First, let’s take a look of the main advantages of multinational corporations that will offer: • The benefit for consumers: it can be easily notice that the larger the corporation, the better they are to lower the average prices and costs for its consumers. For example: some developed countries like Japan or Korea can offer cheaper car price than developing countries, the same with other technology industry like smart phone, and electronic. • Corporations will create jobs and wealth: after putting their money to invest to foreign markets; of course they will hire the local people to get the advantage from the low labor cost. Wealthy is likely to come to their resident soon
While there are some unmistakable positives to outsourcing, I would argue that as a whole, the negatives far outweigh the positives and outsourcing is bad for the United States. There are many benefits to outsourcing, many reasons that company has to outsource some of its business. According to Robin Gareiss, “The No. 1 reason companies turn to outsourcers is to save money--64% say that’s the main goal of their outsourcing contracts” (3). Companies are able to save money because they outsource to another country, and the third party that is in the outsourcing contract, runs the business in that country and is able to pay wages in accordance with that country’s laws, which for the most part there are none.
Markusen and Maskus found horizontal multinational replaces trade whereas, a vertical multinational positively correlates with trade (Markusen & Maskus, 2001). In the U.S., critics of off-shoring argue, it eliminates jobs and exploits poor conditions in low wage countries. Others contend this practice has drained public tax coffers; eroding cash strapped Social Security, Medicare, workers compensation and other payroll-deduction funds (Konrad, 2004). Proponents of off-shoring believe it improves employment opportunities and overall domestic wealth. Their rationale, allowing other countries to produce and export complementary/intermediate products into the U.S., allows the U.S. to focus resources and capital on “higher” value added steps within the overall value chain.
How does outsourcing differ from offshoring? Outsourcing is “hiring an organization to do a task your firm previously performed” (Tanner and Raymond, 2010, p. 173). Companies outsource when they want to lower costs of production. Outsourcing has become very popular for companies in the United States. Companies prefer to work with other companies outside of the U.S. because they have cheaper labor costs than the labor costs in the United States.
This is beneficial to America in that consumers are able to buy more goods and services at lower costs and therefore the gross domestic product rises. In addition, with domestic consumers able to market their product on a global level foreign consumption rises. Immigration brings some of the same benefits as trade. Immigrant workers statistically work for lower wages and take jobs that are purportedly unappealing to native workers. This results in a lower cost to employers and an influx of workers.
These barriers can include tariffs and quotas as well as non tariff obstacles such as licensing rules (“Investopedia,” n.d). Removing such barriers allows international trade occur easier and countries are able to put to practice the comparative advantage aspect in relation to other economies. In Adam Smiths paper “The Wealth Of Nations” paper by Adam Smiths projects the view on international trade as not a zero sum equation resulting in being beneficial to all parties involved eventually. By e... ... middle of paper ... ...country. One of the main arguments against globalization is that large corporations take advantage of poorer nations.
From the surface, outsourcing seems like the perfect way for companies to reduce their expenses, and remain competitive within the industry. A closer examination of the effects of outsourcing on the apparel industry reveals that some of them are not as positive as one would think, and that the negative effects are not felt solely on U.S. soil. Outsourcing apparel production takes jobs from Americans who would be working in the factories that are being moved overseas. Employees who work in the overseas plants don’t have it much better: they are barely paid enough to live on, and are often subject to mistreatment and hazardous working conditions. Outsourcing is without a doubt a good economic decision for companies that want to lower their cost of production, but is it also an ethical one?
They would say that competition is healthy and necessary for economic growth. However, there are many reasons why trade barriers are beneficial and play an important role in international trade. Some of these reasons include being self-sufficient in producing military goods, trying to avoid becoming too specialized in our industries, keeping new industries alive domestically, protecting against foreign competition, and increasing domestic employment while reducing the number of jobs outsourced to other countries because of their cheaper labor
Lastly through the reduction of trade barriers it can lead to trade creation, which occurs when, the consumption switches from high cost producers to low cost producers. This creation of trade can help not only the economy but consumers as well and have many positive effects. Free trade reduces the prices of goods and services to consumers. These lower prices are a result of increased competitiveness when a country opens its borders. There is more competition therefore this pushes the prices that domestic producers charge down because a lot of the imported goods coming in are cheaper therefore the producer surplus decreases but the consumers surplus increases (Feenstra, 2011).
One major advantage associated with trading globally comes from an increase in profits. Typically, the reasons behind purchasing raw materials from a foreign country involve the fact that the materials are cheaper to buy and ship. In turn, this reduces overall expenses and as a result, companies can sell products for less. Supply and demand dictate that when products sell for less than the product of the competition and are of equal quality, the volume sold will rise. Increase in sales, along with the decrease in price of production will ultimately increase profits.