The benefits that can be identified with Reference to International Trade are as follows: International trade allows countries to exchange good and services with the use of money as a medium of exchange. The benefits of international trade have been the major drivers of growth for the last half of the 20th century.
Management processes[ edit ] Globalization and complex supply chainsalong with greater physical distance between higher management and the production-floor employees often requires a change in management methodologies, as inspection and feedback may not be as direct and frequent as in internal processes.
This often requires the assimilation of new communication methods such as voice over IPinstant messagingand Issue tracking systems, new time management methods such as time tracking softwareand new cost- and schedule-assessment tools such as cost estimation software.
This is exacerbated when outsourcing is combined with offshoring in regions where the first language and culture are different. The visual cues that are missing in a telephone call may lead to misunderstandings and difficulties. Williamson wrote that the governance structure is the "framework within which the integrity of a transaction is decided.
Security[ edit ] Before outsourcing, an organization is responsible for the actions of their entire staff, sometimes a substantial liability. When these same people are transferred to an outsource service provider, they may not even change desks.
But their legal status changes. They are no longer directly employed by and responsible to the organization. This creates legal, security and compliance issues that are often addressed through the contract between the client and the suppliers.
This is one of the most complex areas of outsourcing and sometimes involves a specialist third-party adviser. Fraud is a specific security issue as well as criminal activity, whether it is by employees or the supplier staff.
However, it can be disputed that fraud is more likely when outsourcing is involved. Citibank did not find out about the problem until the American customers noticed discrepancies with their accounts and notified the bank. Companies shifting to insourcing often cite the desire to increase control, compliance and to gain competitive differentiation through vertical integration or the development of shared services, commonly called a center of excellence.
For example, global software development, which often involves people working in different countries, cannot simply be called outsourcing.
The outsourcing-based market model fails to explain why these development projects are jointly developed, and not simply bought and sold in the marketplace.
Recently, a study has identified an additional system of governance, termed algocracy, which appears to govern global software projects alongside bureaucratic and market-based mechanisms. The study  distinguishes code-based governance system from bureaucracy and the market, and underscores the prominent features of each organizational form in terms of its ruling mechanism: So, global software development projects, though not insourced, are not outsourced either.
They are in-between, in a process that is sometimes termed "remote in-sourcing. Standpoint of labor[ edit ] From the standpoint of labor, outsourcing may represent a new threat, contributing to worker insecurity, and is reflective of the general process of globalization and economic polarization.
In Europe, the Acquired Rights Directive attempts to address the issue. The Directive is implemented differently in different nations. In the United States, the Trade Adjustment Assistance Act is meant to provide compensation for workers directly affected by international trade agreements.
Whether or not these policies provide the security and fair compensation they promise is debatable. Policy-making strategy[ edit ] A main feature of outsourcing influencing policy-making is the unpredictability it generates regarding the future of any particular sector or skill-group.
The uncertainty of future conditions influences governance approaches to different aspects of long-term policies.
Competitiveness strategy[ edit ] Economic growth requires change, therefore a governance disposed to helping social and economic structures adapt to the changing environment will facilitate growth and a stable transition to new economic structures  until the economic structures become detrimental to the social, political and cultural structures.
In developing countriespolicies that embrace the global phenomenon of outsourcing are a logical response to the ongoing movement towards "open markets" and "trade liberalization. As prices adjust to those in the global market they no longer reflect domestic productivity, driving lower-productivity firms in the previously protected sectors out of business.
Economic theorists argue that the resulting unemployment is only temporary as workers readjust and are eventually incorporated into the country's most productive sectors, namely those which enjoy a competitive edge over other players in the international market.
Nonetheless, rapid liberalization of markets in developing countries has not maximized the productivity potential of the region.
In the Global South, where technological development is drastically lower than in the North, the redeployment of human and capital resources into new export markets has not come at the cost of necessarily low-productivity sectors but rather underdeveloped ones.
In other words, many of the previously protected sectors were not competitive yet on a global scale, not because they naturally lacked the comparative advantage, but because industry efficiency had not yet been reached.
Outsourcing fills in the gap of receding protected national industries, improving employment and living standards. Among other economic externalities, outsourcing promotes capital inflows and infrastructure.
In Mexico, wage convergence was faster in cities where outsourcing first took hold through maquiladorasalong the Mexico—United States border. Though the previous conclusion suggests production conditions in the region remained static, the situation in East Asia experienced rapid transformations.3: benefits of free trade to the countries One of the benefits of free trade is stated in the law of comparative advantage which says that a country should specialize in goods / services that it does best and trades it with other countries for its needs.
The author is indebted to Ryan DeVries and Alexis Dale-Huang for their assistance in the preparation of this essay, and to Stapleton Roy, Chas Freeman, Paul Heer, Peter Dutton, Ryan Haas, and Jeff Bader for their invaluable comments.
The views expressed herein are the author’s alone, however. In. The current economic crisis has quickly spread to developing countries. Given bleak forecast for income growth, policy makers in poor countries might be under significant political pressure to raise barriers on international trade to weaken product market competition, .
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