KEY POINTS:
• Trade creates competition on a global scale and provides
affordable goods
• Trade does not necessitate a “race to the bottom”
Background:
In order to make a product, a business must consider the cost
and availability of labor, materials, facilities and transportation.
They must match these costs against what they might expect
their product to sell for. So for example, it would not make
sense to pay a highly skilled worker a lot of money to produce
a commodity product that will sell for a few dollars if that
worker could be producing something else that would sell for
hundreds of dollars.
Consumers
generally seek to buy many products for the lowest possible
price, especially products with a perceived short life span.
So while a so-called durable good such as a washing machine
might be worth spending more to get a better and longer-lasting
product, something like a t-shirt is generally thought of
as disposable and to be bought as cheaply as possible.
A
fundamental requirement for any business to be successful
is that it must make a profit, or at the very least generate
enough income to pay all of the costs of doing business. These
costs include wages, costs of raw materials, the purchase
or lease of equipment and facilities. In addition, there must
be some compensation to owners and investors or they have
little incentive to risk operating the business. If the business
closes, then the workers have no jobs and consumers can no
longer purchase whatever it was that the company made.
So,
the business has to be able to produce products that can be
profitably sold at a price that consumers will pay. This allows
the business to stay in operation, employ their workers and
reward owners and investors for the risk of running the business.
In
Lesson 2, we studied the Asian Tigers. We discovered that
over decades of growth in Asia, the manufacture of hundreds
of different kinds of consumer goods shifted to this region.
The result for Asia was unparalleled economic growth. The
result for Europe and North America was a wider variety of
affordable consumer goods.
ACTIVITY
1: Research, discuss and debate the concept of “the race
to the bottom.”
(grades 9-12, adjust expectations to grade level)
Background
There are many different groups who are concerned that the
trend towards a freer flow of goods and capital around the
world will result in a “race to the bottom.” This
is often described as a situation in which workers in some
countries lose jobs to lower paid workers in other countries.
In the most dire of these predictions, jobs eventually go
only to those workers desperate enough to work for starvation
wages, live in miserable conditions and their countries are
subjected to environmental disasters.
Those
who disagree with this notion point out that in the U.S.,
where wages are among the highest in the world, job growth
is also among of the highest in the world and the unemployment
rate is among the lowest in the world.
Those
who believe that there is a “race to the bottom”
are often able to document their concerns by showing specific
examples of worker exploitation and wide disparities between
worker wages and the final retail price of the goods that
they make. On the other side of the coin, it is always important
to view wages and working conditions in the context of specific
societal conditions and to also consider what other employment
options are available before coming to conclusions about trade-related
jobs.
Wider
demographic and economic data often supports the concept that
it is only through the introduction of new jobs and new industries
that developing nations are able to climb out of continuing
cycles of poverty. “Race to the bottom” concerns
often claim that these new jobs do not, in fact, pay enough
to achieve the goals of escaping poverty.
There
are many different sides to this issue, and unfortunately
as with many strongly held views, it is almost impossible
to find a balanced perspective from any one group. However,
through discussion and debate it may be possible to better
understand the issues.
Before the exercise, have students write down their own understanding
of what the phrase “the race to the bottom” means.
Collect these statements for comparison after the exercise
is over.
| Have
students divide into groups representing the following: |
| A. |
U.S.
trade union representing garment workers |
| B.
|
U.S.
consumer products manufacturer |
| C. |
U.S.
consumer products retailer |
| D. |
U.S.-based
trade activist group |
| E. |
U.S.
consumer seeking low prices |
| F. |
Developing
nation economic development authority (for example, many
developing nations have government workers who seek foreign
investors willing to build and operate facilities in their
countries) |
| G. |
Developing
nation workers without jobs |
| H. |
Third-party
factory owner (for example, a Korean manufacturing company
may open a plant in Mexico and sell the output of that
plant to the U.S. and European buyers) |
Have
students research different positions on this issue and conduct
a classroom debate, airing the views of each interest group.
Students might also want to interview representatives of each
of these groups and invite them to speak or debate before
the class—some caution should be exercised to have various
points of view represented.
It
might also be interesting to involve another class as observers
and at the conclusion of the discussion have this group grade
the participants on the depth, believability and persuasiveness
of their presentations.
An
easy way to locate a great deal of information on all sides
of this issue is to use the search engine www.google.com and
simply type in “Race to the Bottom.”
An example of two polarized viewpoints would be these two
sites, but there are many more to explore:
http://www.nicnet.org
http://www.freetrade.org
ACTIVITY
2: What would it cost to make a product in your community?
see “Trade Is: Necessary” Unit 1, Lesson 3.
|
