The debate between shrill free traders and strident protectionists has become utterly irrelevant
Even though politicians and pundits have been talking about globalization for decades, the discussion remains at a primitive and uninformed level. We cannot have the debates about globalization we need until we free ourselves from the myths that have grown up around globalization.
Today, shrill free traders continue to debate strident protectionists, as though we still lived in a world where purely national corporations shipped finished products to other countries in return for different kinds of products. The picture of globalization as the inevitable emergence of a single global market in which countries specialize along the lines of absolute advantage (Adam Smith) or comparative advantage (David Ricardo) has long been at odds with reality. The majority of the world’s trade is intra-industry trade in similar goods among the advanced industrial regions, not inter-industry trade in complementary goods among countries with different land or labor endowments. The U.S. and Europe sell each other cars and computers, while Japan deviates from the pattern by using nontariff barriers and currency manipulation to keep out imports. In addition, the world economy is highly regionalized. Trade within each of the three parts of what some called "the triad" of North America, Europe and East Asia is more important than trade among the members of the Triad.
Even more at odds with the conventional wisdom about trade is the fact that between a third and a half of all so-called international trade is "intra-firm" trade, in which components are shipped to and from a multinational corporation’s subsidiaries or partners in different countries. This is not trade, in the traditional sense. It is transnational production.
Transnational production is the successor to national production, which in turn was the successor to local and regional production. Before the industrial revolution, most goods like tools and clothing were made from local materials in or near the place where they were consumed. Steam-powered factory production, combined with distribution by steam locomotives and steamships, created national and imperial markets in the nineteenth century that could support giant corporations that relied on the telegraph for coordination. Successive innovations in energy and communications -- the electric power plant, the telephone, the truck and automobile, jets, container ships, the internet and satellites -- have made possible global production networks which are replacing earlier purely national production networks.
http://www.salon.com/news/politics/war_room/2011/06/28/lind_globalization/index.html?source=rss
