ECON315 – Global Economics - Case Studies Analysis # 5
Dr. Edouard Mafoua
Case Studies Analysis # 5 (Chapters 8 & 9)
(Maximum Points: 30 points; No Plagiarism!)
Name _________________Liam Rice________________________
Score________
Instructions:
Please write double-spaced summary/comments (three paragraphs typed) on each case
study. Each paragraph must contain at three sentences and is worth 3 or 4 points. Please
use Times New Roman, one inch margins, and 12 point font.
A. Case Study # 1: Trade Conflicts (10 points)
Please read and summarize “Is the U.S. - South Korea Free Trade Agreement Good
for Americans?” from Chapter 8.
In 2011, the government of the United States, led by Barack Obama,
approved agreements with South Korea, Panama, and Columbia after a
four-year drought in the formation of free trade associations. The US
government was eager to accept the agreements believing that they
would help create jobs in the weak U.S. economy. However, most
unions were unconvinced fearing that U.S. companies would send more
jobs abroad now that they could use the advantage of lower labor costs
in those nations.
Because South Korea has a large market, free trade with them would
benefit the United States which could lead to American exports being
more attractive to about 50 million consumers. Imports would increase,
which could cost American jobs in two ways: some Korean products
would be less expensive than American products, and some companies
could send jobs abroad. Due to this trade agreement, it was evident
that some U.S. jobs would be lost, but the critical question is whether
the jobs created will be larger than the number lost, depending on the
industries that benefit and the ones that suffer.
Free trade advocates point out that it is a standard trade characteristic
that some industries win while others lose. In this case, due to the free
trade being between the U.S and South Korea, dairy products, fruit,
pork, beef, poultry products, plastics, chemicals and financial services
will benefit while steel products, textiles, semiconductors and parts of
machines will be affected by South Korean competition. To gain
congressional approval of the trade agreement, Obama agreed to
renew the Trade Adjustment Assistance Program, which provided
workers that were laid off because of free trade pacts, temporary
support for income and job retraining.
B. Case Study # 2: Trade Conflicts (10 points)
Please read and summarize “Do U.S. Multinationals Exploit Foreign Workers?” from
Chapter 9.
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According to “Do U.S. Multinationals Exploit Foreign Workers?”, The
critics, the only thing that matters to multinational companies is to
maximize profits, so they research areas for the cheapest labor when
determining where to locate factories. The only ones benefiting from
this practice are the business owners, who have shifted operations
from low-wage factories in industrialized countries to low-wage
factories in developing countries. Workers in developing countries who
are underpaid are not bothered by their earnings. Choosing to work for
a foreign-owned business rather than the alternative and therefore,
foreign workers compete to work for the multinationals.
In case of a scenario where workers in developing countries become
exploited, a solution would be to warn multinationals to operate in
developing countries; however, workers in developing countries would
be worse off if multinationals stopped contacting them. Another option
would be to pressure multinationals to pay workers in developing
nations wages as high as wages paid to workers in industrialized
countries. However, if multinationals are compelled to extend salary
scales to workers in developing countries, these workers would be less
attractive to multinationals because, despite their lower productivity,
they get hired because they are cheap.
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Multinationals do not necessarily have to provide a premium on local
wages when hiring workers, but they can offer other advantages, such
as a modern factory in which to work rather than a sweat factory as
this would increase the wages of all workers, not just those who they
employ. Economists at the Peterson Institute for International
Economics estimate that during the 1990s, the salaries paid by
multinationals to workers in emerging countries were approximately
double the local manufacturing wage; Wages paid by multinationals to
workers in middle-income countries were about 1.8 times the local
manufacturing wage. By U.S. standards, US multinationals pay less to
workers in developing countries, but U.S. standards are irrelevant in
developing countries.
C. Case Study # 3: Trade Conflicts (10 points)
Please read and summarize “Does U.S. Immigration Policy Harm Domestic
Workers?” from Chapter 9.
Some analysts believe that the overall benefits from immigration are small, and therefore
those benefits play an insignificant role in the policy debate. However, others think that
immigration does have a significant effect on the economy; claiming that highly skilled
immigrants help create jobs for domestic workers, as well as fill the undesirable positions
that most Americans do not want. With the majority of the U.S. residents today being
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descendants of immigrants, concerns about the effect of immigration on domestic
workers have resulted in several laws designed to protect against immigration.
Unions have debated for far more restrictive policies, claiming that immigration lowers
the wage and employment levels for domestic residents. Until 1921, when the quota law
was enacted, there was no substantial restriction placed on immigration in the united
states. The quota law which Primarily restricting immigration from eastern and southern
Europe was later changed in 1965 by the Nationality Act Amendments which ended the
country-specific quota, and instead set a limit on the maximum number of immigrants
allowed into the united states.
The immigrants with the purpose of family reunification, as well as those possessing
exceptional skills, were given preferential treatment. However not all immigrants entered
the U.S. legally, and in 1986 the Immigration control act addressed the situation of illegal
immigrants, which was followed by the illegal immigration reform and immigrant
responsibility act in 1996 which also set restrictions on immigration.
