Term Paper on "Globalization Cafta and Globalization" Corporate Social Responsibility"

Term Paper 6 pages (2747 words) Sources: 7

[EXCERPT] . . . .

Globalization CAFTA

CAFTA and Globalization"

Corporate social responsibility is a collective of concepts that are said to further the governance of business in a manner that takes into consideration the ethical aspects of business that could potentially be left behind if the bottom line is the only traditional guide used by any business to make decisions. In a climate of government, consumer and collective business demand for increased CSR in business practices there are many concerns that arise, not the least of which are those surrounding an emerging global economy. There are clear threats to economies that are associated with international trade practices in both old and new markets that have been realized throughout history and have negatively affected nations and regions. One of the best arguments in favor of free trade agreements such as the Canadian American Free trade Agreement is that globalization is inevitable and nations and companies should ready themselves by experiencing global trade and by competing "through product improvements and through global strategies and structures."

This work will argue that in the case of CAFTA the economic arguments in its favor are both logical and correct.

In the book Globaphobia Gary Burtless points out that though many assessments of the modern economy are decidedly positive and still others claim that the economy is, "...very kind to a few at the top, but barely rewarding for many in the middle, and a continuing nightmare for those at the bottom." The question then arises with regard to globalization that because this economy is expanding to the global marketplace, where the majority of peoples suffering from this "continuing nightmare" live all care must be taken to redress this social concern. Some will invariably argue that the development of trade agreements such as CAFTA is simply the next step in a self-serving corporate mindset to more directly direct the funds into the pockets of those at the very top. Though there was much opposition to CAFTA in its inception, due to unfounded fears of potential poor outcomes, the foundation of it was not apposed as it made logical sense, and still does. "Nobody really opposed reducing tariffs, which was the agreement's main purpose."

The theory behind the agreement was simple. Just as a lack of trade barriers between the 50 U.S. states contributed greatly to interstate commerce and kept prices much lower than they would have been otherwise, so too would a lack of trade barriers between Canada and the United States be a boon for businesses and consumers in both nations. How has the U.S.-Canadian version translated into practice? Free trade with Canada went into effect Jan. 1, 1989

The interactions and communications of all concerned, including government, industry and in a small way consumers is the goal of international agreements such as the Canadian-American Free Trade Agreement (CAFTA) as issues and concerns can be aired through mutual communication between nations and regions so potential, future and present concerns can be addressed with regard to international trade. CAFTA was established to set aside the challenges that Canada has with regard to foreign economic control.

A major problem for Canada is that large segments of its economy "notably in manufacturing, petroleum, and mining" are controlled by foreign, especially U.S. interests. This deprives the nation of much of the profits of its industries and makes the economy vulnerable to developments outside Canada. This situation is mitigated somewhat by the fact that Canada itself is a large foreign investor. Since the free trade agreement with the United States (effective 1989), Canadian investment in U.S. border cities, such as Buffalo, N.Y., has increased dramatically.

Canada's foundational concerns about market control by foreign investors need to be addressed in manner that garners open communication and establishes modern economic practices and protections that reestablish the connection it has to the global economy and its own economy.

In the case of CAFTA many of these concerns have been answered by increased Canadian investment in U.S. markets, which in turn balances the potential losses that have been felt by Canada with regard to foreign investment in her resources. "The ultimate test of the success of trade polices is significant growth and diversification of trade flows." Another litmus for the negotiation and implementation of CAFTA is that from its inception the outgrowth of preferential free trade agreements has become as global as the market, all the concerned parties, fearing losses in their own trade with the U.S. (Asia, Central America, EU) have since implemented or begun to implement preferential trade agreements within the global economies. If the free trade agreements, which lower tariffs and increase the ease of which cross national transactions and investments take place, did not work why so many nations would not be interested in benefiting from them?

The agreements, and particularly between strong nations give both parties advantage to trade with global partners in a manner exclusive of protective policies of old. Since its inception CAFTA in the economic market, has successfully deemphasized Asian markets as the most dominant foreign trade force inside the U.S. And Canada and as free trade agreements continue in development, including NAFTA (North American Free Trade Agreement) and CAFTA-DR (Central American Dominican Republic Free Trade Agreement) have furthered the cohesion between nations with regard to long standing labor issues between nations with differing standards and practices as well as a reduced incidence of product dumping in a unidirectional system. As there is no need to artificially reduce prices in a market where taxing restrictions on trade never drive the prices up in the first place and where systems are in place that watch and counter such actions more quickly than restrictive historical economic protections that fostered back door accesses that challenged market and labor.

Many free trade agreements are also paving the way for industries and nations to resolve trade disputes through best practices which are in the best interest of all nations in a global market, despite early problems. The voice of the opposition movement is actually proof that the movement toward global free trade is working in this manner as the opposition complains that these free trade negotiations are paving the way to global government, an unsubstantiated fear-based claim that calls the EU (European Union) a trend setter even though geographic and political differences in other regions are clearly incongruent with an EU type system. As nations come together to collectively address trade issues the opposition movement sees such collectives as an extension of regional governmental unions, though the standards associated with trade negotiations are different in many ways from the EU monetary system that is simply a union put in place to resolve currency issues that are inherent in a region of such small geographic relativity, that contains many independent nations.

The impetus for CAFTA is clear as Canada and the U.S. wished to decrease the level of business and industry defection that was occurring and increase cooperation of Canadian U.S. businesses as well as fostering regional expansion. Yet, there can be no clear idea of the outcome unless one cites successes of CAFTA, which can be felt in many industries,

The results of the free-trade pact are so encouraging that both nations have agreed to accelerate tariff cutting under the new agreement, with 500 provincial trade barriers eliminated by the mid-1990s. In the first three years since the implementation of the CFTA, trends in trade, investment, and commercial cooperation had been impressive. For example:

1. Total Canada-United States trade in 1991 was $176.2 billion, up 35% since 1987, the year before the signing of the agreement.

2. Total bilateral direct investment went from $82.5 billion in 1987 to $96 billion in 1990, an increase of 16%.

3. Cooperation in areas from government procurement, to standards harmonization, to border-crossing procedures has increased.

According to an expert economist the successes of CAFTA do not negate any failures it may have had but do give strong evidence that possible reviews and revisions are and essential and normal part of the process. The example of the telecommunications sector is one that warrants closer address:

The mutual benefits of tariff reduction are nowhere better illustrated than in the telecommunications sector. As high pre-CFTA tariffs have been reduced and eliminated, manufacturers of telecommunications equipment on both sides of the border have benefited. U.S. manufacturers of parts for telephone switching apparatus, for example, increased exports to Canada by over 400% between 1987 and 1991 from $17.3 million to $88.9 million as Canadian tariffs were reduced from as high as 17.6% to zero. Between 1988 and 1991, Canadian manufacturers of telephones also increased their exports to the United States by almost 400%, from $19.1 million in 1988 to $97.9 million in 1991. U.S. tariffs on Canadian sets went from 8.5% to zero in most cases over the same period. Certainly, such performance throughout the economy of North, then Central and South, America would be welcomed by all. No better a model of achievement could be pressed forward for the NAC.

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