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.