At the Workshop in Economic Research (WiER) at the Indian Institute of Management (IIM), Bangalore, Devashish Mitra, Gerald B. and Daphna Cramer Professor of Global Affairs, presented his paper, "The Effects of Trade Reforms: Evidence and Lessons from Developing Asia." 

Mitra argues that trade has been beneficial to developing countries in Asia through a number of channels: higher productivity though greater competition and cheaper inputs, lower price-cost markups through import competition, higher wages, higher employment, lower unemployment rates and, above all, lower poverty rates. This is in sharp contrast to the impact of trade in some of the Latin American countries.

There are, however, a couple of adverse consequences of trade even in Asia, says Mitra. One is the rising income inequality. In addition, workers have been put under some pressure through globalization. Their bargaining power relative to their employers has gone down, most likely due to the greater options available to the employers (in terms of obtaining inputs from abroad) or to consumers (through cheaper and wider variety of imported final goods and services), thereby making the services of domestic workers more replaceable. This has led to a decline in unionization.

Of course, says Mitra, this “de-unionization” can make their manufactures internationally more competitive.

01/05/18