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Your Highness, as Catholic Christians, and princes who love and promote the holy Christian faith, and are enemies of the doctrine of Mahomet, and of all idolatry and heresy, determined to send me, Christopher Columbus, to the above-mentioned countries of India, to see the said princes, people, and territories, and to learn their deposition and proper method of converting them to our holy faith; and furthermore directed that I should not proceed by land to the East, as is customary, but a Westerly route, in which direction we have hitherto no certain evidence that anyone has gone.
------ Entry from the journal of Christopher Columbus on his voyage of 1492
Of course, Columbus did not reach India and en route to China. He discovered North America and called the wrong people Indian. More than 500 years later, you can see Indian and Chinese engineers everywhere in the Silicon Valley; Mexican chefs cook food in ¬¥§üÁF¡B¹©®õÂ×. (Actually I have been there several times before, not bad) Japanese cars outsold American cars in America; Tycoons smoke Cuban cigars; Ladies put on Channel perfume and wear Cartier jewelries; Professors are talking about BRIC and emerging markets in business classes; Young investment bankers are going to China; Hedge funds are setting up in Cayman Island (³¢¥x»Êªº¬ü°ê¤½¥qÅ¥»¡¤]¦b¨ºµn°O) I bought a computer from Dell and forgot to pay my monthly payment --- I received a call from a call center in India; My friend founded a company which sells cheap notebook with open source Linux operating system. His computers were made in Taiwan. His programmers are working in Philippine and Bulgaria. He used to own a web design firm.
It is amazing, isn't it. The world is no longer the segregated world it used to be. It is more integrated and collaborated than ever before. Every country has its role in the supply chain of the world. Every country could boost its standard of living through globalization: exchange goods and services which it has strong relative advantages for goods and services that it lacks as such. I truly believe everyone will be better off as a whole in the long run through trades even though some of the industries and people might be sacrifice in the short run. I had an argument with my friends who major in sociology and who love to protect the rights of the local workers and protect infant industries. Here is my 2 cents:
Infant Industry Argument
Small start-up industries might be inefficient and unable to compete with larger foreign producers who are reaping the benefits of economies of scale. However, if these "infant" industries are protected from foreign competition, they can expand their markets to the point where their production facilities become larger enough to reap the same economies of scale enjoyed by foreign competitors.
This argument has some validity, but often is abused. Also, the empirical evidence shows that it is usually the old-line, large industries with political connections that obtain protections (steel, textile) rather than new "infant" industries such as biotech, software and technology.
Support Domestic Wages
In high wage countries, the public often fears that trading with countries where wages are low will increase labor market competition and push the wage rates lower. However, trade occurs because of comparative advantage. As was previously pointed out, when countries produce more of the products where they have a comparative advantage, the productivity of labor should increase. In a competitive market, wage rates are based on the productivity of labor. Therefore, the higher productivity of labor that results from international trade should result in higher, not lower wage rates.
Again, the public's unwillingness to accept this logic is due to timing and perception. The idea that international trade lowers wage rates might be fallacy for most of workers in the long run, but it persists because it is true for some workers in the short run. Even though international trade may actually raise wage rates in the long run, many people may be unwilling to sacrifice income and undergo the retraining necessary in the short run to attain the longer-tern benefits.
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