 2017). With its focus on free trade and investment, NAFTA poses a threat to the environment. As pointed out above, NAFTA has boosted trade among the partners. With the increased trade, the chances of such accidents as oil spills are high. Oil spills spell catastrophe for fish and other marine life. Given the weak provisions on environmental protection, it is evident that NAFTA poses a real threat to the environment. There is need for Canada to push for the inclusion of stricter provisions which seek to secure the environment even as the three countries pursue free trade. 

Conclusion 

Globalization has transformed how nations relate. Today, it is nearly impossible for a country to isolate itself from the rest of the world. Globalization has facilitated trade and other interactions among countries. Through shared technology and infrastructure, nations are able to collaborate on a wide range of endeavors. Some of the impacts of globalization have been negative. While these impacts raise questions about whether the world should continue to embrace globalization, they do not distract from the many positive effects of globalization. For the world to enjoy the full benefits of globalization, it needs to address the negative effects. Efforts should particularly be committed to resolving the negative effects of globalization on labor. It is important to protect jobs while ensuring that workers are offered fair wages. As they adopt mechanization and outsourcing, companies need to prioritize the wellbeing of their employees. 

References 

Accetturo, A., Dalmazzo, A., & De Blassio, G. (2014). Skill Polarization on Social in Local Labor Markets Under Share-Altering Technical Change. Journal of 

Regional Science, 54 (2), 249-272. 

Baron, J. N., & Hannan, M. T. (2001). Labor Pains: Change in Organizational Models and Employee Turnover in Young, High-Tech Firms. American Journal of Sociology, 106 (4), 960-1012. 

Dias, J. (2017). NAFTA took Good Canadian Jobs and made them Bad Ones in Mexico. Retrieved March 26, 2018 from https://www.huffingtonpost.ca/jerry-dias/nafta-took-good-canadian-jobs-and-made-them-bad-ones-in-mexico_a_23189630/ 

Dion, I. (2017). A Look at Trends in Maritime Transport at the Port of Montreal. Retrieved March 26, 2018 from https://www.edc.ca/en/blog/trends-in-maritime-transport.html 

Duncan, L., & Garver, G. (2017). NAFTA and the Environment: Time to Come Clean. Retrieved March 26, 2018 from https://www.nationalobserver.com/2017/09/28/opinion/nafta-and-environment-time-come-clean 

Javelosa, J., & Houser, K. (2017). This Company Replaced 90% of its Workforce with Machines. Here’s what Happened. Retrieved March 26, 2018 from 

https://www.weforum.org/agenda/2017/02/after-replacing-90-of-employees-with-robots-this-companys-productivity-soared 

McBride, J., & Sergie, M. A. (2017). NAFTA’s Economic Impact. Retrieved March 26, 2018 From https://www.cfr.org/backgrounder/naftas-economic-impact 

Panama Canal Expansion- Key to Global Trade. (2016). Retrieved March 26, 2018 from http://www.ifc.org/wps/wcm/connect/news_ext_content/ifc_external_corporate_site/news+and+events/news/panama+canal+expansion+key+to+global+trade 

Schmieder, J., & Goldschmidt, D. (2016). Domestic Outsourcing Reduces Wages and Contributes to Rising Inequality. Employment Research Newsletter, 23 (1), 4-6. 

Vargas, C. P., & Monsalve, M. E. (2009). Labor Outsourcing: Between Efficiency and Social Equity. Revista CES Derecho, 7 (1), 3-10. 

Workers’ Wages Sink as ‘Domestic Outsourcing’ Grows. (2014). Retrieved March 26, 2018 From https://www.nbcnews.com/feature/in-plain-sight/workers-wages-sink-domestic-outsourcing-grows-n118441