GLOBAL POLITICAL ECONOMY DYNAMICS AND THE
INTERNATIONAL DIVISION OF LABOR
Introduction
Discussions about global political economy cannot be separated from globalization.
Although global political economy is considered a new discourse in higher education (O'Brien
& Williams, 2020), it is actually related to the term globalization which can be interpreted as
a way of economic, technological, military, political and cultural forces and mechanisms
becoming global (Smith, 2006, p. 6). It can be influenced by factors internal and external to
the country. Therefore, to define global political economy, this paper will discuss it through a
nationalist economic perspective that pays attention to the internal situation and conditions of
the country, as well as a liberalist economic perspective that pays attention to the global scale.
From a nationalist economic perspective, the concept is understood as a set of themes
or attitudes from a coherent and systematic collection of various economic or political
theories (Gilpin, 1987, p. 31). Meanwhile, Pryke (2012) argues that global political economy
is a package of activities to build, assist and preserve national economies in the global market.
Furthermore, according to nationalist economists, this concept consists of practices, strategies,
and explicit state policy, selectively, and pragmatically consolidate and expand corporate
power to promote national competitiveness (Tsokhas, 2014, p. 555). This then also further
emphasizes the role of nation or state interests in understanding international relations
interests (O'Brien & Williams, 2020).
Based on the presentation in the previous paragraph, from a nationalist economic
perspective, it can be seen that there is a significant role of the state in the global political
economy. As stated by O'Brien and Williams (2020) that the state and power are believed to
play a fundamental role in constructing international political economy products. In addition,
they argue that there are two basic assumptions of this nationalist economy. The first
assumption is that the interstate system is anarchic and, therefore, it is the duty of each state to
protect its own interests (O'Brien & Williams, 2020, p. 10). The second assumption focuses
on the fundamental role of the state in political life, as the state remains the central player in
the domestic and international environment. It can be seen in this nationalist economic
perspective that the global political economy is influenced by the role of the state in the
marketplace global. Interestingly, although some countries have declared joining the free
market, they still protect their markets from foreign competition (O'Brien & Williams, 2020).
It seems that countries' involvement in the global sphere depends on their internal interests
and how they can define global conditions. In addition, for nationalist economists, they will
put more emphasis on the independence of the state in directing and protecting its own
economy.
In contrast, the liberal economic view does not place the state as an important element
in the global economy, but focuses on individuals or broader players (O'Brien & Williams,
2020). Meanwhile, according to Cohn & Hira (2020) liberals tend to view economics and
politics as separate and autonomous fields of activity. Orthodox liberals argue that the role of
government should be limited to create an open environment where individuals and private
companies can freely express their economic preferences. In addition, liberals consider the
world system as an interdependent whole, therefore, liberalism adherents say that all actors
need to cooperate with others in the global economy (O'Brien & Williams, 2020, p. 13). They
must collaborate to pursue their own goals even if they have to conform to global interests.
The current global economy is more likely to adopt liberal values. For example, trade
is based on the goal of free trade, money easily flows in and out of most countries without
difficulty (O'Brien & Williams, 2020, p. 15). One of the reasons for adopting free trade is to
accommodate leaders to be more rational, as it offers an uncomplicated way to benefit a large
number of supporters without negative economic consequences (Hankla & Kuthy, 2013, p.
494). In addition, liberal values are believed to be an approach to success in the global
economy (Jilberto, Mommen, & Vale, 1993; Landes, 1998).
Based on the previous explanation, in a liberal economic perspective, the way to
succeed in the global economy is for all actors to work as a team because they are a unit.
Countries should apply liberal principles to facilitate cooperation between them. The global
political economy involves many actors that influence each other. From a nationalist
perspective, countries should protect their own economies by liberalists believe all actors are
interdependent and interconnected. This is based on the view that liberalism can be analyzed
as an ideology that accompanies economic change in the new world economy, but also as an
instrument to be adopted by less developed countries to adjust their economies by practicing
under the pressure of the major economies, i.e. those with power (Jilberto, Mommen, & Vale,
1993, p. 3).
Understanding this global political economy cannot be done without examining the
critical factors that determine it. Waters (2001) argues that there are three basic components
that affect the world economy. First, advances in transportation and communication
technologies that connect any part of the world. The second is the acceleration of global trade
followed by a pattern of interdependence between countries. The third is the tremendous
movement of capital in the form of foreign direct investment (FDI). O'Brien and Williams
(2020) argue that the global political economy is determined by international trade and
transnational production associated with transnational corporations and foreign direct
investment.
Research Methods
This research uses a literature review method using journals and online news related to
the global political economy and the international division of labor. This method is used to be
able to analyze the object of research and find a broader perspective from the scientific
references that are the study material.
To gain a deeper understanding of the global political economy, this paper will discuss
the two influential factors of international trade and transnational production. How these two
factors affect the global political economy. In addition, it will relate the global political
economy to the international division of labor.
The main argument is that these two factors affecting the global political economy
have a close relationship with the international division of labor. As mentioned by Perraton
(2003), international trade and multinational corporations have consequences for the labor
market. Therefore, to understand how the dynamics in the global political economy and the
implications for the global division of labor, this paper will try to elaborate on them one by
one. This paper will discuss international trade in the second section, while transnational
production in the third section. The implications of these two factors for the international
division of labor will then be discussed.
Results and Discussion of International Trade
According to Waters (2001) the primary and ongoing basis of economic
internationalization is trade. Trade itself is understood as the activity of two or more
individuals exchanging goods and services (O'Brien & Williams, 2020, p. 109). Such
activities would be called international trade if they are operated abroad. This international
trade can create relationships and interdependence between actors (Waters, 2001). As stated
by Ietto-Gillies (2003), that one evidence of state interconnectedness can be seen in
international trade activities in goods and services. Wallerstein and Marxist in Cohen (2017)
categorize countries into several levels, where there are dominant core countries, dependent
periphery countries and semi-fringe countries that are between the two categories. While core
countries enjoy a high level of technological development, selling sophisticated high-value
goods and services, the role of peripheral countries is simply to supply materials raw
materials, foodstuffs, and also cheap labor on the basis of highly unequal exchanges. Among
them, semi-periphery countries benefit from exploiting periphery countries even as they
themselves are exploited by core countries. This shows that international trade affects the
shape of the global political economy. One reason is that international trade has direct and
indirect effects on people and communities, for example, a family's consumption patterns are
affected by trade in goods (O'Brien & Williams, 2020).
One of the ways in which international trade affects the global economy is through a
free trade regime. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996). The theory of comparative advantage advises countries to
specialize in their most efficient products and services (O'Brien & Williams, 2020). The
ideology of comparative advantage serves to obscure uneven economic development progress
and unequal exchange between countries and regions (McBride & Shields, 1993). Therefore,
proponents of free trade believe that every country should engage in trade international and
reduce barriers.
Furthermore, according to liberal political economy, everyone can benefit from trade
as it can improve efficiency and increase productivity (O'Brien & Williams, 2020). For
example, Langenfeld and Nieberding (2005) estimate that trade growth has provided total
benefits to American consumers of about $2.3 trillion over the trade has provided total benefits
to American consumers of about $2.3 trillion during 1992-2002, or between $20,000 and
$22,000 per household in 2002. In contrast, nationalists believe that free trade is detrimental to
the national economy because it will weaken the economy unbalanced development and can
damage the environment (O'Brien & Williams, 2020). As in the case of Fiji, they are facing a
rapid and radical restructuring of the sugar or banana industry and this is potentially
disastrous for their economy as it is a fundamental commodity (Connel & Soutar, 2007).
Furthermore, in the international trading system, there are significant developments
that encourage trade liberalization. The emergence of the WTO (World Trade Organization),
the successor to the GATT (General Agreement on Tariffs and Trade), is believed to play an
important role in trade liberalization international. The WTO (and GATT before it) has
successfully liberalized trade and managed international trade through multilateral agreements
(Sampson, 2001). Jackson (1998) stated that the establishment of the WTO was the most
significant moment in the history of the world economy, even becoming a fundamental
institution in the international economy, especially with its dispute settlement procedures. The
WTO has changed the management of world trade in the following ways:
Change trade liberalization from being based on tariff adjustments to discussing
domestic policies, institutional practices and regulations.
Broaden the scope of trade and change the focus of negotiations from product
bargaining to policy.
Propose movement towards accession policies, for example, in the areas of subsidies
and trade-related investment measures and services (O'Brien & Williams, 2020).
Based on the above, it can be seen that the WTO has successfully played its role in
international trade, but there is the issue of many developing countries' interests not being
accommodated by the WTO (Sampson, 2001). In a d d i t i o n , countries developing
countries recognize the limitations of political influence in the international trade agreement
process (O'Brien & Williams, 2020). Another problem faced by developing countries is that
they lack the capacity to enforce WTO decisions as well as the high indirect costs of initiating
disputes with the WTO (Horlick, 2006, p. 220). For example, trade in agriculture, which is a
key interest of many developing countries, is particularly liberalized (Walter & Sen, 2009).
Apart from the role of the WTO, the influence of international trade on the global
political economy can be understood through its implications for the global division of labor
(Waters, 2001). The division of labor refers to the roles that people employ in the production
process (O'Brien & Williams, 2020). Waters (2001) states there are two types of division of
labour: social division of labour refers to occupational specialization, and technical division of
labour refers to task specialization. This condition is closely related to the concept of
comparative advantage by liberals who attach importance to the specialization of countries'
commodities to gain an advantage in the production process. In international trade. This means
that by engaging in trade, countries also shape their division of labor. Increase While trade
and mobility are expected to increase the elasticity of demand for human capital, they also
automatically reduce the bargaining power of labor (Perraton, 2003, p. 56). Moreover, in the
reduction of transaction costs due to technological advances, international agreements, non-
tariff barriers results in enormous specialization possibilities (Pomfret, 2014). A country can
choose the specific commodities or services offered in international trade which will also
affect the demand for labor from that country.
Another effect of international trade on labor can be seen in the inequality between
more skilled and less skilled labor. Trade liberalization leads to wage inequality due to
increased trade (Goldberg & Pavnick, 2004). It seems that recent international trade increases
the demand for more skilled workers to support the concept of specialization. Slaughter
(1998) believes that the demand for labor from the less skilled to the more skilled is a key
factor of wage inequality and it is actually happening in some countries such as the United
States and the United Kingdom. He added the argument that many countries with Such
inequality creates problems, such as higher unemployment rates and many job opportunities
avoiding less-skilled workers.
Transnational Production
There is general agreement that the growth of transnational production has shaped the
evolution of the global economy (O'Brien & Williams, 2020, p. 132). One of the main reasons
is that the global production system is a complex process. O'Brien and Williams (2013) argue
that this process involves multiple workers and workplaces with their integration with local,
national, regional and global systems. Because transnational production involves multi-level
actors. It becomes more complicated as it has to integrate different social, political and
economic backgrounds in the global economy. The main reason for the emergence of
transnational production is the innovation of communication and information technology
along with the advancement of transportation (Ietto-Gillies, 2003). This development
increases the possibility to separate production processes around the world.
A significant change affecting production processes across countries is the formation
of transnational companies (TNCs). As stated earlier, in the era of globalization, geographical
issues are no longer a big problem, therefore, TNCs can carry out production processes
separately in different parts of the world. Another reason TNCs invest abroad is because
production costs in developing countries are lower than in developed countries (O'Brien &
Williams, 2020). As stated by Ietto-Gillies (2003), there is a significant development of the
organization of production across countries due to the activities of transnational corporations.
In addition, it is argued that TNCs constitute a major part of the global production structure
and about 50 percent of world trade (O'Brien and Williams, 2020, p. 132). This fact shows the
impact of TNCs on the global production process. TNCs seem to be a key player in global
production.
TNCs play their role in the global economy through foreign direct investment (FDI).
Changes in the global production system are linked to increasing levels of FDI (O'Brien &
Williams, 2020). In addition, Perraton says that FDI by transnational corporations has grown
faster than trade (Perraton, 2003, p. 47). The success of TNCs to invest in many countries
around the world may be due to the recognition that TNCs are a good source of investment,
there is a transfer of technology, and there is an increase in the workforce (Waters, 2001, p.
46).
Indeed, there is skepticism towards transnational corporations and FDI. The concept of
transnational phenomena with interdependence between actors raises concerns of reduced
state sovereignty (Biersteker & Weber, 1996). This is also supported by the expansion of
capitalist companies that exploit labor, directly proportional to the need for workers to be able
to survive or survive to finance their own lives (Tyner, 2019). Moreover, for opponents of
capitalism, TNCs are believed to be a new worldwide method of exploitation that is
essentially "barbaric" and unacceptable (Waters, 2001). For example, a study conducted by
Doytch, Thelen, & Mendoza (2014) found the exploitation of child labor, with children forced
to work in fields for long hours, in a multinational tobacco company in Kazakhstan.
Therefore, for nationalist economic advocates, states must improve their ability to regulate
TNCs investing in their own countries (O'Brien and Williams, 2020).
However, for liberal supporters, there are The advantages offered by transnational
corporations with foreign direct investment. Epstein argues that this development can provide
more employment opportunities especially for developing countries, while also resulting in
wage increases because TNCs in developing countries have more productivity so they can pay
more (Epstein, 2003). In addition, TNCs with FDI can increase tax revenues through
increased economic activity in the host country and can help advance economic growth by
encouraging a more efficient division of labor (O'Brien & Williams, 2020, p. 137). Studies
conducted by Harrison in Mexico, Morocco and Venezuela show that TNCs help domestic
firms to break into export markets and they can improve workers' living standards as they pay
higher wages than domestic firms (Harrison, 1994).
Based on the explanation above, it can be seen that TNCs have a significant impact on
labor. One of the reasons TNCs with FDI are growing is that many developing countries are
implementing active policies to support industrialization and export to developed countries
(O'Brien and Williams, 2020). This is understandable because it will provide employment
opportunities in the country they are. Therefore, it is not surprising that many countries are
trying to attract TNCs to invest in their territories. With respect to the global division of labor,
TNCs will increase the demand for more skilled labor, as research conducted by Bruno, Crino
and Falzoni (2012) states that FDI increases the demand for more skilled labor in Poland.
Actors affected by the global political economy must make behavioral adjustments to
be able to face global competition which is currently increasing (O'Brien & Williams, 2020).
Coupled with technological advances in the form of machines, the value of labor has also
decreased because their portion of work can be replaced by machines (Tyner, 2019). The
higher demand for a more skilled workforce forces people to improve their abilities to
compete with others in the workplace. One of the reasons for this trend is to increase labor
productivity as it is a strong indicator of economic efficiency (Plasmans, 2003). In addition, it
is not surprising that TNCs promote division of labor to increase efficient production.
However, it seems that the labor market is shaped by TNC interests rather than national
interest.
International Trade, Transnational Production and Labor
One of the issues in relation to international trade and transnational production is not
respecting workers' rights. Many TNCs do not invest in their own countries because they want
to reduce their production costs. They tend to hire cheap labor and cut production costs with
forced labor in peripheral countries. As stated by Horvat (2020), the worst features of
exploitation are currently happening in all developing countries in the world.
In 2014, BBC News released a video inside the Apple assembly company. The video
shows that employees work under high pressure and for long, intensive periods of time. They
were forced to work standing up all day. In fact, the company installed electrical wires in t h e
machines so that employees could not lean back when tired. Employees work in a very
grueling environment. Although in 2010 there was a mass worker suicide at Foxconn, one of
the companies that manufactures Apple products, then Apple promised to improve facilitation
and working conditions, but the BBC video shows evidence to the contrary. For example,
everyone in China needs to carry an identity card. However, companies still take workers' IDs
directly when they enter the company (BBC News, 2014). Tyner (2019) also argues that
companies can collect profits not only from the products or services produced but also
through life insurance policies from workers who experience misfortune while performing
their duties.
However, not all TNCs tend to exploit labor for profit. A study analyzing foreign
direct investment and labor rights in 80 developing countries conducted by Busse,
Nunnenkamp, and Spatareanu showed different results. In terms of the correlation between
labor rights and TNCs, the study found that TNCs prefer to invest in countries that respect
labor rights (Busse, Nunnenkamp, & and Spatareanu, 2011). Moreover, labor violence in
potential host countries discourages TNCs from running their activities there, wherever it may
be (Busse, Nunnenkamp and Spatareanu, 2011). This condition shows that TNCs pay great
attention to labor rights, not only focus on their profits as well.
One solution to the above problem is to implement labor standards. Based on Heintz's
(2003) argument, the labor market should be for the larger society and should be governed by
rules, norms, and ethical standards that make allowance for the separate costs of
marketization. The International Labor Organization (ILO) is an organization that promotes
labor standards worldwide. The ILO holds conventions that cover basic human rights areas:
freedom of association and collective bargaining, elimination of forced labor, elimination of
child labor, and elimination of discrimination (Heintz, 2003; O'Brien and Willams, 2020).
However, the main problem in implementing labor standards is how to come up with labor
standards that can be applied worldwide. This is due to the disagreement among actors on the
purpose of labor standards. Furthermore, leaders in many liberal countries argue that
economic growth improves labor standards. Whereas, any interference in trade for labor
reasons will lower the gains from trade (O'Brien and Williams, 2020, p.195).
Conclusions
There are different perspectives on the global political economy. Economic
nationalists place the state as the main actor in the global political economy. This is related to
their concept of protectionism, protecting the economy from the global market. Meanwhile,
economic liberalists argue that states should collaborate with other actors in the global
economy. They believe that the global political economy involves multiple actors. Moreover,
the current global economy is more likely to adopt liberal values such as trade liberalization.
There are dynamics that shape the global political economy. They are international
trade and transnational production. Both dynamics have implications for the global division of
labor. International trade with the concept of 'comparative advantage' comparative advantage'
affects the specialization of labour. Whereas transnational production with TNCs has
implications in driving the division of labor around the world, especially in their host
countries. Both international trade and transnational production have benefits for the
participants. This is because TNCs can provide jobs and also improve the lives of workers.
However, there is skepticism about these dynamics. For example, they are believed to
play a role in wage inequality, especially between less skilled labor and more skilled labor.
Another example is the issue of worker exploitation, such as the Apple factory case and child
labor in tobacco factories. One solution that can be suggested is to enforce global labor
standards.
Results and Discussion of International Trade
According to Waters (2001) the primary and ongoing basis of economic
internationalization is trade. Trade itself is understood as the activity of two or more
individuals exchanging goods and services (O'Brien & Williams, 2020, p. 109). Such
activities would be called international trade if they are operated abroad. This international
trade can create relationships and interdependence between actors (Waters, 2001). As stated
by Ietto-Gillies (2003), that one evidence of state interconnectedness can be seen in
international trade activities in goods and services. Wallerstein and Marxist in Cohen (2017)
categorize countries into several levels, where there are dominant core countries, dependent
periphery countries and semi-fringe countries that are between the two categories. While core
countries enjoy a high level of technological development, selling sophisticated high-value
goods and services, the role of peripheral countries is simply to supply materials raw
materials, foodstuffs, and also cheap labor on the basis of highly unequal exchanges. Among
them, semi-periphery countries benefit from exploiting periphery countries even as they
themselves are exploited by core countries. This shows that international trade affects the
shape of the global political economy. One reason is that international trade has direct and
indirect effects on people and communities, for example, a family's consumption patterns are
affected by trade in goods (O'Brien & Williams, 2020).
One of the ways in which international trade affects the global economy is through a
free trade regime. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996). The theory of comparative advantage advises countries to
specialize in their most efficient products and services (O'Brien & Williams, 2020). The
ideology of comparative advantage serves to obscure uneven economic development progress
and unequal exchange between countries and regions (McBride & Shields, 1993). Therefore,
proponents of free trade believe that every country should engage in trade international and
reduce barriers.
Furthermore, according to liberal political economy, everyone can benefit from trade
as it can improve efficiency and increase productivity (O'Brien & Williams, 2020). For
example, Langenfeld and Nieberding (2005) estimate that trade growth has provided total
benefits to American consumers of about $2.3 trillion over the trade has provided total benefits
to American consumers of about $2.3 trillion during 1992-2002, or between $20,000 and
$22,000 per household in 2002. In contrast, nationalists believe that free trade is detrimental to
the national economy because it will weaken the economy unbalanced development and can
damage the environment (O'Brien & Williams, 2020). As in the case of Fiji, they are facing a
rapid and radical restructuring of the sugar or banana industry and this is potentially
disastrous for their economy as it is a fundamental commodity (Connel & Soutar, 2007).
Furthermore, in the international trading system, there are significant developments
that encourage trade liberalization. The emergence of the WTO (World Trade Organization),
the successor to the GATT (General Agreement on Tariffs and Trade), is believed to play an
important role in trade liberalization international. The WTO (and GATT before it) has
successfully liberalized trade and managed international trade through multilateral agreements
(Sampson, 2001). Jackson (1998) stated that the establishment of the WTO was the most
significant moment in the history of the world economy, even becoming a fundamental
institution in the international economy, especially with its dispute settlement procedures. The
WTO has changed the management of world trade in the following ways:
Change trade liberalization from being based on tariff adjustments to discussing
domestic policies, institutional practices and regulations.
Broaden the scope of trade and change the focus of negotiations from product
bargaining to policy.
Propose movement towards accession policies, for example, in the areas of subsidies
and trade-related investment measures and services (O'Brien & Williams, 2020).
Based on the above, it can be seen that the WTO has successfully played its role in
international trade, but there is the issue of many developing countries' interests not being
accommodated by the WTO (Sampson, 2001). In a d d i t i o n , countries developing
countries recognize the limitations of political influence in the international trade agreement
process (O'Brien & Williams, 2020). Another problem faced by developing countries is that
they lack the capacity to enforce WTO decisions as well as the high indirect costs of initiating
disputes with the WTO (Horlick, 2006, p. 220). For example, trade in agriculture, which is a
key interest of many developing countries, is particularly liberalized (Walter & Sen, 2009).
Apart from the role of the WTO, the influence of international trade on the global
political economy can be understood through its implications for the global division of labor
(Waters, 2001). The division of labor refers to the roles that people employ in the production
process (O'Brien & Williams, 2020). Waters (2001) states there are two types of division of
labour: social division of labour refers to occupational specialization, and technical division of
labour refers to task specialization. This condition is closely related to the concept of
comparative advantage by liberals who attach importance to the specialization of countries'
commodities to gain an advantage in the production process. In international trade. This means
that by engaging in trade, countries also shape their division of labor. Increase While trade
and mobility are expected to increase the elasticity of demand for human capital, they also
automatically reduce the bargaining power of labor (Perraton, 2003, p. 56). Moreover, in the
reduction of transaction costs due to technological advances, international agreements, non-
tariff barriers results in enormous specialization possibilities (Pomfret, 2014). A country can
choose the specific commodities or services offered in international trade which will also
affect the demand for labor from that country.
Another effect of international trade on labor can be seen in the inequality between
more skilled and less skilled labor. Trade liberalization leads to wage inequality due to
increased trade (Goldberg & Pavnick, 2004). It seems that recent international trade increases
the demand for more skilled workers to support the concept of specialization. Slaughter
(1998) believes that the demand for labor from the less skilled to the more skilled is a key
factor of wage inequality and it is actually happening in some countries such as the United
States and the United Kingdom. He added the argument that many countries with Such
inequality creates problems, such as higher unemployment rates and many job opportunities
avoiding less-skilled workers.
Transnational Production
There is general agreement that the growth of transnational production has shaped the
evolution of the global economy (O'Brien & Williams, 2020, p. 132). One of the main reasons
is that the global production system is a complex process. O'Brien and Williams (2013) argue
that this process involves multiple workers and workplaces with their integration with local,
national, regional and global systems. Because transnational production involves multi-level
actors. It becomes more complicated as it has to integrate different social, political and
economic backgrounds in the global economy. The main reason for the emergence of
transnational production is the innovation of communication and information technology
along with the advancement of transportation (Ietto-Gillies, 2003). This development
increases the possibility to separate production processes around the world.
A significant change affecting production processes across countries is the formation
of transnational companies (TNCs). As stated earlier, in the era of globalization, geographical
issues are no longer a big problem, therefore, TNCs can carry out production processes
separately in different parts of the world. Another reason TNCs invest abroad is because
production costs in developing countries are lower than in developed countries (O'Brien &
Williams, 2020). As stated by Ietto-Gillies (2003), there is a significant development of the
organization of production across countries due to the activities of transnational corporations.
In addition, it is argued that TNCs constitute a major part of the global production structure
and about 50 percent of world trade (O'Brien and Williams, 2020, p. 132). This fact shows the
impact of TNCs on the global production process. TNCs seem to be a key player in global
production.
TNCs play their role in the global economy through foreign direct investment (FDI).
Changes in the global production system are linked to increasing levels of FDI (O'Brien &
Williams, 2020). In addition, Perraton says that FDI by transnational corporations has grown
faster than trade (Perraton, 2003, p. 47). The success of TNCs to invest in many countries
around the world may be due to the recognition that TNCs are a good source of investment,
there is a transfer of technology, and there is an increase in the workforce (Waters, 2001, p.
46).
Indeed, there is skepticism towards transnational corporations and FDI. The concept of
transnational phenomena with interdependence between actors raises concerns of reduced
state sovereignty (Biersteker & Weber, 1996). This is also supported by the expansion of
capitalist companies that exploit labor, directly proportional to the need for workers to be able
to survive or survive to finance their own lives (Tyner, 2019). Moreover, for opponents of
capitalism, TNCs are believed to be a new worldwide method of exploitation that is
essentially "barbaric" and unacceptable (Waters, 2001). For example, a study conducted by
Doytch, Thelen, & Mendoza (2014) found the exploitation of child labor, with children forced
to work in fields for long hours, in a multinational tobacco company in Kazakhstan.
Therefore, for nationalist economic advocates, states must improve their ability to regulate
TNCs investing in their own countries (O'Brien and Williams, 2020).
However, for liberal supporters, there are The advantages offered by transnational
corporations with foreign direct investment. Epstein argues that this development can provide
more employment opportunities especially for developing countries, while also resulting in
wage increases because TNCs in developing countries have more productivity so they can pay
more (Epstein, 2003). In addition, TNCs with FDI can increase tax revenues through
increased economic activity in the host country and can help advance economic growth by
encouraging a more efficient division of labor (O'Brien & Williams, 2020, p. 137). Studies
conducted by Harrison in Mexico, Morocco and Venezuela show that TNCs help domestic
firms to break into export markets and they can improve workers' living standards as they pay
higher wages than domestic firms (Harrison, 1994).
Based on the explanation above, it can be seen that TNCs have a significant impact on
labor. One of the reasons TNCs with FDI are growing is that many developing countries are
implementing active policies to support industrialization and export to developed countries
(O'Brien and Williams, 2020). This is understandable because it will provide employment
opportunities in the country they are. Therefore, it is not surprising that many countries are
trying to attract TNCs to invest in their territories. With respect to the global division of labor,
TNCs will increase the demand for more skilled labor, as research conducted by Bruno, Crino
and Falzoni (2012) states that FDI increases the demand for more skilled labor in Poland.
Actors affected by the global political economy must make behavioral adjustments to
be able to face global competition which is currently increasing (O'Brien & Williams, 2020).
Coupled with technological advances in the form of machines, the value of labor has also
decreased because their portion of work can be replaced by machines (Tyner, 2019). The
higher demand for a more skilled workforce forces people to improve their abilities to
compete with others in the workplace. One of the reasons for this trend is to increase labor
productivity as it is a strong indicator of economic efficiency (Plasmans, 2003). In addition, it
is not surprising that TNCs promote division of labor to increase efficient production.
However, it seems that the labor market is shaped by TNC interests rather than national
interest.
International Trade, Transnational Production and Labor
One of the issues in relation to international trade and transnational production is not
respecting workers' rights. Many TNCs do not invest in their own countries because they want
to reduce their production costs. They tend to hire cheap labor and cut production costs with
forced labor in peripheral countries. As stated by Horvat (2020), the worst features of
exploitation are currently happening in all developing countries in the world.
In 2014, BBC News released a video inside the Apple assembly company. The video
shows that employees work under high pressure and for long, intensive periods of time. They
were forced to work standing up all day. In fact, the company installed electrical wires in t h e
machines so that employees could not lean back when tired. Employees work in a very
grueling environment. Although in 2010 there was a mass worker suicide at Foxconn, one of
the companies that manufactures Apple products, then Apple promised to improve facilitation
and working conditions, but the BBC video shows evidence to the contrary. For example,
everyone in China needs to carry an identity card. However, companies still take workers' IDs
directly when they enter the company (BBC News, 2014). Tyner (2019) also argues that
companies can collect profits not only from the products or services produced but also
through life insurance policies from workers who experience misfortune while performing
their duties.
However, not all TNCs tend to exploit labor for profit. A study analyzing foreign
direct investment and labor rights in 80 developing countries conducted by Busse,
Nunnenkamp, and Spatareanu showed different results. In terms of the correlation between
labor rights and TNCs, the study found that TNCs prefer to invest in countries that respect
labor rights (Busse, Nunnenkamp, & and Spatareanu, 2011). Moreover, labor violence in
potential host countries discourages TNCs from running their activities there, wherever it may
be (Busse, Nunnenkamp and Spatareanu, 2011). This condition shows that TNCs pay great
attention to labor rights, not only focus on their profits as well.
One solution to the above problem is to implement labor standards. Based on Heintz's
(2003) argument, the labor market should be for the larger society and should be governed by
rules, norms, and ethical standards that make allowance for the separate costs of
marketization. The International Labor Organization (ILO) is an organization that promotes
labor standards worldwide. The ILO holds conventions that cover basic human rights areas:
freedom of association and collective bargaining, elimination of forced labor, elimination of
child labor, and elimination of discrimination (Heintz, 2003; O'Brien and Willams, 2020).
However, the main problem in implementing labor standards is how to come up with labor
standards that can be applied worldwide. This is due to the disagreement among actors on the
purpose of labor standards. Furthermore, leaders in many liberal countries argue that
economic growth improves labor standards. Whereas, any interference in trade for labor
reasons will lower the gains from trade (O'Brien and Williams, 2020, p.195).
Conclusions
There are different perspectives on the global political economy. Economic
nationalists place the state as the main actor in the global political economy. This is related to
their concept of protectionism, protecting the economy from the global market. Meanwhile,
economic liberalists argue that states should collaborate with other actors in the global
economy. They believe that the global political economy involves multiple actors. Moreover,
the current global economy is more likely to adopt liberal values such as trade liberalization.
There are dynamics that shape the global political economy. They are international
trade and transnational production. Both dynamics have implications for the global division of
labor. International trade with the concept of 'comparative advantage' comparative advantage'
affects the specialization of labour. Whereas transnational production with TNCs has
implications in driving the division of labor around the world, especially in their host
countries. Both international trade and transnational production have benefits for the
participants. This is because TNCs can provide jobs and also improve the lives of workers.
However, there is skepticism about these dynamics. For example, they are believed to
play a role in wage inequality, especially between less skilled labor and more skilled labor.
Another example is the issue of worker exploitation, such as the Apple factory case and child
labor in tobacco factories. One solution that can be suggested is to enforce global labor
standards.
Results and Discussion of International Trade
According to Waters (2001) the primary and ongoing basis of economic
internationalization is trade. Trade itself is understood as the activity of two or more
individuals exchanging goods and services (O'Brien & Williams, 2020, p. 109). Such
activities would be called international trade if they are operated abroad. This international
trade can create relationships and interdependence between actors (Waters, 2001). As stated
by Ietto-Gillies (2003), that one evidence of state interconnectedness can be seen in
international trade activities in goods and services. Wallerstein and Marxist in Cohen (2017)
categorize countries into several levels, where there are dominant core countries, dependent
periphery countries and semi-fringe countries that are between the two categories. While core
countries enjoy a high level of technological development, selling sophisticated high-value
goods and services, the role of peripheral countries is simply to supply materials raw
materials, foodstuffs, and also cheap labor on the basis of highly unequal exchanges. Among
them, semi-periphery countries benefit from exploiting periphery countries even as they
themselves are exploited by core countries. This shows that international trade affects the
shape of the global political economy. One reason is that international trade has direct and
indirect effects on people and communities, for example, a family's consumption patterns are
affected by trade in goods (O'Brien & Williams, 2020).
One of the ways in which international trade affects the global economy is through a
free trade regime. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996). The theory of comparative advantage advises countries to
specialize in their most efficient products and services (O'Brien & Williams, 2020). The
ideology of comparative advantage serves to obscure uneven economic development progress
and unequal exchange between countries and regions (McBride & Shields, 1993). Therefore,
proponents of free trade believe that every country should engage in trade international and
reduce barriers.
Furthermore, according to liberal political economy, everyone can benefit from trade
as it can improve efficiency and increase productivity (O'Brien & Williams, 2020). For
example, Langenfeld and Nieberding (2005) estimate that trade growth has provided total
benefits to American consumers of about $2.3 trillion over the trade has provided total benefits
to American consumers of about $2.3 trillion during 1992-2002, or between $20,000 and
$22,000 per household in 2002. In contrast, nationalists believe that free trade is detrimental to
the national economy because it will weaken the economy unbalanced development and can
damage the environment (O'Brien & Williams, 2020). As in the case of Fiji, they are facing a
rapid and radical restructuring of the sugar or banana industry and this is potentially
disastrous for their economy as it is a fundamental commodity (Connel & Soutar, 2007).
Furthermore, in the international trading system, there are significant developments
that encourage trade liberalization. The emergence of the WTO (World Trade Organization),
the successor to the GATT (General Agreement on Tariffs and Trade), is believed to play an
important role in trade liberalization international. The WTO (and GATT before it) has
successfully liberalized trade and managed international trade through multilateral agreements
(Sampson, 2001). Jackson (1998) stated that the establishment of the WTO was the most
significant moment in the history of the world economy, even becoming a fundamental
institution in the international economy, especially with its dispute settlement procedures. The
WTO has changed the management of world trade in the following ways:
Change trade liberalization from being based on tariff adjustments to discussing
domestic policies, institutional practices and regulations.
Broaden the scope of trade and change the focus of negotiations from product
bargaining to policy.
Propose movement towards accession policies, for example, in the areas of subsidies
and trade-related investment measures and services (O'Brien & Williams, 2020).
Based on the above, it can be seen that the WTO has successfully played its role in
international trade, but there is the issue of many developing countries' interests not being
accommodated by the WTO (Sampson, 2001). In a d d i t i o n , countries developing
countries recognize the limitations of political influence in the international trade agreement
process (O'Brien & Williams, 2020). Another problem faced by developing countries is that
they lack the capacity to enforce WTO decisions as well as the high indirect costs of initiating
disputes with the WTO (Horlick, 2006, p. 220). For example, trade in agriculture, which is a
key interest of many developing countries, is particularly liberalized (Walter & Sen, 2009).
Apart from the role of the WTO, the influence of international trade on the global
political economy can be understood through its implications for the global division of labor
(Waters, 2001). The division of labor refers to the roles that people employ in the production
process (O'Brien & Williams, 2020). Waters (2001) states there are two types of division of
labour: social division of labour refers to occupational specialization, and technical division of
labour refers to task specialization. This condition is closely related to the concept of
comparative advantage by liberals who attach importance to the specialization of countries'
commodities to gain an advantage in the production process. In international trade. This means
that by engaging in trade, countries also shape their division of labor. Increase While trade
and mobility are expected to increase the elasticity of demand for human capital, they also
automatically reduce the bargaining power of labor (Perraton, 2003, p. 56). Moreover, in the
reduction of transaction costs due to technological advances, international agreements, non-
tariff barriers results in enormous specialization possibilities (Pomfret, 2014). A country can
choose the specific commodities or services offered in international trade which will also
affect the demand for labor from that country.
Another effect of international trade on labor can be seen in the inequality between
more skilled and less skilled labor. Trade liberalization leads to wage inequality due to
increased trade (Goldberg & Pavnick, 2004). It seems that recent international trade increases
the demand for more skilled workers to support the concept of specialization. Slaughter
(1998) believes that the demand for labor from the less skilled to the more skilled is a key
factor of wage inequality and it is actually happening in some countries such as the United
States and the United Kingdom. He added the argument that many countries with Such
inequality creates problems, such as higher unemployment rates and many job opportunities
avoiding less-skilled workers.
Transnational Production
There is general agreement that the growth of transnational production has shaped the
evolution of the global economy (O'Brien & Williams, 2020, p. 132). One of the main reasons
is that the global production system is a complex process. O'Brien and Williams (2013) argue
that this process involves multiple workers and workplaces with their integration with local,
national, regional and global systems. Because transnational production involves multi-level
actors. It becomes more complicated as it has to integrate different social, political and
economic backgrounds in the global economy. The main reason for the emergence of
transnational production is the innovation of communication and information technology
along with the advancement of transportation (Ietto-Gillies, 2003). This development
increases the possibility to separate production processes around the world.
A significant change affecting production processes across countries is the formation
of transnational companies (TNCs). As stated earlier, in the era of globalization, geographical
issues are no longer a big problem, therefore, TNCs can carry out production processes
separately in different parts of the world. Another reason TNCs invest abroad is because
production costs in developing countries are lower than in developed countries (O'Brien &
Williams, 2020). As stated by Ietto-Gillies (2003), there is a significant development of the
organization of production across countries due to the activities of transnational corporations.
In addition, it is argued that TNCs constitute a major part of the global production structure
and about 50 percent of world trade (O'Brien and Williams, 2020, p. 132). This fact shows the
impact of TNCs on the global production process. TNCs seem to be a key player in global
production.
TNCs play their role in the global economy through foreign direct investment (FDI).
Changes in the global production system are linked to increasing levels of FDI (O'Brien &
Williams, 2020). In addition, Perraton says that FDI by transnational corporations has grown
faster than trade (Perraton, 2003, p. 47). The success of TNCs to invest in many countries
around the world may be due to the recognition that TNCs are a good source of investment,
there is a transfer of technology, and there is an increase in the workforce (Waters, 2001, p.
46).
Indeed, there is skepticism towards transnational corporations and FDI. The concept of
transnational phenomena with interdependence between actors raises concerns of reduced
state sovereignty (Biersteker & Weber, 1996). This is also supported by the expansion of
capitalist companies that exploit labor, directly proportional to the need for workers to be able
to survive or survive to finance their own lives (Tyner, 2019). Moreover, for opponents of
capitalism, TNCs are believed to be a new worldwide method of exploitation that is
essentially "barbaric" and unacceptable (Waters, 2001). For example, a study conducted by
Doytch, Thelen, & Mendoza (2014) found the exploitation of child labor, with children forced
to work in fields for long hours, in a multinational tobacco company in Kazakhstan.
Therefore, for nationalist economic advocates, states must improve their ability to regulate
TNCs investing in their own countries (O'Brien and Williams, 2020).
However, for liberal supporters, there are The advantages offered by transnational
corporations with foreign direct investment. Epstein argues that this development can provide
more employment opportunities especially for developing countries, while also resulting in
wage increases because TNCs in developing countries have more productivity so they can pay
more (Epstein, 2003). In addition, TNCs with FDI can increase tax revenues through
increased economic activity in the host country and can help advance economic growth by
encouraging a more efficient division of labor (O'Brien & Williams, 2020, p. 137). Studies
conducted by Harrison in Mexico, Morocco and Venezuela show that TNCs help domestic
firms to break into export markets and they can improve workers' living standards as they pay
higher wages than domestic firms (Harrison, 1994).
Based on the explanation above, it can be seen that TNCs have a significant impact on
labor. One of the reasons TNCs with FDI are growing is that many developing countries are
implementing active policies to support industrialization and export to developed countries
(O'Brien and Williams, 2020). This is understandable because it will provide employment
opportunities in the country they are. Therefore, it is not surprising that many countries are
trying to attract TNCs to invest in their territories. With respect to the global division of labor,
TNCs will increase the demand for more skilled labor, as research conducted by Bruno, Crino
and Falzoni (2012) states that FDI increases the demand for more skilled labor in Poland.
Actors affected by the global political economy must make behavioral adjustments to
be able to face global competition which is currently increasing (O'Brien & Williams, 2020).
Coupled with technological advances in the form of machines, the value of labor has also
decreased because their portion of work can be replaced by machines (Tyner, 2019). The
higher demand for a more skilled workforce forces people to improve their abilities to
compete with others in the workplace. One of the reasons for this trend is to increase labor
productivity as it is a strong indicator of economic efficiency (Plasmans, 2003). In addition, it
is not surprising that TNCs promote division of labor to increase efficient production.
However, it seems that the labor market is shaped by TNC interests rather than national
interest.
International Trade, Transnational Production and Labor
One of the issues in relation to international trade and transnational production is not
respecting workers' rights. Many TNCs do not invest in their own countries because they want
to reduce their production costs. They tend to hire cheap labor and cut production costs with
forced labor in peripheral countries. As stated by Horvat (2020), the worst features of
exploitation are currently happening in all developing countries in the world.
In 2014, BBC News released a video inside the Apple assembly company. The video
shows that employees work under high pressure and for long, intensive periods of time. They
were forced to work standing up all day. In fact, the company installed electrical wires in t h e
machines so that employees could not lean back when tired. Employees work in a very
grueling environment. Although in 2010 there was a mass worker suicide at Foxconn, one of
the companies that manufactures Apple products, then Apple promised to improve facilitation
and working conditions, but the BBC video shows evidence to the contrary. For example,
everyone in China needs to carry an identity card. However, companies still take workers' IDs
directly when they enter the company (BBC News, 2014). Tyner (2019) also argues that
companies can collect profits not only from the products or services produced but also
through life insurance policies from workers who experience misfortune while performing
their duties.
However, not all TNCs tend to exploit labor for profit. A study analyzing foreign
direct investment and labor rights in 80 developing countries conducted by Busse,
Nunnenkamp, and Spatareanu showed different results. In terms of the correlation between
labor rights and TNCs, the study found that TNCs prefer to invest in countries that respect
labor rights (Busse, Nunnenkamp, & and Spatareanu, 2011). Moreover, labor violence in
potential host countries discourages TNCs from running their activities there, wherever it may
be (Busse, Nunnenkamp and Spatareanu, 2011). This condition shows that TNCs pay great
attention to labor rights, not only focus on their profits as well.
One solution to the above problem is to implement labor standards. Based on Heintz's
(2003) argument, the labor market should be for the larger society and should be governed by
rules, norms, and ethical standards that make allowance for the separate costs of
marketization. The International Labor Organization (ILO) is an organization that promotes
labor standards worldwide. The ILO holds conventions that cover basic human rights areas:
freedom of association and collective bargaining, elimination of forced labor, elimination of
child labor, and elimination of discrimination (Heintz, 2003; O'Brien and Willams, 2020).
However, the main problem in implementing labor standards is how to come up with labor
standards that can be applied worldwide. This is due to the disagreement among actors on the
purpose of labor standards. Furthermore, leaders in many liberal countries argue that
economic growth improves labor standards. Whereas, any interference in trade for labor
reasons will lower the gains from trade (O'Brien and Williams, 2020, p.195).
Conclusions
There are different perspectives on the global political economy. Economic
nationalists place the state as the main actor in the global political economy. This is related to
their concept of protectionism, protecting the economy from the global market. Meanwhile,
economic liberalists argue that states should collaborate with other actors in the global
economy. They believe that the global political economy involves multiple actors. Moreover,
the current global economy is more likely to adopt liberal values such as trade liberalization.
There are dynamics that shape the global political economy. They are international
trade and transnational production. Both dynamics have implications for the global division of
labor. International trade with the concept of 'comparative advantage' comparative advantage'
affects the specialization of labour. Whereas transnational production with TNCs has
implications in driving the division of labor around the world, especially in their host
countries. Both international trade and transnational production have benefits for the
participants. This is because TNCs can provide jobs and also improve the lives of workers.
However, there is skepticism about these dynamics. For example, they are believed to
play a role in wage inequality, especially between less skilled labor and more skilled labor.
Another example is the issue of worker exploitation, such as the Apple factory case and child
labor in tobacco factories. One solution that can be suggested is to enforce global labor
standards.
Results and Discussion of International Trade
According to Waters (2001) the primary and ongoing basis of economic
internationalization is trade. Trade itself is understood as the activity of two or more
individuals exchanging goods and services (O'Brien & Williams, 2020, p. 109). Such
activities would be called international trade if they are operated abroad. This international
trade can create relationships and interdependence between actors (Waters, 2001). As stated
by Ietto-Gillies (2003), that one evidence of state interconnectedness can be seen in
international trade activities in goods and services. Wallerstein and Marxist in Cohen (2017)
categorize countries into several levels, where there are dominant core countries, dependent
periphery countries and semi-fringe countries that are between the two categories. While core
countries enjoy a high level of technological development, selling sophisticated high-value
goods and services, the role of peripheral countries is simply to supply materials raw
materials, foodstuffs, and also cheap labor on the basis of highly unequal exchanges. Among
them, semi-periphery countries benefit from exploiting periphery countries even as they
themselves are exploited by core countries. This shows that international trade affects the
shape of the global political economy. One reason is that international trade has direct and
indirect effects on people and communities, for example, a family's consumption patterns are
affected by trade in goods (O'Brien & Williams, 2020).
One of the ways in which international trade affects the global economy is through a
free trade regime. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996). The theory of comparative advantage advises countries to
specialize in their most efficient products and services (O'Brien & Williams, 2020). The
ideology of comparative advantage serves to obscure uneven economic development progress
and unequal exchange between countries and regions (McBride & Shields, 1993). Therefore,
proponents of free trade believe that every country should engage in trade international and
reduce barriers.
Furthermore, according to liberal political economy, everyone can benefit from trade
as it can improve efficiency and increase productivity (O'Brien & Williams, 2020). For
example, Langenfeld and Nieberding (2005) estimate that trade growth has provided total
benefits to American consumers of about $2.3 trillion over the trade has provided total benefits
to American consumers of about $2.3 trillion during 1992-2002, or between $20,000 and
$22,000 per household in 2002. In contrast, nationalists believe that free trade is detrimental to
the national economy because it will weaken the economy unbalanced development and can
damage the environment (O'Brien & Williams, 2020). As in the case of Fiji, they are facing a
rapid and radical restructuring of the sugar or banana industry and this is potentially
disastrous for their economy as it is a fundamental commodity (Connel & Soutar, 2007).
Furthermore, in the international trading system, there are significant developments
that encourage trade liberalization. The emergence of the WTO (World Trade Organization),
the successor to the GATT (General Agreement on Tariffs and Trade), is believed to play an
important role in trade liberalization international. The WTO (and GATT before it) has
successfully liberalized trade and managed international trade through multilateral agreements
(Sampson, 2001). Jackson (1998) stated that the establishment of the WTO was the most
significant moment in the history of the world economy, even becoming a fundamental
institution in the international economy, especially with its dispute settlement procedures. The
WTO has changed the management of world trade in the following ways:
Change trade liberalization from being based on tariff adjustments to discussing
domestic policies, institutional practices and regulations.
Broaden the scope of trade and change the focus of negotiations from product
bargaining to policy.
Propose movement towards accession policies, for example, in the areas of subsidies
and trade-related investment measures and services (O'Brien & Williams, 2020).
Based on the above, it can be seen that the WTO has successfully played its role in
international trade, but there is the issue of many developing countries' interests not being
accommodated by the WTO (Sampson, 2001). In a d d i t i o n , countries developing
countries recognize the limitations of political influence in the international trade agreement
process (O'Brien & Williams, 2020). Another problem faced by developing countries is that
they lack the capacity to enforce WTO decisions as well as the high indirect costs of initiating
disputes with the WTO (Horlick, 2006, p. 220). For example, trade in agriculture, which is a
key interest of many developing countries, is particularly liberalized (Walter & Sen, 2009).
Apart from the role of the WTO, the influence of international trade on the global
political economy can be understood through its implications for the global division of labor
(Waters, 2001). The division of labor refers to the roles that people employ in the production
process (O'Brien & Williams, 2020). Waters (2001) states there are two types of division of
labour: social division of labour refers to occupational specialization, and technical division of
labour refers to task specialization. This condition is closely related to the concept of
comparative advantage by liberals who attach importance to the specialization of countries'
commodities to gain an advantage in the production process. In international trade. This means
that by engaging in trade, countries also shape their division of labor. Increase While trade
and mobility are expected to increase the elasticity of demand for human capital, they also
automatically reduce the bargaining power of labor (Perraton, 2003, p. 56). Moreover, in the
reduction of transaction costs due to technological advances, international agreements, non-
tariff barriers results in enormous specialization possibilities (Pomfret, 2014). A country can
choose the specific commodities or services offered in international trade which will also
affect the demand for labor from that country.
Another effect of international trade on labor can be seen in the inequality between
more skilled and less skilled labor. Trade liberalization leads to wage inequality due to
increased trade (Goldberg & Pavnick, 2004). It seems that recent international trade increases
the demand for more skilled workers to support the concept of specialization. Slaughter
(1998) believes that the demand for labor from the less skilled to the more skilled is a key
factor of wage inequality and it is actually happening in some countries such as the United
States and the United Kingdom. He added the argument that many countries with Such
inequality creates problems, such as higher unemployment rates and many job opportunities
avoiding less-skilled workers.
Transnational Production
There is general agreement that the growth of transnational production has shaped the
evolution of the global economy (O'Brien & Williams, 2020, p. 132). One of the main reasons
is that the global production system is a complex process. O'Brien and Williams (2013) argue
that this process involves multiple workers and workplaces with their integration with local,
national, regional and global systems. Because transnational production involves multi-level
actors. It becomes more complicated as it has to integrate different social, political and
economic backgrounds in the global economy. The main reason for the emergence of
transnational production is the innovation of communication and information technology
along with the advancement of transportation (Ietto-Gillies, 2003). This development
increases the possibility to separate production processes around the world.
A significant change affecting production processes across countries is the formation
of transnational companies (TNCs). As stated earlier, in the era of globalization, geographical
issues are no longer a big problem, therefore, TNCs can carry out production processes
separately in different parts of the world. Another reason TNCs invest abroad is because
production costs in developing countries are lower than in developed countries (O'Brien &
Williams, 2020). As stated by Ietto-Gillies (2003), there is a significant development of the
organization of production across countries due to the activities of transnational corporations.
In addition, it is argued that TNCs constitute a major part of the global production structure
and about 50 percent of world trade (O'Brien and Williams, 2020, p. 132). This fact shows the
impact of TNCs on the global production process. TNCs seem to be a key player in global
production.
TNCs play their role in the global economy through foreign direct investment (FDI).
Changes in the global production system are linked to increasing levels of FDI (O'Brien &
Williams, 2020). In addition, Perraton says that FDI by transnational corporations has grown
faster than trade (Perraton, 2003, p. 47). The success of TNCs to invest in many countries
around the world may be due to the recognition that TNCs are a good source of investment,
there is a transfer of technology, and there is an increase in the workforce (Waters, 2001, p.
46).
Indeed, there is skepticism towards transnational corporations and FDI. The concept of
transnational phenomena with interdependence between actors raises concerns of reduced
state sovereignty (Biersteker & Weber, 1996). This is also supported by the expansion of
capitalist companies that exploit labor, directly proportional to the need for workers to be able
to survive or survive to finance their own lives (Tyner, 2019). Moreover, for opponents of
capitalism, TNCs are believed to be a new worldwide method of exploitation that is
essentially "barbaric" and unacceptable (Waters, 2001). For example, a study conducted by
Doytch, Thelen, & Mendoza (2014) found the exploitation of child labor, with children forced
to work in fields for long hours, in a multinational tobacco company in Kazakhstan.
Therefore, for nationalist economic advocates, states must improve their ability to regulate
TNCs investing in their own countries (O'Brien and Williams, 2020).
However, for liberal supporters, there are The advantages offered by transnational
corporations with foreign direct investment. Epstein argues that this development can provide
more employment opportunities especially for developing countries, while also resulting in
wage increases because TNCs in developing countries have more productivity so they can pay
more (Epstein, 2003). In addition, TNCs with FDI can increase tax revenues through
increased economic activity in the host country and can help advance economic growth by
encouraging a more efficient division of labor (O'Brien & Williams, 2020, p. 137). Studies
conducted by Harrison in Mexico, Morocco and Venezuela show that TNCs help domestic
firms to break into export markets and they can improve workers' living standards as they pay
higher wages than domestic firms (Harrison, 1994).
Based on the explanation above, it can be seen that TNCs have a significant impact on
labor. One of the reasons TNCs with FDI are growing is that many developing countries are
implementing active policies to support industrialization and export to developed countries
(O'Brien and Williams, 2020). This is understandable because it will provide employment
opportunities in the country they are. Therefore, it is not surprising that many countries are
trying to attract TNCs to invest in their territories. With respect to the global division of labor,
TNCs will increase the demand for more skilled labor, as research conducted by Bruno, Crino
and Falzoni (2012) states that FDI increases the demand for more skilled labor in Poland.
Actors affected by the global political economy must make behavioral adjustments to
be able to face global competition which is currently increasing (O'Brien & Williams, 2020).
Coupled with technological advances in the form of machines, the value of labor has also
decreased because their portion of work can be replaced by machines (Tyner, 2019). The
higher demand for a more skilled workforce forces people to improve their abilities to
compete with others in the workplace. One of the reasons for this trend is to increase labor
productivity as it is a strong indicator of economic efficiency (Plasmans, 2003). In addition, it
is not surprising that TNCs promote division of labor to increase efficient production.
