Specialisation

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Specialisation

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Trade, foreign direct investment, specialisation, China, US GDP, Chinese GPD, globalisation, automatisation, high level of education, capital flows, migration, free trade, international supply chains, European market, deficit trade, consumers, firms, Amartya Sen

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Abstract

Trade and foreign direct investments driven by specialisation and comparative advantages are controversial and provide arguments against free trade and capital mobility.
Modern production of many products are produced in value chains that involves many countries, depending on comparative advantages of each country.
Comment the following:
a) "This phenomena, with international supply chains, makes the standard official statistics over trade partners irrelevant."
b) "If USA put tariffs on telephones imported from China they would hurt US GDP much more than the negative effect on Chinese GDP."
c) "In order to compensate for the effects from globalisation (and automatisation), governments should increase the taxes on capital income and high labour income and spend it on education for the children in mid- and low-income segments. This is equally important in both rich and poor countries."
d) "The fact that people with a high level of education promotes free trade, capital flows and migration is not explained by insight and knowledge. They just have the largest gains from all kinds of economic globalisation."

"This phenomena, with international supply chains, makes the standard official statistics over trade partners irrelevant."
"If USA put tariffs on telephones imported from China they would hurt US GDP much more than the negative effect on Chinese GDP."
"In order to compensate for the effects from globalisation (and automatisation), governments should increase the taxes on capital income and high labour income and spend it on education for the children in mid- and low-income segments. This is equally important in both rich and poor countries."
"The fact that people with a high level of education promotes free trade, capital flows and migration is not explained by insight and knowledge. They just have the largest gains from all kinds of economic globalisation."

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[...] Trades opening are especially tackling low skilled jobs (relocations). This conclusion is shared by the Nobel Joseph Stiglitz which explains that globalization has contributed to increasing the interdependencies of economies and, in so doing, their sensitivity to external shocks, as well as inequalities in the world. However, according to Stiglitz, more than globalization in itself, it is the way it has been managed that is reprehensible (market failures, intervention of states and supranational organizations, etc.). However this context is far from evolving because the economic elites won't change the market rules, as they are the principals' beneficiaries of this system. [...]

[...] Sources: https://www.unige.ch/fapse/erdie/files/8815/0678/9696/Lauwerier2-EED8.pdf L´éducation au service du développement. La vision de la banque mondiale, de l'OCDE et de l'Unesco, Thibaut Lauwerier https://www.challenges.fr/economie/le-capital-au-xxie-siecle-faites-comme-si-vous-alliez-lu-le-best-seller-de-piketty_17908 "The fact that people with a high level of education promotes free trade, capital flows and migration is not explained by insight and knowledge. They just have the largest gains from all kinds of economic globalisation." credits) In conjunction with technological progress, globalization has contributed to global growth in recent decades. The distribution of gains has not been uniform. [...]

[...] Since the origin of Capitalism, the performance (profitability) of the capital is higher than the economic growth. Consequently, the owners of capital get enriched faster than the income of employment (the increase is related to the growth). So, Thomas Piketty proposes an exceptional tax of 15% on the capital and an 80% tax on the remuneration above 500.000$ and increase the inflation in order to destroy the capital profitability. Indeed, to fight against poverty this gain could be redistributed in education as a lever (2nd objective of the millennium development goal). [...]

[...] Also, the states are no longer the main actors, but Multinational firms are. In consequence, the information "Made in" label lost its meaning. Source: http://ses.ens-lyon.fr/articles/la-nouvelle-division-internationale-du-travail-25433 "If USA put tariffs on telephones imported from China they would hurt US GDP much more than the negative effect on Chinese GDP." The United-States have a huge deficit trade. According to the economists, one of the main reasons is the importation of Chinese goods. Recently, President Trump signed a memorandum on imposing additional import tariffs on 1,300 Chinese goods, with a focus on high-tech items. [...]

[...] At the same time, income inequality has widened in many advanced economies (France is an exception). The "elephant" curve put forward by Milanovic (2016) suggests that the middle-lower income of some advanced countries (Germany, the United States, Eastern Europe in particular) have made relatively little progress since the end of the 1980s. In summary, globalization of trade has accelerated since 1980, with substantial economic gains globally, but has unequally been distributed between countries and within countries. Some emerging countries have particularly benefited from globalization and have bridged part of their development gap with advanced economies, reducing global inequalities. [...]

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