Globalization Country and company interests in conflict.pdfVIP

+Model ARTICLE IN PRESS JPO-5793; No. of Pages 16 Available online at Journal of Policy Modeling xxx (2009) xxx–xxx Globalization: Country and company interests in conflict Ralph Gomory a,∗, William J. Baumolb,1 a Leonard N. Stern School of Business, New York University, New York, NY 10012, United States b Berkley Center for Entrepreneurial Studies, New York University, New York, NY 10012, United States Abstract Globalization has brought about fundamental change. But, the same theory that shows that free trade is beneficial also shows that globalization can be harmful to at least one of the trading countries. Moreover, with globalization, the interests of a country and its companies may diverge. In this paper, we examine free trade in a globalizing world and identify the key policy issues that economists and industrial leaders, alike, must address in today’s interdependent world. © 2009 Published by Elsevier Inc. on behalf of Society for Policy Modeling. Keywords: Globalization; Free trade; Country; Company; Comparative advantage; Equilibrium; Asian countries 1. Introduction We base the conclusions of this paper firmly on some of the oldest and most time honored models in economics. But because we live in a globalizing world the questions that we ask of these familiar models are different than those typically asked in the past. As a result, what emerges from this analysis may go against the grain of many economists’ general beliefs. Globalization has brought about fundamental change. Here we note two significant changes, which we will explain more fully as we go along: (1) The same theory that shows that free trade is beneficial also shows that globalization can be harmful to at least one of the trading countries; and (2) With globalization, the interests of a country and its c