However, it seems that the labor market is shaped by TNC interests rather than national
interest.
International Trade, Transnational Production and Labor
One of the issues in relation to international trade and transnational production is not
respecting workers' rights. Many TNCs do not invest in their own countries because they want
to reduce their production costs. They tend to hire cheap labor and cut production costs with
forced labor in peripheral countries. As stated by Horvat (2020), the worst features of
exploitation are currently happening in all developing countries in the world.
In 2014, BBC News released a video inside the Apple assembly company. The video
shows that employees work under high pressure and for long, intensive periods of time. They
were forced to work standing up all day. In fact, the company installed electrical wires in t h e
machines so that employees could not lean back when tired. Employees work in a very
grueling environment. Although in 2010 there was a mass worker suicide at Foxconn, one of
the companies that manufactures Apple products, then Apple promised to improve facilitation
and working conditions, but the BBC video shows evidence to the contrary. For example,
everyone in China needs to carry an identity card. However, companies still take workers' IDs
directly when they enter the company (BBC News, 2014). Tyner (2019) also argues that
companies can collect profits not only from the products or services produced but also
through life insurance policies from workers who experience misfortune while performing
their duties.
However, not all TNCs tend to exploit labor for profit. A study analyzing foreign
direct investment and labor rights in 80 developing countries conducted by Busse,
Nunnenkamp, and Spatareanu showed different results. In terms of the correlation between
labor rights and TNCs, the study found that TNCs prefer to invest in countries that respect
labor rights (Busse, Nunnenkamp, & and Spatareanu, 2011). Moreover, labor violence in
potential host countries discourages TNCs from running their activities there, wherever it may
be (Busse, Nunnenkamp and Spatareanu, 2011). This condition shows that TNCs pay great
attention to labor rights, not only focus on their profits as well.
One solution to the above problem is to implement labor standards. Based on Heintz's
(2003) argument, the labor market should be for the larger society and should be governed by
rules, norms, and ethical standards that make allowance for the separate costs of
marketization. The International Labor Organization (ILO) is an organization that promotes
labor standards worldwide. The ILO holds conventions that cover basic human rights areas:
freedom of association and collective bargaining, elimination of forced labor, elimination of
child labor, and elimination of discrimination (Heintz, 2003; O'Brien and Willams, 2020).
However, the main problem in implementing labor standards is how to come up with labor
standards that can be applied worldwide. This is due to the disagreement among actors on the
purpose of labor standards. Furthermore, leaders in many liberal countries argue that
economic growth improves labor standards. Whereas, any interference in trade for labor
reasons will lower the gains from trade (O'Brien and Williams, 2020, p.195).
Conclusions
There are different perspectives on the global political economy. Economic
nationalists place the state as the main actor in the global political economy. This is related to
their concept of protectionism, protecting the economy from the global market. Meanwhile,
economic liberalists argue that states should collaborate with other actors in the global
economy. They believe that the global political economy involves multiple actors. Moreover,
the current global economy is more likely to adopt liberal values such as trade liberalization.
There are dynamics that shape the global political economy. They are international
trade and transnational production. Both dynamics have implications for the global division of
labor. International trade with the concept of 'comparative advantage' comparative advantage'
affects the specialization of labour. Whereas transnational production with TNCs has
implications in driving the division of labor around the world, especially in their host
countries. Both international trade and transnational production have benefits for the
participants. This is because TNCs can provide jobs and also improve the lives of workers.
However, there is skepticism about these dynamics. For example, they are believed to
play a role in wage inequality, especially between less skilled labor and more skilled labor.
Another example is the issue of worker exploitation, such as the Apple factory case and child
labor in tobacco factories. One solution that can be suggested is to enforce global labor
standards.
Results and Discussion of International Trade
According to Waters (2001) the primary and ongoing basis of economic
internationalization is trade. Trade itself is understood as the activity of two or more
individuals exchanging goods and services (O'Brien & Williams, 2020, p. 109). Such
activities would be called international trade if they are operated abroad. This international
trade can create relationships and interdependence between actors (Waters, 2001). As stated
by Ietto-Gillies (2003), that one evidence of state interconnectedness can be seen in
international trade activities in goods and services. Wallerstein and Marxist in Cohen (2017)
categorize countries into several levels, where there are dominant core countries, dependent
periphery countries and semi-fringe countries that are between the two categories. While core
countries enjoy a high level of technological development, selling sophisticated high-value
goods and services, the role of peripheral countries is simply to supply materials raw
materials, foodstuffs, and also cheap labor on the basis of highly unequal exchanges. Among
them, semi-periphery countries benefit from exploiting periphery countries even as they
themselves are exploited by core countries. This shows that international trade affects the
shape of the global political economy. One reason is that international trade has direct and
indirect effects on people and communities, for example, a family's consumption patterns are
affected by trade in goods (O'Brien & Williams, 2020).
One of the ways in which international trade affects the global economy is through a
free trade regime. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996). The theory of comparative advantage advises countries to
specialize in their most efficient products and services (O'Brien & Williams, 2020). The
ideology of comparative advantage serves to obscure uneven economic development progress
and unequal exchange between countries and regions (McBride & Shields, 1993). Therefore,
proponents of free trade believe that every country should engage in trade international and
reduce barriers.
Furthermore, according to liberal political economy, everyone can benefit from trade
as it can improve efficiency and increase productivity (O'Brien & Williams, 2020). For
example, Langenfeld and Nieberding (2005) estimate that trade growth has provided total
benefits to American consumers of about $2.3 trillion over the trade has provided total benefits
to American consumers of about $2.3 trillion during 1992-2002, or between $20,000 and
$22,000 per household in 2002. In contrast, nationalists believe that free trade is detrimental to
the national economy because it will weaken the economy unbalanced development and can
damage the environment (O'Brien & Williams, 2020). As in the case of Fiji, they are facing a
rapid and radical restructuring of the sugar or banana industry and this is potentially
disastrous for their economy as it is a fundamental commodity (Connel & Soutar, 2007).
Furthermore, in the international trading system, there are significant developments
that encourage trade liberalization. The emergence of the WTO (World Trade Organization),
the successor to the GATT (General Agreement on Tariffs and Trade), is believed to play an
important role in trade liberalization international. The WTO (and GATT before it) has
successfully liberalized trade and managed international trade through multilateral agreements
(Sampson, 2001). Jackson (1998) stated that the establishment of the WTO was the most
significant moment in the history of the world economy, even becoming a fundamental
institution in the international economy, especially with its dispute settlement procedures. The
WTO has changed the management of world trade in the following ways:
Change trade liberalization from being based on tariff adjustments to discussing
domestic policies, institutional practices and regulations.
Broaden the scope of trade and change the focus of negotiations from product
bargaining to policy.
Propose movement towards accession policies, for example, in the areas of subsidies
and trade-related investment measures and services (O'Brien & Williams, 2020).
Based on the above, it can be seen that the WTO has successfully played its role in
international trade, but there is the issue of many developing countries' interests not being
accommodated by the WTO (Sampson, 2001). In a d d i t i o n , countries developing
countries recognize the limitations of political influence in the international trade agreement
process (O'Brien & Williams, 2020). Another problem faced by developing countries is that
they lack the capacity to enforce WTO decisions as well as the high indirect costs of initiating
disputes with the WTO (Horlick, 2006, p. 220). For example, trade in agriculture, which is a
key interest of many developing countries, is particularly liberalized (Walter & Sen, 2009).
Apart from the role of the WTO, the influence of international trade on the global
political economy can be understood through its implications for the global division of labor
(Waters, 2001). The division of labor refers to the roles that people employ in the production
process (O'Brien & Williams, 2020). Waters (2001) states there are two types of division of
labour: social division of labour refers to occupational specialization, and technical division of
labour refers to task specialization. This condition is closely related to the concept of
comparative advantage by liberals who attach importance to the specialization of countries'
commodities to gain an advantage in the production process. In international trade. This means
that by engaging in trade, countries also shape their division of labor. Increase While trade
and mobility are expected to increase the elasticity of demand for human capital, they also
automatically reduce the bargaining power of labor (Perraton, 2003, p. 56). Moreover, in the
reduction of transaction costs due to technological advances, international agreements, non-
tariff barriers results in enormous specialization possibilities (Pomfret, 2014). A country can
choose the specific commodities or services offered in international trade which will also
affect the demand for labor from that country.
Another effect of international trade on labor can be seen in the inequality between
more skilled and less skilled labor. Trade liberalization leads to wage inequality due to
increased trade (Goldberg & Pavnick, 2004). It seems that recent international trade increases
the demand for more skilled workers to support the concept of specialization. Slaughter
(1998) believes that the demand for labor from the less skilled to the more skilled is a key
factor of wage inequality and it is actually happening in some countries such as the United
States and the United Kingdom. He added the argument that many countries with Such
inequality creates problems, such as higher unemployment rates and many job opportunities
avoiding less-skilled workers.
Transnational Production
There is general agreement that the growth of transnational production has shaped the
evolution of the global economy (O'Brien & Williams, 2020, p. 132). One of the main reasons
is that the global production system is a complex process. O'Brien and Williams (2013) argue
that this process involves multiple workers and workplaces with their integration with local,
national, regional and global systems. Because transnational production involves multi-level
actors. It becomes more complicated as it has to integrate different social, political and
economic backgrounds in the global economy. The main reason for the emergence of
transnational production is the innovation of communication and information technology
along with the advancement of transportation (Ietto-Gillies, 2003). This development
increases the possibility to separate production processes around the world.
A significant change affecting production processes across countries is the formation
of transnational companies (TNCs). As stated earlier, in the era of globalization, geographical
issues are no longer a big problem, therefore, TNCs can carry out production processes
separately in different parts of the world. Another reason TNCs invest abroad is because
production costs in developing countries are lower than in developed countries (O'Brien &
Williams, 2020). As stated by Ietto-Gillies (2003), there is a significant development of the
organization of production across countries due to the activities of transnational corporations.
In addition, it is argued that TNCs constitute a major part of the global production structure
and about 50 percent of world trade (O'Brien and Williams, 2020, p. 132). This fact shows the
impact of TNCs on the global production process. TNCs seem to be a key player in global
production.
TNCs play their role in the global economy through foreign direct investment (FDI).
Changes in the global production system are linked to increasing levels of FDI (O'Brien &
Williams, 2020). In addition, Perraton says that FDI by transnational corporations has grown
faster than trade (Perraton, 2003, p. 47). The success of TNCs to invest in many countries
around the world may be due to the recognition that TNCs are a good source of investment,
there is a transfer of technology, and there is an increase in the workforce (Waters, 2001, p.
46).
Indeed, there is skepticism towards transnational corporations and FDI. The concept of
transnational phenomena with interdependence between actors raises concerns of reduced
state sovereignty (Biersteker & Weber, 1996). This is also supported by the expansion of
capitalist companies that exploit labor, directly proportional to the need for workers to be able
to survive or survive to finance their own lives (Tyner, 2019). Moreover, for opponents of
capitalism, TNCs are believed to be a new worldwide method of exploitation that is
essentially "barbaric" and unacceptable (Waters, 2001). For example, a study conducted by
Doytch, Thelen, & Mendoza (2014) found the exploitation of child labor, with children forced
to work in fields for long hours, in a multinational tobacco company in Kazakhstan.
Therefore, for nationalist economic advocates, states must improve their ability to regulate
TNCs investing in their own countries (O'Brien and Williams, 2020).
However, for liberal supporters, there are The advantages offered by transnational
corporations with foreign direct investment. Epstein argues that this development can provide
more employment opportunities especially for developing countries, while also resulting in
wage increases because TNCs in developing countries have more productivity so they can pay
more (Epstein, 2003). In addition, TNCs with FDI can increase tax revenues through
increased economic activity in the host country and can help advance economic growth by
encouraging a more efficient division of labor (O'Brien & Williams, 2020, p. 137). Studies
conducted by Harrison in Mexico, Morocco and Venezuela show that TNCs help domestic
firms to break into export markets and they can improve workers' living standards as they pay
higher wages than domestic firms (Harrison, 1994).
Based on the explanation above, it can be seen that TNCs have a significant impact on
labor. One of the reasons TNCs with FDI are growing is that many developing countries are
implementing active policies to support industrialization and export to developed countries
(O'Brien and Williams, 2020). This is understandable because it will provide employment
opportunities in the country they are. Therefore, it is not surprising that many countries are
trying to attract TNCs to invest in their territories. With respect to the global division of labor,
TNCs will increase the demand for more skilled labor, as research conducted by Bruno, Crino
and Falzoni (2012) states that FDI increases the demand for more skilled labor in Poland.
Actors affected by the global political economy must make behavioral adjustments to
be able to face global competition which is currently increasing (O'Brien & Williams, 2020).
Coupled with technological advances in the form of machines, the value of labor has also
decreased because their portion of work can be replaced by machines (Tyner, 2019). The
higher demand for a more skilled workforce forces people to improve their abilities to
compete with others in the workplace. One of the reasons for this trend is to increase labor
productivity as it is a strong indicator of economic efficiency (Plasmans, 2003). In addition, it
is not surprising that TNCs promote division of labor to increase efficient production.
However, it seems that the labor market is shaped by TNC interests rather than national
interest.
International Trade, Transnational Production and Labor
One of the issues in relation to international trade and transnational production is not
respecting workers' rights. Many TNCs do not invest in their own countries because they want
to reduce their production costs. They tend to hire cheap labor and cut production costs with
forced labor in peripheral countries. As stated by Horvat (2020), the worst features of
exploitation are currently happening in all developing countries in the world.
In 2014, BBC News released a video inside the Apple assembly company. The video
shows that employees work under high pressure and for long, intensive periods of time. They
were forced to work standing up all day. In fact, the company installed electrical wires in t h e
machines so that employees could not lean back when tired. Employees work in a very
grueling environment. Although in 2010 there was a mass worker suicide at Foxconn, one of
the companies that manufactures Apple products, then Apple promised to improve facilitation
and working conditions, but the BBC video shows evidence to the contrary. For example,
everyone in China needs to carry an identity card. However, companies still take workers' IDs
directly when they enter the company (BBC News, 2014). Tyner (2019) also argues that
companies can collect profits not only from the products or services produced but also
through life insurance policies from workers who experience misfortune while performing
their duties.
However, not all TNCs tend to exploit labor for profit. A study analyzing foreign
direct investment and labor rights in 80 developing countries conducted by Busse,
Nunnenkamp, and Spatareanu showed different results. In terms of the correlation between
labor rights and TNCs, the study found that TNCs prefer to invest in countries that respect
labor rights (Busse, Nunnenkamp, & and Spatareanu, 2011). Moreover, labor violence in
potential host countries discourages TNCs from running their activities there, wherever it may
be (Busse, Nunnenkamp and Spatareanu, 2011). This condition shows that TNCs pay great
attention to labor rights, not only focus on their profits as well.
One solution to the above problem is to implement labor standards. Based on Heintz's
(2003) argument, the labor market should be for the larger society and should be governed by
rules, norms, and ethical standards that make allowance for the separate costs of
marketization. The International Labor Organization (ILO) is an organization that promotes
labor standards worldwide. The ILO holds conventions that cover basic human rights areas:
freedom of association and collective bargaining, elimination of forced labor, elimination of
child labor, and elimination of discrimination (Heintz, 2003; O'Brien and Willams, 2020).
However, the main problem in implementing labor standards is how to come up with labor
standards that can be applied worldwide. This is due to the disagreement among actors on the
purpose of labor standards. Furthermore, leaders in many liberal countries argue that
economic growth improves labor standards. Whereas, any interference in trade for labor
reasons will lower the gains from trade (O'Brien and Williams, 2020, p.195).
Conclusions
There are different perspectives on the global political economy. Economic
nationalists place the state as the main actor in the global political economy. This is related to
their concept of protectionism, protecting the economy from the global market. Meanwhile,
economic liberalists argue that states should collaborate with other actors in the global
economy. They believe that the global political economy involves multiple actors. Moreover,
the current global economy is more likely to adopt liberal values such as trade liberalization.
There are dynamics that shape the global political economy. They are international
trade and transnational production. Both dynamics have implications for the global division of
labor. International trade with the concept of 'comparative advantage' comparative advantage'
affects the specialization of labour. Whereas transnational production with TNCs has
implications in driving the division of labor around the world, especially in their host
countries. Both international trade and transnational production have benefits for the
participants. This is because TNCs can provide jobs and also improve the lives of workers.
However, there is skepticism about these dynamics. For example, they are believed to
play a role in wage inequality, especially between less skilled labor and more skilled labor.
Another example is the issue of worker exploitation, such as the Apple factory case and child
labor in tobacco factories. One solution that can be suggested is to enforce global labor
standards.
Results and Discussion of International Trade
According to Waters (2001) the primary and ongoing basis of economic
internationalization is trade. Trade itself is understood as the activity of two or more
individuals exchanging goods and services (O'Brien & Williams, 2020, p. 109). Such
activities would be called international trade if they are operated abroad. This international
trade can create relationships and interdependence between actors (Waters, 2001). As stated
by Ietto-Gillies (2003), that one evidence of state interconnectedness can be seen in
international trade activities in goods and services. Wallerstein and Marxist in Cohen (2017)
categorize countries into several levels, where there are dominant core countries, dependent
periphery countries and semi-fringe countries that are between the two categories. While core
countries enjoy a high level of technological development, selling sophisticated high-value
goods and services, the role of peripheral countries is simply to supply materials raw
materials, foodstuffs, and also cheap labor on the basis of highly unequal exchanges. Among
them, semi-periphery countries benefit from exploiting periphery countries even as they
themselves are exploited by core countries. This shows that international trade affects the
shape of the global political economy. One reason is that international trade has direct and
indirect effects on people and communities, for example, a family's consumption patterns are
affected by trade in goods (O'Brien & Williams, 2020).
One of the ways in which international trade affects the global economy is through a
free trade regime. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996). The theory of comparative advantage advises countries to
specialize in their most efficient products and services (O'Brien & Williams, 2020). The
ideology of comparative advantage serves to obscure uneven economic development progress
and unequal exchange between countries and regions (McBride & Shields, 1993). Therefore,
proponents of free trade believe that every country should engage in trade international and
reduce barriers.
Furthermore, according to liberal political economy, everyone can benefit from trade
as it can improve efficiency and increase productivity (O'Brien & Williams, 2020). For
example, Langenfeld and Nieberding (2005) estimate that trade growth has provided total
benefits to American consumers of about $2.3 trillion over the trade has provided total benefits
to American consumers of about $2.3 trillion during 1992-2002, or between $20,000 and
$22,000 per household in 2002. In contrast, nationalists believe that free trade is detrimental to
the national economy because it will weaken the economy unbalanced development and can
damage the environment (O'Brien & Williams, 2020). As in the case of Fiji, they are facing a
rapid and radical restructuring of the sugar or banana industry and this is potentially
disastrous for their economy as it is a fundamental commodity (Connel & Soutar, 2007).
Furthermore, in the international trading system, there are significant developments
that encourage trade liberalization. The emergence of the WTO (World Trade Organization),
the successor to the GATT (General Agreement on Tariffs and Trade), is believed to play an
important role in trade liberalization international. The WTO (and GATT before it) has
successfully liberalized trade and managed international trade through multilateral agreements
(Sampson, 2001). Jackson (1998) stated that the establishment of the WTO was the most
significant moment in the history of the world economy, even becoming a fundamental
institution in the international economy, especially with its dispute settlement procedures. The
WTO has changed the management of world trade in the following ways:
Change trade liberalization from being based on tariff adjustments to discussing
domestic policies, institutional practices and regulations.
Broaden the scope of trade and change the focus of negotiations from product
bargaining to policy.
Propose movement towards accession policies, for example, in the areas of subsidies
and trade-related investment measures and services (O'Brien & Williams, 2020).
Based on the above, it can be seen that the WTO has successfully played its role in
international trade, but there is the issue of many developing countries' interests not being
accommodated by the WTO (Sampson, 2001). In a d d i t i o n , countries developing
countries recognize the limitations of political influence in the international trade agreement
process (O'Brien & Williams, 2020). Another problem faced by developing countries is that
they lack the capacity to enforce WTO decisions as well as the high indirect costs of initiating
disputes with the WTO (Horlick, 2006, p. 220). For example, trade in agriculture, which is a
key interest of many developing countries, is particularly liberalized (Walter & Sen, 2009).
Apart from the role of the WTO, the influence of international trade on the global
political economy can be understood through its implications for the global division of labor
(Waters, 2001). The division of labor refers to the roles that people employ in the production
process (O'Brien & Williams, 2020). Waters (2001) states there are two types of division of
labour: social division of labour refers to occupational specialization, and technical division of
labour refers to task specialization. This condition is closely related to the concept of
comparative advantage by liberals who attach importance to the specialization of countries'
commodities to gain an advantage in the production process. In international trade. This means
that by engaging in trade, countries also shape their division of labor. Increase While trade
and mobility are expected to increase the elasticity of demand for human capital, they also
automatically reduce the bargaining power of labor (Perraton, 2003, p. 56). Moreover, in the
reduction of transaction costs due to technological advances, international agreements, non-
tariff barriers results in enormous specialization possibilities (Pomfret, 2014). A country can
choose the specific commodities or services offered in international trade which will also
affect the demand for labor from that country.
Another effect of international trade on labor can be seen in the inequality between
more skilled and less skilled labor. Trade liberalization leads to wage inequality due to
increased trade (Goldberg & Pavnick, 2004). It seems that recent international trade increases
the demand for more skilled workers to support the concept of specialization. Slaughter
(1998) believes that the demand for labor from the less skilled to the more skilled is a key
factor of wage inequality and it is actually happening in some countries such as the United
States and the United Kingdom. He added the argument that many countries with Such
inequality creates problems, such as higher unemployment rates and many job opportunities
avoiding less-skilled workers.
Transnational Production
There is general agreement that the growth of transnational production has shaped the
evolution of the global economy (O'Brien & Williams, 2020, p. 132). One of the main reasons
is that the global production system is a complex process. O'Brien and Williams (2013) argue
that this process involves multiple workers and workplaces with their integration with local,
national, regional and global systems. Because transnational production involves multi-level
actors. It becomes more complicated as it has to integrate different social, political and
economic backgrounds in the global economy. The main reason for the emergence of
transnational production is the innovation of communication and information technology
along with the advancement of transportation (Ietto-Gillies, 2003). This development
increases the possibility to separate production processes around the world.
A significant change affecting production processes across countries is the formation
of transnational companies (TNCs). As stated earlier, in the era of globalization, geographical
issues are no longer a big problem, therefore, TNCs can carry out production processes
separately in different parts of the world. Another reason TNCs invest abroad is because
production costs in developing countries are lower than in developed countries (O'Brien &
Williams, 2020). As stated by Ietto-Gillies (2003), there is a significant development of the
organization of production across countries due to the activities of transnational corporations.
In addition, it is argued that TNCs constitute a major part of the global production structure
and about 50 percent of world trade (O'Brien and Williams, 2020, p. 132). This fact shows the
impact of TNCs on the global production process. TNCs seem to be a key player in global
production.
TNCs play their role in the global economy through foreign direct investment (FDI).
Changes in the global production system are linked to increasing levels of FDI (O'Brien &
Williams, 2020). In addition, Perraton says that FDI by transnational corporations has grown
faster than trade (Perraton, 2003, p. 47). The success of TNCs to invest in many countries
around the world may be due to the recognition that TNCs are a good source of investment,
there is a transfer of technology, and there is an increase in the workforce (Waters, 2001, p.
46).
Indeed, there is skepticism towards transnational corporations and FDI. The concept of
transnational phenomena with interdependence between actors raises concerns of reduced
state sovereignty (Biersteker & Weber, 1996). This is also supported by the expansion of
capitalist companies that exploit labor, directly proportional to the need for workers to be able
to survive or survive to finance their own lives (Tyner, 2019). Moreover, for opponents of
capitalism, TNCs are believed to be a new worldwide method of exploitation that is
essentially "barbaric" and unacceptable (Waters, 2001). For example, a study conducted by
Doytch, Thelen, & Mendoza (2014) found the exploitation of child labor, with children forced
to work in fields for long hours, in a multinational tobacco company in Kazakhstan.
Therefore, for nationalist economic advocates, states must improve their ability to regulate
TNCs investing in their own countries (O'Brien and Williams, 2020).
However, for liberal supporters, there are The advantages offered by transnational
corporations with foreign direct investment. Epstein argues that this development can provide
more employment opportunities especially for developing countries, while also resulting in
wage increases because TNCs in developing countries have more productivity so they can pay
more (Epstein, 2003). In addition, TNCs with FDI can increase tax revenues through
increased economic activity in the host country and can help advance economic growth by
encouraging a more efficient division of labor (O'Brien & Williams, 2020, p. 137). Studies
conducted by Harrison in Mexico, Morocco and Venezuela show that TNCs help domestic
firms to break into export markets and they can improve workers' living standards as they pay
higher wages than domestic firms (Harrison, 1994).
Based on the explanation above, it can be seen that TNCs have a significant impact on
labor. One of the reasons TNCs with FDI are growing is that many developing countries are
implementing active policies to support industrialization and export to developed countries
(O'Brien and Williams, 2020). This is understandable because it will provide employment
opportunities in the country they are. Therefore, it is not surprising that many countries are
trying to attract TNCs to invest in their territories. With respect to the global division of labor,
TNCs will increase the demand for more skilled labor, as research conducted by Bruno, Crino
and Falzoni (2012) states that FDI increases the demand for more skilled labor in Poland.
Actors affected by the global political economy must make behavioral adjustments to
be able to face global competition which is currently increasing (O'Brien & Williams, 2020).
Coupled with technological advances in the form of machines, the value of labor has also
decreased because their portion of work can be replaced by machines (Tyner, 2019). The
higher demand for a more skilled workforce forces people to improve their abilities to
compete with others in the workplace. One of the reasons for this trend is to increase labor
productivity as it is a strong indicator of economic efficiency (Plasmans, 2003). In addition, it
is not surprising that TNCs promote division of labor to increase efficient production.
However, it seems that the labor market is shaped by TNC interests rather than national
interest.
International Trade, Transnational Production and Labor
One of the issues in relation to international trade and transnational production is not
respecting workers' rights. Many TNCs do not invest in their own countries because they want
to reduce their production costs. They tend to hire cheap labor and cut production costs with
forced labor in peripheral countries. As stated by Horvat (2020), the worst features of
exploitation are currently happening in all developing countries in the world.
In 2014, BBC News released a video inside the Apple assembly company. The video
shows that employees work under high pressure and for long, intensive periods of time. They
were forced to work standing up all day. In fact, the company installed electrical wires in t h e
machines so that employees could not lean back when tired. Employees work in a very
grueling environment. Although in 2010 there was a mass worker suicide at Foxconn, one of
the companies that manufactures Apple products, then Apple promised to improve facilitation
and working conditions, but the BBC video shows evidence to the contrary. For example,
everyone in China needs to carry an identity card. However, companies still take workers' IDs
directly when they enter the company (BBC News, 2014). Tyner (2019) also argues that
companies can collect profits not only from the products or services produced but also
through life insurance policies from workers who experience misfortune while performing
their duties.
However, not all TNCs tend to exploit labor for profit. A study analyzing foreign
direct investment and labor rights in 80 developing countries conducted by Busse,
Nunnenkamp, and Spatareanu showed different results. In terms of the correlation between
labor rights and TNCs, the study found that TNCs prefer to invest in countries that respect
labor rights (Busse, Nunnenkamp, & and Spatareanu, 2011). Moreover, labor violence in
potential host countries discourages TNCs from running their activities there, wherever it may
be (Busse, Nunnenkamp and Spatareanu, 2011). This condition shows that TNCs pay great
attention to labor rights, not only focus on their profits as well.
One solution to the above problem is to implement labor standards. Based on Heintz's
(2003) argument, the labor market should be for the larger society and should be governed by
rules, norms, and ethical standards that make allowance for the separate costs of
marketization. The International Labor Organization (ILO) is an organization that promotes
labor standards worldwide. The ILO holds conventions that cover basic human rights areas:
freedom of association and collective bargaining, elimination of forced labor, elimination of
child labor, and elimination of discrimination (Heintz, 2003; O'Brien and Willams, 2020).
However, the main problem in implementing labor standards is how to come up with labor
standards that can be applied worldwide. This is due to the disagreement among actors on the
purpose of labor standards. Furthermore, leaders in many liberal countries argue that
economic growth improves labor standards. Whereas, any interference in trade for labor
reasons will lower the gains from trade (O'Brien and Williams, 2020, p.195).
Conclusions
There are different perspectives on the global political economy. Economic
nationalists place the state as the main actor in the global political economy. This is related to
their concept of protectionism, protecting the economy from the global market. Meanwhile,
economic liberalists argue that states should collaborate with other actors in the global
economy. They believe that the global political economy involves multiple actors. Moreover,
the current global economy is more likely to adopt liberal values such as trade liberalization.
There are dynamics that shape the global political economy. They are international
trade and transnational production. Both dynamics have implications for the global division of
labor. International trade with the concept of 'comparative advantage' comparative advantage'
affects the specialization of labour. Whereas transnational production with TNCs has
implications in driving the division of labor around the world, especially in their host
countries. Both international trade and transnational production have benefits for the
participants. This is because TNCs can provide jobs and also improve the lives of workers.
However, there is skepticism about these dynamics. For example, they are believed to
play a role in wage inequality, especially between less skilled labor and more skilled labor.
Another example is the issue of worker exploitation, such as the Apple factory case and child
labor in tobacco factories. One solution that can be suggested is to enforce global labor
standards.
Results and Discussion of International Trade
According to Waters (2001) the primary and ongoing basis of economic
internationalization is trade. Trade itself is understood as the activity of two or more
individuals exchanging goods and services (O'Brien & Williams, 2020, p. 109). Such
activities would be called international trade if they are operated abroad. This international
trade can create relationships and interdependence between actors (Waters, 2001). As stated
by Ietto-Gillies (2003), that one evidence of state interconnectedness can be seen in
international trade activities in goods and services. Wallerstein and Marxist in Cohen (2017)
categorize countries into several levels, where there are dominant core countries, dependent
periphery countries and semi-fringe countries that are between the two categories. While core
countries enjoy a high level of technological development, selling sophisticated high-value
goods and services, the role of peripheral countries is simply to supply materials raw
materials, foodstuffs, and also cheap labor on the basis of highly unequal exchanges. Among
them, semi-periphery countries benefit from exploiting periphery countries even as they
themselves are exploited by core countries. This shows that international trade affects the
shape of the global political economy. One reason is that international trade has direct and
indirect effects on people and communities, for example, a family's consumption patterns are
affected by trade in goods (O'Brien & Williams, 2020).
One of the ways in which international trade affects the global economy is through a
free trade regime. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996). The theory of comparative advantage advises countries to
specialize in their most efficient products and services (O'Brien & Williams, 2020). The
ideology of comparative advantage serves to obscure uneven economic development progress
and unequal exchange between countries and regions (McBride & Shields, 1993). Therefore,
proponents of free trade believe that every country should engage in trade international and
reduce barriers.
Furthermore, according to liberal political economy, everyone can benefit from trade
as it can improve efficiency and increase productivity (O'Brien & Williams, 2020). For
example, Langenfeld and Nieberding (2005) estimate that trade growth has provided total
benefits to American consumers of about $2.3 trillion over the trade has provided total benefits
to American consumers of about $2.3 trillion during 1992-2002, or between $20,000 and
$22,000 per household in 2002. In contrast, nationalists believe that free trade is detrimental to
the national economy because it will weaken the economy unbalanced development and can
damage the environment (O'Brien & Williams, 2020). As in the case of Fiji, they are facing a
rapid and radical restructuring of the sugar or banana industry and this is potentially
disastrous for their economy as it is a fundamental commodity (Connel & Soutar, 2007).
Furthermore, in the international trading system, there are significant developments
that encourage trade liberalization. The emergence of the WTO (World Trade Organization),
the successor to the GATT (General Agreement on Tariffs and Trade), is believed to play an
important role in trade liberalization international. The WTO (and GATT before it) has
successfully liberalized trade and managed international trade through multilateral agreements
(Sampson, 2001). Jackson (1998) stated that the establishment of the WTO was the most
significant moment in the history of the world economy, even becoming a fundamental
institution in the international economy, especially with its dispute settlement procedures. The
WTO has changed the management of world trade in the following ways:
Change trade liberalization from being based on tariff adjustments to discussing
domestic policies, institutional practices and regulations.
Broaden the scope of trade and change the focus of negotiations from product
bargaining to policy.
Propose movement towards accession policies, for example, in the areas of subsidies
and trade-related investment measures and services (O'Brien & Williams, 2020).
Based on the above, it can be seen that the WTO has successfully played its role in
international trade, but there is the issue of many developing countries' interests not being
accommodated by the WTO (Sampson, 2001). In a d d i t i o n , countries developing
countries recognize the limitations of political influence in the international trade agreement
process (O'Brien & Williams, 2020). Another problem faced by developing countries is that
they lack the capacity to enforce WTO decisions as well as the high indirect costs of initiating
disputes with the WTO (Horlick, 2006, p. 220). For example, trade in agriculture, which is a
key interest of many developing countries, is particularly liberalized (Walter & Sen, 2009).
Apart from the role of the WTO, the influence of international trade on the global
political economy can be understood through its implications for the global division of labor
(Waters, 2001). The division of labor refers to the roles that people employ in the production
process (O'Brien & Williams, 2020). Waters (2001) states there are two types of division of
labour: social division of labour refers to occupational specialization, and technical division of
labour refers to task specialization. This condition is closely related to the concept of
comparative advantage by liberals who attach importance to the specialization of countries'
commodities to gain an advantage in the production process. In international trade. This means
that by engaging in trade, countries also shape their division of labor. Increase While trade
and mobility are expected to increase the elasticity of demand for human capital, they also
automatically reduce the bargaining power of labor (Perraton, 2003, p. 56). Moreover, in the
reduction of transaction costs due to technological advances, international agreements, non-
tariff barriers results in enormous specialization possibilities (Pomfret, 2014). A country can
choose the specific commodities or services offered in international trade which will also
affect the demand for labor from that country.
Another effect of international trade on labor can be seen in the inequality between
more skilled and less skilled labor. Trade liberalization leads to wage inequality due to
increased trade (Goldberg & Pavnick, 2004). It seems that recent international trade increases
the demand for more skilled workers to support the concept of specialization. Slaughter
(1998) believes that the demand for labor from the less skilled to the more skilled is a key
factor of wage inequality and it is actually happening in some countries such as the United
States and the United Kingdom. He added the argument that many countries with Such
inequality creates problems, such as higher unemployment rates and many job opportunities
avoiding less-skilled workers.
Transnational Production
There is general agreement that the growth of transnational production has shaped the
evolution of the global economy (O'Brien & Williams, 2020, p. 132). One of the main reasons
is that the global production system is a complex process. O'Brien and Williams (2013) argue
that this process involves multiple workers and workplaces with their integration with local,
national, regional and global systems. Because transnational production involves multi-level
actors. It becomes more complicated as it has to integrate different social, political and
economic backgrounds in the global economy. The main reason for the emergence of
transnational production is the innovation of communication and information technology
along with the advancement of transportation (Ietto-Gillies, 2003). This development
increases the possibility to separate production processes around the world.
A significant change affecting production processes across countries is the formation
of transnational companies (TNCs). As stated earlier, in the era of globalization, geographical
issues are no longer a big problem, therefore, TNCs can carry out production processes
separately in different parts of the world. Another reason TNCs invest abroad is because
production costs in developing countries are lower than in developed countries (O'Brien &
Williams, 2020). As stated by Ietto-Gillies (2003), there is a significant development of the
organization of production across countries due to the activities of transnational corporations.
In addition, it is argued that TNCs constitute a major part of the global production structure
and about 50 percent of world trade (O'Brien and Williams, 2020, p. 132). This fact shows the
impact of TNCs on the global production process. TNCs seem to be a key player in global
production.
TNCs play their role in the global economy through foreign direct investment (FDI).
Changes in the global production system are linked to increasing levels of FDI (O'Brien &
Williams, 2020). In addition, Perraton says that FDI by transnational corporations has grown
faster than trade (Perraton, 2003, p. 47). The success of TNCs to invest in many countries
around the world may be due to the recognition that TNCs are a good source of investment,
there is a transfer of technology, and there is an increase in the workforce (Waters, 2001, p.
46).
Indeed, there is skepticism towards transnational corporations and FDI. The concept of
transnational phenomena with interdependence between actors raises concerns of reduced
state sovereignty (Biersteker & Weber, 1996). This is also supported by the expansion of
capitalist companies that exploit labor, directly proportional to the need for workers to be able
to survive or survive to finance their own lives (Tyner, 2019). Moreover, for opponents of
capitalism, TNCs are believed to be a new worldwide method of exploitation that is
essentially "barbaric" and unacceptable (Waters, 2001). For example, a study conducted by
Doytch, Thelen, & Mendoza (2014) found the exploitation of child labor, with children forced
to work in fields for long hours, in a multinational tobacco company in Kazakhstan.
Therefore, for nationalist economic advocates, states must improve their ability to regulate
TNCs investing in their own countries (O'Brien and Williams, 2020).
However, for liberal supporters, there are The advantages offered by transnational
corporations with foreign direct investment. Epstein argues that this development can provide
more employment opportunities especially for developing countries, while also resulting in
wage increases because TNCs in developing countries have more productivity so they can pay
more (Epstein, 2003). In addition, TNCs with FDI can increase tax revenues through
increased economic activity in the host country and can help advance economic growth by
encouraging a more efficient division of labor (O'Brien & Williams, 2020, p. 137). Studies
conducted by Harrison in Mexico, Morocco and Venezuela show that TNCs help domestic
firms to break into export markets and they can improve workers' living standards as they pay
higher wages than domestic firms (Harrison, 1994).
Based on the explanation above, it can be seen that TNCs have a significant impact on
labor. One of the reasons TNCs with FDI are growing is that many developing countries are
implementing active policies to support industrialization and export to developed countries
(O'Brien and Williams, 2020). This is understandable because it will provide employment
opportunities in the country they are. Therefore, it is not surprising that many countries are
trying to attract TNCs to invest in their territories. With respect to the global division of labor,
TNCs will increase the demand for more skilled labor, as research conducted by Bruno, Crino
and Falzoni (2012) states that FDI increases the demand for more skilled labor in Poland.
Actors affected by the global political economy must make behavioral adjustments to
be able to face global competition which is currently increasing (O'Brien & Williams, 2020).
Coupled with technological advances in the form of machines, the value of labor has also
decreased because their portion of work can be replaced by machines (Tyner, 2019). The
higher demand for a more skilled workforce forces people to improve their abilities to
compete with others in the workplace. One of the reasons for this trend is to increase labor
productivity as it is a strong indicator of economic efficiency (Plasmans, 2003). In addition, it
is not surprising that TNCs promote division of labor to increase efficient production.
However, it seems that the labor market is shaped by TNC interests rather than national
interest.
International Trade, Transnational Production and Labor
One of the issues in relation to international trade and transnational production is not
respecting workers' rights. Many TNCs do not invest in their own countries because they want
to reduce their production costs. They tend to hire cheap labor and cut production costs with
forced labor in peripheral countries. As stated by Horvat (2020), the worst features of
exploitation are currently happening in all developing countries in the world.
In 2014, BBC News released a video inside the Apple assembly company. The video
shows that employees work under high pressure and for long, intensive periods of time. They
were forced to work standing up all day. In fact, the company installed electrical wires in t h e
machines so that employees could not lean back when tired. Employees work in a very
grueling environment. Although in 2010 there was a mass worker suicide at Foxconn, one of
the companies that manufactures Apple products, then Apple promised to improve facilitation
and working conditions, but the BBC video shows evidence to the contrary. For example,
everyone in China needs to carry an identity card. However, companies still take workers' IDs
directly when they enter the company (BBC News, 2014). Tyner (2019) also argues that
companies can collect profits not only from the products or services produced but also
through life insurance policies from workers who experience misfortune while performing
their duties.
However, not all TNCs tend to exploit labor for profit. A study analyzing foreign
direct investment and labor rights in 80 developing countries conducted by Busse,
Nunnenkamp, and Spatareanu showed different results. In terms of the correlation between
labor rights and TNCs, the study found that TNCs prefer to invest in countries that respect
labor rights (Busse, Nunnenkamp, & and Spatareanu, 2011). Moreover, labor violence in
potential host countries discourages TNCs from running their activities there, wherever it may
be (Busse, Nunnenkamp and Spatareanu, 2011). This condition shows that TNCs pay great
attention to labor rights, not only focus on their profits as well.
One solution to the above problem is to implement labor standards. Based on Heintz's
(2003) argument, the labor market should be for the larger society and should be governed by
rules, norms, and ethical standards that make allowance for the separate costs of
marketization. The International Labor Organization (ILO) is an organization that promotes
labor standards worldwide. The ILO holds conventions that cover basic human rights areas:
freedom of association and collective bargaining, elimination of forced labor, elimination of
child labor, and elimination of discrimination (Heintz, 2003; O'Brien and Willams, 2020).
However, the main problem in implementing labor standards is how to come up with labor
standards that can be applied worldwide. This is due to the disagreement among actors on the
purpose of labor standards. Furthermore, leaders in many liberal countries argue that
economic growth improves labor standards. Whereas, any interference in trade for labor
reasons will lower the gains from trade (O'Brien and Williams, 2020, p.195).
Conclusions
There are different perspectives on the global political economy. Economic
nationalists place the state as the main actor in the global political economy. This is related to
their concept of protectionism, protecting the economy from the global market. Meanwhile,
economic liberalists argue that states should collaborate with other actors in the global
economy. They believe that the global political economy involves multiple actors. Moreover,
the current global economy is more likely to adopt liberal values such as trade liberalization.
There are dynamics that shape the global political economy. They are international
trade and transnational production. Both dynamics have implications for the global division of
labor. International trade with the concept of 'comparative advantage' comparative advantage'
affects the specialization of labour. Whereas transnational production with TNCs has
implications in driving the division of labor around the world, especially in their host
countries. Both international trade and transnational production have benefits for the
participants. This is because TNCs can provide jobs and also improve the lives of workers.
However, there is skepticism about these dynamics. For example, they are believed to
play a role in wage inequality, especially between less skilled labor and more skilled labor.
Another example is the issue of worker exploitation, such as the Apple factory case and child
labor in tobacco factories. One solution that can be suggested is to enforce global labor
standards.
Results and Discussion of International Trade
According to Waters (2001) the primary and ongoing basis of economic
internationalization is trade. Trade itself is understood as the activity of two or more
individuals exchanging goods and services (O'Brien & Williams, 2020, p. 109). Such
activities would be called international trade if they are operated abroad. This international
trade can create relationships and interdependence between actors (Waters, 2001). As stated
by Ietto-Gillies (2003), that one evidence of state interconnectedness can be seen in
international trade activities in goods and services. Wallerstein and Marxist in Cohen (2017)
categorize countries into several levels, where there are dominant core countries, dependent
periphery countries and semi-fringe countries that are between the two categories. While core
countries enjoy a high level of technological development, selling sophisticated high-value
goods and services, the role of peripheral countries is simply to supply materials raw
materials, foodstuffs, and also cheap labor on the basis of highly unequal exchanges. Among
them, semi-periphery countries benefit from exploiting periphery countries even as they
themselves are exploited by core countries. This shows that international trade affects the
shape of the global political economy. One reason is that international trade has direct and
indirect effects on people and communities, for example, a family's consumption patterns are
affected by trade in goods (O'Brien & Williams, 2020).
One of the ways in which international trade affects the global economy is through a
free trade regime. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996). The theory of comparative advantage advises countries to
specialize in their most efficient products and services (O'Brien & Williams, 2020). The
ideology of comparative advantage serves to obscure uneven economic development progress
and unequal exchange between countries and regions (McBride & Shields, 1993). Therefore,
proponents of free trade believe that every country should engage in trade international and
reduce barriers.
Furthermore, according to liberal political economy, everyone can benefit from trade
as it can improve efficiency and increase productivity (O'Brien & Williams, 2020). For
example, Langenfeld and Nieberding (2005) estimate that trade growth has provided total
benefits to American consumers of about $2.3 trillion over the trade has provided total benefits
to American consumers of about $2.3 trillion during 1992-2002, or between $20,000 and
$22,000 per household in 2002. In contrast, nationalists believe that free trade is detrimental to
the national economy because it will weaken the economy unbalanced development and can
damage the environment (O'Brien & Williams, 2020). As in the case of Fiji, they are facing a
rapid and radical restructuring of the sugar or banana industry and this is potentially
disastrous for their economy as it is a fundamental commodity (Connel & Soutar, 2007).
Furthermore, in the international trading system, there are significant developments
that encourage trade liberalization. The emergence of the WTO (World Trade Organization),
the successor to the GATT (General Agreement on Tariffs and Trade), is believed to play an
important role in trade liberalization international. The WTO (and GATT before it) has
successfully liberalized trade and managed international trade through multilateral agreements
(Sampson, 2001). Jackson (1998) stated that the establishment of the WTO was the most
significant moment in the history of the world economy, even becoming a fundamental
institution in the international economy, especially with its dispute settlement procedures. The
WTO has changed the management of world trade in the following ways:
Change trade liberalization from being based on tariff adjustments to discussing
domestic policies, institutional practices and regulations.
Broaden the scope of trade and change the focus of negotiations from product
bargaining to policy.
Propose movement towards accession policies, for example, in the areas of subsidies
and trade-related investment measures and services (O'Brien & Williams, 2020).
Based on the above, it can be seen that the WTO has successfully played its role in
international trade, but there is the issue of many developing countries' interests not being
accommodated by the WTO (Sampson, 2001). In a d d i t i o n , countries developing
countries recognize the limitations of political influence in the international trade agreement
process (O'Brien & Williams, 2020). Another problem faced by developing countries is that
they lack the capacity to enforce WTO decisions as well as the high indirect costs of initiating
disputes with the WTO (Horlick, 2006, p. 220). For example, trade in agriculture, which is a
key interest of many developing countries, is particularly liberalized (Walter & Sen, 2009).
Apart from the role of the WTO, the influence of international trade on the global
political economy can be understood through its implications for the global division of labor
(Waters, 2001). The division of labor refers to the roles that people employ in the production
process (O'Brien & Williams, 2020). Waters (2001) states there are two types of division of
labour: social division of labour refers to occupational specialization, and technical division of
labour refers to task specialization. This condition is closely related to the concept of
comparative advantage by liberals who attach importance to the specialization of countries'
commodities to gain an advantage in the production process. In international trade. This means
that by engaging in trade, countries also shape their division of labor. Increase While trade
and mobility are expected to increase the elasticity of demand for human capital, they also
automatically reduce the bargaining power of labor (Perraton, 2003, p. 56). Moreover, in the
reduction of transaction costs due to technological advances, international agreements, non-
tariff barriers results in enormous specialization possibilities (Pomfret, 2014). A country can
choose the specific commodities or services offered in international trade which will also
affect the demand for labor from that country.
Another effect of international trade on labor can be seen in the inequality between
more skilled and less skilled labor. Trade liberalization leads to wage inequality due to
increased trade (Goldberg & Pavnick, 2004). It seems that recent international trade increases
the demand for more skilled workers to support the concept of specialization. Slaughter
(1998) believes that the demand for labor from the less skilled to the more skilled is a key
factor of wage inequality and it is actually happening in some countries such as the United
States and the United Kingdom. He added the argument that many countries with Such
inequality creates problems, such as higher unemployment rates and many job opportunities
avoiding less-skilled workers.
Transnational Production
There is general agreement that the growth of transnational production has shaped the
evolution of the global economy (O'Brien & Williams, 2020, p. 132). One of the main reasons
is that the global production system is a complex process. O'Brien and Williams (2013) argue
that this process involves multiple workers and workplaces with their integration with local,
national, regional and global systems. Because transnational production involves multi-level
actors. It becomes more complicated as it has to integrate different social, political and
economic backgrounds in the global economy. The main reason for the emergence of
transnational production is the innovation of communication and information technology
along with the advancement of transportation (Ietto-Gillies, 2003). This development
increases the possibility to separate production processes around the world.
A significant change affecting production processes across countries is the formation
of transnational companies (TNCs). As stated earlier, in the era of globalization, geographical
issues are no longer a big problem, therefore, TNCs can carry out production processes
separately in different parts of the world. Another reason TNCs invest abroad is because
production costs in developing countries are lower than in developed countries (O'Brien &
Williams, 2020). As stated by Ietto-Gillies (2003), there is a significant development of the
organization of production across countries due to the activities of transnational corporations.
In addition, it is argued that TNCs constitute a major part of the global production structure
and about 50 percent of world trade (O'Brien and Williams, 2020, p. 132). This fact shows the
impact of TNCs on the global production process. TNCs seem to be a key player in global
production.
TNCs play their role in the global economy through foreign direct investment (FDI).
Changes in the global production system are linked to increasing levels of FDI (O'Brien &
Williams, 2020). In addition, Perraton says that FDI by transnational corporations has grown
faster than trade (Perraton, 2003, p. 47). The success of TNCs to invest in many countries
around the world may be due to the recognition that TNCs are a good source of investment,
there is a transfer of technology, and there is an increase in the workforce (Waters, 2001, p.
46).
Indeed, there is skepticism towards transnational corporations and FDI. The concept of
transnational phenomena with interdependence between actors raises concerns of reduced
state sovereignty (Biersteker & Weber, 1996). This is also supported by the expansion of
capitalist companies that exploit labor, directly proportional to the need for workers to be able
to survive or survive to finance their own lives (Tyner, 2019). Moreover, for opponents of
capitalism, TNCs are believed to be a new worldwide method of exploitation that is
essentially "barbaric" and unacceptable (Waters, 2001). For example, a study conducted by
Doytch, Thelen, & Mendoza (2014) found the exploitation of child labor, with children forced
to work in fields for long hours, in a multinational tobacco company in Kazakhstan.
Therefore, for nationalist economic advocates, states must improve their ability to regulate
TNCs investing in their own countries (O'Brien and Williams, 2020).
However, for liberal supporters, there are The advantages offered by transnational
corporations with foreign direct investment. Epstein argues that this development can provide
more employment opportunities especially for developing countries, while also resulting in
wage increases because TNCs in developing countries have more productivity so they can pay
more (Epstein, 2003). In addition, TNCs with FDI can increase tax revenues through
increased economic activity in the host country and can help advance economic growth by
encouraging a more efficient division of labor (O'Brien & Williams, 2020, p. 137). Studies
conducted by Harrison in Mexico, Morocco and Venezuela show that TNCs help domestic
firms to break into export markets and they can improve workers' living standards as they pay
higher wages than domestic firms (Harrison, 1994).
Based on the explanation above, it can be seen that TNCs have a significant impact on
labor. One of the reasons TNCs with FDI are growing is that many developing countries are
implementing active policies to support industrialization and export to developed countries
(O'Brien and Williams, 2020). This is understandable because it will provide employment
opportunities in the country they are. Therefore, it is not surprising that many countries are
trying to attract TNCs to invest in their territories. With respect to the global division of labor,
TNCs will increase the demand for more skilled labor, as research conducted by Bruno, Crino
and Falzoni (2012) states that FDI increases the demand for more skilled labor in Poland.
Actors affected by the global political economy must make behavioral adjustments to
be able to face global competition which is currently increasing (O'Brien & Williams, 2020).
Coupled with technological advances in the form of machines, the value of labor has also
decreased because their portion of work can be replaced by machines (Tyner, 2019). The
higher demand for a more skilled workforce forces people to improve their abilities to
compete with others in the workplace. One of the reasons for this trend is to increase labor
productivity as it is a strong indicator of economic efficiency (Plasmans, 2003). In addition, it
is not surprising that TNCs promote division of labor to increase efficient production.
However, it seems that the labor market is shaped by TNC interests rather than national
interest.
International Trade, Transnational Production and Labor
One of the issues in relation to international trade and transnational production is not
respecting workers' rights. Many TNCs do not invest in their own countries because they want
to reduce their production costs. They tend to hire cheap labor and cut production costs with
forced labor in peripheral countries. As stated by Horvat (2020), the worst features of
exploitation are currently happening in all developing countries in the world.
In 2014, BBC News released a video inside the Apple assembly company. The video
shows that employees work under high pressure and for long, intensive periods of time. They
were forced to work standing up all day. In fact, the company installed electrical wires in t h e
machines so that employees could not lean back when tired. Employees work in a very
grueling environment. Although in 2010 there was a mass worker suicide at Foxconn, one of
the companies that manufactures Apple products, then Apple promised to improve facilitation
and working conditions, but the BBC video shows evidence to the contrary. For example,
everyone in China needs to carry an identity card. However, companies still take workers' IDs
directly when they enter the company (BBC News, 2014). Tyner (2019) also argues that
companies can collect profits not only from the products or services produced but also
through life insurance policies from workers who experience misfortune while performing
their duties.
However, not all TNCs tend to exploit labor for profit. A study analyzing foreign
direct investment and labor rights in 80 developing countries conducted by Busse,
Nunnenkamp, and Spatareanu showed different results. In terms of the correlation between
labor rights and TNCs, the study found that TNCs prefer to invest in countries that respect
labor rights (Busse, Nunnenkamp, & and Spatareanu, 2011). Moreover, labor violence in
potential host countries discourages TNCs from running their activities there, wherever it may
be (Busse, Nunnenkamp and Spatareanu, 2011). This condition shows that TNCs pay great
attention to labor rights, not only focus on their profits as well.
