International trade, international economics, and international finance – are all integral pieces of globalization. In this article I want to piece apart 7 problems with international trade that are most commonly found throughout literature on the subject.
Globalism is the anti-hero of the left of the political spectrum. Nationalists, on the other hand – despise it.
And in 2013, 30% of all world consumption was imported. This has continued to rise through 2017.
International trade is tied directly with globalism, yet it is a subject that even nationalists don’t talk about in detail. Without international trade, and her problems, globalization wouldn’t be spreading as rapidly as it is now.
This form of trade functions as a way to encourage outsourcing, encourage international migration, and encourage destruction of cultural affinity in favor of profit and (potentially temporary) societal welfare.
It does not theoretically have to function that way. But it is how it is being used.
So let’s look at the seven negative repercussions that have occurred because of how international trade is being maliciously used:
1. Harms Particular Groups
This is the most obvious. International trade tends to cause a lot of harm to specific sectors of the domestic economy.
Think: manufacturing in the U.S.
Because of the cheaper capabilities through decreased regulation and lower wages in third world countries, manufacturing has declined tremendously in the U.S. from her prime years.
We get cheaper goods, but the individuals in each sector affected by imports takes a hit. This means many of the skills learned throughout the years become worthless, and each person needs to re-train to get a job in a completely different field because of the lack of stability in that specific sector.
More people out of a job and more people with worthless skills will significantly impact the domestic economy. It is not as easy as just switching to another same-paying level job. Many individuals will be forced to take a lower salary until they re-train in the labor force. Then competition goes up, suppressing wages in previously non-affected sectors.
Some obvious groups: manufacturing and farming.
Farmers are always campaigning for subsidies to simply be able to stay in business. We must consider without them, many would go out of business and the majority of our food would have to arrive by ship.
2. Distorts Income Distribution
Ever heard the term “The rich get richer, the poor get poorer”?
Normally, I would disagree. But not in the case of international trade.
Those people in charge of massive chains of production become at a significant advantage with international trade. Usually, these people are already insanely wealthy.
They can outsource more, reduce expenses by solely buying imports, and negotiate cross-border trade deals to further line their pockets.
Most of the money will not always return to the consumer in the form of a cheaper good… But instead will go to the suppliers through less expenses but more profit.
One of the biggest hit groups in this category are new college graduates. With less job prospects, less earning potential for lower-level jobs, and more competition through immigration – their wages and potential outlook has become incredibly dim.
It’s not just the “millennial’s are lazy” mantra. They are at a significant disadvantage from this large-scale incorporation of international trade. As will be Generation Z.
3. The Effect on Small Business
It is impossible to compete with mega-conglomerates with ginormous scales of production.
Small businesses can take huge losses from this for that exact reason.
Take a look around once thriving small manufacturing towns in America and you will see the clear-cut example of how bad it can be. Many of these places are ghost towns or quasi no-go zones.
For a small business to compete with imports that are much cheaper, they tend to have to overly specialize or heavily promote. Both of which cost significantly more and reduce profits, making it hard for them to catch up to the big fish that will rake in most of the profit from international trade.
4. Loss of Knowledge
I’ll use farming as an example here, but it can be applied to any sector.
Imagine a country that did not know how to feed its population.
Would that be a safe country to reside in?
What would happen should a price shock occur in the food-importing country that raises food prices astronomically? Or a world war that results in trade routes being made incredibly hostile or hard to navigate?
This loss of specialized knowledge in the sectors which end up being anti-specialized make it tremendously hard for countries to regain them. We could not just decide to go back to a manufacturing-oriented society.
It would take decades to get everything back up and running efficiently again.
This loss of knowledge from international trade makes it so that our key players in the field of knowledge decrease, and are spread throughout all nations on the planet.
Good for globalism, bad for nationalism, dangerous for all.
5. Propagation of Privatized and Monopoly Banking
I’m not going to go into too much detail about why the banking system is bad here, as that deserves an entire article of its own. But if interested, watch this video to get an animated introduction:
International trade contributes to this problem through the currency-exchange issue.
And the study of exchange rates is relatively new because for most of the past century it was fixed by government action. Now, it’s largely up to free markets and banking (through the money supply).
Distinction from international trade and international money is not entirely clear because most international trade involves monetary transactions.
From currency wars, to domination of political power by banking institutions, it will continue to be exacerbated by international trade.
And handing over this much power to foreign entities, whether GATT, the WTO, or to banks, reduces our sovereignty and could cause some massive power-struggles in the future.
6. Control of Prices
International trade seeks to make trade between nations easier through free market forces.
However, assuming that the condition of free market will forever be held constant is a ridiculous assumption.
Foreign governments will have control over domestic prices through the use of trade agreement wars and import/export tariffs/quotas. This again, passes the power away from the domestic nation and into the hands of those outside of her borders, reducing the ability for politicians to play in the home nations fully-vested interest.
If the free market condition does not stay in effect, we reach a violent conclusion: They control the prices more than we do. We can’t divert our industry to make up for it immediately (see point 4 on this list). So we’ll have to take whatever they give us, at any price.
Even if the importing country does not do this for political reasons, they could still affect the prices in other countries if the importing country faces political instability or geopolitical/trade agreement arguments.
If every country simply specializes in their best fields, then every country has a full monopoly. It could be used as a political tool, instead of a free market tool. And by propagating this un-restricted free for all, we are just setting ourselves up for further loss of sovereignty.
7. Loss of Cultural Affinity
International trade promotes two key things that contribute to culture degradation:
- International migration
- American consumerism culture
International migration obviously has a direct effect on culture. With countries being flooded with migrants from a plethora of other cultures, the host culture will inevitably deteriorate or change. Should this trend continue throughout the future, most countries (besides the most protective) will have completely dramatic cultural shifts to match the new demographics of all nations.
Secondly, the consumerism culture will spread like wildfire throughout the world. This has already been seen in more developed areas of poor countries, and will likely increase.
It should be able to go without saying that culture dictates many things of a society. The rippling effects it would cause throughout the economy could never be overstated.