Trade and Jobs in Europe: Much Ado about Nothing?

By Mathias Dewatripont; André Sapir et al. | Go to book overview

9. The Impact of Globalization on Employment in Europe

ANDRÉ SAPIR


9.1 Introduction

Since the mid- 1970s, the demand for low-skilled workers has fallen considerably in Europe and in the United States. In Europe, this has translated mainly into massive unemployment, affecting primarily workers with low skills. In the USA, it has meant an increase in the wage disparity between skilled and unskilled workers, the latter even suffering a fall in their real wages.

At the same time, globalization has greatly increased. Global integration, which can be defined as the process 'by which markets and production in different countries are becoming increasingly interdependent due to the dynamics of trade in goods and services and the flows of capital and technology' ( OECD 1993: 7), has both deepened and widened. Deepening is the process whereby the industrial countries, which had already greatly liberalized their trade through earlier GATT rounds initiated in the late 1940s, have continued to do so through regional and multilateral trade negotiations. Widening is the process whereby hitherto inward- looking developing countries have recently opened up through fundamental changes in their domestic policies. This twin process of liberalization has resulted in extensive imports of manufactured goods from developing countries by industrial countries.

The simultaneous occurrence of falling demand for low-skilled workers in the industrial countries and rising exports of manufactured goods by labour-abundant developing countries has produced a new brand of 'trade pessimism'. Earlier on, developing countries feared that manufactured imports from industrial countries would prevent their own industrialization, force them to specialize in the production of raw materials, and maintain their low income levels. Today, it is instead in the industrial countries that many fear that manufactured imports from developing countries impoverish some of their fellow citizens. As Professor Richard Freeman put it succinctly, the new worry centres on whether the labour conditions 'of low- skilled Americans or French or Germans [are] set in Beijing, Delhi and Djakarta rather than in New York, Paris or Frankfurt' ( Freeman 1995: 16).

The debate over whether globalization is responsible for rising unemployment in Europe and falling wages in the United States contains two separate dimensions. The first dimension relates to the respective role of globalization as opposed to

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