One solution to the above problem is to implement labor standards. Based on Heintz's
(2003) argument, the labor market should be for the larger society and should be governed by
rules, norms, and ethical standards that make allowance for the separate costs of
marketization. The International Labor Organization (ILO) is an organization that promotes
labor standards worldwide. The ILO holds conventions that cover basic human rights areas:
freedom of association and collective bargaining, elimination of forced labor, elimination of
child labor, and elimination of discrimination (Heintz, 2003; O'Brien and Willams, 2020).
However, the main problem in implementing labor standards is how to come up with labor
standards that can be applied worldwide. This is due to the disagreement among actors on the
purpose of labor standards. Furthermore, leaders in many liberal countries argue that
economic growth improves labor standards. Whereas, any interference in trade for labor
reasons will lower the gains from trade (O'Brien and Williams, 2020, p.195).
Conclusions
There are different perspectives on the global political economy. Economic
nationalists place the state as the main actor in the global political economy. This is related to
their concept of protectionism, protecting the economy from the global market. Meanwhile,
economic liberalists argue that states should collaborate with other actors in the global
economy. They believe that the global political economy involves multiple actors. Moreover,
the current global economy is more likely to adopt liberal values such as trade liberalization.
There are dynamics that shape the global political economy. They are international
trade and transnational production. Both dynamics have implications for the global division of
labor. International trade with the concept of 'comparative advantage' comparative advantage'
affects the specialization of labour. Whereas transnational production with TNCs has
implications in driving the division of labor around the world, especially in their host
countries. Both international trade and transnational production have benefits for the
participants. This is because TNCs can provide jobs and also improve the lives of workers.
However, there is skepticism about these dynamics. For example, they are believed to
play a role in wage inequality, especially between less skilled labor and more skilled labor.
Another example is the issue of worker exploitation, such as the Apple factory case and child
labor in tobacco factories. One solution that can be suggested is to enforce global labor
standards.
Results and Discussion of International Trade
According to Waters (2001) the primary and ongoing basis of economic
internationalization is trade. Trade itself is understood as the activity of two or more
individuals exchanging goods and services (O'Brien & Williams, 2020, p. 109). Such
activities would be called international trade if they are operated abroad. This international
trade can create relationships and interdependence between actors (Waters, 2001). As stated
by Ietto-Gillies (2003), that one evidence of state interconnectedness can be seen in
international trade activities in goods and services. Wallerstein and Marxist in Cohen (2017)
categorize countries into several levels, where there are dominant core countries, dependent
periphery countries and semi-fringe countries that are between the two categories. While core
countries enjoy a high level of technological development, selling sophisticated high-value
goods and services, the role of peripheral countries is simply to supply materials raw
materials, foodstuffs, and also cheap labor on the basis of highly unequal exchanges. Among
them, semi-periphery countries benefit from exploiting periphery countries even as they
themselves are exploited by core countries. This shows that international trade affects the
shape of the global political economy. One reason is that international trade has direct and
indirect effects on people and communities, for example, a family's consumption patterns are
affected by trade in goods (O'Brien & Williams, 2020).
One of the ways in which international trade affects the global economy is through a
free trade regime. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996). The theory of comparative advantage advises countries to
specialize in their most efficient products and services (O'Brien & Williams, 2020). The
ideology of comparative advantage serves to obscure uneven economic development progress
and unequal exchange between countries and regions (McBride & Shields, 1993). Therefore,
proponents of free trade believe that every country should engage in trade international and
reduce barriers.
Furthermore, according to liberal political economy, everyone can benefit from trade
as it can improve efficiency and increase productivity (O'Brien & Williams, 2020). For
example, Langenfeld and Nieberding (2005) estimate that trade growth has provided total
benefits to American consumers of about $2.3 trillion over the trade has provided total benefits
to American consumers of about $2.3 trillion during 1992-2002, or between $20,000 and
$22,000 per household in 2002. In contrast, nationalists believe that free trade is detrimental to
the national economy because it will weaken the economy unbalanced development and can
damage the environment (O'Brien & Williams, 2020). As in the case of Fiji, they are facing a
rapid and radical restructuring of the sugar or banana industry and this is potentially
disastrous for their economy as it is a fundamental commodity (Connel & Soutar, 2007).
Furthermore, in the international trading system, there are significant developments
that encourage trade liberalization. The emergence of the WTO (World Trade Organization),
the successor to the GATT (General Agreement on Tariffs and Trade), is believed to play an
important role in trade liberalization international. The WTO (and GATT before it) has
successfully liberalized trade and managed international trade through multilateral agreements
(Sampson, 2001). Jackson (1998) stated that the establishment of the WTO was the most
significant moment in the history of the world economy, even becoming a fundamental
institution in the international economy, especially with its dispute settlement procedures. The
WTO has changed the management of world trade in the following ways:
Change trade liberalization from being based on tariff adjustments to discussing
domestic policies, institutional practices and regulations.
Broaden the scope of trade and change the focus of negotiations from product
bargaining to policy.
Propose movement towards accession policies, for example, in the areas of subsidies
and trade-related investment measures and services (O'Brien & Williams, 2020).
Based on the above, it can be seen that the WTO has successfully played its role in
international trade, but there is the issue of many developing countries' interests not being
accommodated by the WTO (Sampson, 2001). In a d d i t i o n , countries developing
countries recognize the limitations of political influence in the international trade agreement
process (O'Brien & Williams, 2020). Another problem faced by developing countries is that
they lack the capacity to enforce WTO decisions as well as the high indirect costs of initiating
disputes with the WTO (Horlick, 2006, p. 220). For example, trade in agriculture, which is a
key interest of many developing countries, is particularly liberalized (Walter & Sen, 2009).
Apart from the role of the WTO, the influence of international trade on the global
political economy can be understood through its implications for the global division of labor
(Waters, 2001). The division of labor refers to the roles that people employ in the production
process (O'Brien & Williams, 2020). Waters (2001) states there are two types of division of
labour: social division of labour refers to occupational specialization, and technical division of
labour refers to task specialization. This condition is closely related to the concept of
comparative advantage by liberals who attach importance to the specialization of countries'
commodities to gain an advantage in the production process. In international trade. This means
that by engaging in trade, countries also shape their division of labor. Increase While trade
and mobility are expected to increase the elasticity of demand for human capital, they also
automatically reduce the bargaining power of labor (Perraton, 2003, p. 56). Moreover, in the
reduction of transaction costs due to technological advances, international agreements, non-
tariff barriers results in enormous specialization possibilities (Pomfret, 2014). A country can
choose the specific commodities or services offered in international trade which will also
affect the demand for labor from that country.
Another effect of international trade on labor can be seen in the inequality between
more skilled and less skilled labor. Trade liberalization leads to wage inequality due to
increased trade (Goldberg & Pavnick, 2004). It seems that recent international trade increases
the demand for more skilled workers to support the concept of specialization. Slaughter
(1998) believes that the demand for labor from the less skilled to the more skilled is a key
factor of wage inequality and it is actually happening in some countries such as the United
States and the United Kingdom. He added the argument that many countries with Such
inequality creates problems, such as higher unemployment rates and many job opportunities
avoiding less-skilled workers.
Transnational Production
There is general agreement that the growth of transnational production has shaped the
evolution of the global economy (O'Brien & Williams, 2020, p. 132). One of the main reasons
is that the global production system is a complex process. O'Brien and Williams (2013) argue
that this process involves multiple workers and workplaces with their integration with local,
national, regional and global systems. Because transnational production involves multi-level
actors. It becomes more complicated as it has to integrate different social, political and
economic backgrounds in the global economy. The main reason for the emergence of
transnational production is the innovation of communication and information technology
along with the advancement of transportation (Ietto-Gillies, 2003). This development
increases the possibility to separate production processes around the world.
A significant change affecting production processes across countries is the formation
of transnational companies (TNCs). As stated earlier, in the era of globalization, geographical
issues are no longer a big problem, therefore, TNCs can carry out production processes
separately in different parts of the world. Another reason TNCs invest abroad is because
production costs in developing countries are lower than in developed countries (O'Brien &
Williams, 2020). As stated by Ietto-Gillies (2003), there is a significant development of the
organization of production across countries due to the activities of transnational corporations.
In addition, it is argued that TNCs constitute a major part of the global production structure
and about 50 percent of world trade (O'Brien and Williams, 2020, p. 132). This fact shows the
impact of TNCs on the global production process. TNCs seem to be a key player in global
production.
TNCs play their role in the global economy through foreign direct investment (FDI).
Changes in the global production system are linked to increasing levels of FDI (O'Brien &
Williams, 2020). In addition, Perraton says that FDI by transnational corporations has grown
faster than trade (Perraton, 2003, p. 47). The success of TNCs to invest in many countries
around the world may be due to the recognition that TNCs are a good source of investment,
there is a transfer of technology, and there is an increase in the workforce (Waters, 2001, p.
46).
Indeed, there is skepticism towards transnational corporations and FDI. The concept of
transnational phenomena with interdependence between actors raises concerns of reduced
state sovereignty (Biersteker & Weber, 1996). This is also supported by the expansion of
capitalist companies that exploit labor, directly proportional to the need for workers to be able
to survive or survive to finance their own lives (Tyner, 2019). Moreover, for opponents of
capitalism, TNCs are believed to be a new worldwide method of exploitation that is
essentially "barbaric" and unacceptable (Waters, 2001). For example, a study conducted by
Doytch, Thelen, & Mendoza (2014) found the exploitation of child labor, with children forced
to work in fields for long hours, in a multinational tobacco company in Kazakhstan.
Therefore, for nationalist economic advocates, states must improve their ability to regulate
TNCs investing in their own countries (O'Brien and Williams, 2020).
However, for liberal supporters, there are The advantages offered by transnational
corporations with foreign direct investment. Epstein argues that this development can provide
more employment opportunities especially for developing countries, while also resulting in
wage increases because TNCs in developing countries have more productivity so they can pay
more (Epstein, 2003). In addition, TNCs with FDI can increase tax revenues through
increased economic activity in the host country and can help advance economic growth by
encouraging a more efficient division of labor (O'Brien & Williams, 2020, p. 137). Studies
conducted by Harrison in Mexico, Morocco and Venezuela show that TNCs help domestic
firms to break into export markets and they can improve workers' living standards as they pay
higher wages than domestic firms (Harrison, 1994).
Based on the explanation above, it can be seen that TNCs have a significant impact on
labor. One of the reasons TNCs with FDI are growing is that many developing countries are
implementing active policies to support industrialization and export to developed countries
(O'Brien and Williams, 2020). This is understandable because it will provide employment
opportunities in the country they are. Therefore, it is not surprising that many countries are
trying to attract TNCs to invest in their territories. With respect to the global division of labor,
TNCs will increase the demand for more skilled labor, as research conducted by Bruno, Crino
and Falzoni (2012) states that FDI increases the demand for more skilled labor in Poland.
Actors affected by the global political economy must make behavioral adjustments to
be able to face global competition which is currently increasing (O'Brien & Williams, 2020).
Coupled with technological advances in the form of machines, the value of labor has also
decreased because their portion of work can be replaced by machines (Tyner, 2019). The
higher demand for a more skilled workforce forces people to improve their abilities to
compete with others in the workplace. One of the reasons for this trend is to increase labor
productivity as it is a strong indicator of economic efficiency (Plasmans, 2003). In addition, it
is not surprising that TNCs promote division of labor to increase efficient production.
However, it seems that the labor market is shaped by TNC interests rather than national
interest.
International Trade, Transnational Production and Labor
One of the issues in relation to international trade and transnational production is not
respecting workers' rights. Many TNCs do not invest in their own countries because they want
to reduce their production costs. They tend to hire cheap labor and cut production costs with
forced labor in peripheral countries. As stated by Horvat (2020), the worst features of
exploitation are currently happening in all developing countries in the world.
In 2014, BBC News released a video inside the Apple assembly company. The video
shows that employees work under high pressure and for long, intensive periods of time. They
were forced to work standing up all day. In fact, the company installed electrical wires in t h e
machines so that employees could not lean back when tired. Employees work in a very
grueling environment. Although in 2010 there was a mass worker suicide at Foxconn, one of
the companies that manufactures Apple products, then Apple promised to improve facilitation
and working conditions, but the BBC video shows evidence to the contrary. For example,
everyone in China needs to carry an identity card. However, companies still take workers' IDs
directly when they enter the company (BBC News, 2014). Tyner (2019) also argues that
companies can collect profits not only from the products or services produced but also
through life insurance policies from workers who experience misfortune while performing
their duties.
However, not all TNCs tend to exploit labor for profit. A study analyzing foreign
direct investment and labor rights in 80 developing countries conducted by Busse,
Nunnenkamp, and Spatareanu showed different results. In terms of the correlation between
labor rights and TNCs, the study found that TNCs prefer to invest in countries that respect
labor rights (Busse, Nunnenkamp, & and Spatareanu, 2011). Moreover, labor violence in
potential host countries discourages TNCs from running their activities there, wherever it may
be (Busse, Nunnenkamp and Spatareanu, 2011). This condition shows that TNCs pay great
attention to labor rights, not only focus on their profits as well.
One solution to the above problem is to implement labor standards. Based on Heintz's
(2003) argument, the labor market should be for the larger society and should be governed by
rules, norms, and ethical standards that make allowance for the separate costs of
marketization. The International Labor Organization (ILO) is an organization that promotes
labor standards worldwide. The ILO holds conventions that cover basic human rights areas:
freedom of association and collective bargaining, elimination of forced labor, elimination of
child labor, and elimination of discrimination (Heintz, 2003; O'Brien and Willams, 2020).
However, the main problem in implementing labor standards is how to come up with labor
standards that can be applied worldwide. This is due to the disagreement among actors on the
purpose of labor standards. Furthermore, leaders in many liberal countries argue that
economic growth improves labor standards. Whereas, any interference in trade for labor
reasons will lower the gains from trade (O'Brien and Williams, 2020, p.195).
Conclusions
There are different perspectives on the global political economy. Economic
nationalists place the state as the main actor in the global political economy. This is related to
their concept of protectionism, protecting the economy from the global market. Meanwhile,
economic liberalists argue that states should collaborate with other actors in the global
economy. They believe that the global political economy involves multiple actors. Moreover,
the current global economy is more likely to adopt liberal values such as trade liberalization.
There are dynamics that shape the global political economy. They are international
trade and transnational production. Both dynamics have implications for the global division of
labor. International trade with the concept of 'comparative advantage' comparative advantage'
affects the specialization of labour. Whereas transnational production with TNCs has
implications in driving the division of labor around the world, especially in their host
countries. Both international trade and transnational production have benefits for the
participants. This is because TNCs can provide jobs and also improve the lives of workers.
However, there is skepticism about these dynamics. For example, they are believed to
play a role in wage inequality, especially between less skilled labor and more skilled labor.
Another example is the issue of worker exploitation, such as the Apple factory case and child
labor in tobacco factories. One solution that can be suggested is to enforce global labor
standards.
Results and Discussion of International Trade
According to Waters (2001) the primary and ongoing basis of economic
internationalization is trade. Trade itself is understood as the activity of two or more
individuals exchanging goods and services (O'Brien & Williams, 2020, p. 109). Such
activities would be called international trade if they are operated abroad. This international
trade can create relationships and interdependence between actors (Waters, 2001). As stated
by Ietto-Gillies (2003), that one evidence of state interconnectedness can be seen in
international trade activities in goods and services. Wallerstein and Marxist in Cohen (2017)
categorize countries into several levels, where there are dominant core countries, dependent
periphery countries and semi-fringe countries that are between the two categories. While core
countries enjoy a high level of technological development, selling sophisticated high-value
goods and services, the role of peripheral countries is simply to supply materials raw
materials, foodstuffs, and also cheap labor on the basis of highly unequal exchanges. Among
them, semi-periphery countries benefit from exploiting periphery countries even as they
themselves are exploited by core countries. This shows that international trade affects the
shape of the global political economy. One reason is that international trade has direct and
indirect effects on people and communities, for example, a family's consumption patterns are
affected by trade in goods (O'Brien & Williams, 2020).
One of the ways in which international trade affects the global economy is through a
free trade regime. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996). The theory of comparative advantage advises countries to
specialize in their most efficient products and services (O'Brien & Williams, 2020). The
ideology of comparative advantage serves to obscure uneven economic development progress
and unequal exchange between countries and regions (McBride & Shields, 1993). Therefore,
proponents of free trade believe that every country should engage in trade international and
reduce barriers.
Furthermore, according to liberal political economy, everyone can benefit from trade
as it can improve efficiency and increase productivity (O'Brien & Williams, 2020). For
example, Langenfeld and Nieberding (2005) estimate that trade growth has provided total
benefits to American consumers of about $2.3 trillion over the trade has provided total benefits
to American consumers of about $2.3 trillion during 1992-2002, or between $20,000 and
$22,000 per household in 2002. In contrast, nationalists believe that free trade is detrimental to
the national economy because it will weaken the economy unbalanced development and can
damage the environment (O'Brien & Williams, 2020). As in the case of Fiji, they are facing a
rapid and radical restructuring of the sugar or banana industry and this is potentially
disastrous for their economy as it is a fundamental commodity (Connel & Soutar, 2007).
Furthermore, in the international trading system, there are significant developments
that encourage trade liberalization. The emergence of the WTO (World Trade Organization),
the successor to the GATT (General Agreement on Tariffs and Trade), is believed to play an
important role in trade liberalization international. The WTO (and GATT before it) has
successfully liberalized trade and managed international trade through multilateral agreements
(Sampson, 2001). Jackson (1998) stated that the establishment of the WTO was the most
significant moment in the history of the world economy, even becoming a fundamental
institution in the international economy, especially with its dispute settlement procedures. The
WTO has changed the management of world trade in the following ways:
Change trade liberalization from being based on tariff adjustments to discussing
domestic policies, institutional practices and regulations.
Broaden the scope of trade and change the focus of negotiations from product
bargaining to policy.
Propose movement towards accession policies, for example, in the areas of subsidies
and trade-related investment measures and services (O'Brien & Williams, 2020).
Based on the above, it can be seen that the WTO has successfully played its role in
international trade, but there is the issue of many developing countries' interests not being
accommodated by the WTO (Sampson, 2001). In a d d i t i o n , countries developing
countries recognize the limitations of political influence in the international trade agreement
process (O'Brien & Williams, 2020). Another problem faced by developing countries is that
they lack the capacity to enforce WTO decisions as well as the high indirect costs of initiating
disputes with the WTO (Horlick, 2006, p. 220). For example, trade in agriculture, which is a
key interest of many developing countries, is particularly liberalized (Walter & Sen, 2009).
Apart from the role of the WTO, the influence of international trade on the global
political economy can be understood through its implications for the global division of labor
(Waters, 2001). The division of labor refers to the roles that people employ in the production
process (O'Brien & Williams, 2020). Waters (2001) states there are two types of division of
labour: social division of labour refers to occupational specialization, and technical division of
labour refers to task specialization. This condition is closely related to the concept of
comparative advantage by liberals who attach importance to the specialization of countries'
commodities to gain an advantage in the production process. In international trade. This means
that by engaging in trade, countries also shape their division of labor. Increase While trade
and mobility are expected to increase the elasticity of demand for human capital, they also
automatically reduce the bargaining power of labor (Perraton, 2003, p. 56). Moreover, in the
reduction of transaction costs due to technological advances, international agreements, non-
tariff barriers results in enormous specialization possibilities (Pomfret, 2014). A country can
choose the specific commodities or services offered in international trade which will also
affect the demand for labor from that country.
Another effect of international trade on labor can be seen in the inequality between
more skilled and less skilled labor. Trade liberalization leads to wage inequality due to
increased trade (Goldberg & Pavnick, 2004). It seems that recent international trade increases
the demand for more skilled workers to support the concept of specialization. Slaughter
(1998) believes that the demand for labor from the less skilled to the more skilled is a key
factor of wage inequality and it is actually happening in some countries such as the United
States and the United Kingdom. He added the argument that many countries with Such
inequality creates problems, such as higher unemployment rates and many job opportunities
avoiding less-skilled workers.
Transnational Production
There is general agreement that the growth of transnational production has shaped the
evolution of the global economy (O'Brien & Williams, 2020, p. 132). One of the main reasons
is that the global production system is a complex process. O'Brien and Williams (2013) argue
that this process involves multiple workers and workplaces with their integration with local,
national, regional and global systems. Because transnational production involves multi-level
actors. It becomes more complicated as it has to integrate different social, political and
economic backgrounds in the global economy. The main reason for the emergence of
transnational production is the innovation of communication and information technology
along with the advancement of transportation (Ietto-Gillies, 2003). This development
increases the possibility to separate production processes around the world.
A significant change affecting production processes across countries is the formation
of transnational companies (TNCs). As stated earlier, in the era of globalization, geographical
issues are no longer a big problem, therefore, TNCs can carry out production processes
separately in different parts of the world. Another reason TNCs invest abroad is because
production costs in developing countries are lower than in developed countries (O'Brien &
Williams, 2020). As stated by Ietto-Gillies (2003), there is a significant development of the
organization of production across countries due to the activities of transnational corporations.
In addition, it is argued that TNCs constitute a major part of the global production structure
and about 50 percent of world trade (O'Brien and Williams, 2020, p. 132). This fact shows the
impact of TNCs on the global production process. TNCs seem to be a key player in global
production.
TNCs play their role in the global economy through foreign direct investment (FDI).
Changes in the global production system are linked to increasing levels of FDI (O'Brien &
Williams, 2020). In addition, Perraton says that FDI by transnational corporations has grown
faster than trade (Perraton, 2003, p. 47). The success of TNCs to invest in many countries
around the world may be due to the recognition that TNCs are a good source of investment,
there is a transfer of technology, and there is an increase in the workforce (Waters, 2001, p.
46).
Indeed, there is skepticism towards transnational corporations and FDI. The concept of
transnational phenomena with interdependence between actors raises concerns of reduced
state sovereignty (Biersteker & Weber, 1996). This is also supported by the expansion of
capitalist companies that exploit labor, directly proportional to the need for workers to be able
to survive or survive to finance their own lives (Tyner, 2019). Moreover, for opponents of
capitalism, TNCs are believed to be a new worldwide method of exploitation that is
essentially "barbaric" and unacceptable (Waters, 2001). For example, a study conducted by
Doytch, Thelen, & Mendoza (2014) found the exploitation of child labor, with children forced
to work in fields for long hours, in a multinational tobacco company in Kazakhstan.
Therefore, for nationalist economic advocates, states must improve their ability to regulate
TNCs investing in their own countries (O'Brien and Williams, 2020).
However, for liberal supporters, there are The advantages offered by transnational
corporations with foreign direct investment. Epstein argues that this development can provide
more employment opportunities especially for developing countries, while also resulting in
wage increases because TNCs in developing countries have more productivity so they can pay
more (Epstein, 2003). In addition, TNCs with FDI can increase tax revenues through
increased economic activity in the host country and can help advance economic growth by
encouraging a more efficient division of labor (O'Brien & Williams, 2020, p. 137). Studies
conducted by Harrison in Mexico, Morocco and Venezuela show that TNCs help domestic
firms to break into export markets and they can improve workers' living standards as they pay
higher wages than domestic firms (Harrison, 1994).
Based on the explanation above, it can be seen that TNCs have a significant impact on
labor. One of the reasons TNCs with FDI are growing is that many developing countries are
implementing active policies to support industrialization and export to developed countries
(O'Brien and Williams, 2020). This is understandable because it will provide employment
opportunities in the country they are. Therefore, it is not surprising that many countries are
trying to attract TNCs to invest in their territories. With respect to the global division of labor,
TNCs will increase the demand for more skilled labor, as research conducted by Bruno, Crino
and Falzoni (2012) states that FDI increases the demand for more skilled labor in Poland.
Actors affected by the global political economy must make behavioral adjustments to
be able to face global competition which is currently increasing (O'Brien & Williams, 2020).
Coupled with technological advances in the form of machines, the value of labor has also
decreased because their portion of work can be replaced by machines (Tyner, 2019). The
higher demand for a more skilled workforce forces people to improve their abilities to
compete with others in the workplace. One of the reasons for this trend is to increase labor
productivity as it is a strong indicator of economic efficiency (Plasmans, 2003). In addition, it
is not surprising that TNCs promote division of labor to increase efficient production.
However, it seems that the labor market is shaped by TNC interests rather than national
interest.
International Trade, Transnational Production and Labor
One of the issues in relation to international trade and transnational production is not
respecting workers' rights. Many TNCs do not invest in their own countries because they want
to reduce their production costs. They tend to hire cheap labor and cut production costs with
forced labor in peripheral countries. As stated by Horvat (2020), the worst features of
exploitation are currently happening in all developing countries in the world.
In 2014, BBC News released a video inside the Apple assembly company. The video
shows that employees work under high pressure and for long, intensive periods of time. They
were forced to work standing up all day. In fact, the company installed electrical wires in t h e
machines so that employees could not lean back when tired. Employees work in a very
grueling environment. Although in 2010 there was a mass worker suicide at Foxconn, one of
the companies that manufactures Apple products, then Apple promised to improve facilitation
and working conditions, but the BBC video shows evidence to the contrary. For example,
everyone in China needs to carry an identity card. However, companies still take workers' IDs
directly when they enter the company (BBC News, 2014). Tyner (2019) also argues that
companies can collect profits not only from the products or services produced but also
through life insurance policies from workers who experience misfortune while performing
their duties.
However, not all TNCs tend to exploit labor for profit. A study analyzing foreign
direct investment and labor rights in 80 developing countries conducted by Busse,
Nunnenkamp, and Spatareanu showed different results. In terms of the correlation between
labor rights and TNCs, the study found that TNCs prefer to invest in countries that respect
labor rights (Busse, Nunnenkamp, & and Spatareanu, 2011). Moreover, labor violence in
potential host countries discourages TNCs from running their activities there, wherever it may
be (Busse, Nunnenkamp and Spatareanu, 2011). This condition shows that TNCs pay great
attention to labor rights, not only focus on their profits as well.
One solution to the above problem is to implement labor standards. Based on Heintz's
(2003) argument, the labor market should be for the larger society and should be governed by
rules, norms, and ethical standards that make allowance for the separate costs of
marketization. The International Labor Organization (ILO) is an organization that promotes
labor standards worldwide. The ILO holds conventions that cover basic human rights areas:
freedom of association and collective bargaining, elimination of forced labor, elimination of
child labor, and elimination of discrimination (Heintz, 2003; O'Brien and Willams, 2020).
However, the main problem in implementing labor standards is how to come up with labor
standards that can be applied worldwide. This is due to the disagreement among actors on the
purpose of labor standards. Furthermore, leaders in many liberal countries argue that
economic growth improves labor standards. Whereas, any interference in trade for labor
reasons will lower the gains from trade (O'Brien and Williams, 2020, p.195).
Conclusions
There are different perspectives on the global political economy. Economic
nationalists place the state as the main actor in the global political economy. This is related to
their concept of protectionism, protecting the economy from the global market. Meanwhile,
economic liberalists argue that states should collaborate with other actors in the global
economy. They believe that the global political economy involves multiple actors. Moreover,
the current global economy is more likely to adopt liberal values such as trade liberalization.
There are dynamics that shape the global political economy. They are international
trade and transnational production. Both dynamics have implications for the global division of
labor. International trade with the concept of 'comparative advantage' comparative advantage'
affects the specialization of labour. Whereas transnational production with TNCs has
implications in driving the division of labor around the world, especially in their host
countries. Both international trade and transnational production have benefits for the
participants. This is because TNCs can provide jobs and also improve the lives of workers.
However, there is skepticism about these dynamics. For example, they are believed to
play a role in wage inequality, especially between less skilled labor and more skilled labor.
Another example is the issue of worker exploitation, such as the Apple factory case and child
labor in tobacco factories. One solution that can be suggested is to enforce global labor
standards.
Results and Discussion of International Trade
According to Waters (2001) the primary and ongoing basis of economic
internationalization is trade. Trade itself is understood as the activity of two or more
individuals exchanging goods and services (O'Brien & Williams, 2020, p. 109). Such
activities would be called international trade if they are operated abroad. This international
trade can create relationships and interdependence between actors (Waters, 2001). As stated
by Ietto-Gillies (2003), that one evidence of state interconnectedness can be seen in
international trade activities in goods and services. Wallerstein and Marxist in Cohen (2017)
categorize countries into several levels, where there are dominant core countries, dependent
periphery countries and semi-fringe countries that are between the two categories. While core
countries enjoy a high level of technological development, selling sophisticated high-value
goods and services, the role of peripheral countries is simply to supply materials raw
materials, foodstuffs, and also cheap labor on the basis of highly unequal exchanges. Among
them, semi-periphery countries benefit from exploiting periphery countries even as they
themselves are exploited by core countries. This shows that international trade affects the
shape of the global political economy. One reason is that international trade has direct and
indirect effects on people and communities, for example, a family's consumption patterns are
affected by trade in goods (O'Brien & Williams, 2020).
One of the ways in which international trade affects the global economy is through a
free trade regime. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996). The theory of comparative advantage advises countries to
specialize in their most efficient products and services (O'Brien & Williams, 2020). The
ideology of comparative advantage serves to obscure uneven economic development progress
and unequal exchange between countries and regions (McBride & Shields, 1993). Therefore,
proponents of free trade believe that every country should engage in trade international and
reduce barriers.
Furthermore, according to liberal political economy, everyone can benefit from trade
as it can improve efficiency and increase productivity (O'Brien & Williams, 2020). For
example, Langenfeld and Nieberding (2005) estimate that trade growth has provided total
benefits to American consumers of about $2.3 trillion over the trade has provided total benefits
to American consumers of about $2.3 trillion during 1992-2002, or between $20,000 and
$22,000 per household in 2002. In contrast, nationalists believe that free trade is detrimental to
the national economy because it will weaken the economy unbalanced development and can
damage the environment (O'Brien & Williams, 2020). As in the case of Fiji, they are facing a
rapid and radical restructuring of the sugar or banana industry and this is potentially
disastrous for their economy as it is a fundamental commodity (Connel & Soutar, 2007).
Furthermore, in the international trading system, there are significant developments
that encourage trade liberalization. The emergence of the WTO (World Trade Organization),
the successor to the GATT (General Agreement on Tariffs and Trade), is believed to play an
important role in trade liberalization international. The WTO (and GATT before it) has
successfully liberalized trade and managed international trade through multilateral agreements
(Sampson, 2001). Jackson (1998) stated that the establishment of the WTO was the most
significant moment in the history of the world economy, even becoming a fundamental
institution in the international economy, especially with its dispute settlement procedures. The
WTO has changed the management of world trade in the following ways:
Change trade liberalization from being based on tariff adjustments to discussing
domestic policies, institutional practices and regulations.
Broaden the scope of trade and change the focus of negotiations from product
bargaining to policy.
Propose movement towards accession policies, for example, in the areas of subsidies
and trade-related investment measures and services (O'Brien & Williams, 2020).
Based on the above, it can be seen that the WTO has successfully played its role in
international trade, but there is the issue of many developing countries' interests not being
accommodated by the WTO (Sampson, 2001). In a d d i t i o n , countries developing
countries recognize the limitations of political influence in the international trade agreement
process (O'Brien & Williams, 2020). Another problem faced by developing countries is that
they lack the capacity to enforce WTO decisions as well as the high indirect costs of initiating
disputes with the WTO (Horlick, 2006, p. 220). For example, trade in agriculture, which is a
key interest of many developing countries, is particularly liberalized (Walter & Sen, 2009).
Apart from the role of the WTO, the influence of international trade on the global
political economy can be understood through its implications for the global division of labor
(Waters, 2001). The division of labor refers to the roles that people employ in the production
process (O'Brien & Williams, 2020). Waters (2001) states there are two types of division of
labour: social division of labour refers to occupational specialization, and technical division of
labour refers to task specialization. This condition is closely related to the concept of
comparative advantage by liberals who attach importance to the specialization of countries'
commodities to gain an advantage in the production process. In international trade. This means
that by engaging in trade, countries also shape their division of labor. Increase While trade
and mobility are expected to increase the elasticity of demand for human capital, they also
automatically reduce the bargaining power of labor (Perraton, 2003, p. 56). Moreover, in the
reduction of transaction costs due to technological advances, international agreements, non-
tariff barriers results in enormous specialization possibilities (Pomfret, 2014). A country can
choose the specific commodities or services offered in international trade which will also
affect the demand for labor from that country.
Another effect of international trade on labor can be seen in the inequality between
more skilled and less skilled labor. Trade liberalization leads to wage inequality due to
increased trade (Goldberg & Pavnick, 2004). It seems that recent international trade increases
the demand for more skilled workers to support the concept of specialization. Slaughter
(1998) believes that the demand for labor from the less skilled to the more skilled is a key
factor of wage inequality and it is actually happening in some countries such as the United
States and the United Kingdom. He added the argument that many countries with Such
inequality creates problems, such as higher unemployment rates and many job opportunities
avoiding less-skilled workers.
Transnational Production
There is general agreement that the growth of transnational production has shaped the
evolution of the global economy (O'Brien & Williams, 2020, p. 132). One of the main reasons
is that the global production system is a complex process. O'Brien and Williams (2013) argue
that this process involves multiple workers and workplaces with their integration with local,
national, regional and global systems. Because transnational production involves multi-level
actors. It becomes more complicated as it has to integrate different social, political and
economic backgrounds in the global economy. The main reason for the emergence of
transnational production is the innovation of communication and information technology
along with the advancement of transportation (Ietto-Gillies, 2003). This development
increases the possibility to separate production processes around the world.
A significant change affecting production processes across countries is the formation
of transnational companies (TNCs). As stated earlier, in the era of globalization, geographical
issues are no longer a big problem, therefore, TNCs can carry out production processes
separately in different parts of the world. Another reason TNCs invest abroad is because
production costs in developing countries are lower than in developed countries (O'Brien &
Williams, 2020). As stated by Ietto-Gillies (2003), there is a significant development of the
organization of production across countries due to the activities of transnational corporations.
In addition, it is argued that TNCs constitute a major part of the global production structure
and about 50 percent of world trade (O'Brien and Williams, 2020, p. 132). This fact shows the
impact of TNCs on the global production process. TNCs seem to be a key player in global
production.
TNCs play their role in the global economy through foreign direct investment (FDI).
Changes in the global production system are linked to increasing levels of FDI (O'Brien &
Williams, 2020). In addition, Perraton says that FDI by transnational corporations has grown
faster than trade (Perraton, 2003, p. 47). The success of TNCs to invest in many countries
around the world may be due to the recognition that TNCs are a good source of investment,
there is a transfer of technology, and there is an increase in the workforce (Waters, 2001, p.
46).
Indeed, there is skepticism towards transnational corporations and FDI. The concept of
transnational phenomena with interdependence between actors raises concerns of reduced
state sovereignty (Biersteker & Weber, 1996). This is also supported by the expansion of
capitalist companies that exploit labor, directly proportional to the need for workers to be able
to survive or survive to finance their own lives (Tyner, 2019). Moreover, for opponents of
capitalism, TNCs are believed to be a new worldwide method of exploitation that is
essentially "barbaric" and unacceptable (Waters, 2001). For example, a study conducted by
Doytch, Thelen, & Mendoza (2014) found the exploitation of child labor, with children forced
to work in fields for long hours, in a multinational tobacco company in Kazakhstan.
Therefore, for nationalist economic advocates, states must improve their ability to regulate
TNCs investing in their own countries (O'Brien and Williams, 2020).
However, for liberal supporters, there are The advantages offered by transnational
corporations with foreign direct investment. Epstein argues that this development can provide
more employment opportunities especially for developing countries, while also resulting in
wage increases because TNCs in developing countries have more productivity so they can pay
more (Epstein, 2003). In addition, TNCs with FDI can increase tax revenues through
increased economic activity in the host country and can help advance economic growth by
encouraging a more efficient division of labor (O'Brien & Williams, 2020, p. 137). Studies
conducted by Harrison in Mexico, Morocco and Venezuela show that TNCs help domestic
firms to break into export markets and they can improve workers' living standards as they pay
higher wages than domestic firms (Harrison, 1994).
Based on the explanation above, it can be seen that TNCs have a significant impact on
labor. One of the reasons TNCs with FDI are growing is that many developing countries are
implementing active policies to support industrialization and export to developed countries
(O'Brien and Williams, 2020). This is understandable because it will provide employment
opportunities in the country they are. Therefore, it is not surprising that many countries are
trying to attract TNCs to invest in their territories. With respect to the global division of labor,
TNCs will increase the demand for more skilled labor, as research conducted by Bruno, Crino
and Falzoni (2012) states that FDI increases the demand for more skilled labor in Poland.
Actors affected by the global political economy must make behavioral adjustments to
be able to face global competition which is currently increasing (O'Brien & Williams, 2020).
Coupled with technological advances in the form of machines, the value of labor has also
decreased because their portion of work can be replaced by machines (Tyner, 2019). The
higher demand for a more skilled workforce forces people to improve their abilities to
compete with others in the workplace. One of the reasons for this trend is to increase labor
productivity as it is a strong indicator of economic efficiency (Plasmans, 2003). In addition, it
is not surprising that TNCs promote division of labor to increase efficient production.
However, it seems that the labor market is shaped by TNC interests rather than national
interest.
International Trade, Transnational Production and Labor
One of the issues in relation to international trade and transnational production is not
respecting workers' rights. Many TNCs do not invest in their own countries because they want
to reduce their production costs. They tend to hire cheap labor and cut production costs with
forced labor in peripheral countries. As stated by Horvat (2020), the worst features of
exploitation are currently happening in all developing countries in the world.
In 2014, BBC News released a video inside the Apple assembly company. The video
shows that employees work under high pressure and for long, intensive periods of time. They
were forced to work standing up all day. In fact, the company installed electrical wires in t h e
machines so that employees could not lean back when tired. Employees work in a very
grueling environment. Although in 2010 there was a mass worker suicide at Foxconn, one of
the companies that manufactures Apple products, then Apple promised to improve facilitation
and working conditions, but the BBC video shows evidence to the contrary. For example,
everyone in China needs to carry an identity card. However, companies still take workers' IDs
directly when they enter the company (BBC News, 2014). Tyner (2019) also argues that
companies can collect profits not only from the products or services produced but also
through life insurance policies from workers who experience misfortune while performing
their duties.
However, not all TNCs tend to exploit labor for profit. A study analyzing foreign
direct investment and labor rights in 80 developing countries conducted by Busse,
Nunnenkamp, and Spatareanu showed different results. In terms of the correlation between
labor rights and TNCs, the study found that TNCs prefer to invest in countries that respect
labor rights (Busse, Nunnenkamp, & and Spatareanu, 2011). Moreover, labor violence in
potential host countries discourages TNCs from running their activities there, wherever it may
be (Busse, Nunnenkamp and Spatareanu, 2011). This condition shows that TNCs pay great
attention to labor rights, not only focus on their profits as well.
One solution to the above problem is to implement labor standards. Based on Heintz's
(2003) argument, the labor market should be for the larger society and should be governed by
rules, norms, and ethical standards that make allowance for the separate costs of
marketization. The International Labor Organization (ILO) is an organization that promotes
labor standards worldwide. The ILO holds conventions that cover basic human rights areas:
freedom of association and collective bargaining, elimination of forced labor, elimination of
child labor, and elimination of discrimination (Heintz, 2003; O'Brien and Willams, 2020).
However, the main problem in implementing labor standards is how to come up with labor
standards that can be applied worldwide. This is due to the disagreement among actors on the
purpose of labor standards. Furthermore, leaders in many liberal countries argue that
economic growth improves labor standards. Whereas, any interference in trade for labor
reasons will lower the gains from trade (O'Brien and Williams, 2020, p.195).
Conclusions
There are different perspectives on the global political economy. Economic
nationalists place the state as the main actor in the global political economy. This is related to
their concept of protectionism, protecting the economy from the global market. Meanwhile,
economic liberalists argue that states should collaborate with other actors in the global
economy. They believe that the global political economy involves multiple actors. Moreover,
the current global economy is more likely to adopt liberal values such as trade liberalization.
There are dynamics that shape the global political economy. They are international
trade and transnational production. Both dynamics have implications for the global division of
labor. International trade with the concept of 'comparative advantage' comparative advantage'
affects the specialization of labour. Whereas transnational production with TNCs has
implications in driving the division of labor around the world, especially in their host
countries. Both international trade and transnational production have benefits for the
participants. This is because TNCs can provide jobs and also improve the lives of workers.
However, there is skepticism about these dynamics. For example, they are believed to
play a role in wage inequality, especially between less skilled labor and more skilled labor.
Another example is the issue of worker exploitation, such as the Apple factory case and child
labor in tobacco factories. One solution that can be suggested is to enforce global labor
standards.
Results and Discussion of International Trade
According to Waters (2001) the primary and ongoing basis of economic
internationalization is trade. Trade itself is understood as the activity of two or more
individuals exchanging goods and services (O'Brien & Williams, 2020, p. 109). Such
activities would be called international trade if they are operated abroad. This international
trade can create relationships and interdependence between actors (Waters, 2001). As stated
by Ietto-Gillies (2003), that one evidence of state interconnectedness can be seen in
international trade activities in goods and services. Wallerstein and Marxist in Cohen (2017)
categorize countries into several levels, where there are dominant core countries, dependent
periphery countries and semi-fringe countries that are between the two categories. While core
countries enjoy a high level of technological development, selling sophisticated high-value
goods and services, the role of peripheral countries is simply to supply materials raw
materials, foodstuffs, and also cheap labor on the basis of highly unequal exchanges. Among
them, semi-periphery countries benefit from exploiting periphery countries even as they
themselves are exploited by core countries. This shows that international trade affects the
shape of the global political economy. One reason is that international trade has direct and
indirect effects on people and communities, for example, a family's consumption patterns are
affected by trade in goods (O'Brien & Williams, 2020).
One of the ways in which international trade affects the global economy is through a
free trade regime. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996). The theory of comparative advantage advises countries to
specialize in their most efficient products and services (O'Brien & Williams, 2020). The
ideology of comparative advantage serves to obscure uneven economic development progress
and unequal exchange between countries and regions (McBride & Shields, 1993). Therefore,
proponents of free trade believe that every country should engage in trade international and
reduce barriers.
Furthermore, according to liberal political economy, everyone can benefit from trade
as it can improve efficiency and increase productivity (O'Brien & Williams, 2020). For
example, Langenfeld and Nieberding (2005) estimate that trade growth has provided total
benefits to American consumers of about $2.3 trillion over the trade has provided total benefits
to American consumers of about $2.3 trillion during 1992-2002, or between $20,000 and
$22,000 per household in 2002. In contrast, nationalists believe that free trade is detrimental to
the national economy because it will weaken the economy unbalanced development and can
damage the environment (O'Brien & Williams, 2020). As in the case of Fiji, they are facing a
rapid and radical restructuring of the sugar or banana industry and this is potentially
disastrous for their economy as it is a fundamental commodity (Connel & Soutar, 2007).
Furthermore, in the international trading system, there are significant developments
that encourage trade liberalization. The emergence of the WTO (World Trade Organization),
the successor to the GATT (General Agreement on Tariffs and Trade), is believed to play an
important role in trade liberalization international. The WTO (and GATT before it) has
successfully liberalized trade and managed international trade through multilateral agreements
(Sampson, 2001). Jackson (1998) stated that the establishment of the WTO was the most
significant moment in the history of the world economy, even becoming a fundamental
institution in the international economy, especially with its dispute settlement procedures. The
WTO has changed the management of world trade in the following ways:
Change trade liberalization from being based on tariff adjustments to discussing
domestic policies, institutional practices and regulations.
Broaden the scope of trade and change the focus of negotiations from product
bargaining to policy.
Propose movement towards accession policies, for example, in the areas of subsidies
and trade-related investment measures and services (O'Brien & Williams, 2020).
Based on the above, it can be seen that the WTO has successfully played its role in
international trade, but there is the issue of many developing countries' interests not being
accommodated by the WTO (Sampson, 2001). In a d d i t i o n , countries developing
countries recognize the limitations of political influence in the international trade agreement
process (O'Brien & Williams, 2020). Another problem faced by developing countries is that
they lack the capacity to enforce WTO decisions as well as the high indirect costs of initiating
disputes with the WTO (Horlick, 2006, p. 220). For example, trade in agriculture, which is a
key interest of many developing countries, is particularly liberalized (Walter & Sen, 2009).
Apart from the role of the WTO, the influence of international trade on the global
political economy can be understood through its implications for the global division of labor
(Waters, 2001). The division of labor refers to the roles that people employ in the production
process (O'Brien & Williams, 2020). Waters (2001) states there are two types of division of
labour: social division of labour refers to occupational specialization, and technical division of
labour refers to task specialization. This condition is closely related to the concept of
comparative advantage by liberals who attach importance to the specialization of countries'
commodities to gain an advantage in the production process. In international trade. This means
that by engaging in trade, countries also shape their division of labor. Increase While trade
and mobility are expected to increase the elasticity of demand for human capital, they also
automatically reduce the bargaining power of labor (Perraton, 2003, p. 56). Moreover, in the
reduction of transaction costs due to technological advances, international agreements, non-
tariff barriers results in enormous specialization possibilities (Pomfret, 2014). A country can
choose the specific commodities or services offered in international trade which will also
affect the demand for labor from that country.
Another effect of international trade on labor can be seen in the inequality between
more skilled and less skilled labor. Trade liberalization leads to wage inequality due to
increased trade (Goldberg & Pavnick, 2004). It seems that recent international trade increases
the demand for more skilled workers to support the concept of specialization. Slaughter
(1998) believes that the demand for labor from the less skilled to the more skilled is a key
factor of wage inequality and it is actually happening in some countries such as the United
States and the United Kingdom. He added the argument that many countries with Such
inequality creates problems, such as higher unemployment rates and many job opportunities
avoiding less-skilled workers.
Transnational Production
There is general agreement that the growth of transnational production has shaped the
evolution of the global economy (O'Brien & Williams, 2020, p. 132). One of the main reasons
is that the global production system is a complex process. O'Brien and Williams (2013) argue
that this process involves multiple workers and workplaces with their integration with local,
national, regional and global systems. Because transnational production involves multi-level
actors. It becomes more complicated as it has to integrate different social, political and
economic backgrounds in the global economy. The main reason for the emergence of
transnational production is the innovation of communication and information technology
along with the advancement of transportation (Ietto-Gillies, 2003). This development
increases the possibility to separate production processes around the world.
A significant change affecting production processes across countries is the formation
of transnational companies (TNCs). As stated earlier, in the era of globalization, geographical
issues are no longer a big problem, therefore, TNCs can carry out production processes
separately in different parts of the world. Another reason TNCs invest abroad is because
production costs in developing countries are lower than in developed countries (O'Brien &
Williams, 2020). As stated by Ietto-Gillies (2003), there is a significant development of the
organization of production across countries due to the activities of transnational corporations.
In addition, it is argued that TNCs constitute a major part of the global production structure
and about 50 percent of world trade (O'Brien and Williams, 2020, p. 132). This fact shows the
impact of TNCs on the global production process. TNCs seem to be a key player in global
production.
TNCs play their role in the global economy through foreign direct investment (FDI).
Changes in the global production system are linked to increasing levels of FDI (O'Brien &
Williams, 2020). In addition, Perraton says that FDI by transnational corporations has grown
faster than trade (Perraton, 2003, p. 47). The success of TNCs to invest in many countries
around the world may be due to the recognition that TNCs are a good source of investment,
there is a transfer of technology, and there is an increase in the workforce (Waters, 2001, p.
46).
Indeed, there is skepticism towards transnational corporations and FDI. The concept of
transnational phenomena with interdependence between actors raises concerns of reduced
state sovereignty (Biersteker & Weber, 1996). This is also supported by the expansion of
capitalist companies that exploit labor, directly proportional to the need for workers to be able
to survive or survive to finance their own lives (Tyner, 2019). Moreover, for opponents of
capitalism, TNCs are believed to be a new worldwide method of exploitation that is
essentially "barbaric" and unacceptable (Waters, 2001). For example, a study conducted by
Doytch, Thelen, & Mendoza (2014) found the exploitation of child labor, with children forced
to work in fields for long hours, in a multinational tobacco company in Kazakhstan.
Therefore, for nationalist economic advocates, states must improve their ability to regulate
TNCs investing in their own countries (O'Brien and Williams, 2020).
However, for liberal supporters, there are The advantages offered by transnational
corporations with foreign direct investment. Epstein argues that this development can provide
more employment opportunities especially for developing countries, while also resulting in
wage increases because TNCs in developing countries have more productivity so they can pay
more (Epstein, 2003). In addition, TNCs with FDI can increase tax revenues through
increased economic activity in the host country and can help advance economic growth by
encouraging a more efficient division of labor (O'Brien & Williams, 2020, p. 137). Studies
conducted by Harrison in Mexico, Morocco and Venezuela show that TNCs help domestic
firms to break into export markets and they can improve workers' living standards as they pay
higher wages than domestic firms (Harrison, 1994).
Based on the explanation above, it can be seen that TNCs have a significant impact on
labor. One of the reasons TNCs with FDI are growing is that many developing countries are
implementing active policies to support industrialization and export to developed countries
(O'Brien and Williams, 2020). This is understandable because it will provide employment
opportunities in the country they are. Therefore, it is not surprising that many countries are
trying to attract TNCs to invest in their territories. With respect to the global division of labor,
TNCs will increase the demand for more skilled labor, as research conducted by Bruno, Crino
and Falzoni (2012) states that FDI increases the demand for more skilled labor in Poland.
Actors affected by the global political economy must make behavioral adjustments to
be able to face global competition which is currently increasing (O'Brien & Williams, 2020).
Coupled with technological advances in the form of machines, the value of labor has also
decreased because their portion of work can be replaced by machines (Tyner, 2019). The
higher demand for a more skilled workforce forces people to improve their abilities to
compete with others in the workplace. One of the reasons for this trend is to increase labor
productivity as it is a strong indicator of economic efficiency (Plasmans, 2003). In addition, it
is not surprising that TNCs promote division of labor to increase efficient production.
However, it seems that the labor market is shaped by TNC interests rather than national
interest.
International Trade, Transnational Production and Labor
One of the issues in relation to international trade and transnational production is not
respecting workers' rights. Many TNCs do not invest in their own countries because they want
to reduce their production costs. They tend to hire cheap labor and cut production costs with
forced labor in peripheral countries. As stated by Horvat (2020), the worst features of
exploitation are currently happening in all developing countries in the world.
In 2014, BBC News released a video inside the Apple assembly company. The video
shows that employees work under high pressure and for long, intensive periods of time. They
were forced to work standing up all day. In fact, the company installed electrical wires in t h e
machines so that employees could not lean back when tired. Employees work in a very
grueling environment. Although in 2010 there was a mass worker suicide at Foxconn, one of
the companies that manufactures Apple products, then Apple promised to improve facilitation
and working conditions, but the BBC video shows evidence to the contrary. For example,
everyone in China needs to carry an identity card. However, companies still take workers' IDs
directly when they enter the company (BBC News, 2014). Tyner (2019) also argues that
companies can collect profits not only from the products or services produced but also
through life insurance policies from workers who experience misfortune while performing
their duties.
However, not all TNCs tend to exploit labor for profit. A study analyzing foreign
direct investment and labor rights in 80 developing countries conducted by Busse,
Nunnenkamp, and Spatareanu showed different results. In terms of the correlation between
labor rights and TNCs, the study found that TNCs prefer to invest in countries that respect
labor rights (Busse, Nunnenkamp, & and Spatareanu, 2011). Moreover, labor violence in
potential host countries discourages TNCs from running their activities there, wherever it may
be (Busse, Nunnenkamp and Spatareanu, 2011). This condition shows that TNCs pay great
attention to labor rights, not only focus on their profits as well.
One solution to the above problem is to implement labor standards. Based on Heintz's
(2003) argument, the labor market should be for the larger society and should be governed by
rules, norms, and ethical standards that make allowance for the separate costs of
marketization. The International Labor Organization (ILO) is an organization that promotes
labor standards worldwide. The ILO holds conventions that cover basic human rights areas:
freedom of association and collective bargaining, elimination of forced labor, elimination of
child labor, and elimination of discrimination (Heintz, 2003; O'Brien and Willams, 2020).
However, the main problem in implementing labor standards is how to come up with labor
standards that can be applied worldwide. This is due to the disagreement among actors on the
purpose of labor standards. Furthermore, leaders in many liberal countries argue that
economic growth improves labor standards. Whereas, any interference in trade for labor
reasons will lower the gains from trade (O'Brien and Williams, 2020, p.195).
Conclusions
There are different perspectives on the global political economy. Economic
nationalists place the state as the main actor in the global political economy. This is related to
their concept of protectionism, protecting the economy from the global market. Meanwhile,
economic liberalists argue that states should collaborate with other actors in the global
economy. They believe that the global political economy involves multiple actors. Moreover,
the current global economy is more likely to adopt liberal values such as trade liberalization.
