Historical background on Globalization and International trade theory and barriers to trade

Subject: Health Care
Type: Expository Essay
Pages: 6
Word count: 1344
Topics: Globalization, Investment, Macroeconomics, Nursing

Introduction and Background

Globalization can be defined as a trend that enables individuals, corporations, and countries to reach around the globe farther, faster, deeper, and cheaper than ever before. It can also refer to the spread of free-market capitalism to virtually every country in the world. In macroeconomics, globalization is mainly explained through the Ricardian model. According to this model, globalization is facilitated by the mobility of factors of production. Hence, as long as capital investments are mobile and technology can be used in any region, then goods can be produced on an international level.

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International trade, on the other hand, is founded on macroeconomic theories of early economists. The first theory used to explain the concept of international trade is Adam Smith’s absolute advantage (Torelli, 2013). Adam Smith argued that it is possible for nations to flourish through the division of labor. According to this theory, the country with the lowest costs and greater efficiencies is said to have an absolute advantage. Still, Ricardo helped expand on Adam Smith’s theory by arguing that a country’s production efficiencies were determined by its lower opportunity costs. Hence, the theory of comparative advantage was introduced to help explain instances that the theory of absolute advantage could not.

Barriers to trade emerge in regions, which do not favor openness to trade. Barriers to trade are caused by unfavorable trade policies. Typically, trade policies constitute instruments such as tariffs and quotas. Tariffs are taxes levied on imports. If a country is pushing for protectionism, then its tariffs are likely to be very high. However, protectionism becomes a barrier to trade for importers. Quotas are also issued to importers to limit the number of goods being imported. These import limits protect local producers, but they also become a barrier for consumers (Torelli, 2013). Economists favor free trade because it steers the economy away from tariff and protectionist distortions.

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Literature Review

According to Fischer (2003), the forces of globalization have had little or no impact since the nineteenth century. Factors such as democracy, poverty and inequality, and economic liberalization are the real drivers of globalization. Similarly, O’rourke & Williamson (2002) prove that globalization became prevalent in the nineteenth century. The authors test this hypothesis using the commodity prices in three eras. Their findings show intense price convergence in the second era, that is, the nineteenth century. This convergence, (globalization) results from economic integration caused by reduced transport costs and the absence of trade barriers. Together, the two cause a convergence in the prices of goods, which in turn increases the volume of trade.

It is evident that the mobility of labor also drives international trade as a factor of production. Owen (1999) illustrates how international trade affects the accumulation of human capital stocks. In the article, Owen (1999) emphasizes on the change in countries with low human capital stocks. She uses enrollment data from schools and industries. The findings show that an increase in the volume of trade activities leads to an increase in human capital accumulation in countries with scarce labor. However, the findings suggest that these changes are muted in high-income countries.

In a journal article, McDonald (2004) shows how peace results from free trade. The article relies on Ricardo’s theory of comparative advantage to show how high-income countries benefit from free trade. To prove his hypothesis, the author uses the period before World War I, as evidence. The findings show that during this period, highly performing European economies such as Germany and France were benefiting from free trade, which enabled them to obtain allies. However, Russia, which was responsible for starting the First World War, was thriving on tariffs and state assets. This non-liberal economic order provoked the First World War.

Krugman (1993) also defends free trade policies in his article. According to him, a country is better off in a free market if it uses free trade policies. To prove his hypothesis, the author uses two instances. In the first one, a country operates in a free trade market. In this case, the country benefits from reduced costs and mobility of factors of production. Hence, the country can only withdraw if the trade policies go against its interests. The second instance is where a country is operating in an imperfect market. In this case, the country is likely to be under pressure to withdraw free trade policies because they would be inefficient. However, doing this will create a situation similar to that of a prisoner’s dilemma. If the country withdraws its free trade policy, it may or may not benefit from it. Hence, according to (Krugman) retaining free trade policies is the best decision because it is easier for the countries involved to negotiate.

In another article, O’Rourke & Taylor (2006) find out if Democratic and protectionist policies can be used to liberalize trade within a country. According to the authors, a highly democratic society is characterized by socialism. Democracy places market powers in the hands of the citizens. It also makes leaders accountable for their citizens. The authors use data on protectionism, democracy, and factor endowments from the late nineteenth century. The study presents evidence on the effects of tariffs in rich European countries and third world countries over time. Its findings show that democracy, protectionism, and the factor endowment theory had opposite effects during the nineteenth century. Hence, democracy and protectionism may or may not promote free trade.

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Globalization is likely to affect the healthcare sector in an economy through democracy. Democracy encourages workers in different sectors of the economy to practice their professions freely. Hence, through democracy healthcare providers such as nurses are free to offer their services in any part of the world. This promotes the mobility of the health labor force in different countries. As a result, it becomes easy for people to access their healthcare needs from different parts of the world.

As seen in the study by Owen (1999), increased international trade activities lead to increase in human capital stocks. Currently, the healthcare sector in most countries is sponsored by many international organizations. This creates a broad network of healthcare providers all over the world. At the same time, it creates an opportunity for health activities such as nursing to grow. If a country can facilitate training facilities for nurses, then it is likely to produce more nursing professionals as the trade expands.

Also, reduced trade barriers can help nursing practitioners extend their services to deserving countries. For instance, in a developing country, economic challenges such as poverty and inequality contribute to the country’s poor health (Davenport & Low, 2012). However, if the country employs free trade policies, then it is more likely to benefit from free international healthcare services. Some of these services are delivered through nursing care.

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Globalization, international trade, and barriers to trade have been used in this research to help determine how they can be applied in nursing. The research finds that each of the factors positively affects nursing apart from barriers to trade. Nonetheless, eliminating barriers to trade with free trade policies has been seen to promote nursing. Hence, this research shows how macroeconomic variables can be used to explain sectoral behavior in an economy.

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  1. Davenport, E., & Low, W. (2012). The labour behind the (Fair Trade) label. Critical perspectives on international business8(4), 329-348.
  2. Fischer, S. (2003). Globalization and its challenges. The American economic review93(2), 1-30.
  3. Krugman, P. R. (1993). The narrow and broad arguments for free trade. The American Economic Review83(2), 362-366.
  4. McDonald, P. J. (2004). Peace through trade or free trade?. Journal of conflict resolution48(4), 547-572.
  5. O’rourke, K. H., & Williamson, J. G. (2002). When did globalisation begin?. European Review of Economic History6(1), 23-50.
  6. O’Rourke, K. H., & Taylor, A. M. (2006). Democracy and protectionism (No. w12250). National Bureau of Economic Research.
  7. Owen, A. L. (1999). International trade and the accumulation of human capital. Southern Economic Journal, 61-81.
  8. Torelli, P. (2013). International Economics: Understanding the Forces of Globalization for Managers. Business Expert Press.
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