There are dynamics that shape the global political economy. They are international
trade and transnational production. Both dynamics have implications for the global division of
labor. International trade with the concept of 'comparative advantage' comparative advantage'
affects the specialization of labour. Whereas transnational production with TNCs has
implications in driving the division of labor around the world, especially in their host
countries. Both international trade and transnational production have benefits for the
participants. This is because TNCs can provide jobs and also improve the lives of workers.
However, there is skepticism about these dynamics. For example, they are believed to
play a role in wage inequality, especially between less skilled labor and more skilled labor.
Another example is the issue of worker exploitation, such as the Apple factory case and child
labor in tobacco factories. One solution that can be suggested is to enforce global labor
standards.
Results and Discussion of International Trade
According to Waters (2001) the primary and ongoing basis of economic
internationalization is trade. Trade itself is understood as the activity of two or more
individuals exchanging goods and services (O'Brien & Williams, 2020, p. 109). Such
activities would be called international trade if they are operated abroad. This international
trade can create relationships and interdependence between actors (Waters, 2001). As stated
by Ietto-Gillies (2003), that one evidence of state interconnectedness can be seen in
international trade activities in goods and services. Wallerstein and Marxist in Cohen (2017)
categorize countries into several levels, where there are dominant core countries, dependent
periphery countries and semi-fringe countries that are between the two categories. While core
countries enjoy a high level of technological development, selling sophisticated high-value
goods and services, the role of peripheral countries is simply to supply materials raw
materials, foodstuffs, and also cheap labor on the basis of highly unequal exchanges. Among
them, semi-periphery countries benefit from exploiting periphery countries even as they
themselves are exploited by core countries. This shows that international trade affects the
shape of the global political economy. One reason is that international trade has direct and
indirect effects on people and communities, for example, a family's consumption patterns are
affected by trade in goods (O'Brien & Williams, 2020).
One of the ways in which international trade affects the global economy is through a
free trade regime. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996). The theory of comparative advantage advises countries to
specialize in their most efficient products and services (O'Brien & Williams, 2020). The
ideology of comparative advantage serves to obscure uneven economic development progress
and unequal exchange between countries and regions (McBride & Shields, 1993). Therefore,
proponents of free trade believe that every country should engage in trade international and
reduce barriers.
Furthermore, according to liberal political economy, everyone can benefit from trade
as it can improve efficiency and increase productivity (O'Brien & Williams, 2020). For
example, Langenfeld and Nieberding (2005) estimate that trade growth has provided total
benefits to American consumers of about $2.3 trillion over the trade has provided total benefits
to American consumers of about $2.3 trillion during 1992-2002, or between $20,000 and
$22,000 per household in 2002. In contrast, nationalists believe that free trade is detrimental to
the national economy because it will weaken the economy unbalanced development and can
damage the environment (O'Brien & Williams, 2020). As in the case of Fiji, they are facing a
rapid and radical restructuring of the sugar or banana industry and this is potentially
disastrous for their economy as it is a fundamental commodity (Connel & Soutar, 2007).
Furthermore, in the international trading system, there are significant developments
that encourage trade liberalization. The emergence of the WTO (World Trade Organization),
the successor to the GATT (General Agreement on Tariffs and Trade), is believed to play an
important role in trade liberalization international. The WTO (and GATT before it) has
successfully liberalized trade and managed international trade through multilateral agreements
(Sampson, 2001). Jackson (1998) stated that the establishment of the WTO was the most
significant moment in the history of the world economy, even becoming a fundamental
institution in the international economy, especially with its dispute settlement procedures. The
WTO has changed the management of world trade in the following ways:
Change trade liberalization from being based on tariff adjustments to discussing
domestic policies, institutional practices and regulations.
Broaden the scope of trade and change the focus of negotiations from product
bargaining to policy.
Propose movement towards accession policies, for example, in the areas of subsidies
and trade-related investment measures and services (O'Brien & Williams, 2020).
Based on the above, it can be seen that the WTO has successfully played its role in
international trade, but there is the issue of many developing countries' interests not being
accommodated by the WTO (Sampson, 2001). In a d d i t i o n , countries developing
countries recognize the limitations of political influence in the international trade agreement
process (O'Brien & Williams, 2020). Another problem faced by developing countries is that
they lack the capacity to enforce WTO decisions as well as the high indirect costs of initiating
disputes with the WTO (Horlick, 2006, p. 220). For example, trade in agriculture, which is a
key interest of many developing countries, is particularly liberalized (Walter & Sen, 2009).
Apart from the role of the WTO, the influence of international trade on the global
political economy can be understood through its implications for the global division of labor
(Waters, 2001). The division of labor refers to the roles that people employ in the production
process (O'Brien & Williams, 2020). Waters (2001) states there are two types of division of
labour: social division of labour refers to occupational specialization, and technical division of
labour refers to task specialization. This condition is closely related to the concept of
comparative advantage by liberals who attach importance to the specialization of countries'
commodities to gain an advantage in the production process. In international trade. This means
that by engaging in trade, countries also shape their division of labor. Increase While trade
and mobility are expected to increase the elasticity of demand for human capital, they also
automatically reduce the bargaining power of labor (Perraton, 2003, p. 56). Moreover, in the
reduction of transaction costs due to technological advances, international agreements, non-
tariff barriers results in enormous specialization possibilities (Pomfret, 2014). A country can
choose the specific commodities or services offered in international trade which will also
affect the demand for labor from that country.
Another effect of international trade on labor can be seen in the inequality between
more skilled and less skilled labor. Trade liberalization leads to wage inequality due to
increased trade (Goldberg & Pavnick, 2004). It seems that recent international trade increases
the demand for more skilled workers to support the concept of specialization. Slaughter
(1998) believes that the demand for labor from the less skilled to the more skilled is a key
factor of wage inequality and it is actually happening in some countries such as the United
States and the United Kingdom. He added the argument that many countries with Such
inequality creates problems, such as higher unemployment rates and many job opportunities
avoiding less-skilled workers.
Transnational Production
There is general agreement that the growth of transnational production has shaped the
evolution of the global economy (O'Brien & Williams, 2020, p. 132). One of the main reasons
is that the global production system is a complex process. O'Brien and Williams (2013) argue
that this process involves multiple workers and workplaces with their integration with local,
national, regional and global systems. Because transnational production involves multi-level
actors. It becomes more complicated as it has to integrate different social, political and
economic backgrounds in the global economy. The main reason for the emergence of
transnational production is the innovation of communication and information technology
along with the advancement of transportation (Ietto-Gillies, 2003). This development
increases the possibility to separate production processes around the world.
A significant change affecting production processes across countries is the formation
of transnational companies (TNCs). As stated earlier, in the era of globalization, geographical
issues are no longer a big problem, therefore, TNCs can carry out production processes
separately in different parts of the world. Another reason TNCs invest abroad is because
production costs in developing countries are lower than in developed countries (O'Brien &
Williams, 2020). As stated by Ietto-Gillies (2003), there is a significant development of the
organization of production across countries due to the activities of transnational corporations.
In addition, it is argued that TNCs constitute a major part of the global production structure
and about 50 percent of world trade (O'Brien and Williams, 2020, p. 132). This fact shows the
impact of TNCs on the global production process. TNCs seem to be a key player in global
production.
TNCs play their role in the global economy through foreign direct investment (FDI).
Changes in the global production system are linked to increasing levels of FDI (O'Brien &
Williams, 2020). In addition, Perraton says that FDI by transnational corporations has grown
faster than trade (Perraton, 2003, p. 47). The success of TNCs to invest in many countries
around the world may be due to the recognition that TNCs are a good source of investment,
there is a transfer of technology, and there is an increase in the workforce (Waters, 2001, p.
46).
Indeed, there is skepticism towards transnational corporations and FDI. The concept of
transnational phenomena with interdependence between actors raises concerns of reduced
state sovereignty (Biersteker & Weber, 1996). This is also supported by the expansion of
capitalist companies that exploit labor, directly proportional to the need for workers to be able
to survive or survive to finance their own lives (Tyner, 2019). Moreover, for opponents of
capitalism, TNCs are believed to be a new worldwide method of exploitation that is
essentially "barbaric" and unacceptable (Waters, 2001). For example, a study conducted by
Doytch, Thelen, & Mendoza (2014) found the exploitation of child labor, with children forced
to work in fields for long hours, in a multinational tobacco company in Kazakhstan.
Therefore, for nationalist economic advocates, states must improve their ability to regulate
TNCs investing in their own countries (O'Brien and Williams, 2020).
However, for liberal supporters, there are The advantages offered by transnational
corporations with foreign direct investment. Epstein argues that this development can provide
more employment opportunities especially for developing countries, while also resulting in
wage increases because TNCs in developing countries have more productivity so they can pay
more (Epstein, 2003). In addition, TNCs with FDI can increase tax revenues through
increased economic activity in the host country and can help advance economic growth by
encouraging a more efficient division of labor (O'Brien & Williams, 2020, p. 137). Studies
conducted by Harrison in Mexico, Morocco and Venezuela show that TNCs help domestic
firms to break into export markets and they can improve workers' living standards as they pay
higher wages than domestic firms (Harrison, 1994).
Based on the explanation above, it can be seen that TNCs have a significant impact on
labor. One of the reasons TNCs with FDI are growing is that many developing countries are
implementing active policies to support industrialization and export to developed countries
(O'Brien and Williams, 2020). This is understandable because it will provide employment
opportunities in the country they are. Therefore, it is not surprising that many countries are
trying to attract TNCs to invest in their territories. With respect to the global division of labor,
TNCs will increase the demand for more skilled labor, as research conducted by Bruno, Crino
and Falzoni (2012) states that FDI increases the demand for more skilled labor in Poland.
Actors affected by the global political economy must make behavioral adjustments to
be able to face global competition which is currently increasing (O'Brien & Williams, 2020).
Coupled with technological advances in the form of machines, the value of labor has also
decreased because their portion of work can be replaced by machines (Tyner, 2019). The
higher demand for a more skilled workforce forces people to improve their abilities to
compete with others in the workplace. One of the reasons for this trend is to increase labor
productivity as it is a strong indicator of economic efficiency (Plasmans, 2003). In addition, it
is not surprising that TNCs promote division of labor to increase efficient production.
However, it seems that the labor market is shaped by TNC interests rather than national
interest.
International Trade, Transnational Production and Labor
One of the issues in relation to international trade and transnational production is not
respecting workers' rights. Many TNCs do not invest in their own countries because they want
to reduce their production costs. They tend to hire cheap labor and cut production costs with
forced labor in peripheral countries. As stated by Horvat (2020), the worst features of
exploitation are currently happening in all developing countries in the world.
In 2014, BBC News released a video inside the Apple assembly company. The video
shows that employees work under high pressure and for long, intensive periods of time. They
were forced to work standing up all day. In fact, the company installed electrical wires in t h e
machines so that employees could not lean back when tired. Employees work in a very
grueling environment. Although in 2010 there was a mass worker suicide at Foxconn, one of
the companies that manufactures Apple products, then Apple promised to improve facilitation
and working conditions, but the BBC video shows evidence to the contrary. For example,
everyone in China needs to carry an identity card. However, companies still take workers' IDs
directly when they enter the company (BBC News, 2014). Tyner (2019) also argues that
companies can collect profits not only from the products or services produced but also
through life insurance policies from workers who experience misfortune while performing
their duties.
However, not all TNCs tend to exploit labor for profit. A study analyzing foreign
direct investment and labor rights in 80 developing countries conducted by Busse,
Nunnenkamp, and Spatareanu showed different results. In terms of the correlation between
labor rights and TNCs, the study found that TNCs prefer to invest in countries that respect
labor rights (Busse, Nunnenkamp, & and Spatareanu, 2011). Moreover, labor violence in
potential host countries discourages TNCs from running their activities there, wherever it may
be (Busse, Nunnenkamp and Spatareanu, 2011). This condition shows that TNCs pay great
attention to labor rights, not only focus on their profits as well.
One solution to the above problem is to implement labor standards. Based on Heintz's
(2003) argument, the labor market should be for the larger society and should be governed by
rules, norms, and ethical standards that make allowance for the separate costs of
marketization. The International Labor Organization (ILO) is an organization that promotes
labor standards worldwide. The ILO holds conventions that cover basic human rights areas:
freedom of association and collective bargaining, elimination of forced labor, elimination of
child labor, and elimination of discrimination (Heintz, 2003; O'Brien and Willams, 2020).
However, the main problem in implementing labor standards is how to come up with labor
standards that can be applied worldwide. This is due to the disagreement among actors on the
purpose of labor standards. Furthermore, leaders in many liberal countries argue that
economic growth improves labor standards. Whereas, any interference in trade for labor
reasons will lower the gains from trade (O'Brien and Williams, 2020, p.195).
Conclusions
There are different perspectives on the global political economy. Economic
nationalists place the state as the main actor in the global political economy. This is related to
their concept of protectionism, protecting the economy from the global market. Meanwhile,
economic liberalists argue that states should collaborate with other actors in the global
economy. They believe that the global political economy involves multiple actors. Moreover,
the current global economy is more likely to adopt liberal values such as trade liberalization.
There are dynamics that shape the global political economy. They are international
trade and transnational production. Both dynamics have implications for the global division of
labor. International trade with the concept of 'comparative advantage' comparative advantage'
affects the specialization of labour. Whereas transnational production with TNCs has
implications in driving the division of labor around the world, especially in their host
countries. Both international trade and transnational production have benefits for the
participants. This is because TNCs can provide jobs and also improve the lives of workers.
However, there is skepticism about these dynamics. For example, they are believed to
play a role in wage inequality, especially between less skilled labor and more skilled labor.
Another example is the issue of worker exploitation, such as the Apple factory case and child
labor in tobacco factories. One solution that can be suggested is to enforce global labor
standards.
Results and Discussion of International Trade
According to Waters (2001) the primary and ongoing basis of economic
internationalization is trade. Trade itself is understood as the activity of two or more
individuals exchanging goods and services (O'Brien & Williams, 2020, p. 109). Such
activities would be called international trade if they are operated abroad. This international
trade can create relationships and interdependence between actors (Waters, 2001). As stated
by Ietto-Gillies (2003), that one evidence of state interconnectedness can be seen in
international trade activities in goods and services. Wallerstein and Marxist in Cohen (2017)
categorize countries into several levels, where there are dominant core countries, dependent
periphery countries and semi-fringe countries that are between the two categories. While core
countries enjoy a high level of technological development, selling sophisticated high-value
goods and services, the role of peripheral countries is simply to supply materials raw
materials, foodstuffs, and also cheap labor on the basis of highly unequal exchanges. Among
them, semi-periphery countries benefit from exploiting periphery countries even as they
themselves are exploited by core countries. This shows that international trade affects the
shape of the global political economy. One reason is that international trade has direct and
indirect effects on people and communities, for example, a family's consumption patterns are
affected by trade in goods (O'Brien & Williams, 2020).
One of the ways in which international trade affects the global economy is through a
free trade regime. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996). The theory of comparative advantage advises countries to
specialize in their most efficient products and services (O'Brien & Williams, 2020). The
ideology of comparative advantage serves to obscure uneven economic development progress
and unequal exchange between countries and regions (McBride & Shields, 1993). Therefore,
proponents of free trade believe that every country should engage in trade international and
reduce barriers.
Furthermore, according to liberal political economy, everyone can benefit from trade
as it can improve efficiency and increase productivity (O'Brien & Williams, 2020). For
example, Langenfeld and Nieberding (2005) estimate that trade growth has provided total
benefits to American consumers of about $2.3 trillion over the trade has provided total benefits
to American consumers of about $2.3 trillion during 1992-2002, or between $20,000 and
$22,000 per household in 2002. In contrast, nationalists believe that free trade is detrimental to
the national economy because it will weaken the economy unbalanced development and can
damage the environment (O'Brien & Williams, 2020). As in the case of Fiji, they are facing a
rapid and radical restructuring of the sugar or banana industry and this is potentially
disastrous for their economy as it is a fundamental commodity (Connel & Soutar, 2007).
Furthermore, in the international trading system, there are significant developments
that encourage trade liberalization. The emergence of the WTO (World Trade Organization),
the successor to the GATT (General Agreement on Tariffs and Trade), is believed to play an
important role in trade liberalization international. The WTO (and GATT before it) has
successfully liberalized trade and managed international trade through multilateral agreements
(Sampson, 2001). Jackson (1998) stated that the establishment of the WTO was the most
significant moment in the history of the world economy, even becoming a fundamental
institution in the international economy, especially with its dispute settlement procedures. The
WTO has changed the management of world trade in the following ways:
Change trade liberalization from being based on tariff adjustments to discussing
domestic policies, institutional practices and regulations.
Broaden the scope of trade and change the focus of negotiations from product
bargaining to policy.
Propose movement towards accession policies, for example, in the areas of subsidies
and trade-related investment measures and services (O'Brien & Williams, 2020).
Based on the above, it can be seen that the WTO has successfully played its role in
international trade, but there is the issue of many developing countries' interests not being
accommodated by the WTO (Sampson, 2001). In a d d i t i o n , countries developing
countries recognize the limitations of political influence in the international trade agreement
process (O'Brien & Williams, 2020). Another problem faced by developing countries is that
they lack the capacity to enforce WTO decisions as well as the high indirect costs of initiating
disputes with the WTO (Horlick, 2006, p. 220). For example, trade in agriculture, which is a
key interest of many developing countries, is particularly liberalized (Walter & Sen, 2009).
Apart from the role of the WTO, the influence of international trade on the global
political economy can be understood through its implications for the global division of labor
(Waters, 2001). The division of labor refers to the roles that people employ in the production
process (O'Brien & Williams, 2020). Waters (2001) states there are two types of division of
labour: social division of labour refers to occupational specialization, and technical division of
labour refers to task specialization. This condition is closely related to the concept of
comparative advantage by liberals who attach importance to the specialization of countries'
commodities to gain an advantage in the production process. In international trade. This means
that by engaging in trade, countries also shape their division of labor. Increase While trade
and mobility are expected to increase the elasticity of demand for human capital, they also
automatically reduce the bargaining power of labor (Perraton, 2003, p. 56). Moreover, in the
reduction of transaction costs due to technological advances, international agreements, non-
tariff barriers results in enormous specialization possibilities (Pomfret, 2014). A country can
choose the specific commodities or services offered in international trade which will also
affect the demand for labor from that country.
Another effect of international trade on labor can be seen in the inequality between
more skilled and less skilled labor. Trade liberalization leads to wage inequality due to
increased trade (Goldberg & Pavnick, 2004). It seems that recent international trade increases
the demand for more skilled workers to support the concept of specialization. Slaughter
(1998) believes that the demand for labor from the less skilled to the more skilled is a key
factor of wage inequality and it is actually happening in some countries such as the United
States and the United Kingdom. He added the argument that many countries with Such
inequality creates problems, such as higher unemployment rates and many job opportunities
avoiding less-skilled workers.
Transnational Production
There is general agreement that the growth of transnational production has shaped the
evolution of the global economy (O'Brien & Williams, 2020, p. 132). One of the main reasons
is that the global production system is a complex process. O'Brien and Williams (2013) argue
that this process involves multiple workers and workplaces with their integration with local,
national, regional and global systems. Because transnational production involves multi-level
actors. It becomes more complicated as it has to integrate different social, political and
economic backgrounds in the global economy. The main reason for the emergence of
transnational production is the innovation of communication and information technology
along with the advancement of transportation (Ietto-Gillies, 2003). This development
increases the possibility to separate production processes around the world.
A significant change affecting production processes across countries is the formation
of transnational companies (TNCs). As stated earlier, in the era of globalization, geographical
issues are no longer a big problem, therefore, TNCs can carry out production processes
separately in different parts of the world. Another reason TNCs invest abroad is because
production costs in developing countries are lower than in developed countries (O'Brien &
Williams, 2020). As stated by Ietto-Gillies (2003), there is a significant development of the
organization of production across countries due to the activities of transnational corporations.
In addition, it is argued that TNCs constitute a major part of the global production structure
and about 50 percent of world trade (O'Brien and Williams, 2020, p. 132). This fact shows the
impact of TNCs on the global production process. TNCs seem to be a key player in global
production.
TNCs play their role in the global economy through foreign direct investment (FDI).
Changes in the global production system are linked to increasing levels of FDI (O'Brien &
Williams, 2020). In addition, Perraton says that FDI by transnational corporations has grown
faster than trade (Perraton, 2003, p. 47). The success of TNCs to invest in many countries
around the world may be due to the recognition that TNCs are a good source of investment,
there is a transfer of technology, and there is an increase in the workforce (Waters, 2001, p.
46).
Indeed, there is skepticism towards transnational corporations and FDI. The concept of
transnational phenomena with interdependence between actors raises concerns of reduced
state sovereignty (Biersteker & Weber, 1996). This is also supported by the expansion of
capitalist companies that exploit labor, directly proportional to the need for workers to be able
to survive or survive to finance their own lives (Tyner, 2019). Moreover, for opponents of
capitalism, TNCs are believed to be a new worldwide method of exploitation that is
essentially "barbaric" and unacceptable (Waters, 2001). For example, a study conducted by
Doytch, Thelen, & Mendoza (2014) found the exploitation of child labor, with children forced
to work in fields for long hours, in a multinational tobacco company in Kazakhstan.
Therefore, for nationalist economic advocates, states must improve their ability to regulate
TNCs investing in their own countries (O'Brien and Williams, 2020).
However, for liberal supporters, there are The advantages offered by transnational
corporations with foreign direct investment. Epstein argues that this development can provide
more employment opportunities especially for developing countries, while also resulting in
wage increases because TNCs in developing countries have more productivity so they can pay
more (Epstein, 2003). In addition, TNCs with FDI can increase tax revenues through
increased economic activity in the host country and can help advance economic growth by
encouraging a more efficient division of labor (O'Brien & Williams, 2020, p. 137). Studies
conducted by Harrison in Mexico, Morocco and Venezuela show that TNCs help domestic
firms to break into export markets and they can improve workers' living standards as they pay
higher wages than domestic firms (Harrison, 1994).
Based on the explanation above, it can be seen that TNCs have a significant impact on
labor. One of the reasons TNCs with FDI are growing is that many developing countries are
implementing active policies to support industrialization and export to developed countries
(O'Brien and Williams, 2020). This is understandable because it will provide employment
opportunities in the country they are. Therefore, it is not surprising that many countries are
trying to attract TNCs to invest in their territories. With respect to the global division of labor,
TNCs will increase the demand for more skilled labor, as research conducted by Bruno, Crino
and Falzoni (2012) states that FDI increases the demand for more skilled labor in Poland.
Actors affected by the global political economy must make behavioral adjustments to
be able to face global competition which is currently increasing (O'Brien & Williams, 2020).
Coupled with technological advances in the form of machines, the value of labor has also
decreased because their portion of work can be replaced by machines (Tyner, 2019). The
higher demand for a more skilled workforce forces people to improve their abilities to
compete with others in the workplace. One of the reasons for this trend is to increase labor
productivity as it is a strong indicator of economic efficiency (Plasmans, 2003). In addition, it
is not surprising that TNCs promote division of labor to increase efficient production.
However, it seems that the labor market is shaped by TNC interests rather than national
interest.
International Trade, Transnational Production and Labor
One of the issues in relation to international trade and transnational production is not
respecting workers' rights. Many TNCs do not invest in their own countries because they want
to reduce their production costs. They tend to hire cheap labor and cut production costs with
forced labor in peripheral countries. As stated by Horvat (2020), the worst features of
exploitation are currently happening in all developing countries in the world.
In 2014, BBC News released a video inside the Apple assembly company. The video
shows that employees work under high pressure and for long, intensive periods of time. They
were forced to work standing up all day. In fact, the company installed electrical wires in t h e
machines so that employees could not lean back when tired. Employees work in a very
grueling environment. Although in 2010 there was a mass worker suicide at Foxconn, one of
the companies that manufactures Apple products, then Apple promised to improve facilitation
and working conditions, but the BBC video shows evidence to the contrary. For example,
everyone in China needs to carry an identity card. However, companies still take workers' IDs
directly when they enter the company (BBC News, 2014). Tyner (2019) also argues that
companies can collect profits not only from the products or services produced but also
through life insurance policies from workers who experience misfortune while performing
their duties.
However, not all TNCs tend to exploit labor for profit. A study analyzing foreign
direct investment and labor rights in 80 developing countries conducted by Busse,
Nunnenkamp, and Spatareanu showed different results. In terms of the correlation between
labor rights and TNCs, the study found that TNCs prefer to invest in countries that respect
labor rights (Busse, Nunnenkamp, & and Spatareanu, 2011). Moreover, labor violence in
potential host countries discourages TNCs from running their activities there, wherever it may
be (Busse, Nunnenkamp and Spatareanu, 2011). This condition shows that TNCs pay great
attention to labor rights, not only focus on their profits as well.
One solution to the above problem is to implement labor standards. Based on Heintz's
(2003) argument, the labor market should be for the larger society and should be governed by
rules, norms, and ethical standards that make allowance for the separate costs of
marketization. The International Labor Organization (ILO) is an organization that promotes
labor standards worldwide. The ILO holds conventions that cover basic human rights areas:
freedom of association and collective bargaining, elimination of forced labor, elimination of
child labor, and elimination of discrimination (Heintz, 2003; O'Brien and Willams, 2020).
However, the main problem in implementing labor standards is how to come up with labor
standards that can be applied worldwide. This is due to the disagreement among actors on the
purpose of labor standards. Furthermore, leaders in many liberal countries argue that
economic growth improves labor standards. Whereas, any interference in trade for labor
reasons will lower the gains from trade (O'Brien and Williams, 2020, p.195).
Conclusions
There are different perspectives on the global political economy. Economic
nationalists place the state as the main actor in the global political economy. This is related to
their concept of protectionism, protecting the economy from the global market. Meanwhile,
economic liberalists argue that states should collaborate with other actors in the global
economy. They believe that the global political economy involves multiple actors. Moreover,
the current global economy is more likely to adopt liberal values such as trade liberalization.
There are dynamics that shape the global political economy. They are international
trade and transnational production. Both dynamics have implications for the global division of
labor. International trade with the concept of 'comparative advantage' comparative advantage'
affects the specialization of labour. Whereas transnational production with TNCs has
implications in driving the division of labor around the world, especially in their host
countries. Both international trade and transnational production have benefits for the
participants. This is because TNCs can provide jobs and also improve the lives of workers.
However, there is skepticism about these dynamics. For example, they are believed to
play a role in wage inequality, especially between less skilled labor and more skilled labor.
Another example is the issue of worker exploitation, such as the Apple factory case and child
labor in tobacco factories. One solution that can be suggested is to enforce global labor
standards.
Results and Discussion of International Trade
According to Waters (2001) the primary and ongoing basis of economic
internationalization is trade. Trade itself is understood as the activity of two or more
individuals exchanging goods and services (O'Brien & Williams, 2020, p. 109). Such
activities would be called international trade if they are operated abroad. This international
trade can create relationships and interdependence between actors (Waters, 2001). As stated
by Ietto-Gillies (2003), that one evidence of state interconnectedness can be seen in
international trade activities in goods and services. Wallerstein and Marxist in Cohen (2017)
categorize countries into several levels, where there are dominant core countries, dependent
periphery countries and semi-fringe countries that are between the two categories. While core
countries enjoy a high level of technological development, selling sophisticated high-value
goods and services, the role of peripheral countries is simply to supply materials raw
materials, foodstuffs, and also cheap labor on the basis of highly unequal exchanges. Among
them, semi-periphery countries benefit from exploiting periphery countries even as they
themselves are exploited by core countries. This shows that international trade affects the
shape of the global political economy. One reason is that international trade has direct and
indirect effects on people and communities, for example, a family's consumption patterns are
affected by trade in goods (O'Brien & Williams, 2020).
One of the ways in which international trade affects the global economy is through a
free trade regime. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996). The theory of comparative advantage advises countries to
specialize in their most efficient products and services (O'Brien & Williams, 2020). The
ideology of comparative advantage serves to obscure uneven economic development progress
and unequal exchange between countries and regions (McBride & Shields, 1993). Therefore,
proponents of free trade believe that every country should engage in trade international and
reduce barriers.
Furthermore, according to liberal political economy, everyone can benefit from trade
as it can improve efficiency and increase productivity (O'Brien & Williams, 2020). For
example, Langenfeld and Nieberding (2005) estimate that trade growth has provided total
benefits to American consumers of about $2.3 trillion over the trade has provided total benefits
to American consumers of about $2.3 trillion during 1992-2002, or between $20,000 and
$22,000 per household in 2002. In contrast, nationalists believe that free trade is detrimental to
the national economy because it will weaken the economy unbalanced development and can
damage the environment (O'Brien & Williams, 2020). As in the case of Fiji, they are facing a
rapid and radical restructuring of the sugar or banana industry and this is potentially
disastrous for their economy as it is a fundamental commodity (Connel & Soutar, 2007).
Furthermore, in the international trading system, there are significant developments
that encourage trade liberalization. The emergence of the WTO (World Trade Organization),
the successor to the GATT (General Agreement on Tariffs and Trade), is believed to play an
important role in trade liberalization international. The WTO (and GATT before it) has
successfully liberalized trade and managed international trade through multilateral agreements
(Sampson, 2001). Jackson (1998) stated that the establishment of the WTO was the most
significant moment in the history of the world economy, even becoming a fundamental
institution in the international economy, especially with its dispute settlement procedures. The
WTO has changed the management of world trade in the following ways:
Change trade liberalization from being based on tariff adjustments to discussing
domestic policies, institutional practices and regulations.
Broaden the scope of trade and change the focus of negotiations from product
bargaining to policy.
Propose movement towards accession policies, for example, in the areas of subsidies
and trade-related investment measures and services (O'Brien & Williams, 2020).
Based on the above, it can be seen that the WTO has successfully played its role in
international trade, but there is the issue of many developing countries' interests not being
accommodated by the WTO (Sampson, 2001). In a d d i t i o n , countries developing
countries recognize the limitations of political influence in the international trade agreement
process (O'Brien & Williams, 2020). Another problem faced by developing countries is that
they lack the capacity to enforce WTO decisions as well as the high indirect costs of initiating
disputes with the WTO (Horlick, 2006, p. 220). For example, trade in agriculture, which is a
key interest of many developing countries, is particularly liberalized (Walter & Sen, 2009).
Apart from the role of the WTO, the influence of international trade on the global
political economy can be understood through its implications for the global division of labor
(Waters, 2001). The division of labor refers to the roles that people employ in the production
process (O'Brien & Williams, 2020). Waters (2001) states there are two types of division of
labour: social division of labour refers to occupational specialization, and technical division of
labour refers to task specialization. This condition is closely related to the concept of
comparative advantage by liberals who attach importance to the specialization of countries'
commodities to gain an advantage in the production process. In international trade. This means
that by engaging in trade, countries also shape their division of labor. Increase While trade
and mobility are expected to increase the elasticity of demand for human capital, they also
automatically reduce the bargaining power of labor (Perraton, 2003, p. 56). Moreover, in the
reduction of transaction costs due to technological advances, international agreements, non-
tariff barriers results in enormous specialization possibilities (Pomfret, 2014). A country can
choose the specific commodities or services offered in international trade which will also
affect the demand for labor from that country.
Another effect of international trade on labor can be seen in the inequality between
more skilled and less skilled labor. Trade liberalization leads to wage inequality due to
increased trade (Goldberg & Pavnick, 2004). It seems that recent international trade increases
the demand for more skilled workers to support the concept of specialization. Slaughter
(1998) believes that the demand for labor from the less skilled to the more skilled is a key
factor of wage inequality and it is actually happening in some countries such as the United
States and the United Kingdom. He added the argument that many countries with Such
inequality creates problems, such as higher unemployment rates and many job opportunities
avoiding less-skilled workers.
Transnational Production
There is general agreement that the growth of transnational production has shaped the
evolution of the global economy (O'Brien & Williams, 2020, p. 132). One of the main reasons
is that the global production system is a complex process. O'Brien and Williams (2013) argue
that this process involves multiple workers and workplaces with their integration with local,
national, regional and global systems. Because transnational production involves multi-level
actors. It becomes more complicated as it has to integrate different social, political and
economic backgrounds in the global economy. The main reason for the emergence of
transnational production is the innovation of communication and information technology
along with the advancement of transportation (Ietto-Gillies, 2003). This development
increases the possibility to separate production processes around the world.
A significant change affecting production processes across countries is the formation
of transnational companies (TNCs). As stated earlier, in the era of globalization, geographical
issues are no longer a big problem, therefore, TNCs can carry out production processes
separately in different parts of the world. Another reason TNCs invest abroad is because
production costs in developing countries are lower than in developed countries (O'Brien &
Williams, 2020). As stated by Ietto-Gillies (2003), there is a significant development of the
organization of production across countries due to the activities of transnational corporations.
In addition, it is argued that TNCs constitute a major part of the global production structure
and about 50 percent of world trade (O'Brien and Williams, 2020, p. 132). This fact shows the
impact of TNCs on the global production process. TNCs seem to be a key player in global
production.
TNCs play their role in the global economy through foreign direct investment (FDI).
Changes in the global production system are linked to increasing levels of FDI (O'Brien &
Williams, 2020). In addition, Perraton says that FDI by transnational corporations has grown
faster than trade (Perraton, 2003, p. 47). The success of TNCs to invest in many countries
around the world may be due to the recognition that TNCs are a good source of investment,
there is a transfer of technology, and there is an increase in the workforce (Waters, 2001, p.
46).
Indeed, there is skepticism towards transnational corporations and FDI. The concept of
transnational phenomena with interdependence between actors raises concerns of reduced
state sovereignty (Biersteker & Weber, 1996). This is also supported by the expansion of
capitalist companies that exploit labor, directly proportional to the need for workers to be able
to survive or survive to finance their own lives (Tyner, 2019). Moreover, for opponents of
capitalism, TNCs are believed to be a new worldwide method of exploitation that is
essentially "barbaric" and unacceptable (Waters, 2001). For example, a study conducted by
Doytch, Thelen, & Mendoza (2014) found the exploitation of child labor, with children forced
to work in fields for long hours, in a multinational tobacco company in Kazakhstan.
Therefore, for nationalist economic advocates, states must improve their ability to regulate
TNCs investing in their own countries (O'Brien and Williams, 2020).
However, for liberal supporters, there are The advantages offered by transnational
corporations with foreign direct investment. Epstein argues that this development can provide
more employment opportunities especially for developing countries, while also resulting in
wage increases because TNCs in developing countries have more productivity so they can pay
more (Epstein, 2003). In addition, TNCs with FDI can increase tax revenues through
increased economic activity in the host country and can help advance economic growth by
encouraging a more efficient division of labor (O'Brien & Williams, 2020, p. 137). Studies
conducted by Harrison in Mexico, Morocco and Venezuela show that TNCs help domestic
firms to break into export markets and they can improve workers' living standards as they pay
higher wages than domestic firms (Harrison, 1994).
Based on the explanation above, it can be seen that TNCs have a significant impact on
labor. One of the reasons TNCs with FDI are growing is that many developing countries are
implementing active policies to support industrialization and export to developed countries
(O'Brien and Williams, 2020). This is understandable because it will provide employment
opportunities in the country they are. Therefore, it is not surprising that many countries are
trying to attract TNCs to invest in their territories. With respect to the global division of labor,
TNCs will increase the demand for more skilled labor, as research conducted by Bruno, Crino
and Falzoni (2012) states that FDI increases the demand for more skilled labor in Poland.
Actors affected by the global political economy must make behavioral adjustments to
be able to face global competition which is currently increasing (O'Brien & Williams, 2020).
Coupled with technological advances in the form of machines, the value of labor has also
decreased because their portion of work can be replaced by machines (Tyner, 2019). The
higher demand for a more skilled workforce forces people to improve their abilities to
compete with others in the workplace. One of the reasons for this trend is to increase labor
productivity as it is a strong indicator of economic efficiency (Plasmans, 2003). In addition, it
is not surprising that TNCs promote division of labor to increase efficient production.
However, it seems that the labor market is shaped by TNC interests rather than national
interest.
International Trade, Transnational Production and Labor
One of the issues in relation to international trade and transnational production is not
respecting workers' rights. Many TNCs do not invest in their own countries because they want
to reduce their production costs. They tend to hire cheap labor and cut production costs with
forced labor in peripheral countries. As stated by Horvat (2020), the worst features of
exploitation are currently happening in all developing countries in the world.
In 2014, BBC News released a video inside the Apple assembly company. The video
shows that employees work under high pressure and for long, intensive periods of time. They
were forced to work standing up all day. In fact, the company installed electrical wires in t h e
machines so that employees could not lean back when tired. Employees work in a very
grueling environment. Although in 2010 there was a mass worker suicide at Foxconn, one of
the companies that manufactures Apple products, then Apple promised to improve facilitation
and working conditions, but the BBC video shows evidence to the contrary. For example,
everyone in China needs to carry an identity card. However, companies still take workers' IDs
directly when they enter the company (BBC News, 2014). Tyner (2019) also argues that
companies can collect profits not only from the products or services produced but also
through life insurance policies from workers who experience misfortune while performing
their duties.
However, not all TNCs tend to exploit labor for profit. A study analyzing foreign
direct investment and labor rights in 80 developing countries conducted by Busse,
Nunnenkamp, and Spatareanu showed different results. In terms of the correlation between
labor rights and TNCs, the study found that TNCs prefer to invest in countries that respect
labor rights (Busse, Nunnenkamp, & and Spatareanu, 2011). Moreover, labor violence in
potential host countries discourages TNCs from running their activities there, wherever it may
be (Busse, Nunnenkamp and Spatareanu, 2011). This condition shows that TNCs pay great
attention to labor rights, not only focus on their profits as well.
One solution to the above problem is to implement labor standards. Based on Heintz's
(2003) argument, the labor market should be for the larger society and should be governed by
rules, norms, and ethical standards that make allowance for the separate costs of
marketization. The International Labor Organization (ILO) is an organization that promotes
labor standards worldwide. The ILO holds conventions that cover basic human rights areas:
freedom of association and collective bargaining, elimination of forced labor, elimination of
child labor, and elimination of discrimination (Heintz, 2003; O'Brien and Willams, 2020).
However, the main problem in implementing labor standards is how to come up with labor
standards that can be applied worldwide. This is due to the disagreement among actors on the
purpose of labor standards. Furthermore, leaders in many liberal countries argue that
economic growth improves labor standards. Whereas, any interference in trade for labor
reasons will lower the gains from trade (O'Brien and Williams, 2020, p.195).
Conclusions
There are different perspectives on the global political economy. Economic
nationalists place the state as the main actor in the global political economy. This is related to
their concept of protectionism, protecting the economy from the global market. Meanwhile,
economic liberalists argue that states should collaborate with other actors in the global
economy. They believe that the global political economy involves multiple actors. Moreover,
the current global economy is more likely to adopt liberal values such as trade liberalization.
There are dynamics that shape the global political economy. They are international
trade and transnational production. Both dynamics have implications for the global division of
labor. International trade with the concept of 'comparative advantage' comparative advantage'
affects the specialization of labour. Whereas transnational production with TNCs has
implications in driving the division of labor around the world, especially in their host
countries. Both international trade and transnational production have benefits for the
participants. This is because TNCs can provide jobs and also improve the lives of workers.
However, there is skepticism about these dynamics. For example, they are believed to
play a role in wage inequality, especially between less skilled labor and more skilled labor.
Another example is the issue of worker exploitation, such as the Apple factory case and child
labor in tobacco factories. One solution that can be suggested is to enforce global labor
standards.
Results and Discussion of International Trade
According to Waters (2001) the primary and ongoing basis of economic
internationalization is trade. Trade itself is understood as the activity of two or more
individuals exchanging goods and services (O'Brien & Williams, 2020, p. 109). Such
activities would be called international trade if they are operated abroad. This international
trade can create relationships and interdependence between actors (Waters, 2001). As stated
by Ietto-Gillies (2003), that one evidence of state interconnectedness can be seen in
international trade activities in goods and services. Wallerstein and Marxist in Cohen (2017)
categorize countries into several levels, where there are dominant core countries, dependent
periphery countries and semi-fringe countries that are between the two categories. While core
countries enjoy a high level of technological development, selling sophisticated high-value
goods and services, the role of peripheral countries is simply to supply materials raw
materials, foodstuffs, and also cheap labor on the basis of highly unequal exchanges. Among
them, semi-periphery countries benefit from exploiting periphery countries even as they
themselves are exploited by core countries. This shows that international trade affects the
shape of the global political economy. One reason is that international trade has direct and
indirect effects on people and communities, for example, a family's consumption patterns are
affected by trade in goods (O'Brien & Williams, 2020).
One of the ways in which international trade affects the global economy is through a
free trade regime. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996). The theory of comparative advantage advises countries to
specialize in their most efficient products and services (O'Brien & Williams, 2020). The
ideology of comparative advantage serves to obscure uneven economic development progress
and unequal exchange between countries and regions (McBride & Shields, 1993). Therefore,
proponents of free trade believe that every country should engage in trade international and
reduce barriers.
Furthermore, according to liberal political economy, everyone can benefit from trade
as it can improve efficiency and increase productivity (O'Brien & Williams, 2020). For
example, Langenfeld and Nieberding (2005) estimate that trade growth has provided total
benefits to American consumers of about $2.3 trillion over the trade has provided total benefits
to American consumers of about $2.3 trillion during 1992-2002, or between $20,000 and
$22,000 per household in 2002. In contrast, nationalists believe that free trade is detrimental to
the national economy because it will weaken the economy unbalanced development and can
damage the environment (O'Brien & Williams, 2020). As in the case of Fiji, they are facing a
rapid and radical restructuring of the sugar or banana industry and this is potentially
disastrous for their economy as it is a fundamental commodity (Connel & Soutar, 2007).
Furthermore, in the international trading system, there are significant developments
that encourage trade liberalization. The emergence of the WTO (World Trade Organization),
the successor to the GATT (General Agreement on Tariffs and Trade), is believed to play an
important role in trade liberalization international. The WTO (and GATT before it) has
successfully liberalized trade and managed international trade through multilateral agreements
(Sampson, 2001). Jackson (1998) stated that the establishment of the WTO was the most
significant moment in the history of the world economy, even becoming a fundamental
institution in the international economy, especially with its dispute settlement procedures. The
WTO has changed the management of world trade in the following ways:
Change trade liberalization from being based on tariff adjustments to discussing
domestic policies, institutional practices and regulations.
Broaden the scope of trade and change the focus of negotiations from product
bargaining to policy.
Propose movement towards accession policies, for example, in the areas of subsidies
and trade-related investment measures and services (O'Brien & Williams, 2020).
Based on the above, it can be seen that the WTO has successfully played its role in
international trade, but there is the issue of many developing countries' interests not being
accommodated by the WTO (Sampson, 2001). In a d d i t i o n , countries developing
countries recognize the limitations of political influence in the international trade agreement
process (O'Brien & Williams, 2020). Another problem faced by developing countries is that
they lack the capacity to enforce WTO decisions as well as the high indirect costs of initiating
disputes with the WTO (Horlick, 2006, p. 220). For example, trade in agriculture, which is a
key interest of many developing countries, is particularly liberalized (Walter & Sen, 2009).
Apart from the role of the WTO, the influence of international trade on the global
political economy can be understood through its implications for the global division of labor
(Waters, 2001). The division of labor refers to the roles that people employ in the production
process (O'Brien & Williams, 2020). Waters (2001) states there are two types of division of
labour: social division of labour refers to occupational specialization, and technical division of
labour refers to task specialization. This condition is closely related to the concept of
comparative advantage by liberals who attach importance to the specialization of countries'
commodities to gain an advantage in the production process. In international trade. This means
that by engaging in trade, countries also shape their division of labor. Increase While trade
and mobility are expected to increase the elasticity of demand for human capital, they also
automatically reduce the bargaining power of labor (Perraton, 2003, p. 56). Moreover, in the
reduction of transaction costs due to technological advances, international agreements, non-
tariff barriers results in enormous specialization possibilities (Pomfret, 2014). A country can
choose the specific commodities or services offered in international trade which will also
affect the demand for labor from that country.
Another effect of international trade on labor can be seen in the inequality between
more skilled and less skilled labor. Trade liberalization leads to wage inequality due to
increased trade (Goldberg & Pavnick, 2004). It seems that recent international trade increases
the demand for more skilled workers to support the concept of specialization. Slaughter
(1998) believes that the demand for labor from the less skilled to the more skilled is a key
factor of wage inequality and it is actually happening in some countries such as the United
States and the United Kingdom. He added the argument that many countries with Such
inequality creates problems, such as higher unemployment rates and many job opportunities
avoiding less-skilled workers.
Transnational Production
There is general agreement that the growth of transnational production has shaped the
evolution of the global economy (O'Brien & Williams, 2020, p. 132). One of the main reasons
is that the global production system is a complex process. O'Brien and Williams (2013) argue
that this process involves multiple workers and workplaces with their integration with local,
national, regional and global systems. Because transnational production involves multi-level
actors. It becomes more complicated as it has to integrate different social, political and
economic backgrounds in the global economy. The main reason for the emergence of
transnational production is the innovation of communication and information technology
along with the advancement of transportation (Ietto-Gillies, 2003). This development
increases the possibility to separate production processes around the world.
A significant change affecting production processes across countries is the formation
of transnational companies (TNCs). As stated earlier, in the era of globalization, geographical
issues are no longer a big problem, therefore, TNCs can carry out production processes
separately in different parts of the world. Another reason TNCs invest abroad is because
production costs in developing countries are lower than in developed countries (O'Brien &
Williams, 2020). As stated by Ietto-Gillies (2003), there is a significant development of the
organization of production across countries due to the activities of transnational corporations.
In addition, it is argued that TNCs constitute a major part of the global production structure
and about 50 percent of world trade (O'Brien and Williams, 2020, p. 132). This fact shows the
impact of TNCs on the global production process. TNCs seem to be a key player in global
production.
TNCs play their role in the global economy through foreign direct investment (FDI).
Changes in the global production system are linked to increasing levels of FDI (O'Brien &
Williams, 2020). In addition, Perraton says that FDI by transnational corporations has grown
faster than trade (Perraton, 2003, p. 47). The success of TNCs to invest in many countries
around the world may be due to the recognition that TNCs are a good source of investment,
there is a transfer of technology, and there is an increase in the workforce (Waters, 2001, p.
46).
Indeed, there is skepticism towards transnational corporations and FDI. The concept of
transnational phenomena with interdependence between actors raises concerns of reduced
state sovereignty (Biersteker & Weber, 1996). This is also supported by the expansion of
capitalist companies that exploit labor, directly proportional to the need for workers to be able
to survive or survive to finance their own lives (Tyner, 2019). Moreover, for opponents of
capitalism, TNCs are believed to be a new worldwide method of exploitation that is
essentially "barbaric" and unacceptable (Waters, 2001). For example, a study conducted by
Doytch, Thelen, & Mendoza (2014) found the exploitation of child labor, with children forced
to work in fields for long hours, in a multinational tobacco company in Kazakhstan.
Therefore, for nationalist economic advocates, states must improve their ability to regulate
TNCs investing in their own countries (O'Brien and Williams, 2020).
However, for liberal supporters, there are The advantages offered by transnational
corporations with foreign direct investment. Epstein argues that this development can provide
more employment opportunities especially for developing countries, while also resulting in
wage increases because TNCs in developing countries have more productivity so they can pay
more (Epstein, 2003). In addition, TNCs with FDI can increase tax revenues through
increased economic activity in the host country and can help advance economic growth by
encouraging a more efficient division of labor (O'Brien & Williams, 2020, p. 137). Studies
conducted by Harrison in Mexico, Morocco and Venezuela show that TNCs help domestic
firms to break into export markets and they can improve workers' living standards as they pay
higher wages than domestic firms (Harrison, 1994).
Based on the explanation above, it can be seen that TNCs have a significant impact on
labor. One of the reasons TNCs with FDI are growing is that many developing countries are
implementing active policies to support industrialization and export to developed countries
(O'Brien and Williams, 2020). This is understandable because it will provide employment
opportunities in the country they are. Therefore, it is not surprising that many countries are
trying to attract TNCs to invest in their territories. With respect to the global division of labor,
TNCs will increase the demand for more skilled labor, as research conducted by Bruno, Crino
and Falzoni (2012) states that FDI increases the demand for more skilled labor in Poland.
Actors affected by the global political economy must make behavioral adjustments to
be able to face global competition which is currently increasing (O'Brien & Williams, 2020).
Coupled with technological advances in the form of machines, the value of labor has also
decreased because their portion of work can be replaced by machines (Tyner, 2019). The
higher demand for a more skilled workforce forces people to improve their abilities to
compete with others in the workplace. One of the reasons for this trend is to increase labor
productivity as it is a strong indicator of economic efficiency (Plasmans, 2003). In addition, it
is not surprising that TNCs promote division of labor to increase efficient production.
However, it seems that the labor market is shaped by TNC interests rather than national
interest.
International Trade, Transnational Production and Labor
One of the issues in relation to international trade and transnational production is not
respecting workers' rights. Many TNCs do not invest in their own countries because they want
to reduce their production costs. They tend to hire cheap labor and cut production costs with
forced labor in peripheral countries. As stated by Horvat (2020), the worst features of
exploitation are currently happening in all developing countries in the world.
In 2014, BBC News released a video inside the Apple assembly company. The video
shows that employees work under high pressure and for long, intensive periods of time. They
were forced to work standing up all day. In fact, the company installed electrical wires in t h e
machines so that employees could not lean back when tired. Employees work in a very
grueling environment. Although in 2010 there was a mass worker suicide at Foxconn, one of
the companies that manufactures Apple products, then Apple promised to improve facilitation
and working conditions, but the BBC video shows evidence to the contrary. For example,
everyone in China needs to carry an identity card. However, companies still take workers' IDs
directly when they enter the company (BBC News, 2014). Tyner (2019) also argues that
companies can collect profits not only from the products or services produced but also
through life insurance policies from workers who experience misfortune while performing
their duties.
However, not all TNCs tend to exploit labor for profit. A study analyzing foreign
direct investment and labor rights in 80 developing countries conducted by Busse,
Nunnenkamp, and Spatareanu showed different results. In terms of the correlation between
labor rights and TNCs, the study found that TNCs prefer to invest in countries that respect
labor rights (Busse, Nunnenkamp, & and Spatareanu, 2011). Moreover, labor violence in
potential host countries discourages TNCs from running their activities there, wherever it may
be (Busse, Nunnenkamp and Spatareanu, 2011). This condition shows that TNCs pay great
attention to labor rights, not only focus on their profits as well.
One solution to the above problem is to implement labor standards. Based on Heintz's
(2003) argument, the labor market should be for the larger society and should be governed by
rules, norms, and ethical standards that make allowance for the separate costs of
marketization. The International Labor Organization (ILO) is an organization that promotes
labor standards worldwide. The ILO holds conventions that cover basic human rights areas:
freedom of association and collective bargaining, elimination of forced labor, elimination of
child labor, and elimination of discrimination (Heintz, 2003; O'Brien and Willams, 2020).
However, the main problem in implementing labor standards is how to come up with labor
standards that can be applied worldwide. This is due to the disagreement among actors on the
purpose of labor standards. Furthermore, leaders in many liberal countries argue that
economic growth improves labor standards. Whereas, any interference in trade for labor
reasons will lower the gains from trade (O'Brien and Williams, 2020, p.195).
Conclusions
There are different perspectives on the global political economy. Economic
nationalists place the state as the main actor in the global political economy. This is related to
their concept of protectionism, protecting the economy from the global market. Meanwhile,
economic liberalists argue that states should collaborate with other actors in the global
economy. They believe that the global political economy involves multiple actors. Moreover,
the current global economy is more likely to adopt liberal values such as trade liberalization.
There are dynamics that shape the global political economy. They are international
trade and transnational production. Both dynamics have implications for the global division of
labor. International trade with the concept of 'comparative advantage' comparative advantage'
affects the specialization of labour. Whereas transnational production with TNCs has
implications in driving the division of labor around the world, especially in their host
countries. Both international trade and transnational production have benefits for the
participants. This is because TNCs can provide jobs and also improve the lives of workers.
However, there is skepticism about these dynamics. For example, they are believed to
play a role in wage inequality, especially between less skilled labor and more skilled labor.
Another example is the issue of worker exploitation, such as the Apple factory case and child
labor in tobacco factories. One solution that can be suggested is to enforce global labor
standards.
Results and Discussion of International Trade
According to Waters (2001) the primary and ongoing basis of economic
internationalization is trade. Trade itself is understood as the activity of two or more
individuals exchanging goods and services (O'Brien & Williams, 2020, p. 109). Such
activities would be called international trade if they are operated abroad. This international
trade can create relationships and interdependence between actors (Waters, 2001). As stated
by Ietto-Gillies (2003), that one evidence of state interconnectedness can be seen in
international trade activities in goods and services. Wallerstein and Marxist in Cohen (2017)
categorize countries into several levels, where there are dominant core countries, dependent
periphery countries and semi-fringe countries that are between the two categories. While core
countries enjoy a high level of technological development, selling sophisticated high-value
goods and services, the role of peripheral countries is simply to supply materials raw
materials, foodstuffs, and also cheap labor on the basis of highly unequal exchanges. Among
them, semi-periphery countries benefit from exploiting periphery countries even as they
themselves are exploited by core countries. This shows that international trade affects the
shape of the global political economy. One reason is that international trade has direct and
indirect effects on people and communities, for example, a family's consumption patterns are
affected by trade in goods (O'Brien & Williams, 2020).
One of the ways in which international trade affects the global economy is through a
free trade regime. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996). The theory of comparative advantage advises countries to
specialize in their most efficient products and services (O'Brien & Williams, 2020). The
ideology of comparative advantage serves to obscure uneven economic development progress
and unequal exchange between countries and regions (McBride & Shields, 1993). Therefore,
proponents of free trade believe that every country should engage in trade international and
reduce barriers.
Furthermore, according to liberal political economy, everyone can benefit from trade
as it can improve efficiency and increase productivity (O'Brien & Williams, 2020). For
example, Langenfeld and Nieberding (2005) estimate that trade growth has provided total
benefits to American consumers of about $2.3 trillion over the trade has provided total benefits
to American consumers of about $2.3 trillion during 1992-2002, or between $20,000 and
$22,000 per household in 2002. In contrast, nationalists believe that free trade is detrimental to
the national economy because it will weaken the economy unbalanced development and can
damage the environment (O'Brien & Williams, 2020). As in the case of Fiji, they are facing a
rapid and radical restructuring of the sugar or banana industry and this is potentially
disastrous for their economy as it is a fundamental commodity (Connel & Soutar, 2007).
Furthermore, in the international trading system, there are significant developments
that encourage trade liberalization. The emergence of the WTO (World Trade Organization),
the successor to the GATT (General Agreement on Tariffs and Trade), is believed to play an
important role in trade liberalization international. The WTO (and GATT before it) has
successfully liberalized trade and managed international trade through multilateral agreements
(Sampson, 2001). Jackson (1998) stated that the establishment of the WTO was the most
significant moment in the history of the world economy, even becoming a fundamental
institution in the international economy, especially with its dispute settlement procedures. The
WTO has changed the management of world trade in the following ways:
Change trade liberalization from being based on tariff adjustments to discussing
domestic policies, institutional practices and regulations.
Broaden the scope of trade and change the focus of negotiations from product
bargaining to policy.
Propose movement towards accession policies, for example, in the areas of subsidies
and trade-related investment measures and services (O'Brien & Williams, 2020).
Based on the above, it can be seen that the WTO has successfully played its role in
international trade, but there is the issue of many developing countries' interests not being
accommodated by the WTO (Sampson, 2001). In a d d i t i o n , countries developing
countries recognize the limitations of political influence in the international trade agreement
process (O'Brien & Williams, 2020). Another problem faced by developing countries is that
they lack the capacity to enforce WTO decisions as well as the high indirect costs of initiating
disputes with the WTO (Horlick, 2006, p. 220). For example, trade in agriculture, which is a
key interest of many developing countries, is particularly liberalized (Walter & Sen, 2009).
Apart from the role of the WTO, the influence of international trade on the global
political economy can be understood through its implications for the global division of labor
(Waters, 2001). The division of labor refers to the roles that people employ in the production
process (O'Brien & Williams, 2020). Waters (2001) states there are two types of division of
labour: social division of labour refers to occupational specialization, and technical division of
labour refers to task specialization. This condition is closely related to the concept of
comparative advantage by liberals who attach importance to the specialization of countries'
commodities to gain an advantage in the production process. In international trade. This means
that by engaging in trade, countries also shape their division of labor. Increase While trade
and mobility are expected to increase the elasticity of demand for human capital, they also
automatically reduce the bargaining power of labor (Perraton, 2003, p. 56). Moreover, in the
reduction of transaction costs due to technological advances, international agreements, non-
tariff barriers results in enormous specialization possibilities (Pomfret, 2014). A country can
choose the specific commodities or services offered in international trade which will also
affect the demand for labor from that country.
Another effect of international trade on labor can be seen in the inequality between
more skilled and less skilled labor. Trade liberalization leads to wage inequality due to
increased trade (Goldberg & Pavnick, 2004). It seems that recent international trade increases
the demand for more skilled workers to support the concept of specialization. Slaughter
(1998) believes that the demand for labor from the less skilled to the more skilled is a key
factor of wage inequality and it is actually happening in some countries such as the United
States and the United Kingdom. He added the argument that many countries with Such
inequality creates problems, such as higher unemployment rates and many job opportunities
avoiding less-skilled workers.
Transnational Production
There is general agreement that the growth of transnational production has shaped the
evolution of the global economy (O'Brien & Williams, 2020, p. 132). One of the main reasons
is that the global production system is a complex process. O'Brien and Williams (2013) argue
that this process involves multiple workers and workplaces with their integration with local,
national, regional and global systems. Because transnational production involves multi-level
actors. It becomes more complicated as it has to integrate different social, political and
economic backgrounds in the global economy. The main reason for the emergence of
transnational production is the innovation of communication and information technology
along with the advancement of transportation (Ietto-Gillies, 2003). This development
increases the possibility to separate production processes around the world.
A significant change affecting production processes across countries is the formation
of transnational companies (TNCs). As stated earlier, in the era of globalization, geographical
issues are no longer a big problem, therefore, TNCs can carry out production processes
separately in different parts of the world. Another reason TNCs invest abroad is because
production costs in developing countries are lower than in developed countries (O'Brien &
Williams, 2020). As stated by Ietto-Gillies (2003), there is a significant development of the
organization of production across countries due to the activities of transnational corporations.
In addition, it is argued that TNCs constitute a major part of the global production structure
and about 50 percent of world trade (O'Brien and Williams, 2020, p. 132). This fact shows the
impact of TNCs on the global production process. TNCs seem to be a key player in global
production.
TNCs play their role in the global economy through foreign direct investment (FDI).
Changes in the global production system are linked to increasing levels of FDI (O'Brien &
Williams, 2020). In addition, Perraton says that FDI by transnational corporations has grown
faster than trade (Perraton, 2003, p. 47). The success of TNCs to invest in many countries
around the world may be due to the recognition that TNCs are a good source of investment,
there is a transfer of technology, and there is an increase in the workforce (Waters, 2001, p.
46).
Indeed, there is skepticism towards transnational corporations and FDI. The concept of
transnational phenomena with interdependence between actors raises concerns of reduced
state sovereignty (Biersteker & Weber, 1996). This is also supported by the expansion of
capitalist companies that exploit labor, directly proportional to the need for workers to be able
to survive or survive to finance their own lives (Tyner, 2019). Moreover, for opponents of
capitalism, TNCs are believed to be a new worldwide method of exploitation that is
essentially "barbaric" and unacceptable (Waters, 2001). For example, a study conducted by
Doytch, Thelen, & Mendoza (2014) found the exploitation of child labor, with children forced
to work in fields for long hours, in a multinational tobacco company in Kazakhstan.
Therefore, for nationalist economic advocates, states must improve their ability to regulate
TNCs investing in their own countries (O'Brien and Williams, 2020).
However, for liberal supporters, there are The advantages offered by transnational
corporations with foreign direct investment. Epstein argues that this development can provide
more employment opportunities especially for developing countries, while also resulting in
wage increases because TNCs in developing countries have more productivity so they can pay
more (Epstein, 2003). In addition, TNCs with FDI can increase tax revenues through
increased economic activity in the host country and can help advance economic growth by
encouraging a more efficient division of labor (O'Brien & Williams, 2020, p. 137). Studies
conducted by Harrison in Mexico, Morocco and Venezuela show that TNCs help domestic
firms to break into export markets and they can improve workers' living standards as they pay
higher wages than domestic firms (Harrison, 1994).
Based on the explanation above, it can be seen that TNCs have a significant impact on
labor. One of the reasons TNCs with FDI are growing is that many developing countries are
implementing active policies to support industrialization and export to developed countries
(O'Brien and Williams, 2020). This is understandable because it will provide employment
opportunities in the country they are. Therefore, it is not surprising that many countries are
trying to attract TNCs to invest in their territories. With respect to the global division of labor,
TNCs will increase the demand for more skilled labor, as research conducted by Bruno, Crino
and Falzoni (2012) states that FDI increases the demand for more skilled labor in Poland.
Actors affected by the global political economy must make behavioral adjustments to
be able to face global competition which is currently increasing (O'Brien & Williams, 2020).
Coupled with technological advances in the form of machines, the value of labor has also
decreased because their portion of work can be replaced by machines (Tyner, 2019). The
higher demand for a more skilled workforce forces people to improve their abilities to
compete with others in the workplace. One of the reasons for this trend is to increase labor
productivity as it is a strong indicator of economic efficiency (Plasmans, 2003). In addition, it
is not surprising that TNCs promote division of labor to increase efficient production.
However, it seems that the labor market is shaped by TNC interests rather than national
interest.
International Trade, Transnational Production and Labor
One of the issues in relation to international trade and transnational production is not
respecting workers' rights. Many TNCs do not invest in their own countries because they want
to reduce their production costs. They tend to hire cheap labor and cut production costs with
forced labor in peripheral countries. As stated by Horvat (2020), the worst features of
exploitation are currently happening in all developing countries in the world.
In 2014, BBC News released a video inside the Apple assembly company. The video
shows that employees work under high pressure and for long, intensive periods of time. They
were forced to work standing up all day. In fact, the company installed electrical wires in t h e
machines so that employees could not lean back when tired. Employees work in a very
grueling environment. Although in 2010 there was a mass worker suicide at Foxconn, one of
the companies that manufactures Apple products, then Apple promised to improve facilitation
and working conditions, but the BBC video shows evidence to the contrary. For example,
everyone in China needs to carry an identity card. However, companies still take workers' IDs
directly when they enter the company (BBC News, 2014). Tyner (2019) also argues that
companies can collect profits not only from the products or services produced but also
through life insurance policies from workers who experience misfortune while performing
their duties.
However, not all TNCs tend to exploit labor for profit. A study analyzing foreign
direct investment and labor rights in 80 developing countries conducted by Busse,
Nunnenkamp, and Spatareanu showed different results. In terms of the correlation between
labor rights and TNCs, the study found that TNCs prefer to invest in countries that respect
labor rights (Busse, Nunnenkamp, & and Spatareanu, 2011). Moreover, labor violence in
potential host countries discourages TNCs from running their activities there, wherever it may
be (Busse, Nunnenkamp and Spatareanu, 2011). This condition shows that TNCs pay great
attention to labor rights, not only focus on their profits as well.
One solution to the above problem is to implement labor standards. Based on Heintz's
(2003) argument, the labor market should be for the larger society and should be governed by
rules, norms, and ethical standards that make allowance for the separate costs of
marketization. The International Labor Organization (ILO) is an organization that promotes
labor standards worldwide. The ILO holds conventions that cover basic human rights areas:
freedom of association and collective bargaining, elimination of forced labor, elimination of
child labor, and elimination of discrimination (Heintz, 2003; O'Brien and Willams, 2020).
However, the main problem in implementing labor standards is how to come up with labor
standards that can be applied worldwide. This is due to the disagreement among actors on the
purpose of labor standards. Furthermore, leaders in many liberal countries argue that
economic growth improves labor standards. Whereas, any interference in trade for labor
reasons will lower the gains from trade (O'Brien and Williams, 2020, p.195).
Conclusions
There are different perspectives on the global political economy. Economic
nationalists place the state as the main actor in the global political economy. This is related to
their concept of protectionism, protecting the economy from the global market. Meanwhile,
economic liberalists argue that states should collaborate with other actors in the global
economy. They believe that the global political economy involves multiple actors. Moreover,
the current global economy is more likely to adopt liberal values such as trade liberalization.
There are dynamics that shape the global political economy. They are international
trade and transnational production. Both dynamics have implications for the global division of
labor. International trade with the concept of 'comparative advantage' comparative advantage'
affects the specialization of labour. Whereas transnational production with TNCs has
implications in driving the division of labor around the world, especially in their host
countries. Both international trade and transnational production have benefits for the
participants. This is because TNCs can provide jobs and also improve the lives of workers.
However, there is skepticism about these dynamics. For example, they are believed to
play a role in wage inequality, especially between less skilled labor and more skilled labor.
Another example is the issue of worker exploitation, such as the Apple factory case and child
labor in tobacco factories. One solution that can be suggested is to enforce global labor
standards.
Results and Discussion of International Trade
According to Waters (2001) the primary and ongoing basis of economic
internationalization is trade. Trade itself is understood as the activity of two or more
individuals exchanging goods and services (O'Brien & Williams, 2020, p. 109). Such
activities would be called international trade if they are operated abroad. This international
trade can create relationships and interdependence between actors (Waters, 2001). As stated
by Ietto-Gillies (2003), that one evidence of state interconnectedness can be seen in
international trade activities in goods and services. Wallerstein and Marxist in Cohen (2017)
categorize countries into several levels, where there are dominant core countries, dependent
periphery countries and semi-fringe countries that are between the two categories. While core
countries enjoy a high level of technological development, selling sophisticated high-value
goods and services, the role of peripheral countries is simply to supply materials raw
materials, foodstuffs, and also cheap labor on the basis of highly unequal exchanges. Among
them, semi-periphery countries benefit from exploiting periphery countries even as they
themselves are exploited by core countries. This shows that international trade affects the
shape of the global political economy. One reason is that international trade has direct and
indirect effects on people and communities, for example, a family's consumption patterns are
affected by trade in goods (O'Brien & Williams, 2020).
One of the ways in which international trade affects the global economy is through a
free trade regime. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996). The theory of comparative advantage advises countries to
specialize in their most efficient products and services (O'Brien & Williams, 2020). The
ideology of comparative advantage serves to obscure uneven economic development progress
and unequal exchange between countries and regions (McBride & Shields, 1993). Therefore,
proponents of free trade believe that every country should engage in trade international and
reduce barriers.
Furthermore, according to liberal political economy, everyone can benefit from trade
as it can improve efficiency and increase productivity (O'Brien & Williams, 2020). For
example, Langenfeld and Nieberding (2005) estimate that trade growth has provided total
benefits to American consumers of about $2.3 trillion over the trade has provided total benefits
to American consumers of about $2.3 trillion during 1992-2002, or between $20,000 and
$22,000 per household in 2002. In contrast, nationalists believe that free trade is detrimental to
the national economy because it will weaken the economy unbalanced development and can
damage the environment (O'Brien & Williams, 2020). As in the case of Fiji, they are facing a
rapid and radical restructuring of the sugar or banana industry and this is potentially
disastrous for their economy as it is a fundamental commodity (Connel & Soutar, 2007).
Furthermore, in the international trading system, there are significant developments
that encourage trade liberalization. The emergence of the WTO (World Trade Organization),
the successor to the GATT (General Agreement on Tariffs and Trade), is believed to play an
important role in trade liberalization international. The WTO (and GATT before it) has
successfully liberalized trade and managed international trade through multilateral agreements
(Sampson, 2001). Jackson (1998) stated that the establishment of the WTO was the most
significant moment in the history of the world economy, even becoming a fundamental
institution in the international economy, especially with its dispute settlement procedures. The
WTO has changed the management of world trade in the following ways:
Change trade liberalization from being based on tariff adjustments to discussing
domestic policies, institutional practices and regulations.
Broaden the scope of trade and change the focus of negotiations from product
bargaining to policy.
Propose movement towards accession policies, for example, in the areas of subsidies
and trade-related investment measures and services (O'Brien & Williams, 2020).
Based on the above, it can be seen that the WTO has successfully played its role in
international trade, but there is the issue of many developing countries' interests not being
accommodated by the WTO (Sampson, 2001). In a d d i t i o n , countries developing
countries recognize the limitations of political influence in the international trade agreement
process (O'Brien & Williams, 2020). Another problem faced by developing countries is that
they lack the capacity to enforce WTO decisions as well as the high indirect costs of initiating
disputes with the WTO (Horlick, 2006, p. 220). For example, trade in agriculture, which is a
key interest of many developing countries, is particularly liberalized (Walter & Sen, 2009).
Apart from the role of the WTO, the influence of international trade on the global
political economy can be understood through its implications for the global division of labor
(Waters, 2001). The division of labor refers to the roles that people employ in the production
process (O'Brien & Williams, 2020). Waters (2001) states there are two types of division of
labour: social division of labour refers to occupational specialization, and technical division of
labour refers to task specialization. This condition is closely related to the concept of
comparative advantage by liberals who attach importance to the specialization of countries'
commodities to gain an advantage in the production process. In international trade. This means
that by engaging in trade, countries also shape their division of labor. Increase While trade
and mobility are expected to increase the elasticity of demand for human capital, they also
automatically reduce the bargaining power of labor (Perraton, 2003, p. 56). Moreover, in the
reduction of transaction costs due to technological advances, international agreements, non-
tariff barriers results in enormous specialization possibilities (Pomfret, 2014). A country can
choose the specific commodities or services offered in international trade which will also
affect the demand for labor from that country.
Another effect of international trade on labor can be seen in the inequality between
more skilled and less skilled labor. Trade liberalization leads to wage inequality due to
increased trade (Goldberg & Pavnick, 2004). It seems that recent international trade increases
the demand for more skilled workers to support the concept of specialization. Slaughter
(1998) believes that the demand for labor from the less skilled to the more skilled is a key
factor of wage inequality and it is actually happening in some countries such as the United
States and the United Kingdom. He added the argument that many countries with Such
inequality creates problems, such as higher unemployment rates and many job opportunities
avoiding less-skilled workers.
Transnational Production
There is general agreement that the growth of transnational production has shaped the
evolution of the global economy (O'Brien & Williams, 2020, p. 132). One of the main reasons
is that the global production system is a complex process. O'Brien and Williams (2013) argue
that this process involves multiple workers and workplaces with their integration with local,
national, regional and global systems. Because transnational production involves multi-level
actors. It becomes more complicated as it has to integrate different social, political and
economic backgrounds in the global economy. The main reason for the emergence of
transnational production is the innovation of communication and information technology
along with the advancement of transportation (Ietto-Gillies, 2003). This development
increases the possibility to separate production processes around the world.
A significant change affecting production processes across countries is the formation
of transnational companies (TNCs). As stated earlier, in the era of globalization, geographical
issues are no longer a big problem, therefore, TNCs can carry out production processes
separately in different parts of the world. Another reason TNCs invest abroad is because
production costs in developing countries are lower than in developed countries (O'Brien &
Williams, 2020). As stated by Ietto-Gillies (2003), there is a significant development of the
organization of production across countries due to the activities of transnational corporations.
In addition, it is argued that TNCs constitute a major part of the global production structure
and about 50 percent of world trade (O'Brien and Williams, 2020, p. 132). This fact shows the
impact of TNCs on the global production process. TNCs seem to be a key player in global
production.
TNCs play their role in the global economy through foreign direct investment (FDI).
Changes in the global production system are linked to increasing levels of FDI (O'Brien &
Williams, 2020). In addition, Perraton says that FDI by transnational corporations has grown
faster than trade (Perraton, 2003, p. 47). The success of TNCs to invest in many countries
around the world may be due to the recognition that TNCs are a good source of investment,
there is a transfer of technology, and there is an increase in the workforce (Waters, 2001, p.
46).
Indeed, there is skepticism towards transnational corporations and FDI. The concept of
transnational phenomena with interdependence between actors raises concerns of reduced
state sovereignty (Biersteker & Weber, 1996). This is also supported by the expansion of
capitalist companies that exploit labor, directly proportional to the need for workers to be able
to survive or survive to finance their own lives (Tyner, 2019). Moreover, for opponents of
capitalism, TNCs are believed to be a new worldwide method of exploitation that is
essentially "barbaric" and unacceptable (Waters, 2001). For example, a study conducted by
Doytch, Thelen, & Mendoza (2014) found the exploitation of child labor, with children forced
to work in fields for long hours, in a multinational tobacco company in Kazakhstan.
Therefore, for nationalist economic advocates, states must improve their ability to regulate
TNCs investing in their own countries (O'Brien and Williams, 2020).
However, for liberal supporters, there are The advantages offered by transnational
corporations with foreign direct investment. Epstein argues that this development can provide
more employment opportunities especially for developing countries, while also resulting in
wage increases because TNCs in developing countries have more productivity so they can pay
more (Epstein, 2003). In addition, TNCs with FDI can increase tax revenues through
increased economic activity in the host country and can help advance economic growth by
encouraging a more efficient division of labor (O'Brien & Williams, 2020, p. 137). Studies
conducted by Harrison in Mexico, Morocco and Venezuela show that TNCs help domestic
firms to break into export markets and they can improve workers' living standards as they pay
higher wages than domestic firms (Harrison, 1994).
Based on the explanation above, it can be seen that TNCs have a significant impact on
labor. One of the reasons TNCs with FDI are growing is that many developing countries are
implementing active policies to support industrialization and export to developed countries
(O'Brien and Williams, 2020). This is understandable because it will provide employment
opportunities in the country they are. Therefore, it is not surprising that many countries are
trying to attract TNCs to invest in their territories. With respect to the global division of labor,
TNCs will increase the demand for more skilled labor, as research conducted by Bruno, Crino
and Falzoni (2012) states that FDI increases the demand for more skilled labor in Poland.
Actors affected by the global political economy must make behavioral adjustments to
be able to face global competition which is currently increasing (O'Brien & Williams, 2020).
Coupled with technological advances in the form of machines, the value of labor has also
decreased because their portion of work can be replaced by machines (Tyner, 2019). The
higher demand for a more skilled workforce forces people to improve their abilities to
compete with others in the workplace. One of the reasons for this trend is to increase labor
productivity as it is a strong indicator of economic efficiency (Plasmans, 2003). In addition, it
is not surprising that TNCs promote division of labor to increase efficient production.
However, it seems that the labor market is shaped by TNC interests rather than national
interest.
International Trade, Transnational Production and Labor
One of the issues in relation to international trade and transnational production is not
respecting workers' rights. Many TNCs do not invest in their own countries because they want
to reduce their production costs. They tend to hire cheap labor and cut production costs with
forced labor in peripheral countries. As stated by Horvat (2020), the worst features of
exploitation are currently happening in all developing countries in the world.
In 2014, BBC News released a video inside the Apple assembly company. The video
shows that employees work under high pressure and for long, intensive periods of time. They
were forced to work standing up all day. In fact, the company installed electrical wires in t h e
machines so that employees could not lean back when tired. Employees work in a very
grueling environment. Although in 2010 there was a mass worker suicide at Foxconn, one of
the companies that manufactures Apple products, then Apple promised to improve facilitation
and working conditions, but the BBC video shows evidence to the contrary. For example,
everyone in China needs to carry an identity card. However, companies still take workers' IDs
directly when they enter the company (BBC News, 2014). Tyner (2019) also argues that
companies can collect profits not only from the products or services produced but also
through life insurance policies from workers who experience misfortune while performing
their duties.
However, not all TNCs tend to exploit labor for profit. A study analyzing foreign
direct investment and labor rights in 80 developing countries conducted by Busse,
Nunnenkamp, and Spatareanu showed different results. In terms of the correlation between
labor rights and TNCs, the study found that TNCs prefer to invest in countries that respect
labor rights (Busse, Nunnenkamp, & and Spatareanu, 2011). Moreover, labor violence in
potential host countries discourages TNCs from running their activities there, wherever it may
be (Busse, Nunnenkamp and Spatareanu, 2011). This condition shows that TNCs pay great
attention to labor rights, not only focus on their profits as well.
One solution to the above problem is to implement labor standards. Based on Heintz's
(2003) argument, the labor market should be for the larger society and should be governed by
rules, norms, and ethical standards that make allowance for the separate costs of
marketization. The International Labor Organization (ILO) is an organization that promotes
labor standards worldwide. The ILO holds conventions that cover basic human rights areas:
freedom of association and collective bargaining, elimination of forced labor, elimination of
child labor, and elimination of discrimination (Heintz, 2003; O'Brien and Willams, 2020).
However, the main problem in implementing labor standards is how to come up with labor
standards that can be applied worldwide. This is due to the disagreement among actors on the
purpose of labor standards. Furthermore, leaders in many liberal countries argue that
economic growth improves labor standards. Whereas, any interference in trade for labor
reasons will lower the gains from trade (O'Brien and Williams, 2020, p.195).
Conclusions
There are different perspectives on the global political economy. Economic
nationalists place the state as the main actor in the global political economy. This is related to
their concept of protectionism, protecting the economy from the global market. Meanwhile,
economic liberalists argue that states should collaborate with other actors in the global
economy. They believe that the global political economy involves multiple actors. Moreover,
the current global economy is more likely to adopt liberal values such as trade liberalization.
There are dynamics that shape the global political economy. They are international
trade and transnational production. Both dynamics have implications for the global division of
labor. International trade with the concept of 'comparative advantage' comparative advantage'
affects the specialization of labour. Whereas transnational production with TNCs has
implications in driving the division of labor around the world, especially in their host
countries. Both international trade and transnational production have benefits for the
participants. This is because TNCs can provide jobs and also improve the lives of workers.
However, there is skepticism about these dynamics. For example, they are believed to
play a role in wage inequality, especially between less skilled labor and more skilled labor.
Another example is the issue of worker exploitation, such as the Apple factory case and child
labor in tobacco factories. One solution that can be suggested is to enforce global labor
standards.
Results and Discussion of International Trade
According to Waters (2001) the primary and ongoing basis of economic
internationalization is trade. Trade itself is understood as the activity of two or more
individuals exchanging goods and services (O'Brien & Williams, 2020, p. 109). Such
activities would be called international trade if they are operated abroad. This international
trade can create relationships and interdependence between actors (Waters, 2001). As stated
by Ietto-Gillies (2003), that one evidence of state interconnectedness can be seen in
international trade activities in goods and services. Wallerstein and Marxist in Cohen (2017)
categorize countries into several levels, where there are dominant core countries, dependent
periphery countries and semi-fringe countries that are between the two categories. While core
countries enjoy a high level of technological development, selling sophisticated high-value
goods and services, the role of peripheral countries is simply to supply materials raw
materials, foodstuffs, and also cheap labor on the basis of highly unequal exchanges. Among
them, semi-periphery countries benefit from exploiting periphery countries even as they
themselves are exploited by core countries. This shows that international trade affects the
shape of the global political economy. One reason is that international trade has direct and
indirect effects on people and communities, for example, a family's consumption patterns are
affected by trade in goods (O'Brien & Williams, 2020).
One of the ways in which international trade affects the global economy is through a
free trade regime. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996). The theory of comparative advantage advises countries to
specialize in their most efficient products and services (O'Brien & Williams, 2020). The
ideology of comparative advantage serves to obscure uneven economic development progress
and unequal exchange between countries and regions (McBride & Shields, 1993). Therefore,
proponents of free trade believe that every country should engage in trade international and
reduce barriers.
Furthermore, according to liberal political economy, everyone can benefit from trade
as it can improve efficiency and increase productivity (O'Brien & Williams, 2020). For
example, Langenfeld and Nieberding (2005) estimate that trade growth has provided total
benefits to American consumers of about $2.3 trillion over the trade has provided total benefits
to American consumers of about $2.3 trillion during 1992-2002, or between $20,000 and
$22,000 per household in 2002. In contrast, nationalists believe that free trade is detrimental to
the national economy because it will weaken the economy unbalanced development and can
damage the environment (O'Brien & Williams, 2020). As in the case of Fiji, they are facing a
rapid and radical restructuring of the sugar or banana industry and this is potentially
disastrous for their economy as it is a fundamental commodity (Connel & Soutar, 2007).
Furthermore, in the international trading system, there are significant developments
that encourage trade liberalization. The emergence of the WTO (World Trade Organization),
the successor to the GATT (General Agreement on Tariffs and Trade), is believed to play an
important role in trade liberalization international. The WTO (and GATT before it) has
successfully liberalized trade and managed international trade through multilateral agreements
(Sampson, 2001). Jackson (1998) stated that the establishment of the WTO was the most
significant moment in the history of the world economy, even becoming a fundamental
institution in the international economy, especially with its dispute settlement procedures. The
WTO has changed the management of world trade in the following ways:
Change trade liberalization from being based on tariff adjustments to discussing
domestic policies, institutional practices and regulations.
Broaden the scope of trade and change the focus of negotiations from product
bargaining to policy.
Propose movement towards accession policies, for example, in the areas of subsidies
and trade-related investment measures and services (O'Brien & Williams, 2020).
Based on the above, it can be seen that the WTO has successfully played its role in
international trade, but there is the issue of many developing countries' interests not being
accommodated by the WTO (Sampson, 2001). In a d d i t i o n , countries developing
countries recognize the limitations of political influence in the international trade agreement
process (O'Brien & Williams, 2020). Another problem faced by developing countries is that
they lack the capacity to enforce WTO decisions as well as the high indirect costs of initiating
disputes with the WTO (Horlick, 2006, p. 220). For example, trade in agriculture, which is a
key interest of many developing countries, is particularly liberalized (Walter & Sen, 2009).
Apart from the role of the WTO, the influence of international trade on the global
political economy can be understood through its implications for the global division of labor
(Waters, 2001). The division of labor refers to the roles that people employ in the production
process (O'Brien & Williams, 2020). Waters (2001) states there are two types of division of
labour: social division of labour refers to occupational specialization, and technical division of
labour refers to task specialization. This condition is closely related to the concept of
comparative advantage by liberals who attach importance to the specialization of countries'
commodities to gain an advantage in the production process. In international trade. This means
that by engaging in trade, countries also shape their division of labor. Increase While trade
and mobility are expected to increase the elasticity of demand for human capital, they also
automatically reduce the bargaining power of labor (Perraton, 2003, p. 56). Moreover, in the
reduction of transaction costs due to technological advances, international agreements, non-
tariff barriers results in enormous specialization possibilities (Pomfret, 2014). A country can
choose the specific commodities or services offered in international trade which will also
affect the demand for labor from that country.
Another effect of international trade on labor can be seen in the inequality between
more skilled and less skilled labor. Trade liberalization leads to wage inequality due to
increased trade (Goldberg & Pavnick, 2004). It seems that recent international trade increases
the demand for more skilled workers to support the concept of specialization. Slaughter
(1998) believes that the demand for labor from the less skilled to the more skilled is a key
factor of wage inequality and it is actually happening in some countries such as the United
States and the United Kingdom. He added the argument that many countries with Such
inequality creates problems, such as higher unemployment rates and many job opportunities
avoiding less-skilled workers.
Transnational Production
There is general agreement that the growth of transnational production has shaped the
evolution of the global economy (O'Brien & Williams, 2020, p. 132). One of the main reasons
is that the global production system is a complex process. O'Brien and Williams (2013) argue
that this process involves multiple workers and workplaces with their integration with local,
national, regional and global systems. Because transnational production involves multi-level
actors. It becomes more complicated as it has to integrate different social, political and
economic backgrounds in the global economy. The main reason for the emergence of
transnational production is the innovation of communication and information technology
along with the advancement of transportation (Ietto-Gillies, 2003). This development
increases the possibility to separate production processes around the world.
A significant change affecting production processes across countries is the formation
of transnational companies (TNCs). As stated earlier, in the era of globalization, geographical
issues are no longer a big problem, therefore, TNCs can carry out production processes
separately in different parts of the world. Another reason TNCs invest abroad is because
production costs in developing countries are lower than in developed countries (O'Brien &
Williams, 2020). As stated by Ietto-Gillies (2003), there is a significant development of the
organization of production across countries due to the activities of transnational corporations.
In addition, it is argued that TNCs constitute a major part of the global production structure
and about 50 percent of world trade (O'Brien and Williams, 2020, p. 132). This fact shows the
impact of TNCs on the global production process. TNCs seem to be a key player in global
production.
TNCs play their role in the global economy through foreign direct investment (FDI).
Changes in the global production system are linked to increasing levels of FDI (O'Brien &
Williams, 2020). In addition, Perraton says that FDI by transnational corporations has grown
faster than trade (Perraton, 2003, p. 47). The success of TNCs to invest in many countries
around the world may be due to the recognition that TNCs are a good source of investment,
there is a transfer of technology, and there is an increase in the workforce (Waters, 2001, p.
46).
Indeed, there is skepticism towards transnational corporations and FDI. The concept of
transnational phenomena with interdependence between actors raises concerns of reduced
state sovereignty (Biersteker & Weber, 1996). This is also supported by the expansion of
capitalist companies that exploit labor, directly proportional to the need for workers to be able
to survive or survive to finance their own lives (Tyner, 2019). Moreover, for opponents of
capitalism, TNCs are believed to be a new worldwide method of exploitation that is
essentially "barbaric" and unacceptable (Waters, 2001). For example, a study conducted by
Doytch, Thelen, & Mendoza (2014) found the exploitation of child labor, with children forced
to work in fields for long hours, in a multinational tobacco company in Kazakhstan.
Therefore, for nationalist economic advocates, states must improve their ability to regulate
TNCs investing in their own countries (O'Brien and Williams, 2020).
However, for liberal supporters, there are The advantages offered by transnational
corporations with foreign direct investment. Epstein argues that this development can provide
more employment opportunities especially for developing countries, while also resulting in
wage increases because TNCs in developing countries have more productivity so they can pay
more (Epstein, 2003). In addition, TNCs with FDI can increase tax revenues through
increased economic activity in the host country and can help advance economic growth by
encouraging a more efficient division of labor (O'Brien & Williams, 2020, p. 137). Studies
conducted by Harrison in Mexico, Morocco and Venezuela show that TNCs help domestic
firms to break into export markets and they can improve workers' living standards as they pay
higher wages than domestic firms (Harrison, 1994).
Based on the explanation above, it can be seen that TNCs have a significant impact on
labor. One of the reasons TNCs with FDI are growing is that many developing countries are
implementing active policies to support industrialization and export to developed countries
(O'Brien and Williams, 2020). This is understandable because it will provide employment
opportunities in the country they are. Therefore, it is not surprising that many countries are
trying to attract TNCs to invest in their territories. With respect to the global division of labor,
TNCs will increase the demand for more skilled labor, as research conducted by Bruno, Crino
and Falzoni (2012) states that FDI increases the demand for more skilled labor in Poland.
Actors affected by the global political economy must make behavioral adjustments to
be able to face global competition which is currently increasing (O'Brien & Williams, 2020).
Coupled with technological advances in the form of machines, the value of labor has also
decreased because their portion of work can be replaced by machines (Tyner, 2019). The
higher demand for a more skilled workforce forces people to improve their abilities to
compete with others in the workplace. One of the reasons for this trend is to increase labor
productivity as it is a strong indicator of economic efficiency (Plasmans, 2003). In addition, it
is not surprising that TNCs promote division of labor to increase efficient production.
However, it seems that the labor market is shaped by TNC interests rather than national
interest.
International Trade, Transnational Production and Labor
One of the issues in relation to international trade and transnational production is not
respecting workers' rights. Many TNCs do not invest in their own countries because they want
to reduce their production costs. They tend to hire cheap labor and cut production costs with
forced labor in peripheral countries. As stated by Horvat (2020), the worst features of
exploitation are currently happening in all developing countries in the world.
In 2014, BBC News released a video inside the Apple assembly company. The video
shows that employees work under high pressure and for long, intensive periods of time. They
were forced to work standing up all day. In fact, the company installed electrical wires in t h e
machines so that employees could not lean back when tired. Employees work in a very
grueling environment. Although in 2010 there was a mass worker suicide at Foxconn, one of
the companies that manufactures Apple products, then Apple promised to improve facilitation
and working conditions, but the BBC video shows evidence to the contrary. For example,
everyone in China needs to carry an identity card. However, companies still take workers' IDs
directly when they enter the company (BBC News, 2014). Tyner (2019) also argues that
companies can collect profits not only from the products or services produced but also
through life insurance policies from workers who experience misfortune while performing
their duties.
However, not all TNCs tend to exploit labor for profit. A study analyzing foreign
direct investment and labor rights in 80 developing countries conducted by Busse,
Nunnenkamp, and Spatareanu showed different results. In terms of the correlation between
labor rights and TNCs, the study found that TNCs prefer to invest in countries that respect
labor rights (Busse, Nunnenkamp, & and Spatareanu, 2011). Moreover, labor violence in
potential host countries discourages TNCs from running their activities there, wherever it may
be (Busse, Nunnenkamp and Spatareanu, 2011). This condition shows that TNCs pay great
attention to labor rights, not only focus on their profits as well.
One solution to the above problem is to implement labor standards. Based on Heintz's
(2003) argument, the labor market should be for the larger society and should be governed by
rules, norms, and ethical standards that make allowance for the separate costs of
marketization. The International Labor Organization (ILO) is an organization that promotes
labor standards worldwide. The ILO holds conventions that cover basic human rights areas:
freedom of association and collective bargaining, elimination of forced labor, elimination of
child labor, and elimination of discrimination (Heintz, 2003; O'Brien and Willams, 2020).
However, the main problem in implementing labor standards is how to come up with labor
standards that can be applied worldwide. This is due to the disagreement among actors on the
purpose of labor standards. Furthermore, leaders in many liberal countries argue that
economic growth improves labor standards. Whereas, any interference in trade for labor
reasons will lower the gains from trade (O'Brien and Williams, 2020, p.195).
Conclusions
There are different perspectives on the global political economy. Economic
nationalists place the state as the main actor in the global political economy. This is related to
their concept of protectionism, protecting the economy from the global market. Meanwhile,
economic liberalists argue that states should collaborate with other actors in the global
economy. They believe that the global political economy involves multiple actors. Moreover,
the current global economy is more likely to adopt liberal values such as trade liberalization.
There are dynamics that shape the global political economy. They are international
trade and transnational production. Both dynamics have implications for the global division of
labor. International trade with the concept of 'comparative advantage' comparative advantage'
affects the specialization of labour. Whereas transnational production with TNCs has
implications in driving the division of labor around the world, especially in their host
countries. Both international trade and transnational production have benefits for the
participants. This is because TNCs can provide jobs and also improve the lives of workers.
However, there is skepticism about these dynamics. For example, they are believed to
play a role in wage inequality, especially between less skilled labor and more skilled labor.
Another example is the issue of worker exploitation, such as the Apple factory case and child
labor in tobacco factories. One solution that can be suggested is to enforce global labor
standards.
Results and Discussion of International Trade
According to Waters (2001) the primary and ongoing basis of economic
internationalization is trade. Trade itself is understood as the activity of two or more
individuals exchanging goods and services (O'Brien & Williams, 2020, p. 109). Such
activities would be called international trade if they are operated abroad. This international
trade can create relationships and interdependence between actors (Waters, 2001). As stated
by Ietto-Gillies (2003), that one evidence of state interconnectedness can be seen in
international trade activities in goods and services. Wallerstein and Marxist in Cohen (2017)
categorize countries into several levels, where there are dominant core countries, dependent
periphery countries and semi-fringe countries that are between the two categories. While core
countries enjoy a high level of technological development, selling sophisticated high-value
goods and services, the role of peripheral countries is simply to supply materials raw
materials, foodstuffs, and also cheap labor on the basis of highly unequal exchanges. Among
them, semi-periphery countries benefit from exploiting periphery countries even as they
themselves are exploited by core countries. This shows that international trade affects the
shape of the global political economy. One reason is that international trade has direct and
indirect effects on people and communities, for example, a family's consumption patterns are
affected by trade in goods (O'Brien & Williams, 2020).
One of the ways in which international trade affects the global economy is through a
free trade regime. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996). The theory of comparative advantage advises countries to
specialize in their most efficient products and services (O'Brien & Williams, 2020). The
ideology of comparative advantage serves to obscure uneven economic development progress
and unequal exchange between countries and regions (McBride & Shields, 1993). Therefore,
proponents of free trade believe that every country should engage in trade international and
reduce barriers.
Furthermore, according to liberal political economy, everyone can benefit from trade
as it can improve efficiency and increase productivity (O'Brien & Williams, 2020). For
example, Langenfeld and Nieberding (2005) estimate that trade growth has provided total
benefits to American consumers of about $2.3 trillion over the trade has provided total benefits
to American consumers of about $2.3 trillion during 1992-2002, or between $20,000 and
$22,000 per household in 2002. In contrast, nationalists believe that free trade is detrimental to
the national economy because it will weaken the economy unbalanced development and can
damage the environment (O'Brien & Williams, 2020). As in the case of Fiji, they are facing a
rapid and radical restructuring of the sugar or banana industry and this is potentially
disastrous for their economy as it is a fundamental commodity (Connel & Soutar, 2007).
Furthermore, in the international trading system, there are significant developments
that encourage trade liberalization. The emergence of the WTO (World Trade Organization),
the successor to the GATT (General Agreement on Tariffs and Trade), is believed to play an
important role in trade liberalization international. The WTO (and GATT before it) has
successfully liberalized trade and managed international trade through multilateral agreements
(Sampson, 2001). Jackson (1998) stated that the establishment of the WTO was the most
significant moment in the history of the world economy, even becoming a fundamental
institution in the international economy, especially with its dispute settlement procedures. The
WTO has changed the management of world trade in the following ways:
Change trade liberalization from being based on tariff adjustments to discussing
domestic policies, institutional practices and regulations.
Broaden the scope of trade and change the focus of negotiations from product
bargaining to policy.
Propose movement towards accession policies, for example, in the areas of subsidies
and trade-related investment measures and services (O'Brien & Williams, 2020).
Based on the above, it can be seen that the WTO has successfully played its role in
international trade, but there is the issue of many developing countries' interests not being
accommodated by the WTO (Sampson, 2001). In a d d i t i o n , countries developing
countries recognize the limitations of political influence in the international trade agreement
process (O'Brien & Williams, 2020). Another problem faced by developing countries is that
they lack the capacity to enforce WTO decisions as well as the high indirect costs of initiating
disputes with the WTO (Horlick, 2006, p. 220). For example, trade in agriculture, which is a
key interest of many developing countries, is particularly liberalized (Walter & Sen, 2009).
Apart from the role of the WTO, the influence of international trade on the global
political economy can be understood through its implications for the global division of labor
(Waters, 2001). The division of labor refers to the roles that people employ in the production
process (O'Brien & Williams, 2020). Waters (2001) states there are two types of division of
labour: social division of labour refers to occupational specialization, and technical division of
labour refers to task specialization. This condition is closely related to the concept of
comparative advantage by liberals who attach importance to the specialization of countries'
commodities to gain an advantage in the production process. In international trade. This means
that by engaging in trade, countries also shape their division of labor. Increase While trade
and mobility are expected to increase the elasticity of demand for human capital, they also
automatically reduce the bargaining power of labor (Perraton, 2003, p. 56). Moreover, in the
reduction of transaction costs due to technological advances, international agreements, non-
tariff barriers results in enormous specialization possibilities (Pomfret, 2014). A country can
choose the specific commodities or services offered in international trade which will also
affect the demand for labor from that country.
Another effect of international trade on labor can be seen in the inequality between
more skilled and less skilled labor. Trade liberalization leads to wage inequality due to
increased trade (Goldberg & Pavnick, 2004). It seems that recent international trade increases
the demand for more skilled workers to support the concept of specialization. Slaughter
(1998) believes that the demand for labor from the less skilled to the more skilled is a key
factor of wage inequality and it is actually happening in some countries such as the United
States and the United Kingdom. He added the argument that many countries with Such
inequality creates problems, such as higher unemployment rates and many job opportunities
avoiding less-skilled workers.
Transnational Production
There is general agreement that the growth of transnational production has shaped the
evolution of the global economy (O'Brien & Williams, 2020, p. 132). One of the main reasons
is that the global production system is a complex process. O'Brien and Williams (2013) argue
that this process involves multiple workers and workplaces with their integration with local,
national, regional and global systems. Because transnational production involves multi-level
actors. It becomes more complicated as it has to integrate different social, political and
economic backgrounds in the global economy. The main reason for the emergence of
transnational production is the innovation of communication and information technology
along with the advancement of transportation (Ietto-Gillies, 2003). This development
increases the possibility to separate production processes around the world.
A significant change affecting production processes across countries is the formation
of transnational companies (TNCs). As stated earlier, in the era of globalization, geographical
issues are no longer a big problem, therefore, TNCs can carry out production processes
separately in different parts of the world. Another reason TNCs invest abroad is because
production costs in developing countries are lower than in developed countries (O'Brien &
Williams, 2020). As stated by Ietto-Gillies (2003), there is a significant development of the
organization of production across countries due to the activities of transnational corporations.
In addition, it is argued that TNCs constitute a major part of the global production structure
and about 50 percent of world trade (O'Brien and Williams, 2020, p. 132). This fact shows the
impact of TNCs on the global production process. TNCs seem to be a key player in global
production.
TNCs play their role in the global economy through foreign direct investment (FDI).
Changes in the global production system are linked to increasing levels of FDI (O'Brien &
Williams, 2020). In addition, Perraton says that FDI by transnational corporations has grown
faster than trade (Perraton, 2003, p. 47). The success of TNCs to invest in many countries
around the world may be due to the recognition that TNCs are a good source of investment,
there is a transfer of technology, and there is an increase in the workforce (Waters, 2001, p.
46).
Indeed, there is skepticism towards transnational corporations and FDI. The concept of
transnational phenomena with interdependence between actors raises concerns of reduced
state sovereignty (Biersteker & Weber, 1996). This is also supported by the expansion of
capitalist companies that exploit labor, directly proportional to the need for workers to be able
to survive or survive to finance their own lives (Tyner, 2019). Moreover, for opponents of
capitalism, TNCs are believed to be a new worldwide method of exploitation that is
essentially "barbaric" and unacceptable (Waters, 2001). For example, a study conducted by
Doytch, Thelen, & Mendoza (2014) found the exploitation of child labor, with children forced
to work in fields for long hours, in a multinational tobacco company in Kazakhstan.
Therefore, for nationalist economic advocates, states must improve their ability to regulate
TNCs investing in their own countries (O'Brien and Williams, 2020).
However, for liberal supporters, there are The advantages offered by transnational
corporations with foreign direct investment. Epstein argues that this development can provide
more employment opportunities especially for developing countries, while also resulting in
wage increases because TNCs in developing countries have more productivity so they can pay
more (Epstein, 2003). In addition, TNCs with FDI can increase tax revenues through
increased economic activity in the host country and can help advance economic growth by
encouraging a more efficient division of labor (O'Brien & Williams, 2020, p. 137). Studies
conducted by Harrison in Mexico, Morocco and Venezuela show that TNCs help domestic
firms to break into export markets and they can improve workers' living standards as they pay
higher wages than domestic firms (Harrison, 1994).
Based on the explanation above, it can be seen that TNCs have a significant impact on
labor. One of the reasons TNCs with FDI are growing is that many developing countries are
implementing active policies to support industrialization and export to developed countries
(O'Brien and Williams, 2020). This is understandable because it will provide employment
opportunities in the country they are. Therefore, it is not surprising that many countries are
trying to attract TNCs to invest in their territories. With respect to the global division of labor,
TNCs will increase the demand for more skilled labor, as research conducted by Bruno, Crino
and Falzoni (2012) states that FDI increases the demand for more skilled labor in Poland.
Actors affected by the global political economy must make behavioral adjustments to
be able to face global competition which is currently increasing (O'Brien & Williams, 2020).
Coupled with technological advances in the form of machines, the value of labor has also
decreased because their portion of work can be replaced by machines (Tyner, 2019). The
higher demand for a more skilled workforce forces people to improve their abilities to
compete with others in the workplace. One of the reasons for this trend is to increase labor
productivity as it is a strong indicator of economic efficiency (Plasmans, 2003). In addition, it
is not surprising that TNCs promote division of labor to increase efficient production.
However, it seems that the labor market is shaped by TNC interests rather than national
interest.
International Trade, Transnational Production and Labor
One of the issues in relation to international trade and transnational production is not
respecting workers' rights. Many TNCs do not invest in their own countries because they want
to reduce their production costs. They tend to hire cheap labor and cut production costs with
forced labor in peripheral countries. As stated by Horvat (2020), the worst features of
exploitation are currently happening in all developing countries in the world.
In 2014, BBC News released a video inside the Apple assembly company. The video
shows that employees work under high pressure and for long, intensive periods of time. They
were forced to work standing up all day. In fact, the company installed electrical wires in t h e
machines so that employees could not lean back when tired. Employees work in a very
grueling environment. Although in 2010 there was a mass worker suicide at Foxconn, one of
the companies that manufactures Apple products, then Apple promised to improve facilitation
and working conditions, but the BBC video shows evidence to the contrary. For example,
everyone in China needs to carry an identity card. However, companies still take workers' IDs
directly when they enter the company (BBC News, 2014). Tyner (2019) also argues that
companies can collect profits not only from the products or services produced but also
through life insurance policies from workers who experience misfortune while performing
their duties.
However, not all TNCs tend to exploit labor for profit. A study analyzing foreign
direct investment and labor rights in 80 developing countries conducted by Busse,
Nunnenkamp, and Spatareanu showed different results. In terms of the correlation between
labor rights and TNCs, the study found that TNCs prefer to invest in countries that respect
labor rights (Busse, Nunnenkamp, & and Spatareanu, 2011). Moreover, labor violence in
potential host countries discourages TNCs from running their activities there, wherever it may
be (Busse, Nunnenkamp and Spatareanu, 2011). This condition shows that TNCs pay great
attention to labor rights, not only focus on their profits as well.
One solution to the above problem is to implement labor standards. Based on Heintz's
(2003) argument, the labor market should be for the larger society and should be governed by
rules, norms, and ethical standards that make allowance for the separate costs of
marketization. The International Labor Organization (ILO) is an organization that promotes
labor standards worldwide. The ILO holds conventions that cover basic human rights areas:
freedom of association and collective bargaining, elimination of forced labor, elimination of
child labor, and elimination of discrimination (Heintz, 2003; O'Brien and Willams, 2020).
However, the main problem in implementing labor standards is how to come up with labor
standards that can be applied worldwide. This is due to the disagreement among actors on the
purpose of labor standards. Furthermore, leaders in many liberal countries argue that
economic growth improves labor standards. Whereas, any interference in trade for labor
reasons will lower the gains from trade (O'Brien and Williams, 2020, p.195).
Conclusions
There are different perspectives on the global political economy. Economic
nationalists place the state as the main actor in the global political economy. This is related to
their concept of protectionism, protecting the economy from the global market. Meanwhile,
economic liberalists argue that states should collaborate with other actors in the global
economy. They believe that the global political economy involves multiple actors. Moreover,
the current global economy is more likely to adopt liberal values such as trade liberalization.
There are dynamics that shape the global political economy. They are international
trade and transnational production. Both dynamics have implications for the global division of
labor. International trade with the concept of 'comparative advantage' comparative advantage'
affects the specialization of labour. Whereas transnational production with TNCs has
implications in driving the division of labor around the world, especially in their host
countries. Both international trade and transnational production have benefits for the
participants. This is because TNCs can provide jobs and also improve the lives of workers.
However, there is skepticism about these dynamics. For example, they are believed to
play a role in wage inequality, especially between less skilled labor and more skilled labor.
Another example is the issue of worker exploitation, such as the Apple factory case and child
labor in tobacco factories. One solution that can be suggested is to enforce global labor
standards.
Results and Discussion of International Trade
According to Waters (2001) the primary and ongoing basis of economic
internationalization is trade. Trade itself is understood as the activity of two or more
individuals exchanging goods and services (O'Brien & Williams, 2020, p. 109). Such
activities would be called international trade if they are operated abroad. This international
trade can create relationships and interdependence between actors (Waters, 2001). As stated
by Ietto-Gillies (2003), that one evidence of state interconnectedness can be seen in
international trade activities in goods and services. Wallerstein and Marxist in Cohen (2017)
categorize countries into several levels, where there are dominant core countries, dependent
periphery countries and semi-fringe countries that are between the two categories. While core
countries enjoy a high level of technological development, selling sophisticated high-value
goods and services, the role of peripheral countries is simply to supply materials raw
materials, foodstuffs, and also cheap labor on the basis of highly unequal exchanges. Among
them, semi-periphery countries benefit from exploiting periphery countries even as they
themselves are exploited by core countries. This shows that international trade affects the
shape of the global political economy. One reason is that international trade has direct and
indirect effects on people and communities, for example, a family's consumption patterns are
affected by trade in goods (O'Brien & Williams, 2020).
One of the ways in which international trade affects the global economy is through a
free trade regime. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996). The theory of comparative advantage advises countries to
specialize in their most efficient products and services (O'Brien & Williams, 2020). The
ideology of comparative advantage serves to obscure uneven economic development progress
and unequal exchange between countries and regions (McBride & Shields, 1993). Therefore,
proponents of free trade believe that every country should engage in trade international and
reduce barriers.
Furthermore, according to liberal political economy, everyone can benefit from trade
as it can improve efficiency and increase productivity (O'Brien & Williams, 2020). For
example, Langenfeld and Nieberding (2005) estimate that trade growth has provided total
benefits to American consumers of about $2.3 trillion over the trade has provided total benefits
to American consumers of about $2.3 trillion during 1992-2002, or between $20,000 and
$22,000 per household in 2002. In contrast, nationalists believe that free trade is detrimental to
the national economy because it will weaken the economy unbalanced development and can
damage the environment (O'Brien & Williams, 2020). As in the case of Fiji, they are facing a
rapid and radical restructuring of the sugar or banana industry and this is potentially
disastrous for their economy as it is a fundamental commodity (Connel & Soutar, 2007).
Furthermore, in the international trading system, there are significant developments
that encourage trade liberalization. The emergence of the WTO (World Trade Organization),
the successor to the GATT (General Agreement on Tariffs and Trade), is believed to play an
important role in trade liberalization international. The WTO (and GATT before it) has
successfully liberalized trade and managed international trade through multilateral agreements
(Sampson, 2001). Jackson (1998) stated that the establishment of the WTO was the most
significant moment in the history of the world economy, even becoming a fundamental
institution in the international economy, especially with its dispute settlement procedures. The
WTO has changed the management of world trade in the following ways:
Change trade liberalization from being based on tariff adjustments to discussing
domestic policies, institutional practices and regulations.
Broaden the scope of trade and change the focus of negotiations from product
bargaining to policy.
Propose movement towards accession policies, for example, in the areas of subsidies
and trade-related investment measures and services (O'Brien & Williams, 2020).
Based on the above, it can be seen that the WTO has successfully played its role in
international trade, but there is the issue of many developing countries' interests not being
accommodated by the WTO (Sampson, 2001). In a d d i t i o n , countries developing
countries recognize the limitations of political influence in the international trade agreement
process (O'Brien & Williams, 2020). Another problem faced by developing countries is that
they lack the capacity to enforce WTO decisions as well as the high indirect costs of initiating
disputes with the WTO (Horlick, 2006, p. 220). For example, trade in agriculture, which is a
key interest of many developing countries, is particularly liberalized (Walter & Sen, 2009).
Apart from the role of the WTO, the influence of international trade on the global
political economy can be understood through its implications for the global division of labor
(Waters, 2001). The division of labor refers to the roles that people employ in the production
process (O'Brien & Williams, 2020). Waters (2001) states there are two types of division of
labour: social division of labour refers to occupational specialization, and technical division of
labour refers to task specialization. This condition is closely related to the concept of
comparative advantage by liberals who attach importance to the specialization of countries'
commodities to gain an advantage in the production process. In international trade. This means
that by engaging in trade, countries also shape their division of labor. Increase While trade
and mobility are expected to increase the elasticity of demand for human capital, they also
automatically reduce the bargaining power of labor (Perraton, 2003, p. 56). Moreover, in the
reduction of transaction costs due to technological advances, international agreements, non-
tariff barriers results in enormous specialization possibilities (Pomfret, 2014). A country can
choose the specific commodities or services offered in international trade which will also
affect the demand for labor from that country.
Another effect of international trade on labor can be seen in the inequality between
more skilled and less skilled labor. Trade liberalization leads to wage inequality due to
increased trade (Goldberg & Pavnick, 2004). It seems that recent international trade increases
the demand for more skilled workers to support the concept of specialization. Slaughter
(1998) believes that the demand for labor from the less skilled to the more skilled is a key
factor of wage inequality and it is actually happening in some countries such as the United
States and the United Kingdom. He added the argument that many countries with Such
inequality creates problems, such as higher unemployment rates and many job opportunities
avoiding less-skilled workers.
Transnational Production
There is general agreement that the growth of transnational production has shaped the
evolution of the global economy (O'Brien & Williams, 2020, p. 132). One of the main reasons
is that the global production system is a complex process. O'Brien and Williams (2013) argue
that this process involves multiple workers and workplaces with their integration with local,
national, regional and global systems. Because transnational production involves multi-level
actors. It becomes more complicated as it has to integrate different social, political and
economic backgrounds in the global economy. The main reason for the emergence of
transnational production is the innovation of communication and information technology
along with the advancement of transportation (Ietto-Gillies, 2003). This development
increases the possibility to separate production processes around the world.
A significant change affecting production processes across countries is the formation
of transnational companies (TNCs). As stated earlier, in the era of globalization, geographical
issues are no longer a big problem, therefore, TNCs can carry out production processes
separately in different parts of the world. Another reason TNCs invest abroad is because
production costs in developing countries are lower than in developed countries (O'Brien &
Williams, 2020). As stated by Ietto-Gillies (2003), there is a significant development of the
organization of production across countries due to the activities of transnational corporations.
In addition, it is argued that TNCs constitute a major part of the global production structure
and about 50 percent of world trade (O'Brien and Williams, 2020, p. 132). This fact shows the
impact of TNCs on the global production process. TNCs seem to be a key player in global
production.
TNCs play their role in the global economy through foreign direct investment (FDI).
Changes in the global production system are linked to increasing levels of FDI (O'Brien &
Williams, 2020). In addition, Perraton says that FDI by transnational corporations has grown
faster than trade (Perraton, 2003, p. 47). The success of TNCs to invest in many countries
around the world may be due to the recognition that TNCs are a good source of investment,
there is a transfer of technology, and there is an increase in the workforce (Waters, 2001, p.
46).
Indeed, there is skepticism towards transnational corporations and FDI. The concept of
transnational phenomena with interdependence between actors raises concerns of reduced
state sovereignty (Biersteker & Weber, 1996). This is also supported by the expansion of
capitalist companies that exploit labor, directly proportional to the need for workers to be able
to survive or survive to finance their own lives (Tyner, 2019). Moreover, for opponents of
capitalism, TNCs are believed to be a new worldwide method of exploitation that is
essentially "barbaric" and unacceptable (Waters, 2001). For example, a study conducted by
Doytch, Thelen, & Mendoza (2014) found the exploitation of child labor, with children forced
to work in fields for long hours, in a multinational tobacco company in Kazakhstan.
Therefore, for nationalist economic advocates, states must improve their ability to regulate
TNCs investing in their own countries (O'Brien and Williams, 2020).
However, for liberal supporters, there are The advantages offered by transnational
corporations with foreign direct investment. Epstein argues that this development can provide
more employment opportunities especially for developing countries, while also resulting in
wage increases because TNCs in developing countries have more productivity so they can pay
more (Epstein, 2003). In addition, TNCs with FDI can increase tax revenues through
increased economic activity in the host country and can help advance economic growth by
encouraging a more efficient division of labor (O'Brien & Williams, 2020, p. 137). Studies
conducted by Harrison in Mexico, Morocco and Venezuela show that TNCs help domestic
firms to break into export markets and they can improve workers' living standards as they pay
higher wages than domestic firms (Harrison, 1994).
Based on the explanation above, it can be seen that TNCs have a significant impact on
labor. One of the reasons TNCs with FDI are growing is that many developing countries are
implementing active policies to support industrialization and export to developed countries
(O'Brien and Williams, 2020). This is understandable because it will provide employment
opportunities in the country they are. Therefore, it is not surprising that many countries are
trying to attract TNCs to invest in their territories. With respect to the global division of labor,
TNCs will increase the demand for more skilled labor, as research conducted by Bruno, Crino
and Falzoni (2012) states that FDI increases the demand for more skilled labor in Poland.
Actors affected by the global political economy must make behavioral adjustments to
be able to face global competition which is currently increasing (O'Brien & Williams, 2020).
Coupled with technological advances in the form of machines, the value of labor has also
decreased because their portion of work can be replaced by machines (Tyner, 2019). The
higher demand for a more skilled workforce forces people to improve their abilities to
compete with others in the workplace. One of the reasons for this trend is to increase labor
productivity as it is a strong indicator of economic efficiency (Plasmans, 2003). In addition, it
is not surprising that TNCs promote division of labor to increase efficient production.
However, it seems that the labor market is shaped by TNC interests rather than national
interest.
International Trade, Transnational Production and Labor
One of the issues in relation to international trade and transnational production is not
respecting workers' rights. Many TNCs do not invest in their own countries because they want
to reduce their production costs. They tend to hire cheap labor and cut production costs with
forced labor in peripheral countries. As stated by Horvat (2020), the worst features of
exploitation are currently happening in all developing countries in the world.
In 2014, BBC News released a video inside the Apple assembly company. The video
shows that employees work under high pressure and for long, intensive periods of time. They
were forced to work standing up all day. In fact, the company installed electrical wires in t h e
machines so that employees could not lean back when tired. Employees work in a very
grueling environment. Although in 2010 there was a mass worker suicide at Foxconn, one of
the companies that manufactures Apple products, then Apple promised to improve facilitation
and working conditions, but the BBC video shows evidence to the contrary. For example,
everyone in China needs to carry an identity card. However, companies still take workers' IDs
directly when they enter the company (BBC News, 2014). Tyner (2019) also argues that
companies can collect profits not only from the products or services produced but also
through life insurance policies from workers who experience misfortune while performing
their duties.
However, not all TNCs tend to exploit labor for profit. A study analyzing foreign
direct investment and labor rights in 80 developing countries conducted by Busse,
Nunnenkamp, and Spatareanu showed different results. In terms of the correlation between
labor rights and TNCs, the study found that TNCs prefer to invest in countries that respect
labor rights (Busse, Nunnenkamp, & and Spatareanu, 2011). Moreover, labor violence in
potential host countries discourages TNCs from running their activities there, wherever it may
be (Busse, Nunnenkamp and Spatareanu, 2011). This condition shows that TNCs pay great
attention to labor rights, not only focus on their profits as well.
One solution to the above problem is to implement labor standards. Based on Heintz's
(2003) argument, the labor market should be for the larger society and should be governed by
rules, norms, and ethical standards that make allowance for the separate costs of
marketization. The International Labor Organization (ILO) is an organization that promotes
labor standards worldwide. The ILO holds conventions that cover basic human rights areas:
freedom of association and collective bargaining, elimination of forced labor, elimination of
child labor, and elimination of discrimination (Heintz, 2003; O'Brien and Willams, 2020).
However, the main problem in implementing labor standards is how to come up with labor
standards that can be applied worldwide. This is due to the disagreement among actors on the
purpose of labor standards. Furthermore, leaders in many liberal countries argue that
economic growth improves labor standards. Whereas, any interference in trade for labor
reasons will lower the gains from trade (O'Brien and Williams, 2020, p.195).
Conclusions
There are different perspectives on the global political economy. Economic
nationalists place the state as the main actor in the global political economy. This is related to
their concept of protectionism, protecting the economy from the global market. Meanwhile,
economic liberalists argue that states should collaborate with other actors in the global
economy. They believe that the global political economy involves multiple actors. Moreover,
the current global economy is more likely to adopt liberal values such as trade liberalization.
There are dynamics that shape the global political economy. They are international
trade and transnational production. Both dynamics have implications for the global division of
labor. International trade with the concept of 'comparative advantage' comparative advantage'
affects the specialization of labour. Whereas transnational production with TNCs has
implications in driving the division of labor around the world, especially in their host
countries. Both international trade and transnational production have benefits for the
participants. This is because TNCs can provide jobs and also improve the lives of workers.
However, there is skepticism about these dynamics. For example, they are believed to
play a role in wage inequality, especially between less skilled labor and more skilled labor.
Another example is the issue of worker exploitation, such as the Apple factory case and child
labor in tobacco factories. One solution that can be suggested is to enforce global labor
standards.
Results and Discussion of International Trade
According to Waters (2001) the primary and ongoing basis of economic
internationalization is trade. Trade itself is understood as the activity of two or more
individuals exchanging goods and services (O'Brien & Williams, 2020, p. 109). Such
activities would be called international trade if they are operated abroad. This international
trade can create relationships and interdependence between actors (Waters, 2001). As stated
by Ietto-Gillies (2003), that one evidence of state interconnectedness can be seen in
international trade activities in goods and services. Wallerstein and Marxist in Cohen (2017)
categorize countries into several levels, where there are dominant core countries, dependent
periphery countries and semi-fringe countries that are between the two categories. While core
countries enjoy a high level of technological development, selling sophisticated high-value
goods and services, the role of peripheral countries is simply to supply materials raw
materials, foodstuffs, and also cheap labor on the basis of highly unequal exchanges. Among
them, semi-periphery countries benefit from exploiting periphery countries even as they
themselves are exploited by core countries. This shows that international trade affects the
shape of the global political economy. One reason is that international trade has direct and
indirect effects on people and communities, for example, a family's consumption patterns are
affected by trade in goods (O'Brien & Williams, 2020).
One of the ways in which international trade affects the global economy is through a
free trade regime. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996). The theory of comparative advantage advises countries to
specialize in their most efficient products and services (O'Brien & Williams, 2020). The
ideology of comparative advantage serves to obscure uneven economic development progress
and unequal exchange between countries and regions (McBride & Shields, 1993). Therefore,
proponents of free trade believe that every country should engage in trade international and
reduce barriers.
Furthermore, according to liberal political economy, everyone can benefit from trade
as it can improve efficiency and increase productivity (O'Brien & Williams, 2020). For
example, Langenfeld and Nieberding (2005) estimate that trade growth has provided total
benefits to American consumers of about $2.3 trillion over the trade has provided total benefits
to American consumers of about $2.3 trillion during 1992-2002, or between $20,000 and
$22,000 per household in 2002. In contrast, nationalists believe that free trade is detrimental to
the national economy because it will weaken the economy unbalanced development and can
damage the environment (O'Brien & Williams, 2020). As in the case of Fiji, they are facing a
rapid and radical restructuring of the sugar or banana industry and this is potentially
disastrous for their economy as it is a fundamental commodity (Connel & Soutar, 2007).
Furthermore, in the international trading system, there are significant developments
that encourage trade liberalization. The emergence of the WTO (World Trade Organization),
the successor to the GATT (General Agreement on Tariffs and Trade), is believed to play an
important role in trade liberalization international. The WTO (and GATT before it) has
successfully liberalized trade and managed international trade through multilateral agreements
(Sampson, 2001). Jackson (1998) stated that the establishment of the WTO was the most
significant moment in the history of the world economy, even becoming a fundamental
institution in the international economy, especially with its dispute settlement procedures. The
WTO has changed the management of world trade in the following ways:
Change trade liberalization from being based on tariff adjustments to discussing
domestic policies, institutional practices and regulations.
Broaden the scope of trade and change the focus of negotiations from product
bargaining to policy.
Propose movement towards accession policies, for example, in the areas of subsidies
and trade-related investment measures and services (O'Brien & Williams, 2020).
Based on the above, it can be seen that the WTO has successfully played its role in
international trade, but there is the issue of many developing countries' interests not being
accommodated by the WTO (Sampson, 2001). In a d d i t i o n , countries developing
countries recognize the limitations of political influence in the international trade agreement
process (O'Brien & Williams, 2020). Another problem faced by developing countries is that
they lack the capacity to enforce WTO decisions as well as the high indirect costs of initiating
disputes with the WTO (Horlick, 2006, p. 220). For example, trade in agriculture, which is a
key interest of many developing countries, is particularly liberalized (Walter & Sen, 2009).
Apart from the role of the WTO, the influence of international trade on the global
political economy can be understood through its implications for the global division of labor
(Waters, 2001). The division of labor refers to the roles that people employ in the production
process (O'Brien & Williams, 2020). Waters (2001) states there are two types of division of
labour: social division of labour refers to occupational specialization, and technical division of
labour refers to task specialization. This condition is closely related to the concept of
comparative advantage by liberals who attach importance to the specialization of countries'
commodities to gain an advantage in the production process. In international trade. This means
that by engaging in trade, countries also shape their division of labor. Increase While trade
and mobility are expected to increase the elasticity of demand for human capital, they also
automatically reduce the bargaining power of labor (Perraton, 2003, p. 56). Moreover, in the
reduction of transaction costs due to technological advances, international agreements, non-
tariff barriers results in enormous specialization possibilities (Pomfret, 2014). A country can
choose the specific commodities or services offered in international trade which will also
affect the demand for labor from that country.
Another effect of international trade on labor can be seen in the inequality between
more skilled and less skilled labor. Trade liberalization leads to wage inequality due to
increased trade (Goldberg & Pavnick, 2004). It seems that recent international trade increases
the demand for more skilled workers to support the concept of specialization. Slaughter
(1998) believes that the demand for labor from the less skilled to the more skilled is a key
factor of wage inequality and it is actually happening in some countries such as the United
States and the United Kingdom. He added the argument that many countries with Such
inequality creates problems, such as higher unemployment rates and many job opportunities
avoiding less-skilled workers.
Transnational Production
There is general agreement that the growth of transnational production has shaped the
evolution of the global economy (O'Brien & Williams, 2020, p. 132). One of the main reasons
is that the global production system is a complex process. O'Brien and Williams (2013) argue
that this process involves multiple workers and workplaces with their integration with local,
national, regional and global systems. Because transnational production involves multi-level
actors. It becomes more complicated as it has to integrate different social, political and
economic backgrounds in the global economy. The main reason for the emergence of
transnational production is the innovation of communication and information technology
along with the advancement of transportation (Ietto-Gillies, 2003). This development
increases the possibility to separate production processes around the world.
A significant change affecting production processes across countries is the formation
of transnational companies (TNCs). As stated earlier, in the era of globalization, geographical
issues are no longer a big problem, therefore, TNCs can carry out production processes
separately in different parts of the world. Another reason TNCs invest abroad is because
production costs in developing countries are lower than in developed countries (O'Brien &
Williams, 2020). As stated by Ietto-Gillies (2003), there is a significant development of the
organization of production across countries due to the activities of transnational corporations.
In addition, it is argued that TNCs constitute a major part of the global production structure
and about 50 percent of world trade (O'Brien and Williams, 2020, p. 132). This fact shows the
impact of TNCs on the global production process. TNCs seem to be a key player in global
production.
TNCs play their role in the global economy through foreign direct investment (FDI).
Changes in the global production system are linked to increasing levels of FDI (O'Brien &
Williams, 2020). In addition, Perraton says that FDI by transnational corporations has grown
faster than trade (Perraton, 2003, p. 47). The success of TNCs to invest in many countries
around the world may be due to the recognition that TNCs are a good source of investment,
there is a transfer of technology, and there is an increase in the workforce (Waters, 2001, p.
46).
Indeed, there is skepticism towards transnational corporations and FDI. The concept of
transnational phenomena with interdependence between actors raises concerns of reduced
state sovereignty (Biersteker & Weber, 1996). This is also supported by the expansion of
capitalist companies that exploit labor, directly proportional to the need for workers to be able
to survive or survive to finance their own lives (Tyner, 2019). Moreover, for opponents of
capitalism, TNCs are believed to be a new worldwide method of exploitation that is
essentially "barbaric" and unacceptable (Waters, 2001). For example, a study conducted by
Doytch, Thelen, & Mendoza (2014) found the exploitation of child labor, with children forced
to work in fields for long hours, in a multinational tobacco company in Kazakhstan.
Therefore, for nationalist economic advocates, states must improve their ability to regulate
TNCs investing in their own countries (O'Brien and Williams, 2020).
However, for liberal supporters, there are The advantages offered by transnational
corporations with foreign direct investment. Epstein argues that this development can provide
more employment opportunities especially for developing countries, while also resulting in
wage increases because TNCs in developing countries have more productivity so they can pay
more (Epstein, 2003). In addition, TNCs with FDI can increase tax revenues through
increased economic activity in the host country and can help advance economic growth by
encouraging a more efficient division of labor (O'Brien & Williams, 2020, p. 137). Studies
conducted by Harrison in Mexico, Morocco and Venezuela show that TNCs help domestic
firms to break into export markets and they can improve workers' living standards as they pay
higher wages than domestic firms (Harrison, 1994).
Based on the explanation above, it can be seen that TNCs have a significant impact on
labor. One of the reasons TNCs with FDI are growing is that many developing countries are
implementing active policies to support industrialization and export to developed countries
(O'Brien and Williams, 2020). This is understandable because it will provide employment
opportunities in the country they are. Therefore, it is not surprising that many countries are
trying to attract TNCs to invest in their territories. With respect to the global division of labor,
TNCs will increase the demand for more skilled labor, as research conducted by Bruno, Crino
and Falzoni (2012) states that FDI increases the demand for more skilled labor in Poland.
Actors affected by the global political economy must make behavioral adjustments to
be able to face global competition which is currently increasing (O'Brien & Williams, 2020).
Coupled with technological advances in the form of machines, the value of labor has also
decreased because their portion of work can be replaced by machines (Tyner, 2019). The
higher demand for a more skilled workforce forces people to improve their abilities to
compete with others in the workplace. One of the reasons for this trend is to increase labor
productivity as it is a strong indicator of economic efficiency (Plasmans, 2003). In addition, it
is not surprising that TNCs promote division of labor to increase efficient production.
However, it seems that the labor market is shaped by TNC interests rather than national
interest.
International Trade, Transnational Production and Labor
One of the issues in relation to international trade and transnational production is not
respecting workers' rights. Many TNCs do not invest in their own countries because they want
to reduce their production costs. They tend to hire cheap labor and cut production costs with
forced labor in peripheral countries. As stated by Horvat (2020), the worst features of
exploitation are currently happening in all developing countries in the world.
In 2014, BBC News released a video inside the Apple assembly company. The video
shows that employees work under high pressure and for long, intensive periods of time. They
were forced to work standing up all day. In fact, the company installed electrical wires in t h e
machines so that employees could not lean back when tired. Employees work in a very
grueling environment. Although in 2010 there was a mass worker suicide at Foxconn, one of
the companies that manufactures Apple products, then Apple promised to improve facilitation
and working conditions, but the BBC video shows evidence to the contrary. For example,
everyone in China needs to carry an identity card. However, companies still take workers' IDs
directly when they enter the company (BBC News, 2014). Tyner (2019) also argues that
companies can collect profits not only from the products or services produced but also
through life insurance policies from workers who experience misfortune while performing
their duties.
However, not all TNCs tend to exploit labor for profit. A study analyzing foreign
direct investment and labor rights in 80 developing countries conducted by Busse,
Nunnenkamp, and Spatareanu showed different results. In terms of the correlation between
labor rights and TNCs, the study found that TNCs prefer to invest in countries that respect
labor rights (Busse, Nunnenkamp, & and Spatareanu, 2011). Moreover, labor violence in
potential host countries discourages TNCs from running their activities there, wherever it may
be (Busse, Nunnenkamp and Spatareanu, 2011). This condition shows that TNCs pay great
attention to labor rights, not only focus on their profits as well.
One solution to the above problem is to implement labor standards. Based on Heintz's
(2003) argument, the labor market should be for the larger society and should be governed by
rules, norms, and ethical standards that make allowance for the separate costs of
marketization. The International Labor Organization (ILO) is an organization that promotes
labor standards worldwide. The ILO holds conventions that cover basic human rights areas:
freedom of association and collective bargaining, elimination of forced labor, elimination of
child labor, and elimination of discrimination (Heintz, 2003; O'Brien and Willams, 2020).
However, the main problem in implementing labor standards is how to come up with labor
standards that can be applied worldwide. This is due to the disagreement among actors on the
purpose of labor standards. Furthermore, leaders in many liberal countries argue that
economic growth improves labor standards. Whereas, any interference in trade for labor
reasons will lower the gains from trade (O'Brien and Williams, 2020, p.195).
Conclusions
There are different perspectives on the global political economy. Economic
nationalists place the state as the main actor in the global political economy. This is related to
their concept of protectionism, protecting the economy from the global market. Meanwhile,
economic liberalists argue that states should collaborate with other actors in the global
economy. They believe that the global political economy involves multiple actors. Moreover,
the current global economy is more likely to adopt liberal values such as trade liberalization.
There are dynamics that shape the global political economy. They are international
trade and transnational production. Both dynamics have implications for the global division of
labor. International trade with the concept of 'comparative advantage' comparative advantage'
affects the specialization of labour. Whereas transnational production with TNCs has
implications in driving the division of labor around the world, especially in their host
countries. Both international trade and transnational production have benefits for the
participants. This is because TNCs can provide jobs and also improve the lives of workers.
However, there is skepticism about these dynamics. For example, they are believed to
play a role in wage inequality, especially between less skilled labor and more skilled labor.
Another example is the issue of worker exploitation, such as the Apple factory case and child
labor in tobacco factories. One solution that can be suggested is to enforce global labor
standards.
Results and Discussion of International Trade
According to Waters (2001) the primary and ongoing basis of economic
internationalization is trade. Trade itself is understood as the activity of two or more
individuals exchanging goods and services (O'Brien & Williams, 2020, p. 109). Such
activities would be called international trade if they are operated abroad. This international
trade can create relationships and interdependence between actors (Waters, 2001). As stated
by Ietto-Gillies (2003), that one evidence of state interconnectedness can be seen in
international trade activities in goods and services. Wallerstein and Marxist in Cohen (2017)
categorize countries into several levels, where there are dominant core countries, dependent
periphery countries and semi-fringe countries that are between the two categories. While core
countries enjoy a high level of technological development, selling sophisticated high-value
goods and services, the role of peripheral countries is simply to supply materials raw
materials, foodstuffs, and also cheap labor on the basis of highly unequal exchanges. Among
them, semi-periphery countries benefit from exploiting periphery countries even as they
themselves are exploited by core countries. This shows that international trade affects the
shape of the global political economy. One reason is that international trade has direct and
indirect effects on people and communities, for example, a family's consumption patterns are
affected by trade in goods (O'Brien & Williams, 2020).
One of the ways in which international trade affects the global economy is through a
free trade regime. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996). The theory of comparative advantage advises countries to
specialize in their most efficient products and services (O'Brien & Williams, 2020). The
ideology of comparative advantage serves to obscure uneven economic development progress
and unequal exchange between countries and regions (McBride & Shields, 1993). Therefore,
proponents of free trade believe that every country should engage in trade international and
reduce barriers.
Furthermore, according to liberal political economy, everyone can benefit from trade
as it can improve efficiency and increase productivity (O'Brien & Williams, 2020). For
example, Langenfeld and Nieberding (2005) estimate that trade growth has provided total
benefits to American consumers of about $2.3 trillion over the trade has provided total benefits
to American consumers of about $2.3 trillion during 1992-2002, or between $20,000 and
$22,000 per household in 2002. In contrast, nationalists believe that free trade is detrimental to
the national economy because it will weaken the economy unbalanced development and can
damage the environment (O'Brien & Williams, 2020). As in the case of Fiji, they are facing a
rapid and radical restructuring of the sugar or banana industry and this is potentially
disastrous for their economy as it is a fundamental commodity (Connel & Soutar, 2007).
Furthermore, in the international trading system, there are significant developments
that encourage trade liberalization. The emergence of the WTO (World Trade Organization),
the successor to the GATT (General Agreement on Tariffs and Trade), is believed to play an
important role in trade liberalization international. The WTO (and GATT before it) has
successfully liberalized trade and managed international trade through multilateral agreements
(Sampson, 2001). Jackson (1998) stated that the establishment of the WTO was the most
significant moment in the history of the world economy, even becoming a fundamental
institution in the international economy, especially with its dispute settlement procedures. The
WTO has changed the management of world trade in the following ways:
Change trade liberalization from being based on tariff adjustments to discussing
domestic policies, institutional practices and regulations.
Broaden the scope of trade and change the focus of negotiations from product
bargaining to policy.
Propose movement towards accession policies, for example, in the areas of subsidies
and trade-related investment measures and services (O'Brien & Williams, 2020).
Based on the above, it can be seen that the WTO has successfully played its role in
international trade, but there is the issue of many developing countries' interests not being
accommodated by the WTO (Sampson, 2001). In a d d i t i o n , countries developing
countries recognize the limitations of political influence in the international trade agreement
process (O'Brien & Williams, 2020). Another problem faced by developing countries is that
they lack the capacity to enforce WTO decisions as well as the high indirect costs of initiating
disputes with the WTO (Horlick, 2006, p. 220). For example, trade in agriculture, which is a
key interest of many developing countries, is particularly liberalized (Walter & Sen, 2009).
Apart from the role of the WTO, the influence of international trade on the global
political economy can be understood through its implications for the global division of labor
(Waters, 2001). The division of labor refers to the roles that people employ in the production
process (O'Brien & Williams, 2020). Waters (2001) states there are two types of division of
labour: social division of labour refers to occupational specialization, and technical division of
labour refers to task specialization. This condition is closely related to the concept of
comparative advantage by liberals who attach importance to the specialization of countries'
commodities to gain an advantage in the production process. In international trade. This means
that by engaging in trade, countries also shape their division of labor. Increase While trade
and mobility are expected to increase the elasticity of demand for human capital, they also
automatically reduce the bargaining power of labor (Perraton, 2003, p. 56). Moreover, in the
reduction of transaction costs due to technological advances, international agreements, non-
tariff barriers results in enormous specialization possibilities (Pomfret, 2014). A country can
choose the specific commodities or services offered in international trade which will also
affect the demand for labor from that country.
Another effect of international trade on labor can be seen in the inequality between
more skilled and less skilled labor. Trade liberalization leads to wage inequality due to
increased trade (Goldberg & Pavnick, 2004). It seems that recent international trade increases
the demand for more skilled workers to support the concept of specialization. Slaughter
(1998) believes that the demand for labor from the less skilled to the more skilled is a key
factor of wage inequality and it is actually happening in some countries such as the United
States and the United Kingdom. He added the argument that many countries with Such
inequality creates problems, such as higher unemployment rates and many job opportunities
avoiding less-skilled workers.
Transnational Production
There is general agreement that the growth of transnational production has shaped the
evolution of the global economy (O'Brien & Williams, 2020, p. 132). One of the main reasons
is that the global production system is a complex process. O'Brien and Williams (2013) argue
that this process involves multiple workers and workplaces with their integration with local,
national, regional and global systems. Because transnational production involves multi-level
actors. It becomes more complicated as it has to integrate different social, political and
economic backgrounds in the global economy. The main reason for the emergence of
transnational production is the innovation of communication and information technology
along with the advancement of transportation (Ietto-Gillies, 2003). This development
increases the possibility to separate production processes around the world.
A significant change affecting production processes across countries is the formation
of transnational companies (TNCs). As stated earlier, in the era of globalization, geographical
issues are no longer a big problem, therefore, TNCs can carry out production processes
separately in different parts of the world. Another reason TNCs invest abroad is because
production costs in developing countries are lower than in developed countries (O'Brien &
Williams, 2020). As stated by Ietto-Gillies (2003), there is a significant development of the
organization of production across countries due to the activities of transnational corporations.
In addition, it is argued that TNCs constitute a major part of the global production structure
and about 50 percent of world trade (O'Brien and Williams, 2020, p. 132). This fact shows the
impact of TNCs on the global production process. TNCs seem to be a key player in global
production.
TNCs play their role in the global economy through foreign direct investment (FDI).
Changes in the global production system are linked to increasing levels of FDI (O'Brien &
Williams, 2020). In addition, Perraton says that FDI by transnational corporations has grown
faster than trade (Perraton, 2003, p. 47). The success of TNCs to invest in many countries
around the world may be due to the recognition that TNCs are a good source of investment,
there is a transfer of technology, and there is an increase in the workforce (Waters, 2001, p.
46).
Indeed, there is skepticism towards transnational corporations and FDI. The concept of
transnational phenomena with interdependence between actors raises concerns of reduced
state sovereignty (Biersteker & Weber, 1996). This is also supported by the expansion of
capitalist companies that exploit labor, directly proportional to the need for workers to be able
to survive or survive to finance their own lives (Tyner, 2019). Moreover, for opponents of
capitalism, TNCs are believed to be a new worldwide method of exploitation that is
essentially "barbaric" and unacceptable (Waters, 2001). For example, a study conducted by
Doytch, Thelen, & Mendoza (2014) found the exploitation of child labor, with children forced
to work in fields for long hours, in a multinational tobacco company in Kazakhstan.
Therefore, for nationalist economic advocates, states must improve their ability to regulate
TNCs investing in their own countries (O'Brien and Williams, 2020).
However, for liberal supporters, there are The advantages offered by transnational
corporations with foreign direct investment. Epstein argues that this development can provide
more employment opportunities especially for developing countries, while also resulting in
wage increases because TNCs in developing countries have more productivity so they can pay
more (Epstein, 2003). In addition, TNCs with FDI can increase tax revenues through
increased economic activity in the host country and can help advance economic growth by
encouraging a more efficient division of labor (O'Brien & Williams, 2020, p. 137). Studies
conducted by Harrison in Mexico, Morocco and Venezuela show that TNCs help domestic
firms to break into export markets and they can improve workers' living standards as they pay
higher wages than domestic firms (Harrison, 1994).
Based on the explanation above, it can be seen that TNCs have a significant impact on
labor. One of the reasons TNCs with FDI are growing is that many developing countries are
implementing active policies to support industrialization and export to developed countries
(O'Brien and Williams, 2020). This is understandable because it will provide employment
opportunities in the country they are. Therefore, it is not surprising that many countries are
trying to attract TNCs to invest in their territories. With respect to the global division of labor,
TNCs will increase the demand for more skilled labor, as research conducted by Bruno, Crino
and Falzoni (2012) states that FDI increases the demand for more skilled labor in Poland.
Actors affected by the global political economy must make behavioral adjustments to
be able to face global competition which is currently increasing (O'Brien & Williams, 2020).
Coupled with technological advances in the form of machines, the value of labor has also
decreased because their portion of work can be replaced by machines (Tyner, 2019). The
higher demand for a more skilled workforce forces people to improve their abilities to
compete with others in the workplace. One of the reasons for this trend is to increase labor
productivity as it is a strong indicator of economic efficiency (Plasmans, 2003). In addition, it
is not surprising that TNCs promote division of labor to increase efficient production.
However, it seems that the labor market is shaped by TNC interests rather than national
interest.
International Trade, Transnational Production and Labor
One of the issues in relation to international trade and transnational production is not
respecting workers' rights. Many TNCs do not invest in their own countries because they want
to reduce their production costs. They tend to hire cheap labor and cut production costs with
forced labor in peripheral countries. As stated by Horvat (2020), the worst features of
exploitation are currently happening in all developing countries in the world.
In 2014, BBC News released a video inside the Apple assembly company. The video
shows that employees work under high pressure and for long, intensive periods of time. They
were forced to work standing up all day. In fact, the company installed electrical wires in t h e
machines so that employees could not lean back when tired. Employees work in a very
grueling environment. Although in 2010 there was a mass worker suicide at Foxconn, one of
the companies that manufactures Apple products, then Apple promised to improve facilitation
and working conditions, but the BBC video shows evidence to the contrary. For example,
everyone in China needs to carry an identity card. However, companies still take workers' IDs
directly when they enter the company (BBC News, 2014). Tyner (2019) also argues that
companies can collect profits not only from the products or services produced but also
through life insurance policies from workers who experience misfortune while performing
their duties.
However, not all TNCs tend to exploit labor for profit. A study analyzing foreign
direct investment and labor rights in 80 developing countries conducted by Busse,
Nunnenkamp, and Spatareanu showed different results. In terms of the correlation between
labor rights and TNCs, the study found that TNCs prefer to invest in countries that respect
labor rights (Busse, Nunnenkamp, & and Spatareanu, 2011). Moreover, labor violence in
potential host countries discourages TNCs from running their activities there, wherever it may
be (Busse, Nunnenkamp and Spatareanu, 2011). This condition shows that TNCs pay great
attention to labor rights, not only focus on their profits as well.
One solution to the above problem is to implement labor standards. Based on Heintz's
(2003) argument, the labor market should be for the larger society and should be governed by
rules, norms, and ethical standards that make allowance for the separate costs of
marketization. The International Labor Organization (ILO) is an organization that promotes
labor standards worldwide. The ILO holds conventions that cover basic human rights areas:
freedom of association and collective bargaining, elimination of forced labor, elimination of
child labor, and elimination of discrimination (Heintz, 2003; O'Brien and Willams, 2020).
However, the main problem in implementing labor standards is how to come up with labor
standards that can be applied worldwide. This is due to the disagreement among actors on the
purpose of labor standards. Furthermore, leaders in many liberal countries argue that
economic growth improves labor standards. Whereas, any interference in trade for labor
reasons will lower the gains from trade (O'Brien and Williams, 2020, p.195).
Conclusions
There are different perspectives on the global political economy. Economic
nationalists place the state as the main actor in the global political economy. This is related to
their concept of protectionism, protecting the economy from the global market. Meanwhile,
economic liberalists argue that states should collaborate with other actors in the global
economy. They believe that the global political economy involves multiple actors. Moreover,
the current global economy is more likely to adopt liberal values such as trade liberalization.
There are dynamics that shape the global political economy. They are international
trade and transnational production. Both dynamics have implications for the global division of
labor. International trade with the concept of 'comparative advantage' comparative advantage'
affects the specialization of labour. Whereas transnational production with TNCs has
implications in driving the division of labor around the world, especially in their host
countries. Both international trade and transnational production have benefits for the
participants. This is because TNCs can provide jobs and also improve the lives of workers.
However, there is skepticism about these dynamics. For example, they are believed to
play a role in wage inequality, especially between less skilled labor and more skilled labor.
Another example is the issue of worker exploitation, such as the Apple factory case and child
labor in tobacco factories. One solution that can be suggested is to enforce global labor
standards.
Results and Discussion of International Trade
According to Waters (2001) the primary and ongoing basis of economic
internationalization is trade. Trade itself is understood as the activity of two or more
individuals exchanging goods and services (O'Brien & Williams, 2020, p. 109). Such
activities would be called international trade if they are operated abroad. This international
trade can create relationships and interdependence between actors (Waters, 2001). As stated
by Ietto-Gillies (2003), that one evidence of state interconnectedness can be seen in
international trade activities in goods and services. Wallerstein and Marxist in Cohen (2017)
categorize countries into several levels, where there are dominant core countries, dependent
periphery countries and semi-fringe countries that are between the two categories. While core
countries enjoy a high level of technological development, selling sophisticated high-value
goods and services, the role of peripheral countries is simply to supply materials raw
materials, foodstuffs, and also cheap labor on the basis of highly unequal exchanges. Among
them, semi-periphery countries benefit from exploiting periphery countries even as they
themselves are exploited by core countries. This shows that international trade affects the
shape of the global political economy. One reason is that international trade has direct and
indirect effects on people and communities, for example, a family's consumption patterns are
affected by trade in goods (O'Brien & Williams, 2020).
One of the ways in which international trade affects the global economy is through a
free trade regime. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996). The theory of comparative advantage advises countries to
specialize in their most efficient products and services (O'Brien & Williams, 2020). The
ideology of comparative advantage serves to obscure uneven economic development progress
and unequal exchange between countries and regions (McBride & Shields, 1993). Therefore,
proponents of free trade believe that every country should engage in trade international and
reduce barriers.
Furthermore, according to liberal political economy, everyone can benefit from trade
as it can improve efficiency and increase productivity (O'Brien & Williams, 2020). For
example, Langenfeld and Nieberding (2005) estimate that trade growth has provided total
benefits to American consumers of about $2.3 trillion over the trade has provided total benefits
to American consumers of about $2.3 trillion during 1992-2002, or between $20,000 and
$22,000 per household in 2002. In contrast, nationalists believe that free trade is detrimental to
the national economy because it will weaken the economy unbalanced development and can
damage the environment (O'Brien & Williams, 2020). As in the case of Fiji, they are facing a
rapid and radical restructuring of the sugar or banana industry and this is potentially
disastrous for their economy as it is a fundamental commodity (Connel & Soutar, 2007).
Furthermore, in the international trading system, there are significant developments
that encourage trade liberalization. The emergence of the WTO (World Trade Organization),
the successor to the GATT (General Agreement on Tariffs and Trade), is believed to play an
important role in trade liberalization international. The WTO (and GATT before it) has
successfully liberalized trade and managed international trade through multilateral agreements
(Sampson, 2001). Jackson (1998) stated that the establishment of the WTO was the most
significant moment in the history of the world economy, even becoming a fundamental
institution in the international economy, especially with its dispute settlement procedures. The
WTO has changed the management of world trade in the following ways:
Change trade liberalization from being based on tariff adjustments to discussing
domestic policies, institutional practices and regulations.
Broaden the scope of trade and change the focus of negotiations from product
bargaining to policy.
Propose movement towards accession policies, for example, in the areas of subsidies
and trade-related investment measures and services (O'Brien & Williams, 2020).
Based on the above, it can be seen that the WTO has successfully played its role in
international trade, but there is the issue of many developing countries' interests not being
accommodated by the WTO (Sampson, 2001). In a d d i t i o n , countries developing
countries recognize the limitations of political influence in the international trade agreement
process (O'Brien & Williams, 2020). Another problem faced by developing countries is that
they lack the capacity to enforce WTO decisions as well as the high indirect costs of initiating
disputes with the WTO (Horlick, 2006, p. 220). For example, trade in agriculture, which is a
key interest of many developing countries, is particularly liberalized (Walter & Sen, 2009).
Apart from the role of the WTO, the influence of international trade on the global
political economy can be understood through its implications for the global division of labor
(Waters, 2001). The division of labor refers to the roles that people employ in the production
process (O'Brien & Williams, 2020). Waters (2001) states there are two types of division of
labour: social division of labour refers to occupational specialization, and technical division of
labour refers to task specialization. This condition is closely related to the concept of
comparative advantage by liberals who attach importance to the specialization of countries'
commodities to gain an advantage in the production process. In international trade. This means
that by engaging in trade, countries also shape their division of labor. Increase While trade
and mobility are expected to increase the elasticity of demand for human capital, they also
automatically reduce the bargaining power of labor (Perraton, 2003, p. 56). Moreover, in the
reduction of transaction costs due to technological advances, international agreements, non-
tariff barriers results in enormous specialization possibilities (Pomfret, 2014). A country can
choose the specific commodities or services offered in international trade which will also
affect the demand for labor from that country.
Another effect of international trade on labor can be seen in the inequality between
more skilled and less skilled labor. Trade liberalization leads to wage inequality due to
increased trade (Goldberg & Pavnick, 2004). It seems that recent international trade increases
the demand for more skilled workers to support the concept of specialization. Slaughter
(1998) believes that the demand for labor from the less skilled to the more skilled is a key
factor of wage inequality and it is actually happening in some countries such as the United
States and the United Kingdom. He added the argument that many countries with Such
inequality creates problems, such as higher unemployment rates and many job opportunities
avoiding less-skilled workers.
Transnational Production
There is general agreement that the growth of transnational production has shaped the
evolution of the global economy (O'Brien & Williams, 2020, p. 132). One of the main reasons
is that the global production system is a complex process. O'Brien and Williams (2013) argue
that this process involves multiple workers and workplaces with their integration with local,
national, regional and global systems. Because transnational production involves multi-level
actors. It becomes more complicated as it has to integrate different social, political and
economic backgrounds in the global economy. The main reason for the emergence of
transnational production is the innovation of communication and information technology
along with the advancement of transportation (Ietto-Gillies, 2003). This development
increases the possibility to separate production processes around the world.
A significant change affecting production processes across countries is the formation
of transnational companies (TNCs). As stated earlier, in the era of globalization, geographical
issues are no longer a big problem, therefore, TNCs can carry out production processes
separately in different parts of the world. Another reason TNCs invest abroad is because
production costs in developing countries are lower than in developed countries (O'Brien &
Williams, 2020). As stated by Ietto-Gillies (2003), there is a significant development of the
organization of production across countries due to the activities of transnational corporations.
In addition, it is argued that TNCs constitute a major part of the global production structure
and about 50 percent of world trade (O'Brien and Williams, 2020, p. 132). This fact shows the
impact of TNCs on the global production process. TNCs seem to be a key player in global
production.
TNCs play their role in the global economy through foreign direct investment (FDI).
Changes in the global production system are linked to increasing levels of FDI (O'Brien &
Williams, 2020). In addition, Perraton says that FDI by transnational corporations has grown
faster than trade (Perraton, 2003, p. 47). The success of TNCs to invest in many countries
around the world may be due to the recognition that TNCs are a good source of investment,
there is a transfer of technology, and there is an increase in the workforce (Waters, 2001, p.
46).
Indeed, there is skepticism towards transnational corporations and FDI. The concept of
transnational phenomena with interdependence between actors raises concerns of reduced
state sovereignty (Biersteker & Weber, 1996). This is also supported by the expansion of
capitalist companies that exploit labor, directly proportional to the need for workers to be able
to survive or survive to finance their own lives (Tyner, 2019). Moreover, for opponents of
capitalism, TNCs are believed to be a new worldwide method of exploitation that is
essentially "barbaric" and unacceptable (Waters, 2001). For example, a study conducted by
Doytch, Thelen, & Mendoza (2014) found the exploitation of child labor, with children forced
to work in fields for long hours, in a multinational tobacco company in Kazakhstan.
Therefore, for nationalist economic advocates, states must improve their ability to regulate
TNCs investing in their own countries (O'Brien and Williams, 2020).
However, for liberal supporters, there are The advantages offered by transnational
corporations with foreign direct investment. Epstein argues that this development can provide
more employment opportunities especially for developing countries, while also resulting in
wage increases because TNCs in developing countries have more productivity so they can pay
more (Epstein, 2003). In addition, TNCs with FDI can increase tax revenues through
increased economic activity in the host country and can help advance economic growth by
encouraging a more efficient division of labor (O'Brien & Williams, 2020, p. 137). Studies
conducted by Harrison in Mexico, Morocco and Venezuela show that TNCs help domestic
firms to break into export markets and they can improve workers' living standards as they pay
higher wages than domestic firms (Harrison, 1994).
Based on the explanation above, it can be seen that TNCs have a significant impact on
labor. One of the reasons TNCs with FDI are growing is that many developing countries are
implementing active policies to support industrialization and export to developed countries
(O'Brien and Williams, 2020). This is understandable because it will provide employment
opportunities in the country they are. Therefore, it is not surprising that many countries are
trying to attract TNCs to invest in their territories. With respect to the global division of labor,
TNCs will increase the demand for more skilled labor, as research conducted by Bruno, Crino
and Falzoni (2012) states that FDI increases the demand for more skilled labor in Poland.
Actors affected by the global political economy must make behavioral adjustments to
be able to face global competition which is currently increasing (O'Brien & Williams, 2020).
Coupled with technological advances in the form of machines, the value of labor has also
decreased because their portion of work can be replaced by machines (Tyner, 2019). The
higher demand for a more skilled workforce forces people to improve their abilities to
compete with others in the workplace. One of the reasons for this trend is to increase labor
productivity as it is a strong indicator of economic efficiency (Plasmans, 2003). In addition, it
is not surprising that TNCs promote division of labor to increase efficient production.
However, it seems that the labor market is shaped by TNC interests rather than national
interest.
International Trade, Transnational Production and Labor
One of the issues in relation to international trade and transnational production is not
respecting workers' rights. Many TNCs do not invest in their own countries because they want
to reduce their production costs. They tend to hire cheap labor and cut production costs with
forced labor in peripheral countries. As stated by Horvat (2020), the worst features of
exploitation are currently happening in all developing countries in the world.
In 2014, BBC News released a video inside the Apple assembly company. The video
shows that employees work under high pressure and for long, intensive periods of time. They
were forced to work standing up all day. In fact, the company installed electrical wires in t h e
machines so that employees could not lean back when tired. Employees work in a very
grueling environment. Although in 2010 there was a mass worker suicide at Foxconn, one of
the companies that manufactures Apple products, then Apple promised to improve facilitation
and working conditions, but the BBC video shows evidence to the contrary. For example,
everyone in China needs to carry an identity card. However, companies still take workers' IDs
directly when they enter the company (BBC News, 2014). Tyner (2019) also argues that
companies can collect profits not only from the products or services produced but also
through life insurance policies from workers who experience misfortune while performing
their duties.
However, not all TNCs tend to exploit labor for profit. A study analyzing foreign
direct investment and labor rights in 80 developing countries conducted by Busse,
Nunnenkamp, and Spatareanu showed different results. In terms of the correlation between
labor rights and TNCs, the study found that TNCs prefer to invest in countries that respect
labor rights (Busse, Nunnenkamp, & and Spatareanu, 2011). Moreover, labor violence in
potential host countries discourages TNCs from running their activities there, wherever it may
be (Busse, Nunnenkamp and Spatareanu, 2011). This condition shows that TNCs pay great
attention to labor rights, not only focus on their profits as well.
One solution to the above problem is to implement labor standards. Based on Heintz's
(2003) argument, the labor market should be for the larger society and should be governed by
rules, norms, and ethical standards that make allowance for the separate costs of
marketization. The International Labor Organization (ILO) is an organization that promotes
labor standards worldwide. The ILO holds conventions that cover basic human rights areas:
freedom of association and collective bargaining, elimination of forced labor, elimination of
child labor, and elimination of discrimination (Heintz, 2003; O'Brien and Willams, 2020).
However, the main problem in implementing labor standards is how to come up with labor
standards that can be applied worldwide. This is due to the disagreement among actors on the
purpose of labor standards. Furthermore, leaders in many liberal countries argue that
economic growth improves labor standards. Whereas, any interference in trade for labor
reasons will lower the gains from trade (O'Brien and Williams, 2020, p.195).
Conclusions
There are different perspectives on the global political economy. Economic
nationalists place the state as the main actor in the global political economy. This is related to
their concept of protectionism, protecting the economy from the global market. Meanwhile,
economic liberalists argue that states should collaborate with other actors in the global
economy. They believe that the global political economy involves multiple actors. Moreover,
the current global economy is more likely to adopt liberal values such as trade liberalization.
There are dynamics that shape the global political economy. They are international
trade and transnational production. Both dynamics have implications for the global division of
labor. International trade with the concept of 'comparative advantage' comparative advantage'
affects the specialization of labour. Whereas transnational production with TNCs has
implications in driving the division of labor around the world, especially in their host
countries. Both international trade and transnational production have benefits for the
participants. This is because TNCs can provide jobs and also improve the lives of workers.
However, there is skepticism about these dynamics. For example, they are believed to
play a role in wage inequality, especially between less skilled labor and more skilled labor.
Another example is the issue of worker exploitation, such as the Apple factory case and child
labor in tobacco factories. One solution that can be suggested is to enforce global labor
standards.
Results and Discussion of International Trade
According to Waters (2001) the primary and ongoing basis of economic
internationalization is trade. Trade itself is understood as the activity of two or more
individuals exchanging goods and services (O'Brien & Williams, 2020, p. 109). Such
activities would be called international trade if they are operated abroad. This international
trade can create relationships and interdependence between actors (Waters, 2001). As stated
by Ietto-Gillies (2003), that one evidence of state interconnectedness can be seen in
international trade activities in goods and services. Wallerstein and Marxist in Cohen (2017)
categorize countries into several levels, where there are dominant core countries, dependent
periphery countries and semi-fringe countries that are between the two categories. While core
countries enjoy a high level of technological development, selling sophisticated high-value
goods and services, the role of peripheral countries is simply to supply materials raw
materials, foodstuffs, and also cheap labor on the basis of highly unequal exchanges. Among
them, semi-periphery countries benefit from exploiting periphery countries even as they
themselves are exploited by core countries. This shows that international trade affects the
shape of the global political economy. One reason is that international trade has direct and
indirect effects on people and communities, for example, a family's consumption patterns are
affected by trade in goods (O'Brien & Williams, 2020).
One of the ways in which international trade affects the global economy is through a
free trade regime. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996). The theory of comparative advantage advises countries to
specialize in their most efficient products and services (O'Brien & Williams, 2020). The
ideology of comparative advantage serves to obscure uneven economic development progress
and unequal exchange between countries and regions (McBride & Shields, 1993). Therefore,
proponents of free trade believe that every country should engage in trade international and
reduce barriers.
Furthermore, according to liberal political economy, everyone can benefit from trade
as it can improve efficiency and increase productivity (O'Brien & Williams, 2020). For
example, Langenfeld and Nieberding (2005) estimate that trade growth has provided total
benefits to American consumers of about $2.3 trillion over the trade has provided total benefits
to American consumers of about $2.3 trillion during 1992-2002, or between $20,000 and
$22,000 per household in 2002. In contrast, nationalists believe that free trade is detrimental to
the national economy because it will weaken the economy unbalanced development and can
damage the environment (O'Brien & Williams, 2020). As in the case of Fiji, they are facing a
rapid and radical restructuring of the sugar or banana industry and this is potentially
disastrous for their economy as it is a fundamental commodity (Connel & Soutar, 2007).
Furthermore, in the international trading system, there are significant developments
that encourage trade liberalization. The emergence of the WTO (World Trade Organization),
the successor to the GATT (General Agreement on Tariffs and Trade), is believed to play an
important role in trade liberalization international. The WTO (and GATT before it) has
successfully liberalized trade and managed international trade through multilateral agreements
(Sampson, 2001). Jackson (1998) stated that the establishment of the WTO was the most
significant moment in the history of the world economy, even becoming a fundamental
institution in the international economy, especially with its dispute settlement procedures. The
WTO has changed the management of world trade in the following ways:
Change trade liberalization from being based on tariff adjustments to discussing
domestic policies, institutional practices and regulations.
Broaden the scope of trade and change the focus of negotiations from product
bargaining to policy.
Propose movement towards accession policies, for example, in the areas of subsidies
and trade-related investment measures and services (O'Brien & Williams, 2020).
Based on the above, it can be seen that the WTO has successfully played its role in
international trade, but there is the issue of many developing countries' interests not being
accommodated by the WTO (Sampson, 2001). In a d d i t i o n , countries developing
countries recognize the limitations of political influence in the international trade agreement
process (O'Brien & Williams, 2020). Another problem faced by developing countries is that
they lack the capacity to enforce WTO decisions as well as the high indirect costs of initiating
disputes with the WTO (Horlick, 2006, p. 220). For example, trade in agriculture, which is a
key interest of many developing countries, is particularly liberalized (Walter & Sen, 2009).
Apart from the role of the WTO, the influence of international trade on the global
political economy can be understood through its implications for the global division of labor
(Waters, 2001). The division of labor refers to the roles that people employ in the production
process (O'Brien & Williams, 2020). Waters (2001) states there are two types of division of
labour: social division of labour refers to occupational specialization, and technical division of
labour refers to task specialization. This condition is closely related to the concept of
comparative advantage by liberals who attach importance to the specialization of countries'
commodities to gain an advantage in the production process. In international trade. This means
that by engaging in trade, countries also shape their division of labor. Increase While trade
and mobility are expected to increase the elasticity of demand for human capital, they also
automatically reduce the bargaining power of labor (Perraton, 2003, p. 56). Moreover, in the
reduction of transaction costs due to technological advances, international agreements, non-
tariff barriers results in enormous specialization possibilities (Pomfret, 2014). A country can
choose the specific commodities or services offered in international trade which will also
affect the demand for labor from that country.
Another effect of international trade on labor can be seen in the inequality between
more skilled and less skilled labor. Trade liberalization leads to wage inequality due to
increased trade (Goldberg & Pavnick, 2004). It seems that recent international trade increases
the demand for more skilled workers to support the concept of specialization. Slaughter
(1998) believes that the demand for labor from the less skilled to the more skilled is a key
factor of wage inequality and it is actually happening in some countries such as the United
States and the United Kingdom. He added the argument that many countries with Such
inequality creates problems, such as higher unemployment rates and many job opportunities
avoiding less-skilled workers.
Transnational Production
There is general agreement that the growth of transnational production has shaped the
evolution of the global economy (O'Brien & Williams, 2020, p. 132). One of the main reasons
is that the global production system is a complex process. O'Brien and Williams (2013) argue
that this process involves multiple workers and workplaces with their integration with local,
national, regional and global systems. Because transnational production involves multi-level
actors. It becomes more complicated as it has to integrate different social, political and
economic backgrounds in the global economy. The main reason for the emergence of
transnational production is the innovation of communication and information technology
along with the advancement of transportation (Ietto-Gillies, 2003). This development
increases the possibility to separate production processes around the world.
A significant change affecting production processes across countries is the formation
of transnational companies (TNCs). As stated earlier, in the era of globalization, geographical
issues are no longer a big problem, therefore, TNCs can carry out production processes
separately in different parts of the world. Another reason TNCs invest abroad is because
production costs in developing countries are lower than in developed countries (O'Brien &
Williams, 2020). As stated by Ietto-Gillies (2003), there is a significant development of the
organization of production across countries due to the activities of transnational corporations.
In addition, it is argued that TNCs constitute a major part of the global production structure
and about 50 percent of world trade (O'Brien and Williams, 2020, p. 132). This fact shows the
impact of TNCs on the global production process. TNCs seem to be a key player in global
production.
TNCs play their role in the global economy through foreign direct investment (FDI).
Changes in the global production system are linked to increasing levels of FDI (O'Brien &
Williams, 2020). In addition, Perraton says that FDI by transnational corporations has grown
faster than trade (Perraton, 2003, p. 47). The success of TNCs to invest in many countries
around the world may be due to the recognition that TNCs are a good source of investment,
there is a transfer of technology, and there is an increase in the workforce (Waters, 2001, p.
46).
Indeed, there is skepticism towards transnational corporations and FDI. The concept of
transnational phenomena with interdependence between actors raises concerns of reduced
state sovereignty (Biersteker & Weber, 1996). This is also supported by the expansion of
capitalist companies that exploit labor, directly proportional to the need for workers to be able
to survive or survive to finance their own lives (Tyner, 2019). Moreover, for opponents of
capitalism, TNCs are believed to be a new worldwide method of exploitation that is
essentially "barbaric" and unacceptable (Waters, 2001). For example, a study conducted by
Doytch, Thelen, & Mendoza (2014) found the exploitation of child labor, with children forced
to work in fields for long hours, in a multinational tobacco company in Kazakhstan.
Therefore, for nationalist economic advocates, states must improve their ability to regulate
TNCs investing in their own countries (O'Brien and Williams, 2020).
However, for liberal supporters, there are The advantages offered by transnational
corporations with foreign direct investment. Epstein argues that this development can provide
more employment opportunities especially for developing countries, while also resulting in
wage increases because TNCs in developing countries have more productivity so they can pay
more (Epstein, 2003). In addition, TNCs with FDI can increase tax revenues through
increased economic activity in the host country and can help advance economic growth by
encouraging a more efficient division of labor (O'Brien & Williams, 2020, p. 137). Studies
conducted by Harrison in Mexico, Morocco and Venezuela show that TNCs help domestic
firms to break into export markets and they can improve workers' living standards as they pay
higher wages than domestic firms (Harrison, 1994).
Based on the explanation above, it can be seen that TNCs have a significant impact on
labor. One of the reasons TNCs with FDI are growing is that many developing countries are
implementing active policies to support industrialization and export to developed countries
(O'Brien and Williams, 2020). This is understandable because it will provide employment
opportunities in the country they are. Therefore, it is not surprising that many countries are
trying to attract TNCs to invest in their territories. With respect to the global division of labor,
TNCs will increase the demand for more skilled labor, as research conducted by Bruno, Crino
and Falzoni (2012) states that FDI increases the demand for more skilled labor in Poland.
Actors affected by the global political economy must make behavioral adjustments to
be able to face global competition which is currently increasing (O'Brien & Williams, 2020).
Coupled with technological advances in the form of machines, the value of labor has also
decreased because their portion of work can be replaced by machines (Tyner, 2019). The
higher demand for a more skilled workforce forces people to improve their abilities to
compete with others in the workplace. One of the reasons for this trend is to increase labor
productivity as it is a strong indicator of economic efficiency (Plasmans, 2003). In addition, it
is not surprising that TNCs promote division of labor to increase efficient production.
However, it seems that the labor market is shaped by TNC interests rather than national
interest.
International Trade, Transnational Production and Labor
One of the issues in relation to international trade and transnational production is not
respecting workers' rights. Many TNCs do not invest in their own countries because they want
to reduce their production costs. They tend to hire cheap labor and cut production costs with
forced labor in peripheral countries. As stated by Horvat (2020), the worst features of
exploitation are currently happening in all developing countries in the world.
In 2014, BBC News released a video inside the Apple assembly company. The video
shows that employees work under high pressure and for long, intensive periods of time. They
were forced to work standing up all day. In fact, the company installed electrical wires in t h e
machines so that employees could not lean back when tired. Employees work in a very
grueling environment. Although in 2010 there was a mass worker suicide at Foxconn, one of
the companies that manufactures Apple products, then Apple promised to improve facilitation
and working conditions, but the BBC video shows evidence to the contrary. For example,
everyone in China needs to carry an identity card. However, companies still take workers' IDs
directly when they enter the company (BBC News, 2014). Tyner (2019) also argues that
companies can collect profits not only from the products or services produced but also
through life insurance policies from workers who experience misfortune while performing
their duties.
However, not all TNCs tend to exploit labor for profit. A study analyzing foreign
direct investment and labor rights in 80 developing countries conducted by Busse,
Nunnenkamp, and Spatareanu showed different results. In terms of the correlation between
labor rights and TNCs, the study found that TNCs prefer to invest in countries that respect
labor rights (Busse, Nunnenkamp, & and Spatareanu, 2011). Moreover, labor violence in
potential host countries discourages TNCs from running their activities there, wherever it may
be (Busse, Nunnenkamp and Spatareanu, 2011). This condition shows that TNCs pay great
attention to labor rights, not only focus on their profits as well.
One solution to the above problem is to implement labor standards. Based on Heintz's
(2003) argument, the labor market should be for the larger society and should be governed by
rules, norms, and ethical standards that make allowance for the separate costs of
marketization. The International Labor Organization (ILO) is an organization that promotes
labor standards worldwide. The ILO holds conventions that cover basic human rights areas:
freedom of association and collective bargaining, elimination of forced labor, elimination of
child labor, and elimination of discrimination (Heintz, 2003; O'Brien and Willams, 2020).
However, the main problem in implementing labor standards is how to come up with labor
standards that can be applied worldwide. This is due to the disagreement among actors on the
purpose of labor standards. Furthermore, leaders in many liberal countries argue that
economic growth improves labor standards. Whereas, any interference in trade for labor
reasons will lower the gains from trade (O'Brien and Williams, 2020, p.195).
Conclusions
There are different perspectives on the global political economy. Economic
nationalists place the state as the main actor in the global political economy. This is related to
their concept of protectionism, protecting the economy from the global market. Meanwhile,
economic liberalists argue that states should collaborate with other actors in the global
economy. They believe that the global political economy involves multiple actors. Moreover,
the current global economy is more likely to adopt liberal values such as trade liberalization.
There are dynamics that shape the global political economy. They are international
trade and transnational production. Both dynamics have implications for the global division of
labor. International trade with the concept of 'comparative advantage' comparative advantage'
affects the specialization of labour. Whereas transnational production with TNCs has
implications in driving the division of labor around the world, especially in their host
countries. Both international trade and transnational production have benefits for the
participants. This is because TNCs can provide jobs and also improve the lives of workers.
However, there is skepticism about these dynamics. For example, they are believed to
play a role in wage inequality, especially between less skilled labor and more skilled labor.
Another example is the issue of worker exploitation, such as the Apple factory case and child
labor in tobacco factories. One solution that can be suggested is to enforce global labor
standards.
Results and Discussion of International Trade
According to Waters (2001) the primary and ongoing basis of economic
internationalization is trade. Trade itself is understood as the activity of two or more
individuals exchanging goods and services (O'Brien & Williams, 2020, p. 109). Such
activities would be called international trade if they are operated abroad. This international
trade can create relationships and interdependence between actors (Waters, 2001). As stated
by Ietto-Gillies (2003), that one evidence of state interconnectedness can be seen in
international trade activities in goods and services. Wallerstein and Marxist in Cohen (2017)
categorize countries into several levels, where there are dominant core countries, dependent
periphery countries and semi-fringe countries that are between the two categories. While core
countries enjoy a high level of technological development, selling sophisticated high-value
goods and services, the role of peripheral countries is simply to supply materials raw
materials, foodstuffs, and also cheap labor on the basis of highly unequal exchanges. Among
them, semi-periphery countries benefit from exploiting periphery countries even as they
themselves are exploited by core countries. This shows that international trade affects the
shape of the global political economy. One reason is that international trade has direct and
indirect effects on people and communities, for example, a family's consumption patterns are
affected by trade in goods (O'Brien & Williams, 2020).
One of the ways in which international trade affects the global economy is through a
free trade regime. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996). The theory of comparative advantage advises countries to
specialize in their most efficient products and services (O'Brien & Williams, 2020). The
ideology of comparative advantage serves to obscure uneven economic development progress
and unequal exchange between countries and regions (McBride & Shields, 1993). Therefore,
proponents of free trade believe that every country should engage in trade international and
reduce barriers.
Furthermore, according to liberal political economy, everyone can benefit from trade
as it can improve efficiency and increase productivity (O'Brien & Williams, 2020). For
example, Langenfeld and Nieberding (2005) estimate that trade growth has provided total
benefits to American consumers of about $2.3 trillion over the trade has provided total benefits
to American consumers of about $2.3 trillion during 1992-2002, or between $20,000 and
$22,000 per household in 2002. In contrast, nationalists believe that free trade is detrimental to
the national economy because it will weaken the economy unbalanced development and can
damage the environment (O'Brien & Williams, 2020). As in the case of Fiji, they are facing a
rapid and radical restructuring of the sugar or banana industry and this is potentially
disastrous for their economy as it is a fundamental commodity (Connel & Soutar, 2007).
Furthermore, in the international trading system, there are significant developments
that encourage trade liberalization. The emergence of the WTO (World Trade Organization),
the successor to the GATT (General Agreement on Tariffs and Trade), is believed to play an
important role in trade liberalization international. The WTO (and GATT before it) has
successfully liberalized trade and managed international trade through multilateral agreements
(Sampson, 2001). Jackson (1998) stated that the establishment of the WTO was the most
significant moment in the history of the world economy, even becoming a fundamental
institution in the international economy, especially with its dispute settlement procedures. The
WTO has changed the management of world trade in the following ways:
Change trade liberalization from being based on tariff adjustments to discussing
domestic policies, institutional practices and regulations.
Broaden the scope of trade and change the focus of negotiations from product
bargaining to policy.
Propose movement towards accession policies, for example, in the areas of subsidies
and trade-related investment measures and services (O'Brien & Williams, 2020).
Based on the above, it can be seen that the WTO has successfully played its role in
international trade, but there is the issue of many developing countries' interests not being
accommodated by the WTO (Sampson, 2001). In a d d i t i o n , countries developing
countries recognize the limitations of political influence in the international trade agreement
process (O'Brien & Williams, 2020). Another problem faced by developing countries is that
they lack the capacity to enforce WTO decisions as well as the high indirect costs of initiating
disputes with the WTO (Horlick, 2006, p. 220). For example, trade in agriculture, which is a
key interest of many developing countries, is particularly liberalized (Walter & Sen, 2009).
Apart from the role of the WTO, the influence of international trade on the global
political economy can be understood through its implications for the global division of labor
(Waters, 2001). The division of labor refers to the roles that people employ in the production
process (O'Brien & Williams, 2020). Waters (2001) states there are two types of division of
labour: social division of labour refers to occupational specialization, and technical division of
labour refers to task specialization. This condition is closely related to the concept of
comparative advantage by liberals who attach importance to the specialization of countries'
commodities to gain an advantage in the production process. In international trade. This means
that by engaging in trade, countries also shape their division of labor. Increase While trade
and mobility are expected to increase the elasticity of demand for human capital, they also
automatically reduce the bargaining power of labor (Perraton, 2003, p. 56). Moreover, in the
reduction of transaction costs due to technological advances, international agreements, non-
tariff barriers results in enormous specialization possibilities (Pomfret, 2014). A country can
choose the specific commodities or services offered in international trade which will also
affect the demand for labor from that country.
Another effect of international trade on labor can be seen in the inequality between
more skilled and less skilled labor. Trade liberalization leads to wage inequality due to
increased trade (Goldberg & Pavnick, 2004). It seems that recent international trade increases
the demand for more skilled workers to support the concept of specialization. Slaughter
(1998) believes that the demand for labor from the less skilled to the more skilled is a key
factor of wage inequality and it is actually happening in some countries such as the United
States and the United Kingdom. He added the argument that many countries with Such
inequality creates problems, such as higher unemployment rates and many job opportunities
avoiding less-skilled workers.
Transnational Production
There is general agreement that the growth of transnational production has shaped the
evolution of the global economy (O'Brien & Williams, 2020, p. 132). One of the main reasons
is that the global production system is a complex process. O'Brien and Williams (2013) argue
that this process involves multiple workers and workplaces with their integration with local,
national, regional and global systems. Because transnational production involves multi-level
actors. It becomes more complicated as it has to integrate different social, political and
economic backgrounds in the global economy. The main reason for the emergence of
transnational production is the innovation of communication and information technology
along with the advancement of transportation (Ietto-Gillies, 2003). This development
increases the possibility to separate production processes around the world.
A significant change affecting production processes across countries is the formation
of transnational companies (TNCs). As stated earlier, in the era of globalization, geographical
issues are no longer a big problem, therefore, TNCs can carry out production processes
separately in different parts of the world. Another reason TNCs invest abroad is because
production costs in developing countries are lower than in developed countries (O'Brien &
Williams, 2020). As stated by Ietto-Gillies (2003), there is a significant development of the
organization of production across countries due to the activities of transnational corporations.
In addition, it is argued that TNCs constitute a major part of the global production structure
and about 50 percent of world trade (O'Brien and Williams, 2020, p. 132). This fact shows the
impact of TNCs on the global production process. TNCs seem to be a key player in global
production.
TNCs play their role in the global economy through foreign direct investment (FDI).
Changes in the global production system are linked to increasing levels of FDI (O'Brien &
Williams, 2020). In addition, Perraton says that FDI by transnational corporations has grown
faster than trade (Perraton, 2003, p. 47). The success of TNCs to invest in many countries
around the world may be due to the recognition that TNCs are a good source of investment,
there is a transfer of technology, and there is an increase in the workforce (Waters, 2001, p.
46).
Indeed, there is skepticism towards transnational corporations and FDI. The concept of
transnational phenomena with interdependence between actors raises concerns of reduced
state sovereignty (Biersteker & Weber, 1996). This is also supported by the expansion of
capitalist companies that exploit labor, directly proportional to the need for workers to be able
to survive or survive to finance their own lives (Tyner, 2019). Moreover, for opponents of
capitalism, TNCs are believed to be a new worldwide method of exploitation that is
essentially "barbaric" and unacceptable (Waters, 2001). For example, a study conducted by
Doytch, Thelen, & Mendoza (2014) found the exploitation of child labor, with children forced
to work in fields for long hours, in a multinational tobacco company in Kazakhstan.
Therefore, for nationalist economic advocates, states must improve their ability to regulate
TNCs investing in their own countries (O'Brien and Williams, 2020).
However, for liberal supporters, there are The advantages offered by transnational
corporations with foreign direct investment. Epstein argues that this development can provide
more employment opportunities especially for developing countries, while also resulting in
wage increases because TNCs in developing countries have more productivity so they can pay
more (Epstein, 2003). In addition, TNCs with FDI can increase tax revenues through
increased economic activity in the host country and can help advance economic growth by
encouraging a more efficient division of labor (O'Brien & Williams, 2020, p. 137). Studies
conducted by Harrison in Mexico, Morocco and Venezuela show that TNCs help domestic
firms to break into export markets and they can improve workers' living standards as they pay
higher wages than domestic firms (Harrison, 1994).
Based on the explanation above, it can be seen that TNCs have a significant impact on
labor. One of the reasons TNCs with FDI are growing is that many developing countries are
implementing active policies to support industrialization and export to developed countries
(O'Brien and Williams, 2020). This is understandable because it will provide employment
opportunities in the country they are. Therefore, it is not surprising that many countries are
trying to attract TNCs to invest in their territories. With respect to the global division of labor,
TNCs will increase the demand for more skilled labor, as research conducted by Bruno, Crino
and Falzoni (2012) states that FDI increases the demand for more skilled labor in Poland.
Actors affected by the global political economy must make behavioral adjustments to
be able to face global competition which is currently increasing (O'Brien & Williams, 2020).
Coupled with technological advances in the form of machines, the value of labor has also
decreased because their portion of work can be replaced by machines (Tyner, 2019). The
higher demand for a more skilled workforce forces people to improve their abilities to
compete with others in the workplace. One of the reasons for this trend is to increase labor
productivity as it is a strong indicator of economic efficiency (Plasmans, 2003). In addition, it
is not surprising that TNCs promote division of labor to increase efficient production.
However, it seems that the labor market is shaped by TNC interests rather than national
interest.
International Trade, Transnational Production and Labor
One of the issues in relation to international trade and transnational production is not
respecting workers' rights. Many TNCs do not invest in their own countries because they want
to reduce their production costs. They tend to hire cheap labor and cut production costs with
forced labor in peripheral countries. As stated by Horvat (2020), the worst features of
exploitation are currently happening in all developing countries in the world.
In 2014, BBC News released a video inside the Apple assembly company. The video
shows that employees work under high pressure and for long, intensive periods of time. They
were forced to work standing up all day. In fact, the company installed electrical wires in t h e
machines so that employees could not lean back when tired. Employees work in a very
grueling environment. Although in 2010 there was a mass worker suicide at Foxconn, one of
the companies that manufactures Apple products, then Apple promised to improve facilitation
and working conditions, but the BBC video shows evidence to the contrary. For example,
everyone in China needs to carry an identity card. However, companies still take workers' IDs
directly when they enter the company (BBC News, 2014). Tyner (2019) also argues that
companies can collect profits not only from the products or services produced but also
through life insurance policies from workers who experience misfortune while performing
their duties.
However, not all TNCs tend to exploit labor for profit. A study analyzing foreign
direct investment and labor rights in 80 developing countries conducted by Busse,
Nunnenkamp, and Spatareanu showed different results. In terms of the correlation between
labor rights and TNCs, the study found that TNCs prefer to invest in countries that respect
labor rights (Busse, Nunnenkamp, & and Spatareanu, 2011). Moreover, labor violence in
potential host countries discourages TNCs from running their activities there, wherever it may
be (Busse, Nunnenkamp and Spatareanu, 2011). This condition shows that TNCs pay great
attention to labor rights, not only focus on their profits as well.
One solution to the above problem is to implement labor standards. Based on Heintz's
(2003) argument, the labor market should be for the larger society and should be governed by
rules, norms, and ethical standards that make allowance for the separate costs of
marketization. The International Labor Organization (ILO) is an organization that promotes
labor standards worldwide. The ILO holds conventions that cover basic human rights areas:
freedom of association and collective bargaining, elimination of forced labor, elimination of
child labor, and elimination of discrimination (Heintz, 2003; O'Brien and Willams, 2020).
However, the main problem in implementing labor standards is how to come up with labor
standards that can be applied worldwide. This is due to the disagreement among actors on the
purpose of labor standards. Furthermore, leaders in many liberal countries argue that
economic growth improves labor standards. Whereas, any interference in trade for labor
reasons will lower the gains from trade (O'Brien and Williams, 2020, p.195).
Conclusions
There are different perspectives on the global political economy. Economic
nationalists place the state as the main actor in the global political economy. This is related to
their concept of protectionism, protecting the economy from the global market. Meanwhile,
economic liberalists argue that states should collaborate with other actors in the global
economy. They believe that the global political economy involves multiple actors. Moreover,
the current global economy is more likely to adopt liberal values such as trade liberalization.
There are dynamics that shape the global political economy. They are international
trade and transnational production. Both dynamics have implications for the global division of
labor. International trade with the concept of 'comparative advantage' comparative advantage'
affects the specialization of labour. Whereas transnational production with TNCs has
implications in driving the division of labor around the world, especially in their host
countries. Both international trade and transnational production have benefits for the
participants. This is because TNCs can provide jobs and also improve the lives of workers.
However, there is skepticism about these dynamics. For example, they are believed to
play a role in wage inequality, especially between less skilled labor and more skilled labor.
Another example is the issue of worker exploitation, such as the Apple factory case and child
labor in tobacco factories. One solution that can be suggested is to enforce global labor
standards.
Results and Discussion of International Trade
According to Waters (2001) the primary and ongoing basis of economic
internationalization is trade. Trade itself is understood as the activity of two or more
individuals exchanging goods and services (O'Brien & Williams, 2020, p. 109). Such
activities would be called international trade if they are operated abroad. This international
trade can create relationships and interdependence between actors (Waters, 2001). As stated
by Ietto-Gillies (2003), that one evidence of state interconnectedness can be seen in
international trade activities in goods and services. Wallerstein and Marxist in Cohen (2017)
categorize countries into several levels, where there are dominant core countries, dependent
periphery countries and semi-fringe countries that are between the two categories. While core
countries enjoy a high level of technological development, selling sophisticated high-value
goods and services, the role of peripheral countries is simply to supply materials raw
materials, foodstuffs, and also cheap labor on the basis of highly unequal exchanges. Among
them, semi-periphery countries benefit from exploiting periphery countries even as they
themselves are exploited by core countries. This shows that international trade affects the
shape of the global political economy. One reason is that international trade has direct and
indirect effects on people and communities, for example, a family's consumption patterns are
affected by trade in goods (O'Brien & Williams, 2020).
One of the ways in which international trade affects the global economy is through a
free trade regime. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996). The theory of comparative advantage advises countries to
specialize in their most efficient products and services (O'Brien & Williams, 2020). The
ideology of comparative advantage serves to obscure uneven economic development progress
and unequal exchange between countries and regions (McBride & Shields, 1993). Therefore,
proponents of free trade believe that every country should engage in trade international and
reduce barriers.
Furthermore, according to liberal political economy, everyone can benefit from trade
as it can improve efficiency and increase productivity (O'Brien & Williams, 2020). For
example, Langenfeld and Nieberding (2005) estimate that trade growth has provided total
benefits to American consumers of about $2.3 trillion over the trade has provided total benefits
to American consumers of about $2.3 trillion during 1992-2002, or between $20,000 and
$22,000 per household in 2002. In contrast, nationalists believe that free trade is detrimental to
the national economy because it will weaken the economy unbalanced development and can
damage the environment (O'Brien & Williams, 2020). As in the case of Fiji, they are facing a
rapid and radical restructuring of the sugar or banana industry and this is potentially
disastrous for their economy as it is a fundamental commodity (Connel & Soutar, 2007).
Furthermore, in the international trading system, there are significant developments
that encourage trade liberalization. The emergence of the WTO (World Trade Organization),
the successor to the GATT (General Agreement on Tariffs and Trade), is believed to play an
important role in trade liberalization international. The WTO (and GATT before it) has
successfully liberalized trade and managed international trade through multilateral agreements
(Sampson, 2001). Jackson (1998) stated that the establishment of the WTO was the most
significant moment in the history of the world economy, even becoming a fundamental
institution in the international economy, especially with its dispute settlement procedures. The
WTO has changed the management of world trade in the following ways:
Change trade liberalization from being based on tariff adjustments to discussing
domestic policies, institutional practices and regulations.
Broaden the scope of trade and change the focus of negotiations from product
bargaining to policy.
Propose movement towards accession policies, for example, in the areas of subsidies
and trade-related investment measures and services (O'Brien & Williams, 2020).
Based on the above, it can be seen that the WTO has successfully played its role in
international trade, but there is the issue of many developing countries' interests not being
accommodated by the WTO (Sampson, 2001). In a d d i t i o n , countries developing
countries recognize the limitations of political influence in the international trade agreement
process (O'Brien & Williams, 2020). Another problem faced by developing countries is that
they lack the capacity to enforce WTO decisions as well as the high indirect costs of initiating
disputes with the WTO (Horlick, 2006, p. 220). For example, trade in agriculture, which is a
key interest of many developing countries, is particularly liberalized (Walter & Sen, 2009).
Apart from the role of the WTO, the influence of international trade on the global
political economy can be understood through its implications for the global division of labor
(Waters, 2001). The division of labor refers to the roles that people employ in the production
process (O'Brien & Williams, 2020). Waters (2001) states there are two types of division of
labour: social division of labour refers to occupational specialization, and technical division of
labour refers to task specialization. This condition is closely related to the concept of
comparative advantage by liberals who attach importance to the specialization of countries'
commodities to gain an advantage in the production process. In international trade. This means
that by engaging in trade, countries also shape their division of labor. Increase While trade
and mobility are expected to increase the elasticity of demand for human capital, they also
automatically reduce the bargaining power of labor (Perraton, 2003, p. 56). Moreover, in the
reduction of transaction costs due to technological advances, international agreements, non-
tariff barriers results in enormous specialization possibilities (Pomfret, 2014). A country can
choose the specific commodities or services offered in international trade which will also
affect the demand for labor from that country.
Another effect of international trade on labor can be seen in the inequality between
more skilled and less skilled labor. Trade liberalization leads to wage inequality due to
increased trade (Goldberg & Pavnick, 2004). It seems that recent international trade increases
the demand for more skilled workers to support the concept of specialization. Slaughter
(1998) believes that the demand for labor from the less skilled to the more skilled is a key
factor of wage inequality and it is actually happening in some countries such as the United
States and the United Kingdom. He added the argument that many countries with Such
inequality creates problems, such as higher unemployment rates and many job opportunities
avoiding less-skilled workers.
Transnational Production
There is general agreement that the growth of transnational production has shaped the
evolution of the global economy (O'Brien & Williams, 2020, p. 132). One of the main reasons
is that the global production system is a complex process. O'Brien and Williams (2013) argue
that this process involves multiple workers and workplaces with their integration with local,
national, regional and global systems. Because transnational production involves multi-level
actors. It becomes more complicated as it has to integrate different social, political and
economic backgrounds in the global economy. The main reason for the emergence of
transnational production is the innovation of communication and information technology
along with the advancement of transportation (Ietto-Gillies, 2003). This development
increases the possibility to separate production processes around the world.
A significant change affecting production processes across countries is the formation
of transnational companies (TNCs). As stated earlier, in the era of globalization, geographical
issues are no longer a big problem, therefore, TNCs can carry out production processes
separately in different parts of the world. Another reason TNCs invest abroad is because
production costs in developing countries are lower than in developed countries (O'Brien &
Williams, 2020). As stated by Ietto-Gillies (2003), there is a significant development of the
organization of production across countries due to the activities of transnational corporations.
In addition, it is argued that TNCs constitute a major part of the global production structure
and about 50 percent of world trade (O'Brien and Williams, 2020, p. 132). This fact shows the
impact of TNCs on the global production process. TNCs seem to be a key player in global
production.
TNCs play their role in the global economy through foreign direct investment (FDI).
Changes in the global production system are linked to increasing levels of FDI (O'Brien &
Williams, 2020). In addition, Perraton says that FDI by transnational corporations has grown
faster than trade (Perraton, 2003, p. 47). The success of TNCs to invest in many countries
around the world may be due to the recognition that TNCs are a good source of investment,
there is a transfer of technology, and there is an increase in the workforce (Waters, 2001, p.
46).
Indeed, there is skepticism towards transnational corporations and FDI. The concept of
transnational phenomena with interdependence between actors raises concerns of reduced
state sovereignty (Biersteker & Weber, 1996). This is also supported by the expansion of
capitalist companies that exploit labor, directly proportional to the need for workers to be able
to survive or survive to finance their own lives (Tyner, 2019). Moreover, for opponents of
capitalism, TNCs are believed to be a new worldwide method of exploitation that is
essentially "barbaric" and unacceptable (Waters, 2001). For example, a study conducted by
Doytch, Thelen, & Mendoza (2014) found the exploitation of child labor, with children forced
to work in fields for long hours, in a multinational tobacco company in Kazakhstan.
Therefore, for nationalist economic advocates, states must improve their ability to regulate
TNCs investing in their own countries (O'Brien and Williams, 2020).
However, for liberal supporters, there are The advantages offered by transnational
corporations with foreign direct investment. Epstein argues that this development can provide
more employment opportunities especially for developing countries, while also resulting in
wage increases because TNCs in developing countries have more productivity so they can pay
more (Epstein, 2003). In addition, TNCs with FDI can increase tax revenues through
increased economic activity in the host country and can help advance economic growth by
encouraging a more efficient division of labor (O'Brien & Williams, 2020, p. 137). Studies
conducted by Harrison in Mexico, Morocco and Venezuela show that TNCs help domestic
firms to break into export markets and they can improve workers' living standards as they pay
higher wages than domestic firms (Harrison, 1994).
Based on the explanation above, it can be seen that TNCs have a significant impact on
labor. One of the reasons TNCs with FDI are growing is that many developing countries are
implementing active policies to support industrialization and export to developed countries
(O'Brien and Williams, 2020). This is understandable because it will provide employment
opportunities in the country they are. Therefore, it is not surprising that many countries are
trying to attract TNCs to invest in their territories. With respect to the global division of labor,
TNCs will increase the demand for more skilled labor, as research conducted by Bruno, Crino
and Falzoni (2012) states that FDI increases the demand for more skilled labor in Poland.
Actors affected by the global political economy must make behavioral adjustments to
be able to face global competition which is currently increasing (O'Brien & Williams, 2020).
Coupled with technological advances in the form of machines, the value of labor has also
decreased because their portion of work can be replaced by machines (Tyner, 2019). The
higher demand for a more skilled workforce forces people to improve their abilities to
compete with others in the workplace. One of the reasons for this trend is to increase labor
productivity as it is a strong indicator of economic efficiency (Plasmans, 2003). In addition, it
is not surprising that TNCs promote division of labor to increase efficient production.
However, it seems that the labor market is shaped by TNC interests rather than national
interest.
International Trade, Transnational Production and Labor
One of the issues in relation to international trade and transnational production is not
respecting workers' rights. Many TNCs do not invest in their own countries because they want
to reduce their production costs. They tend to hire cheap labor and cut production costs with
forced labor in peripheral countries. As stated by Horvat (2020), the worst features of
exploitation are currently happening in all developing countries in the world.
In 2014, BBC News released a video inside the Apple assembly company. The video
shows that employees work under high pressure and for long, intensive periods of time. They
were forced to work standing up all day. In fact, the company installed electrical wires in t h e
machines so that employees could not lean back when tired. Employees work in a very
grueling environment. Although in 2010 there was a mass worker suicide at Foxconn, one of
the companies that manufactures Apple products, then Apple promised to improve facilitation
and working conditions, but the BBC video shows evidence to the contrary. For example,
everyone in China needs to carry an identity card. However, companies still take workers' IDs
directly when they enter the company (BBC News, 2014). Tyner (2019) also argues that
companies can collect profits not only from the products or services produced but also
through life insurance policies from workers who experience misfortune while performing
their duties.
However, not all TNCs tend to exploit labor for profit. A study analyzing foreign
direct investment and labor rights in 80 developing countries conducted by Busse,
Nunnenkamp, and Spatareanu showed different results. In terms of the correlation between
labor rights and TNCs, the study found that TNCs prefer to invest in countries that respect
labor rights (Busse, Nunnenkamp, & and Spatareanu, 2011). Moreover, labor violence in
potential host countries discourages TNCs from running their activities there, wherever it may
be (Busse, Nunnenkamp and Spatareanu, 2011). This condition shows that TNCs pay great
attention to labor rights, not only focus on their profits as well.
One solution to the above problem is to implement labor standards. Based on Heintz's
(2003) argument, the labor market should be for the larger society and should be governed by
rules, norms, and ethical standards that make allowance for the separate costs of
marketization. The International Labor Organization (ILO) is an organization that promotes
labor standards worldwide. The ILO holds conventions that cover basic human rights areas:
freedom of association and collective bargaining, elimination of forced labor, elimination of
child labor, and elimination of discrimination (Heintz, 2003; O'Brien and Willams, 2020).
However, the main problem in implementing labor standards is how to come up with labor
standards that can be applied worldwide. This is due to the disagreement among actors on the
purpose of labor standards. Furthermore, leaders in many liberal countries argue that
economic growth improves labor standards. Whereas, any interference in trade for labor
reasons will lower the gains from trade (O'Brien and Williams, 2020, p.195).
Conclusions
There are different perspectives on the global political economy. Economic
nationalists place the state as the main actor in the global political economy. This is related to
their concept of protectionism, protecting the economy from the global market. Meanwhile,
economic liberalists argue that states should collaborate with other actors in the global
economy. They believe that the global political economy involves multiple actors. Moreover,
the current global economy is more likely to adopt liberal values such as trade liberalization.
There are dynamics that shape the global political economy. They are international
trade and transnational production. Both dynamics have implications for the global division of
labor. International trade with the concept of 'comparative advantage' comparative advantage'
affects the specialization of labour. Whereas transnational production with TNCs has
implications in driving the division of labor around the world, especially in their host
countries. Both international trade and transnational production have benefits for the
participants. This is because TNCs can provide jobs and also improve the lives of workers.
However, there is skepticism about these dynamics. For example, they are believed to
play a role in wage inequality, especially between less skilled labor and more skilled labor.
Another example is the issue of worker exploitation, such as the Apple factory case and child
labor in tobacco factories. One solution that can be suggested is to enforce global labor
standards.
Results and Discussion of International Trade
According to Waters (2001) the primary and ongoing basis of economic
internationalization is trade. Trade itself is understood as the activity of two or more
individuals exchanging goods and services (O'Brien & Williams, 2020, p. 109). Such
activities would be called international trade if they are operated abroad. This international
trade can create relationships and interdependence between actors (Waters, 2001). As stated
by Ietto-Gillies (2003), that one evidence of state interconnectedness can be seen in
international trade activities in goods and services. Wallerstein and Marxist in Cohen (2017)
categorize countries into several levels, where there are dominant core countries, dependent
periphery countries and semi-fringe countries that are between the two categories. While core
countries enjoy a high level of technological development, selling sophisticated high-value
goods and services, the role of peripheral countries is simply to supply materials raw
materials, foodstuffs, and also cheap labor on the basis of highly unequal exchanges. Among
them, semi-periphery countries benefit from exploiting periphery countries even as they
themselves are exploited by core countries. This shows that international trade affects the
shape of the global political economy. One reason is that international trade has direct and
indirect effects on people and communities, for example, a family's consumption patterns are
affected by trade in goods (O'Brien & Williams, 2020).
One of the ways in which international trade affects the global economy is through a
free trade regime. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996). The theory of comparative advantage advises countries to
specialize in their most efficient products and services (O'Brien & Williams, 2020). The
ideology of comparative advantage serves to obscure uneven economic development progress
and unequal exchange between countries and regions (McBride & Shields, 1993). Therefore,
proponents of free trade believe that every country should engage in trade international and
reduce barriers.
Furthermore, according to liberal political economy, everyone can benefit from trade
as it can improve efficiency and increase productivity (O'Brien & Williams, 2020). For
example, Langenfeld and Nieberding (2005) estimate that trade growth has provided total
benefits to American consumers of about $2.3 trillion over the trade has provided total benefits
to American consumers of about $2.3 trillion during 1992-2002, or between $20,000 and
$22,000 per household in 2002. In contrast, nationalists believe that free trade is detrimental to
the national economy because it will weaken the economy unbalanced development and can
damage the environment (O'Brien & Williams, 2020). As in the case of Fiji, they are facing a
rapid and radical restructuring of the sugar or banana industry and this is potentially
disastrous for their economy as it is a fundamental commodity (Connel & Soutar, 2007).
Furthermore, in the international trading system, there are significant developments
that encourage trade liberalization. The emergence of the WTO (World Trade Organization),
the successor to the GATT (General Agreement on Tariffs and Trade), is believed to play an
important role in trade liberalization international. The WTO (and GATT before it) has
successfully liberalized trade and managed international trade through multilateral agreements
(Sampson, 2001). Jackson (1998) stated that the establishment of the WTO was the most
significant moment in the history of the world economy, even becoming a fundamental
institution in the international economy, especially with its dispute settlement procedures. The
WTO has changed the management of world trade in the following ways:
Change trade liberalization from being based on tariff adjustments to discussing
domestic policies, institutional practices and regulations.
Broaden the scope of trade and change the focus of negotiations from product
bargaining to policy.
Propose movement towards accession policies, for example, in the areas of subsidies
and trade-related investment measures and services (O'Brien & Williams, 2020).
Based on the above, it can be seen that the WTO has successfully played its role in
international trade, but there is the issue of many developing countries' interests not being
accommodated by the WTO (Sampson, 2001). In a d d i t i o n , countries developing
countries recognize the limitations of political influence in the international trade agreement
process (O'Brien & Williams, 2020). Another problem faced by developing countries is that
they lack the capacity to enforce WTO decisions as well as the high indirect costs of initiating
disputes with the WTO (Horlick, 2006, p. 220). For example, trade in agriculture, which is a
key interest of many developing countries, is particularly liberalized (Walter & Sen, 2009).
Apart from the role of the WTO, the influence of international trade on the global
political economy can be understood through its implications for the global division of labor
(Waters, 2001). The division of labor refers to the roles that people employ in the production
process (O'Brien & Williams, 2020). Waters (2001) states there are two types of division of
labour: social division of labour refers to occupational specialization, and technical division of
labour refers to task specialization. This condition is closely related to the concept of
comparative advantage by liberals who attach importance to the specialization of countries'
commodities to gain an advantage in the production process. In international trade. This means
that by engaging in trade, countries also shape their division of labor. Increase While trade
and mobility are expected to increase the elasticity of demand for human capital, they also
automatically reduce the bargaining power of labor (Perraton, 2003, p. 56). Moreover, in the
reduction of transaction costs due to technological advances, international agreements, non-
tariff barriers results in enormous specialization possibilities (Pomfret, 2014). A country can
choose the specific commodities or services offered in international trade which will also
affect the demand for labor from that country.
Another effect of international trade on labor can be seen in the inequality between
more skilled and less skilled labor. Trade liberalization leads to wage inequality due to
increased trade (Goldberg & Pavnick, 2004). It seems that recent international trade increases
the demand for more skilled workers to support the concept of specialization. Slaughter
(1998) believes that the demand for labor from the less skilled to the more skilled is a key
factor of wage inequality and it is actually happening in some countries such as the United
States and the United Kingdom. He added the argument that many countries with Such
inequality creates problems, such as higher unemployment rates and many job opportunities
avoiding less-skilled workers.
Transnational Production
There is general agreement that the growth of transnational production has shaped the
evolution of the global economy (O'Brien & Williams, 2020, p. 132). One of the main reasons
is that the global production system is a complex process. O'Brien and Williams (2013) argue
that this process involves multiple workers and workplaces with their integration with local,
national, regional and global systems. Because transnational production involves multi-level
actors. It becomes more complicated as it has to integrate different social, political and
economic backgrounds in the global economy. The main reason for the emergence of
transnational production is the innovation of communication and information technology
along with the advancement of transportation (Ietto-Gillies, 2003). This development
increases the possibility to separate production processes around the world.
A significant change affecting production processes across countries is the formation
of transnational companies (TNCs). As stated earlier, in the era of globalization, geographical
issues are no longer a big problem, therefore, TNCs can carry out production processes
separately in different parts of the world. Another reason TNCs invest abroad is because
production costs in developing countries are lower than in developed countries (O'Brien &
Williams, 2020). As stated by Ietto-Gillies (2003), there is a significant development of the
organization of production across countries due to the activities of transnational corporations.
In addition, it is argued that TNCs constitute a major part of the global production structure
and about 50 percent of world trade (O'Brien and Williams, 2020, p. 132). This fact shows the
impact of TNCs on the global production process. TNCs seem to be a key player in global
production.
TNCs play their role in the global economy through foreign direct investment (FDI).
Changes in the global production system are linked to increasing levels of FDI (O'Brien &
Williams, 2020). In addition, Perraton says that FDI by transnational corporations has grown
faster than trade (Perraton, 2003, p. 47). The success of TNCs to invest in many countries
around the world may be due to the recognition that TNCs are a good source of investment,
there is a transfer of technology, and there is an increase in the workforce (Waters, 2001, p.
46).
Indeed, there is skepticism towards transnational corporations and FDI. The concept of
transnational phenomena with interdependence between actors raises concerns of reduced
state sovereignty (Biersteker & Weber, 1996). This is also supported by the expansion of
capitalist companies that exploit labor, directly proportional to the need for workers to be able
to survive or survive to finance their own lives (Tyner, 2019). Moreover, for opponents of
capitalism, TNCs are believed to be a new worldwide method of exploitation that is
essentially "barbaric" and unacceptable (Waters, 2001). For example, a study conducted by
Doytch, Thelen, & Mendoza (2014) found the exploitation of child labor, with children forced
to work in fields for long hours, in a multinational tobacco company in Kazakhstan.
Therefore, for nationalist economic advocates, states must improve their ability to regulate
TNCs investing in their own countries (O'Brien and Williams, 2020).
However, for liberal supporters, there are The advantages offered by transnational
corporations with foreign direct investment. Epstein argues that this development can provide
more employment opportunities especially for developing countries, while also resulting in
wage increases because TNCs in developing countries have more productivity so they can pay
more (Epstein, 2003). In addition, TNCs with FDI can increase tax revenues through
increased economic activity in the host country and can help advance economic growth by
encouraging a more efficient division of labor (O'Brien & Williams, 2020, p. 137). Studies
conducted by Harrison in Mexico, Morocco and Venezuela show that TNCs help domestic
firms to break into export markets and they can improve workers' living standards as they pay
higher wages than domestic firms (Harrison, 1994).
Based on the explanation above, it can be seen that TNCs have a significant impact on
labor. One of the reasons TNCs with FDI are growing is that many developing countries are
implementing active policies to support industrialization and export to developed countries
(O'Brien and Williams, 2020). This is understandable because it will provide employment
opportunities in the country they are. Therefore, it is not surprising that many countries are
trying to attract TNCs to invest in their territories. With respect to the global division of labor,
TNCs will increase the demand for more skilled labor, as research conducted by Bruno, Crino
and Falzoni (2012) states that FDI increases the demand for more skilled labor in Poland.
Actors affected by the global political economy must make behavioral adjustments to
be able to face global competition which is currently increasing (O'Brien & Williams, 2020).
Coupled with technological advances in the form of machines, the value of labor has also
decreased because their portion of work can be replaced by machines (Tyner, 2019). The
higher demand for a more skilled workforce forces people to improve their abilities to
compete with others in the workplace. One of the reasons for this trend is to increase labor
productivity as it is a strong indicator of economic efficiency (Plasmans, 2003). In addition, it
is not surprising that TNCs promote division of labor to increase efficient production.
However, it seems that the labor market is shaped by TNC interests rather than national
interest.
International Trade, Transnational Production and Labor
One of the issues in relation to international trade and transnational production is not
respecting workers' rights. Many TNCs do not invest in their own countries because they want
to reduce their production costs. They tend to hire cheap labor and cut production costs with
forced labor in peripheral countries. As stated by Horvat (2020), the worst features of
exploitation are currently happening in all developing countries in the world.
In 2014, BBC News released a video inside the Apple assembly company. The video
shows that employees work under high pressure and for long, intensive periods of time. They
were forced to work standing up all day. In fact, the company installed electrical wires in t h e
machines so that employees could not lean back when tired. Employees work in a very
grueling environment. Although in 2010 there was a mass worker suicide at Foxconn, one of
the companies that manufactures Apple products, then Apple promised to improve facilitation
and working conditions, but the BBC video shows evidence to the contrary. For example,
everyone in China needs to carry an identity card. However, companies still take workers' IDs
directly when they enter the company (BBC News, 2014). Tyner (2019) also argues that
companies can collect profits not only from the products or services produced but also
through life insurance policies from workers who experience misfortune while performing
their duties.
However, not all TNCs tend to exploit labor for profit. A study analyzing foreign
direct investment and labor rights in 80 developing countries conducted by Busse,
Nunnenkamp, and Spatareanu showed different results. In terms of the correlation between
labor rights and TNCs, the study found that TNCs prefer to invest in countries that respect
labor rights (Busse, Nunnenkamp, & and Spatareanu, 2011). Moreover, labor violence in
potential host countries discourages TNCs from running their activities there, wherever it may
be (Busse, Nunnenkamp and Spatareanu, 2011). This condition shows that TNCs pay great
attention to labor rights, not only focus on their profits as well.
One solution to the above problem is to implement labor standards. Based on Heintz's
(2003) argument, the labor market should be for the larger society and should be governed by
rules, norms, and ethical standards that make allowance for the separate costs of
marketization. The International Labor Organization (ILO) is an organization that promotes
labor standards worldwide. The ILO holds conventions that cover basic human rights areas:
freedom of association and collective bargaining, elimination of forced labor, elimination of
child labor, and elimination of discrimination (Heintz, 2003; O'Brien and Willams, 2020).
However, the main problem in implementing labor standards is how to come up with labor
standards that can be applied worldwide. This is due to the disagreement among actors on the
purpose of labor standards. Furthermore, leaders in many liberal countries argue that
economic growth improves labor standards. Whereas, any interference in trade for labor
reasons will lower the gains from trade (O'Brien and Williams, 2020, p.195).
Conclusions
There are different perspectives on the global political economy. Economic
nationalists place the state as the main actor in the global political economy. This is related to
their concept of protectionism, protecting the economy from the global market. Meanwhile,
economic liberalists argue that states should collaborate with other actors in the global
economy. They believe that the global political economy involves multiple actors. Moreover,
the current global economy is more likely to adopt liberal values such as trade liberalization.
There are dynamics that shape the global political economy. They are international
trade and transnational production. Both dynamics have implications for the global division of
labor. International trade with the concept of 'comparative advantage' comparative advantage'
affects the specialization of labour. Whereas transnational production with TNCs has
implications in driving the division of labor around the world, especially in their host
countries. Both international trade and transnational production have benefits for the
participants. This is because TNCs can provide jobs and also improve the lives of workers.
However, there is skepticism about these dynamics. For example, they are believed to
play a role in wage inequality, especially between less skilled labor and more skilled labor.
Another example is the issue of worker exploitation, such as the Apple factory case and child
labor in tobacco factories. One solution that can be suggested is to enforce global labor
standards.
Results and Discussion of International Trade
According to Waters (2001) the primary and ongoing basis of economic
internationalization is trade. Trade itself is understood as the activity of two or more
individuals exchanging goods and services (O'Brien & Williams, 2020, p. 109). Such
activities would be called international trade if they are operated abroad. This international
trade can create relationships and interdependence between actors (Waters, 2001). As stated
by Ietto-Gillies (2003), that one evidence of state interconnectedness can be seen in
international trade activities in goods and services. Wallerstein and Marxist in Cohen (2017)
categorize countries into several levels, where there are dominant core countries, dependent
periphery countries and semi-fringe countries that are between the two categories. While core
countries enjoy a high level of technological development, selling sophisticated high-value
goods and services, the role of peripheral countries is simply to supply materials raw
materials, foodstuffs, and also cheap labor on the basis of highly unequal exchanges. Among
them, semi-periphery countries benefit from exploiting periphery countries even as they
themselves are exploited by core countries. This shows that international trade affects the
shape of the global political economy. One reason is that international trade has direct and
indirect effects on people and communities, for example, a family's consumption patterns are
affected by trade in goods (O'Brien & Williams, 2020).
One of the ways in which international trade affects the global economy is through a
free trade regime. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996). The theory of comparative advantage advises countries to
specialize in their most efficient products and services (O'Brien & Williams, 2020). The
ideology of comparative advantage serves to obscure uneven economic development progress
and unequal exchange between countries and regions (McBride & Shields, 1993). Therefore,
proponents of free trade believe that every country should engage in trade international and
reduce barriers.
Furthermore, according to liberal political economy, everyone can benefit from trade
as it can improve efficiency and increase productivity (O'Brien & Williams, 2020). For
example, Langenfeld and Nieberding (2005) estimate that trade growth has provided total
benefits to American consumers of about $2.3 trillion over the trade has provided total benefits
to American consumers of about $2.3 trillion during 1992-2002, or between $20,000 and
$22,000 per household in 2002. In contrast, nationalists believe that free trade is detrimental to
the national economy because it will weaken the economy unbalanced development and can
damage the environment (O'Brien & Williams, 2020). As in the case of Fiji, they are facing a
rapid and radical restructuring of the sugar or banana industry and this is potentially
disastrous for their economy as it is a fundamental commodity (Connel & Soutar, 2007).
Furthermore, in the international trading system, there are significant developments
that encourage trade liberalization. The emergence of the WTO (World Trade Organization),
the successor to the GATT (General Agreement on Tariffs and Trade), is believed to play an
important role in trade liberalization international. The WTO (and GATT before it) has
successfully liberalized trade and managed international trade through multilateral agreements
(Sampson, 2001). Jackson (1998) stated that the establishment of the WTO was the most
significant moment in the history of the world economy, even becoming a fundamental
institution in the international economy, especially with its dispute settlement procedures. The
WTO has changed the management of world trade in the following ways:
Change trade liberalization from being based on tariff adjustments to discussing
domestic policies, institutional practices and regulations.
Broaden the scope of trade and change the focus of negotiations from product
bargaining to policy.
Propose movement towards accession policies, for example, in the areas of subsidies
and trade-related investment measures and services (O'Brien & Williams, 2020).
Based on the above, it can be seen that the WTO has successfully played its role in
international trade, but there is the issue of many developing countries' interests not being
accommodated by the WTO (Sampson, 2001). In a d d i t i o n , countries developing
countries recognize the limitations of political influence in the international trade agreement
process (O'Brien & Williams, 2020). Another problem faced by developing countries is that
they lack the capacity to enforce WTO decisions as well as the high indirect costs of initiating
disputes with the WTO (Horlick, 2006, p. 220). For example, trade in agriculture, which is a
key interest of many developing countries, is particularly liberalized (Walter & Sen, 2009).
Apart from the role of the WTO, the influence of international trade on the global
political economy can be understood through its implications for the global division of labor
(Waters, 2001). The division of labor refers to the roles that people employ in the production
process (O'Brien & Williams, 2020). Waters (2001) states there are two types of division of
labour: social division of labour refers to occupational specialization, and technical division of
labour refers to task specialization. This condition is closely related to the concept of
comparative advantage by liberals who attach importance to the specialization of countries'
commodities to gain an advantage in the production process. In international trade. This means
that by engaging in trade, countries also shape their division of labor. Increase While trade
and mobility are expected to increase the elasticity of demand for human capital, they also
automatically reduce the bargaining power of labor (Perraton, 2003, p. 56). Moreover, in the
reduction of transaction costs due to technological advances, international agreements, non-
tariff barriers results in enormous specialization possibilities (Pomfret, 2014). A country can
choose the specific commodities or services offered in international trade which will also
affect the demand for labor from that country.
Another effect of international trade on labor can be seen in the inequality between
more skilled and less skilled labor. Trade liberalization leads to wage inequality due to
increased trade (Goldberg & Pavnick, 2004). It seems that recent international trade increases
the demand for more skilled workers to support the concept of specialization. Slaughter
(1998) believes that the demand for labor from the less skilled to the more skilled is a key
factor of wage inequality and it is actually happening in some countries such as the United
States and the United Kingdom. He added the argument that many countries with Such
inequality creates problems, such as higher unemployment rates and many job opportunities
avoiding less-skilled workers.
Transnational Production
There is general agreement that the growth of transnational production has shaped the
evolution of the global economy (O'Brien & Williams, 2020, p. 132). One of the main reasons
is that the global production system is a complex process. O'Brien and Williams (2013) argue
that this process involves multiple workers and workplaces with their integration with local,
national, regional and global systems. Because transnational production involves multi-level
actors. It becomes more complicated as it has to integrate different social, political and
economic backgrounds in the global economy. The main reason for the emergence of
transnational production is the innovation of communication and information technology
along with the advancement of transportation (Ietto-Gillies, 2003). This development
increases the possibility to separate production processes around the world.
A significant change affecting production processes across countries is the formation
of transnational companies (TNCs). As stated earlier, in the era of globalization, geographical
issues are no longer a big problem, therefore, TNCs can carry out production processes
separately in different parts of the world. Another reason TNCs invest abroad is because
production costs in developing countries are lower than in developed countries (O'Brien &
Williams, 2020). As stated by Ietto-Gillies (2003), there is a significant development of the
organization of production across countries due to the activities of transnational corporations.
In addition, it is argued that TNCs constitute a major part of the global production structure
and about 50 percent of world trade (O'Brien and Williams, 2020, p. 132). This fact shows the
impact of TNCs on the global production process. TNCs seem to be a key player in global
production.
TNCs play their role in the global economy through foreign direct investment (FDI).
Changes in the global production system are linked to increasing levels of FDI (O'Brien &
Williams, 2020). In addition, Perraton says that FDI by transnational corporations has grown
faster than trade (Perraton, 2003, p. 47). The success of TNCs to invest in many countries
around the world may be due to the recognition that TNCs are a good source of investment,
there is a transfer of technology, and there is an increase in the workforce (Waters, 2001, p.
46).
Indeed, there is skepticism towards transnational corporations and FDI. The concept of
transnational phenomena with interdependence between actors raises concerns of reduced
state sovereignty (Biersteker & Weber, 1996). This is also supported by the expansion of
capitalist companies that exploit labor, directly proportional to the need for workers to be able
to survive or survive to finance their own lives (Tyner, 2019). Moreover, for opponents of
capitalism, TNCs are believed to be a new worldwide method of exploitation that is
essentially "barbaric" and unacceptable (Waters, 2001). For example, a study conducted by
Doytch, Thelen, & Mendoza (2014) found the exploitation of child labor, with children forced
to work in fields for long hours, in a multinational tobacco company in Kazakhstan.
Therefore, for nationalist economic advocates, states must improve their ability to regulate
TNCs investing in their own countries (O'Brien and Williams, 2020).
However, for liberal supporters, there are The advantages offered by transnational
corporations with foreign direct investment. Epstein argues that this development can provide
more employment opportunities especially for developing countries, while also resulting in
wage increases because TNCs in developing countries have more productivity so they can pay
more (Epstein, 2003). In addition, TNCs with FDI can increase tax revenues through
increased economic activity in the host country and can help advance economic growth by
encouraging a more efficient division of labor (O'Brien & Williams, 2020, p. 137). Studies
conducted by Harrison in Mexico, Morocco and Venezuela show that TNCs help domestic
firms to break into export markets and they can improve workers' living standards as they pay
higher wages than domestic firms (Harrison, 1994).
Based on the explanation above, it can be seen that TNCs have a significant impact on
labor. One of the reasons TNCs with FDI are growing is that many developing countries are
implementing active policies to support industrialization and export to developed countries
(O'Brien and Williams, 2020). This is understandable because it will provide employment
opportunities in the country they are. Therefore, it is not surprising that many countries are
trying to attract TNCs to invest in their territories. With respect to the global division of labor,
TNCs will increase the demand for more skilled labor, as research conducted by Bruno, Crino
and Falzoni (2012) states that FDI increases the demand for more skilled labor in Poland.
Actors affected by the global political economy must make behavioral adjustments to
be able to face global competition which is currently increasing (O'Brien & Williams, 2020).
Coupled with technological advances in the form of machines, the value of labor has also
decreased because their portion of work can be replaced by machines (Tyner, 2019). The
higher demand for a more skilled workforce forces people to improve their abilities to
compete with others in the workplace. One of the reasons for this trend is to increase labor
productivity as it is a strong indicator of economic efficiency (Plasmans, 2003). In addition, it
is not surprising that TNCs promote division of labor to increase efficient production.
However, it seems that the labor market is shaped by TNC interests rather than national
interest.
International Trade, Transnational Production and Labor
One of the issues in relation to international trade and transnational production is not
respecting workers' rights. Many TNCs do not invest in their own countries because they want
to reduce their production costs. They tend to hire cheap labor and cut production costs with
forced labor in peripheral countries. As stated by Horvat (2020), the worst features of
exploitation are currently happening in all developing countries in the world.
In 2014, BBC News released a video inside the Apple assembly company. The video
shows that employees work under high pressure and for long, intensive periods of time. They
were forced to work standing up all day. In fact, the company installed electrical wires in t h e
machines so that employees could not lean back when tired. Employees work in a very
grueling environment. Although in 2010 there was a mass worker suicide at Foxconn, one of
the companies that manufactures Apple products, then Apple promised to improve facilitation
and working conditions, but the BBC video shows evidence to the contrary. For example,
everyone in China needs to carry an identity card. However, companies still take workers' IDs
directly when they enter the company (BBC News, 2014). Tyner (2019) also argues that
companies can collect profits not only from the products or services produced but also
through life insurance policies from workers who experience misfortune while performing
their duties.
However, not all TNCs tend to exploit labor for profit. A study analyzing foreign
direct investment and labor rights in 80 developing countries conducted by Busse,
Nunnenkamp, and Spatareanu showed different results. In terms of the correlation between
labor rights and TNCs, the study found that TNCs prefer to invest in countries that respect
labor rights (Busse, Nunnenkamp, & and Spatareanu, 2011). Moreover, labor violence in
potential host countries discourages TNCs from running their activities there, wherever it may
be (Busse, Nunnenkamp and Spatareanu, 2011). This condition shows that TNCs pay great
attention to labor rights, not only focus on their profits as well.
One solution to the above problem is to implement labor standards. Based on Heintz's
(2003) argument, the labor market should be for the larger society and should be governed by
rules, norms, and ethical standards that make allowance for the separate costs of
marketization. The International Labor Organization (ILO) is an organization that promotes
labor standards worldwide. The ILO holds conventions that cover basic human rights areas:
freedom of association and collective bargaining, elimination of forced labor, elimination of
child labor, and elimination of discrimination (Heintz, 2003; O'Brien and Willams, 2020).
However, the main problem in implementing labor standards is how to come up with labor
standards that can be applied worldwide. This is due to the disagreement among actors on the
purpose of labor standards. Furthermore, leaders in many liberal countries argue that
economic growth improves labor standards. Whereas, any interference in trade for labor
reasons will lower the gains from trade (O'Brien and Williams, 2020, p.195).
Conclusions
There are different perspectives on the global political economy. Economic
nationalists place the state as the main actor in the global political economy. This is related to
their concept of protectionism, protecting the economy from the global market. Meanwhile,
economic liberalists argue that states should collaborate with other actors in the global
economy. They believe that the global political economy involves multiple actors. Moreover,
the current global economy is more likely to adopt liberal values such as trade liberalization.
There are dynamics that shape the global political economy. They are international
trade and transnational production. Both dynamics have implications for the global division of
labor. International trade with the concept of 'comparative advantage' comparative advantage'
affects the specialization of labour. Whereas transnational production with TNCs has
implications in driving the division of labor around the world, especially in their host
countries. Both international trade and transnational production have benefits for the
participants. This is because TNCs can provide jobs and also improve the lives of workers.
However, there is skepticism about these dynamics. For example, they are believed to
play a role in wage inequality, especially between less skilled labor and more skilled labor.
Another example is the issue of worker exploitation, such as the Apple factory case and child
labor in tobacco factories. One solution that can be suggested is to enforce global labor
standards.
Results and Discussion of International Trade
According to Waters (2001) the primary and ongoing basis of economic
internationalization is trade. Trade itself is understood as the activity of two or more
individuals exchanging goods and services (O'Brien & Williams, 2020, p. 109). Such
activities would be called international trade if they are operated abroad. This international
trade can create relationships and interdependence between actors (Waters, 2001). As stated
by Ietto-Gillies (2003), that one evidence of state interconnectedness can be seen in
international trade activities in goods and services. Wallerstein and Marxist in Cohen (2017)
categorize countries into several levels, where there are dominant core countries, dependent
periphery countries and semi-fringe countries that are between the two categories. While core
countries enjoy a high level of technological development, selling sophisticated high-value
goods and services, the role of peripheral countries is simply to supply materials raw
materials, foodstuffs, and also cheap labor on the basis of highly unequal exchanges. Among
them, semi-periphery countries benefit from exploiting periphery countries even as they
themselves are exploited by core countries. This shows that international trade affects the
shape of the global political economy. One reason is that international trade has direct and
indirect effects on people and communities, for example, a family's consumption patterns are
affected by trade in goods (O'Brien & Williams, 2020).
One of the ways in which international trade affects the global economy is through a
free trade regime. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996). The theory of comparative advantage advises countries to
specialize in their most efficient products and services (O'Brien & Williams, 2020). The
ideology of comparative advantage serves to obscure uneven economic development progress
and unequal exchange between countries and regions (McBride & Shields, 1993). Therefore,
proponents of free trade believe that every country should engage in trade international and
reduce barriers.
Furthermore, according to liberal political economy, everyone can benefit from trade
as it can improve efficiency and increase productivity (O'Brien & Williams, 2020). For
example, Langenfeld and Nieberding (2005) estimate that trade growth has provided total
benefits to American consumers of about $2.3 trillion over the trade has provided total benefits
to American consumers of about $2.3 trillion during 1992-2002, or between $20,000 and
$22,000 per household in 2002. In contrast, nationalists believe that free trade is detrimental to
the national economy because it will weaken the economy unbalanced development and can
damage the environment (O'Brien & Williams, 2020). As in the case of Fiji, they are facing a
rapid and radical restructuring of the sugar or banana industry and this is potentially
disastrous for their economy as it is a fundamental commodity (Connel & Soutar, 2007).
Furthermore, in the international trading system, there are significant developments
that encourage trade liberalization. The emergence of the WTO (World Trade Organization),
the successor to the GATT (General Agreement on Tariffs and Trade), is believed to play an
important role in trade liberalization international. The WTO (and GATT before it) has
successfully liberalized trade and managed international trade through multilateral agreements
(Sampson, 2001). Jackson (1998) stated that the establishment of the WTO was the most
significant moment in the history of the world economy, even becoming a fundamental
institution in the international economy, especially with its dispute settlement procedures. The
WTO has changed the management of world trade in the following ways:
Change trade liberalization from being based on tariff adjustments to discussing
domestic policies, institutional practices and regulations.
Broaden the scope of trade and change the focus of negotiations from product
bargaining to policy.
Propose movement towards accession policies, for example, in the areas of subsidies
and trade-related investment measures and services (O'Brien & Williams, 2020).
Based on the above, it can be seen that the WTO has successfully played its role in
international trade, but there is the issue of many developing countries' interests not being
accommodated by the WTO (Sampson, 2001). In a d d i t i o n , countries developing
countries recognize the limitations of political influence in the international trade agreement
process (O'Brien & Williams, 2020). Another problem faced by developing countries is that
they lack the capacity to enforce WTO decisions as well as the high indirect costs of initiating
disputes with the WTO (Horlick, 2006, p. 220). For example, trade in agriculture, which is a
key interest of many developing countries, is particularly liberalized (Walter & Sen, 2009).
Apart from the role of the WTO, the influence of international trade on the global
political economy can be understood through its implications for the global division of labor
(Waters, 2001). The division of labor refers to the roles that people employ in the production
process (O'Brien & Williams, 2020). Waters (2001) states there are two types of division of
labour: social division of labour refers to occupational specialization, and technical division of
labour refers to task specialization. This condition is closely related to the concept of
comparative advantage by liberals who attach importance to the specialization of countries'
commodities to gain an advantage in the production process. In international trade. This means
that by engaging in trade, countries also shape their division of labor. Increase While trade
and mobility are expected to increase the elasticity of demand for human capital, they also
automatically reduce the bargaining power of labor (Perraton, 2003, p. 56). Moreover, in the
reduction of transaction costs due to technological advances, international agreements, non-
tariff barriers results in enormous specialization possibilities (Pomfret, 2014). A country can
choose the specific commodities or services offered in international trade which will also
affect the demand for labor from that country.
Another effect of international trade on labor can be seen in the inequality between
more skilled and less skilled labor. Trade liberalization leads to wage inequality due to
increased trade (Goldberg & Pavnick, 2004). It seems that recent international trade increases
the demand for more skilled workers to support the concept of specialization. Slaughter
(1998) believes that the demand for labor from the less skilled to the more skilled is a key
factor of wage inequality and it is actually happening in some countries such as the United
States and the United Kingdom. He added the argument that many countries with Such
inequality creates problems, such as higher unemployment rates and many job opportunities
avoiding less-skilled workers.
Transnational Production
There is general agreement that the growth of transnational production has shaped the
evolution of the global economy (O'Brien & Williams, 2020, p. 132). One of the main reasons
is that the global production system is a complex process. O'Brien and Williams (2013) argue
that this process involves multiple workers and workplaces with their integration with local,
national, regional and global systems. Because transnational production involves multi-level
actors. It becomes more complicated as it has to integrate different social, political and
economic backgrounds in the global economy. The main reason for the emergence of
transnational production is the innovation of communication and information technology
along with the advancement of transportation (Ietto-Gillies, 2003). This development
increases the possibility to separate production processes around the world.
A significant change affecting production processes across countries is the formation
of transnational companies (TNCs). As stated earlier, in the era of globalization, geographical
issues are no longer a big problem, therefore, TNCs can carry out production processes
separately in different parts of the world. Another reason TNCs invest abroad is because
production costs in developing countries are lower than in developed countries (O'Brien &
Williams, 2020). As stated by Ietto-Gillies (2003), there is a significant development of the
organization of production across countries due to the activities of transnational corporations.
In addition, it is argued that TNCs constitute a major part of the global production structure
and about 50 percent of world trade (O'Brien and Williams, 2020, p. 132). This fact shows the
impact of TNCs on the global production process. TNCs seem to be a key player in global
production.
TNCs play their role in the global economy through foreign direct investment (FDI).
Changes in the global production system are linked to increasing levels of FDI (O'Brien &
Williams, 2020). In addition, Perraton says that FDI by transnational corporations has grown
faster than trade (Perraton, 2003, p. 47). The success of TNCs to invest in many countries
around the world may be due to the recognition that TNCs are a good source of investment,
there is a transfer of technology, and there is an increase in the workforce (Waters, 2001, p.
46).
Indeed, there is skepticism towards transnational corporations and FDI. The concept of
transnational phenomena with interdependence between actors raises concerns of reduced
state sovereignty (Biersteker & Weber, 1996). This is also supported by the expansion of
capitalist companies that exploit labor, directly proportional to the need for workers to be able
to survive or survive to finance their own lives (Tyner, 2019). Moreover, for opponents of
capitalism, TNCs are believed to be a new worldwide method of exploitation that is
essentially "barbaric" and unacceptable (Waters, 2001). For example, a study conducted by
Doytch, Thelen, & Mendoza (2014) found the exploitation of child labor, with children forced
to work in fields for long hours, in a multinational tobacco company in Kazakhstan.
Therefore, for nationalist economic advocates, states must improve their ability to regulate
TNCs investing in their own countries (O'Brien and Williams, 2020).
However, for liberal supporters, there are The advantages offered by transnational
corporations with foreign direct investment. Epstein argues that this development can provide
more employment opportunities especially for developing countries, while also resulting in
wage increases because TNCs in developing countries have more productivity so they can pay
more (Epstein, 2003). In addition, TNCs with FDI can increase tax revenues through
increased economic activity in the host country and can help advance economic growth by
encouraging a more efficient division of labor (O'Brien & Williams, 2020, p. 137). Studies
conducted by Harrison in Mexico, Morocco and Venezuela show that TNCs help domestic
firms to break into export markets and they can improve workers' living standards as they pay
higher wages than domestic firms (Harrison, 1994).
Based on the explanation above, it can be seen that TNCs have a significant impact on
labor. One of the reasons TNCs with FDI are growing is that many developing countries are
implementing active policies to support industrialization and export to developed countries
(O'Brien and Williams, 2020). This is understandable because it will provide employment
opportunities in the country they are. Therefore, it is not surprising that many countries are
trying to attract TNCs to invest in their territories. With respect to the global division of labor,
TNCs will increase the demand for more skilled labor, as research conducted by Bruno, Crino
and Falzoni (2012) states that FDI increases the demand for more skilled labor in Poland.
Actors affected by the global political economy must make behavioral adjustments to
be able to face global competition which is currently increasing (O'Brien & Williams, 2020).
Coupled with technological advances in the form of machines, the value of labor has also
decreased because their portion of work can be replaced by machines (Tyner, 2019). The
higher demand for a more skilled workforce forces people to improve their abilities to
compete with others in the workplace. One of the reasons for this trend is to increase labor
productivity as it is a strong indicator of economic efficiency (Plasmans, 2003). In addition, it
is not surprising that TNCs promote division of labor to increase efficient production.
However, it seems that the labor market is shaped by TNC interests rather than national
interest.
International Trade, Transnational Production and Labor
One of the issues in relation to international trade and transnational production is not
respecting workers' rights. Many TNCs do not invest in their own countries because they want
to reduce their production costs. They tend to hire cheap labor and cut production costs with
forced labor in peripheral countries. As stated by Horvat (2020), the worst features of
exploitation are currently happening in all developing countries in the world.
In 2014, BBC News released a video inside the Apple assembly company. The video
shows that employees work under high pressure and for long, intensive periods of time. They
were forced to work standing up all day. In fact, the company installed electrical wires in t h e
machines so that employees could not lean back when tired. Employees work in a very
grueling environment. Although in 2010 there was a mass worker suicide at Foxconn, one of
the companies that manufactures Apple products, then Apple promised to improve facilitation
and working conditions, but the BBC video shows evidence to the contrary. For example,
everyone in China needs to carry an identity card. However, companies still take workers' IDs
directly when they enter the company (BBC News, 2014). Tyner (2019) also argues that
companies can collect profits not only from the products or services produced but also
through life insurance policies from workers who experience misfortune while performing
their duties.
However, not all TNCs tend to exploit labor for profit. A study analyzing foreign
direct investment and labor rights in 80 developing countries conducted by Busse,
Nunnenkamp, and Spatareanu showed different results. In terms of the correlation between
labor rights and TNCs, the study found that TNCs prefer to invest in countries that respect
labor rights (Busse, Nunnenkamp, & and Spatareanu, 2011). Moreover, labor violence in
potential host countries discourages TNCs from running their activities there, wherever it may
be (Busse, Nunnenkamp and Spatareanu, 2011). This condition shows that TNCs pay great
attention to labor rights, not only focus on their profits as well.
One solution to the above problem is to implement labor standards. Based on Heintz's
(2003) argument, the labor market should be for the larger society and should be governed by
rules, norms, and ethical standards that make allowance for the separate costs of
marketization. The International Labor Organization (ILO) is an organization that promotes
labor standards worldwide. The ILO holds conventions that cover basic human rights areas:
freedom of association and collective bargaining, elimination of forced labor, elimination of
child labor, and elimination of discrimination (Heintz, 2003; O'Brien and Willams, 2020).
However, the main problem in implementing labor standards is how to come up with labor
standards that can be applied worldwide. This is due to the disagreement among actors on the
purpose of labor standards. Furthermore, leaders in many liberal countries argue that
economic growth improves labor standards. Whereas, any interference in trade for labor
reasons will lower the gains from trade (O'Brien and Williams, 2020, p.195).
Conclusions
There are different perspectives on the global political economy. Economic
nationalists place the state as the main actor in the global political economy. This is related to
their concept of protectionism, protecting the economy from the global market. Meanwhile,
economic liberalists argue that states should collaborate with other actors in the global
economy. They believe that the global political economy involves multiple actors. Moreover,
the current global economy is more likely to adopt liberal values such as trade liberalization.
There are dynamics that shape the global political economy. They are international
trade and transnational production. Both dynamics have implications for the global division of
labor. International trade with the concept of 'comparative advantage' comparative advantage'
affects the specialization of labour. Whereas transnational production with TNCs has
implications in driving the division of labor around the world, especially in their host
countries. Both international trade and transnational production have benefits for the
participants. This is because TNCs can provide jobs and also improve the lives of workers.
However, there is skepticism about these dynamics. For example, they are believed to
play a role in wage inequality, especially between less skilled labor and more skilled labor.
Another example is the issue of worker exploitation, such as the Apple factory case and child
labor in tobacco factories. One solution that can be suggested is to enforce global labor
standards.
Results and Discussion of International Trade
According to Waters (2001) the primary and ongoing basis of economic
internationalization is trade. Trade itself is understood as the activity of two or more
individuals exchanging goods and services (O'Brien & Williams, 2020, p. 109). Such
activities would be called international trade if they are operated abroad. This international
trade can create relationships and interdependence between actors (Waters, 2001). As stated
by Ietto-Gillies (2003), that one evidence of state interconnectedness can be seen in
international trade activities in goods and services. Wallerstein and Marxist in Cohen (2017)
categorize countries into several levels, where there are dominant core countries, dependent
periphery countries and semi-fringe countries that are between the two categories. While core
countries enjoy a high level of technological development, selling sophisticated high-value
goods and services, the role of peripheral countries is simply to supply materials raw
materials, foodstuffs, and also cheap labor on the basis of highly unequal exchanges. Among
them, semi-periphery countries benefit from exploiting periphery countries even as they
themselves are exploited by core countries. This shows that international trade affects the
shape of the global political economy. One reason is that international trade has direct and
indirect effects on people and communities, for example, a family's consumption patterns are
affected by trade in goods (O'Brien & Williams, 2020).
One of the ways in which international trade affects the global economy is through a
free trade regime. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996). The theory of comparative advantage advises countries to
specialize in their most efficient products and services (O'Brien & Williams, 2020). The
ideology of comparative advantage serves to obscure uneven economic development progress
and unequal exchange between countries and regions (McBride & Shields, 1993). Therefore,
proponents of free trade believe that every country should engage in trade international and
reduce barriers.
Furthermore, according to liberal political economy, everyone can benefit from trade
as it can improve efficiency and increase productivity (O'Brien & Williams, 2020). For
example, Langenfeld and Nieberding (2005) estimate that trade growth has provided total
benefits to American consumers of about $2.3 trillion over the trade has provided total benefits
to American consumers of about $2.3 trillion during 1992-2002, or between $20,000 and
$22,000 per household in 2002. In contrast, nationalists believe that free trade is detrimental to
the national economy because it will weaken the economy unbalanced development and can
damage the environment (O'Brien & Williams, 2020). As in the case of Fiji, they are facing a
rapid and radical restructuring of the sugar or banana industry and this is potentially
disastrous for their economy as it is a fundamental commodity (Connel & Soutar, 2007).
Furthermore, in the international trading system, there are significant developments
that encourage trade liberalization. The emergence of the WTO (World Trade Organization),
the successor to the GATT (General Agreement on Tariffs and Trade), is believed to play an
important role in trade liberalization international. The WTO (and GATT before it) has
successfully liberalized trade and managed international trade through multilateral agreements
(Sampson, 2001). Jackson (1998) stated that the establishment of the WTO was the most
significant moment in the history of the world economy, even becoming a fundamental
institution in the international economy, especially with its dispute settlement procedures. The
WTO has changed the management of world trade in the following ways:
Change trade liberalization from being based on tariff adjustments to discussing
domestic policies, institutional practices and regulations.
Broaden the scope of trade and change the focus of negotiations from product
bargaining to policy.
Propose movement towards accession policies, for example, in the areas of subsidies
and trade-related investment measures and services (O'Brien & Williams, 2020).
Based on the above, it can be seen that the WTO has successfully played its role in
international trade, but there is the issue of many developing countries' interests not being
accommodated by the WTO (Sampson, 2001). In a d d i t i o n , countries developing
countries recognize the limitations of political influence in the international trade agreement
process (O'Brien & Williams, 2020). Another problem faced by developing countries is that
they lack the capacity to enforce WTO decisions as well as the high indirect costs of initiating
disputes with the WTO (Horlick, 2006, p. 220). For example, trade in agriculture, which is a
key interest of many developing countries, is particularly liberalized (Walter & Sen, 2009).
Apart from the role of the WTO, the influence of international trade on the global
political economy can be understood through its implications for the global division of labor
(Waters, 2001). The division of labor refers to the roles that people employ in the production
process (O'Brien & Williams, 2020). Waters (2001) states there are two types of division of
labour: social division of labour refers to occupational specialization, and technical division of
labour refers to task specialization. This condition is closely related to the concept of
comparative advantage by liberals who attach importance to the specialization of countries'
commodities to gain an advantage in the production process. In international trade. This means
that by engaging in trade, countries also shape their division of labor. Increase While trade
and mobility are expected to increase the elasticity of demand for human capital, they also
automatically reduce the bargaining power of labor (Perraton, 2003, p. 56). Moreover, in the
reduction of transaction costs due to technological advances, international agreements, non-
tariff barriers results in enormous specialization possibilities (Pomfret, 2014). A country can
choose the specific commodities or services offered in international trade which will also
affect the demand for labor from that country.
Another effect of international trade on labor can be seen in the inequality between
more skilled and less skilled labor. Trade liberalization leads to wage inequality due to
increased trade (Goldberg & Pavnick, 2004). It seems that recent international trade increases
the demand for more skilled workers to support the concept of specialization. Slaughter
(1998) believes that the demand for labor from the less skilled to the more skilled is a key
factor of wage inequality and it is actually happening in some countries such as the United
States and the United Kingdom. He added the argument that many countries with Such
inequality creates problems, such as higher unemployment rates and many job opportunities
avoiding less-skilled workers.
Transnational Production
There is general agreement that the growth of transnational production has shaped the
evolution of the global economy (O'Brien & Williams, 2020, p. 132). One of the main reasons
is that the global production system is a complex process. O'Brien and Williams (2013) argue
that this process involves multiple workers and workplaces with their integration with local,
national, regional and global systems. Because transnational production involves multi-level
actors. It becomes more complicated as it has to integrate different social, political and
economic backgrounds in the global economy. The main reason for the emergence of
transnational production is the innovation of communication and information technology
along with the advancement of transportation (Ietto-Gillies, 2003). This development
increases the possibility to separate production processes around the world.
A significant change affecting production processes across countries is the formation
of transnational companies (TNCs). As stated earlier, in the era of globalization, geographical
issues are no longer a big problem, therefore, TNCs can carry out production processes
separately in different parts of the world. Another reason TNCs invest abroad is because
production costs in developing countries are lower than in developed countries (O'Brien &
Williams, 2020). As stated by Ietto-Gillies (2003), there is a significant development of the
organization of production across countries due to the activities of transnational corporations.
In addition, it is argued that TNCs constitute a major part of the global production structure
and about 50 percent of world trade (O'Brien and Williams, 2020, p. 132). This fact shows the
impact of TNCs on the global production process. TNCs seem to be a key player in global
production.
TNCs play their role in the global economy through foreign direct investment (FDI).
Changes in the global production system are linked to increasing levels of FDI (O'Brien &
Williams, 2020). In addition, Perraton says that FDI by transnational corporations has grown
faster than trade (Perraton, 2003, p. 47). The success of TNCs to invest in many countries
around the world may be due to the recognition that TNCs are a good source of investment,
there is a transfer of technology, and there is an increase in the workforce (Waters, 2001, p.
46).
Indeed, there is skepticism towards transnational corporations and FDI. The concept of
transnational phenomena with interdependence between actors raises concerns of reduced
state sovereignty (Biersteker & Weber, 1996). This is also supported by the expansion of
capitalist companies that exploit labor, directly proportional to the need for workers to be able
to survive or survive to finance their own lives (Tyner, 2019). Moreover, for opponents of
capitalism, TNCs are believed to be a new worldwide method of exploitation that is
essentially "barbaric" and unacceptable (Waters, 2001). For example, a study conducted by
Doytch, Thelen, & Mendoza (2014) found the exploitation of child labor, with children forced
to work in fields for long hours, in a multinational tobacco company in Kazakhstan.
Therefore, for nationalist economic advocates, states must improve their ability to regulate
TNCs investing in their own countries (O'Brien and Williams, 2020).
However, for liberal supporters, there are The advantages offered by transnational
corporations with foreign direct investment. Epstein argues that this development can provide
more employment opportunities especially for developing countries, while also resulting in
wage increases because TNCs in developing countries have more productivity so they can pay
more (Epstein, 2003). In addition, TNCs with FDI can increase tax revenues through
increased economic activity in the host country and can help advance economic growth by
encouraging a more efficient division of labor (O'Brien & Williams, 2020, p. 137). Studies
conducted by Harrison in Mexico, Morocco and Venezuela show that TNCs help domestic
firms to break into export markets and they can improve workers' living standards as they pay
higher wages than domestic firms (Harrison, 1994).
Based on the explanation above, it can be seen that TNCs have a significant impact on
labor. One of the reasons TNCs with FDI are growing is that many developing countries are
implementing active policies to support industrialization and export to developed countries
(O'Brien and Williams, 2020). This is understandable because it will provide employment
opportunities in the country they are. Therefore, it is not surprising that many countries are
trying to attract TNCs to invest in their territories. With respect to the global division of labor,
TNCs will increase the demand for more skilled labor, as research conducted by Bruno, Crino
and Falzoni (2012) states that FDI increases the demand for more skilled labor in Poland.
Actors affected by the global political economy must make behavioral adjustments to
be able to face global competition which is currently increasing (O'Brien & Williams, 2020).
Coupled with technological advances in the form of machines, the value of labor has also
decreased because their portion of work can be replaced by machines (Tyner, 2019). The
higher demand for a more skilled workforce forces people to improve their abilities to
compete with others in the workplace. One of the reasons for this trend is to increase labor
productivity as it is a strong indicator of economic efficiency (Plasmans, 2003). In addition, it
is not surprising that TNCs promote division of labor to increase efficient production.
However, it seems that the labor market is shaped by TNC interests rather than national
interest.
International Trade, Transnational Production and Labor
One of the issues in relation to international trade and transnational production is not
respecting workers' rights. Many TNCs do not invest in their own countries because they want
to reduce their production costs. They tend to hire cheap labor and cut production costs with
forced labor in peripheral countries. As stated by Horvat (2020), the worst features of
exploitation are currently happening in all developing countries in the world.
In 2014, BBC News released a video inside the Apple assembly company. The video
shows that employees work under high pressure and for long, intensive periods of time. They
were forced to work standing up all day. In fact, the company installed electrical wires in t h e
machines so that employees could not lean back when tired. Employees work in a very
grueling environment. Although in 2010 there was a mass worker suicide at Foxconn, one of
the companies that manufactures Apple products, then Apple promised to improve facilitation
and working conditions, but the BBC video shows evidence to the contrary. For example,
everyone in China needs to carry an identity card. However, companies still take workers' IDs
directly when they enter the company (BBC News, 2014). Tyner (2019) also argues that
companies can collect profits not only from the products or services produced but also
through life insurance policies from workers who experience misfortune while performing
their duties.
However, not all TNCs tend to exploit labor for profit. A study analyzing foreign
direct investment and labor rights in 80 developing countries conducted by Busse,
Nunnenkamp, and Spatareanu showed different results. In terms of the correlation between
labor rights and TNCs, the study found that TNCs prefer to invest in countries that respect
labor rights (Busse, Nunnenkamp, & and Spatareanu, 2011). Moreover, labor violence in
potential host countries discourages TNCs from running their activities there, wherever it may
be (Busse, Nunnenkamp and Spatareanu, 2011). This condition shows that TNCs pay great
attention to labor rights, not only focus on their profits as well.
One solution to the above problem is to implement labor standards. Based on Heintz's
(2003) argument, the labor market should be for the larger society and should be governed by
rules, norms, and ethical standards that make allowance for the separate costs of
marketization. The International Labor Organization (ILO) is an organization that promotes
labor standards worldwide. The ILO holds conventions that cover basic human rights areas:
freedom of association and collective bargaining, elimination of forced labor, elimination of
child labor, and elimination of discrimination (Heintz, 2003; O'Brien and Willams, 2020).
However, the main problem in implementing labor standards is how to come up with labor
standards that can be applied worldwide. This is due to the disagreement among actors on the
purpose of labor standards. Furthermore, leaders in many liberal countries argue that
economic growth improves labor standards. Whereas, any interference in trade for labor
reasons will lower the gains from trade (O'Brien and Williams, 2020, p.195).
Conclusions
There are different perspectives on the global political economy. Economic
nationalists place the state as the main actor in the global political economy. This is related to
their concept of protectionism, protecting the economy from the global market. Meanwhile,
economic liberalists argue that states should collaborate with other actors in the global
economy. They believe that the global political economy involves multiple actors. Moreover,
the current global economy is more likely to adopt liberal values such as trade liberalization.
There are dynamics that shape the global political economy. They are international
trade and transnational production. Both dynamics have implications for the global division of
labor. International trade with the concept of 'comparative advantage' comparative advantage'
affects the specialization of labour. Whereas transnational production with TNCs has
implications in driving the division of labor around the world, especially in their host
countries. Both international trade and transnational production have benefits for the
participants. This is because TNCs can provide jobs and also improve the lives of workers.
However, there is skepticism about these dynamics. For example, they are believed to
play a role in wage inequality, especially between less skilled labor and more skilled labor.
Another example is the issue of worker exploitation, such as the Apple factory case and child
labor in tobacco factories. One solution that can be suggested is to enforce global labor
standards.
Results and Discussion of International Trade
According to Waters (2001) the primary and ongoing basis of economic
internationalization is trade. Trade itself is understood as the activity of two or more
individuals exchanging goods and services (O'Brien & Williams, 2020, p. 109). Such
activities would be called international trade if they are operated abroad. This international
trade can create relationships and interdependence between actors (Waters, 2001). As stated
by Ietto-Gillies (2003), that one evidence of state interconnectedness can be seen in
international trade activities in goods and services. Wallerstein and Marxist in Cohen (2017)
categorize countries into several levels, where there are dominant core countries, dependent
periphery countries and semi-fringe countries that are between the two categories. While core
countries enjoy a high level of technological development, selling sophisticated high-value
goods and services, the role of peripheral countries is simply to supply materials raw
materials, foodstuffs, and also cheap labor on the basis of highly unequal exchanges. Among
them, semi-periphery countries benefit from exploiting periphery countries even as they
themselves are exploited by core countries. This shows that international trade affects the
shape of the global political economy. One reason is that international trade has direct and
indirect effects on people and communities, for example, a family's consumption patterns are
affected by trade in goods (O'Brien & Williams, 2020).
One of the ways in which international trade affects the global economy is through a
free trade regime. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996). The theory of comparative advantage advises countries to
specialize in their most efficient products and services (O'Brien & Williams, 2020). The
ideology of comparative advantage serves to obscure uneven economic development progress
and unequal exchange between countries and regions (McBride & Shields, 1993). Therefore,
proponents of free trade believe that every country should engage in trade international and
reduce barriers.
Furthermore, according to liberal political economy, everyone can benefit from trade
as it can improve efficiency and increase productivity (O'Brien & Williams, 2020). For
example, Langenfeld and Nieberding (2005) estimate that trade growth has provided total
benefits to American consumers of about $2.3 trillion over the trade has provided total benefits
to American consumers of about $2.3 trillion during 1992-2002, or between $20,000 and
$22,000 per household in 2002. In contrast, nationalists believe that free trade is detrimental to
the national economy because it will weaken the economy unbalanced development and can
damage the environment (O'Brien & Williams, 2020). As in the case of Fiji, they are facing a
rapid and radical restructuring of the sugar or banana industry and this is potentially
disastrous for their economy as it is a fundamental commodity (Connel & Soutar, 2007).
Furthermore, in the international trading system, there are significant developments
that encourage trade liberalization. The emergence of the WTO (World Trade Organization),
the successor to the GATT (General Agreement on Tariffs and Trade), is believed to play an
important role in trade liberalization international. The WTO (and GATT before it) has
successfully liberalized trade and managed international trade through multilateral agreements
(Sampson, 2001). Jackson (1998) stated that the establishment of the WTO was the most
significant moment in the history of the world economy, even becoming a fundamental
institution in the international economy, especially with its dispute settlement procedures. The
WTO has changed the management of world trade in the following ways:
Change trade liberalization from being based on tariff adjustments to discussing
domestic policies, institutional practices and regulations.
Broaden the scope of trade and change the focus of negotiations from product
bargaining to policy.
Propose movement towards accession policies, for example, in the areas of subsidies
and trade-related investment measures and services (O'Brien & Williams, 2020).
Based on the above, it can be seen that the WTO has successfully played its role in
international trade, but there is the issue of many developing countries' interests not being
accommodated by the WTO (Sampson, 2001). In a d d i t i o n , countries developing
countries recognize the limitations of political influence in the international trade agreement
process (O'Brien & Williams, 2020). Another problem faced by developing countries is that
they lack the capacity to enforce WTO decisions as well as the high indirect costs of initiating
disputes with the WTO (Horlick, 2006, p. 220). For example, trade in agriculture, which is a
key interest of many developing countries, is particularly liberalized (Walter & Sen, 2009).
Apart from the role of the WTO, the influence of international trade on the global
political economy can be understood through its implications for the global division of labor
(Waters, 2001). The division of labor refers to the roles that people employ in the production
process (O'Brien & Williams, 2020). Waters (2001) states there are two types of division of
labour: social division of labour refers to occupational specialization, and technical division of
labour refers to task specialization. This condition is closely related to the concept of
comparative advantage by liberals who attach importance to the specialization of countries'
commodities to gain an advantage in the production process. In international trade. This means
that by engaging in trade, countries also shape their division of labor. Increase While trade
and mobility are expected to increase the elasticity of demand for human capital, they also
automatically reduce the bargaining power of labor (Perraton, 2003, p. 56). Moreover, in the
reduction of transaction costs due to technological advances, international agreements, non-
tariff barriers results in enormous specialization possibilities (Pomfret, 2014). A country can
choose the specific commodities or services offered in international trade which will also
affect the demand for labor from that country.
Another effect of international trade on labor can be seen in the inequality between
more skilled and less skilled labor. Trade liberalization leads to wage inequality due to
increased trade (Goldberg & Pavnick, 2004). It seems that recent international trade increases
the demand for more skilled workers to support the concept of specialization. Slaughter
(1998) believes that the demand for labor from the less skilled to the more skilled is a key
factor of wage inequality and it is actually happening in some countries such as the United
States and the United Kingdom. He added the argument that many countries with Such
inequality creates problems, such as higher unemployment rates and many job opportunities
avoiding less-skilled workers.
Transnational Production
There is general agreement that the growth of transnational production has shaped the
evolution of the global economy (O'Brien & Williams, 2020, p. 132). One of the main reasons
is that the global production system is a complex process. O'Brien and Williams (2013) argue
that this process involves multiple workers and workplaces with their integration with local,
national, regional and global systems. Because transnational production involves multi-level
actors. It becomes more complicated as it has to integrate different social, political and
economic backgrounds in the global economy. The main reason for the emergence of
transnational production is the innovation of communication and information technology
along with the advancement of transportation (Ietto-Gillies, 2003). This development
increases the possibility to separate production processes around the world.
A significant change affecting production processes across countries is the formation
of transnational companies (TNCs). As stated earlier, in the era of globalization, geographical
issues are no longer a big problem, therefore, TNCs can carry out production processes
separately in different parts of the world. Another reason TNCs invest abroad is because
production costs in developing countries are lower than in developed countries (O'Brien &
Williams, 2020). As stated by Ietto-Gillies (2003), there is a significant development of the
organization of production across countries due to the activities of transnational corporations.
In addition, it is argued that TNCs constitute a major part of the global production structure
and about 50 percent of world trade (O'Brien and Williams, 2020, p. 132). This fact shows the
impact of TNCs on the global production process. TNCs seem to be a key player in global
production.
TNCs play their role in the global economy through foreign direct investment (FDI).
Changes in the global production system are linked to increasing levels of FDI (O'Brien &
Williams, 2020). In addition, Perraton says that FDI by transnational corporations has grown
faster than trade (Perraton, 2003, p. 47). The success of TNCs to invest in many countries
around the world may be due to the recognition that TNCs are a good source of investment,
there is a transfer of technology, and there is an increase in the workforce (Waters, 2001, p.
46).
Indeed, there is skepticism towards transnational corporations and FDI. The concept of
transnational phenomena with interdependence between actors raises concerns of reduced
state sovereignty (Biersteker & Weber, 1996). This is also supported by the expansion of
capitalist companies that exploit labor, directly proportional to the need for workers to be able
to survive or survive to finance their own lives (Tyner, 2019). Moreover, for opponents of
capitalism, TNCs are believed to be a new worldwide method of exploitation that is
essentially "barbaric" and unacceptable (Waters, 2001). For example, a study conducted by
Doytch, Thelen, & Mendoza (2014) found the exploitation of child labor, with children forced
to work in fields for long hours, in a multinational tobacco company in Kazakhstan.
Therefore, for nationalist economic advocates, states must improve their ability to regulate
TNCs investing in their own countries (O'Brien and Williams, 2020).
However, for liberal supporters, there are The advantages offered by transnational
corporations with foreign direct investment. Epstein argues that this development can provide
more employment opportunities especially for developing countries, while also resulting in
wage increases because TNCs in developing countries have more productivity so they can pay
more (Epstein, 2003). In addition, TNCs with FDI can increase tax revenues through
increased economic activity in the host country and can help advance economic growth by
encouraging a more efficient division of labor (O'Brien & Williams, 2020, p. 137). Studies
conducted by Harrison in Mexico, Morocco and Venezuela show that TNCs help domestic
firms to break into export markets and they can improve workers' living standards as they pay
higher wages than domestic firms (Harrison, 1994).
Based on the explanation above, it can be seen that TNCs have a significant impact on
labor. One of the reasons TNCs with FDI are growing is that many developing countries are
implementing active policies to support industrialization and export to developed countries
(O'Brien and Williams, 2020). This is understandable because it will provide employment
opportunities in the country they are. Therefore, it is not surprising that many countries are
trying to attract TNCs to invest in their territories. With respect to the global division of labor,
TNCs will increase the demand for more skilled labor, as research conducted by Bruno, Crino
and Falzoni (2012) states that FDI increases the demand for more skilled labor in Poland.
Actors affected by the global political economy must make behavioral adjustments to
be able to face global competition which is currently increasing (O'Brien & Williams, 2020).
Coupled with technological advances in the form of machines, the value of labor has also
decreased because their portion of work can be replaced by machines (Tyner, 2019). The
higher demand for a more skilled workforce forces people to improve their abilities to
compete with others in the workplace. One of the reasons for this trend is to increase labor
productivity as it is a strong indicator of economic efficiency (Plasmans, 2003). In addition, it
is not surprising that TNCs promote division of labor to increase efficient production.
However, it seems that the labor market is shaped by TNC interests rather than national
interest.
International Trade, Transnational Production and Labor
One of the issues in relation to international trade and transnational production is not
respecting workers' rights. Many TNCs do not invest in their own countries because they want
to reduce their production costs. They tend to hire cheap labor and cut production costs with
forced labor in peripheral countries. As stated by Horvat (2020), the worst features of
exploitation are currently happening in all developing countries in the world.
In 2014, BBC News released a video inside the Apple assembly company. The video
shows that employees work under high pressure and for long, intensive periods of time. They
were forced to work standing up all day. In fact, the company installed electrical wires in t h e
machines so that employees could not lean back when tired. Employees work in a very
grueling environment. Although in 2010 there was a mass worker suicide at Foxconn, one of
the companies that manufactures Apple products, then Apple promised to improve facilitation
and working conditions, but the BBC video shows evidence to the contrary. For example,
everyone in China needs to carry an identity card. However, companies still take workers' IDs
directly when they enter the company (BBC News, 2014). Tyner (2019) also argues that
companies can collect profits not only from the products or services produced but also
through life insurance policies from workers who experience misfortune while performing
their duties.
However, not all TNCs tend to exploit labor for profit. A study analyzing foreign
direct investment and labor rights in 80 developing countries conducted by Busse,
Nunnenkamp, and Spatareanu showed different results. In terms of the correlation between
labor rights and TNCs, the study found that TNCs prefer to invest in countries that respect
labor rights (Busse, Nunnenkamp, & and Spatareanu, 2011). Moreover, labor violence in
potential host countries discourages TNCs from running their activities there, wherever it may
be (Busse, Nunnenkamp and Spatareanu, 2011). This condition shows that TNCs pay great
attention to labor rights, not only focus on their profits as well.
One solution to the above problem is to implement labor standards. Based on Heintz's
(2003) argument, the labor market should be for the larger society and should be governed by
rules, norms, and ethical standards that make allowance for the separate costs of
marketization. The International Labor Organization (ILO) is an organization that promotes
labor standards worldwide. The ILO holds conventions that cover basic human rights areas:
freedom of association and collective bargaining, elimination of forced labor, elimination of
child labor, and elimination of discrimination (Heintz, 2003; O'Brien and Willams, 2020).
However, the main problem in implementing labor standards is how to come up with labor
standards that can be applied worldwide. This is due to the disagreement among actors on the
purpose of labor standards. Furthermore, leaders in many liberal countries argue that
economic growth improves labor standards. Whereas, any interference in trade for labor
reasons will lower the gains from trade (O'Brien and Williams, 2020, p.195).
Conclusions
There are different perspectives on the global political economy. Economic
nationalists place the state as the main actor in the global political economy. This is related to
their concept of protectionism, protecting the economy from the global market. Meanwhile,
economic liberalists argue that states should collaborate with other actors in the global
economy. They believe that the global political economy involves multiple actors. Moreover,
the current global economy is more likely to adopt liberal values such as trade liberalization.
There are dynamics that shape the global political economy. They are international
trade and transnational production. Both dynamics have implications for the global division of
labor. International trade with the concept of 'comparative advantage' comparative advantage'
affects the specialization of labour. Whereas transnational production with TNCs has
implications in driving the division of labor around the world, especially in their host
countries. Both international trade and transnational production have benefits for the
participants. This is because TNCs can provide jobs and also improve the lives of workers.
However, there is skepticism about these dynamics. For example, they are believed to
play a role in wage inequality, especially between less skilled labor and more skilled labor.
Another example is the issue of worker exploitation, such as the Apple factory case and child
labor in tobacco factories. One solution that can be suggested is to enforce global labor
standards.
Results and Discussion of International Trade
According to Waters (2001) the primary and ongoing basis of economic
internationalization is trade. Trade itself is understood as the activity of two or more
individuals exchanging goods and services (O'Brien & Williams, 2020, p. 109). Such
activities would be called international trade if they are operated abroad. This international
trade can create relationships and interdependence between actors (Waters, 2001). As stated
by Ietto-Gillies (2003), that one evidence of state interconnectedness can be seen in
international trade activities in goods and services. Wallerstein and Marxist in Cohen (2017)
categorize countries into several levels, where there are dominant core countries, dependent
periphery countries and semi-fringe countries that are between the two categories. While core
countries enjoy a high level of technological development, selling sophisticated high-value
goods and services, the role of peripheral countries is simply to supply materials raw
materials, foodstuffs, and also cheap labor on the basis of highly unequal exchanges. Among
them, semi-periphery countries benefit from exploiting periphery countries even as they
themselves are exploited by core countries. This shows that international trade affects the
shape of the global political economy. One reason is that international trade has direct and
indirect effects on people and communities, for example, a family's consumption patterns are
affected by trade in goods (O'Brien & Williams, 2020).
One of the ways in which international trade affects the global economy is through a
free trade regime. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996). The theory of comparative advantage advises countries to
specialize in their most efficient products and services (O'Brien & Williams, 2020). The
ideology of comparative advantage serves to obscure uneven economic development progress
and unequal exchange between countries and regions (McBride & Shields, 1993). Therefore,
proponents of free trade believe that every country should engage in trade international and
reduce barriers.
Furthermore, according to liberal political economy, everyone can benefit from trade
as it can improve efficiency and increase productivity (O'Brien & Williams, 2020). For
example, Langenfeld and Nieberding (2005) estimate that trade growth has provided total
benefits to American consumers of about $2.3 trillion over the trade has provided total benefits
to American consumers of about $2.3 trillion during 1992-2002, or between $20,000 and
$22,000 per household in 2002. In contrast, nationalists believe that free trade is detrimental to
the national economy because it will weaken the economy unbalanced development and can
damage the environment (O'Brien & Williams, 2020). As in the case of Fiji, they are facing a
rapid and radical restructuring of the sugar or banana industry and this is potentially
disastrous for their economy as it is a fundamental commodity (Connel & Soutar, 2007).
Furthermore, in the international trading system, there are significant developments
that encourage trade liberalization. The emergence of the WTO (World Trade Organization),
the successor to the GATT (General Agreement on Tariffs and Trade), is believed to play an
important role in trade liberalization international. The WTO (and GATT before it) has
successfully liberalized trade and managed international trade through multilateral agreements
(Sampson, 2001). Jackson (1998) stated that the establishment of the WTO was the most
significant moment in the history of the world economy, even becoming a fundamental
institution in the international economy, especially with its dispute settlement procedures. The
WTO has changed the management of world trade in the following ways:
Change trade liberalization from being based on tariff adjustments to discussing
domestic policies, institutional practices and regulations.
Broaden the scope of trade and change the focus of negotiations from product
bargaining to policy.
Propose movement towards accession policies, for example, in the areas of subsidies
and trade-related investment measures and services (O'Brien & Williams, 2020).
Based on the above, it can be seen that the WTO has successfully played its role in
international trade, but there is the issue of many developing countries' interests not being
accommodated by the WTO (Sampson, 2001). In a d d i t i o n , countries developing
countries recognize the limitations of political influence in the international trade agreement
process (O'Brien & Williams, 2020). Another problem faced by developing countries is that
they lack the capacity to enforce WTO decisions as well as the high indirect costs of initiating
disputes with the WTO (Horlick, 2006, p. 220). For example, trade in agriculture, which is a
key interest of many developing countries, is particularly liberalized (Walter & Sen, 2009).
Apart from the role of the WTO, the influence of international trade on the global
political economy can be understood through its implications for the global division of labor
(Waters, 2001). The division of labor refers to the roles that people employ in the production
process (O'Brien & Williams, 2020). Waters (2001) states there are two types of division of
labour: social division of labour refers to occupational specialization, and technical division of
labour refers to task specialization. This condition is closely related to the concept of
comparative advantage by liberals who attach importance to the specialization of countries'
commodities to gain an advantage in the production process. In international trade. This means
that by engaging in trade, countries also shape their division of labor. Increase While trade
and mobility are expected to increase the elasticity of demand for human capital, they also
automatically reduce the bargaining power of labor (Perraton, 2003, p. 56). Moreover, in the
reduction of transaction costs due to technological advances, international agreements, non-
tariff barriers results in enormous specialization possibilities (Pomfret, 2014). A country can
choose the specific commodities or services offered in international trade which will also
affect the demand for labor from that country.
Another effect of international trade on labor can be seen in the inequality between
more skilled and less skilled labor. Trade liberalization leads to wage inequality due to
increased trade (Goldberg & Pavnick, 2004). It seems that recent international trade increases
the demand for more skilled workers to support the concept of specialization. Slaughter
(1998) believes that the demand for labor from the less skilled to the more skilled is a key
factor of wage inequality and it is actually happening in some countries such as the United
States and the United Kingdom. He added the argument that many countries with Such
inequality creates problems, such as higher unemployment rates and many job opportunities
avoiding less-skilled workers.
Transnational Production
There is general agreement that the growth of transnational production has shaped the
evolution of the global economy (O'Brien & Williams, 2020, p. 132). One of the main reasons
is that the global production system is a complex process. O'Brien and Williams (2013) argue
that this process involves multiple workers and workplaces with their integration with local,
national, regional and global systems. Because transnational production involves multi-level
actors. It becomes more complicated as it has to integrate different social, political and
economic backgrounds in the global economy. The main reason for the emergence of
transnational production is the innovation of communication and information technology
along with the advancement of transportation (Ietto-Gillies, 2003). This development
increases the possibility to separate production processes around the world.
A significant change affecting production processes across countries is the formation
of transnational companies (TNCs). As stated earlier, in the era of globalization, geographical
issues are no longer a big problem, therefore, TNCs can carry out production processes
separately in different parts of the world. Another reason TNCs invest abroad is because
production costs in developing countries are lower than in developed countries (O'Brien &
Williams, 2020). As stated by Ietto-Gillies (2003), there is a significant development of the
organization of production across countries due to the activities of transnational corporations.
In addition, it is argued that TNCs constitute a major part of the global production structure
and about 50 percent of world trade (O'Brien and Williams, 2020, p. 132). This fact shows the
impact of TNCs on the global production process. TNCs seem to be a key player in global
production.
TNCs play their role in the global economy through foreign direct investment (FDI).
Changes in the global production system are linked to increasing levels of FDI (O'Brien &
Williams, 2020). In addition, Perraton says that FDI by transnational corporations has grown
faster than trade (Perraton, 2003, p. 47). The success of TNCs to invest in many countries
around the world may be due to the recognition that TNCs are a good source of investment,
there is a transfer of technology, and there is an increase in the workforce (Waters, 2001, p.
46).
Indeed, there is skepticism towards transnational corporations and FDI. The concept of
transnational phenomena with interdependence between actors raises concerns of reduced
state sovereignty (Biersteker & Weber, 1996). This is also supported by the expansion of
capitalist companies that exploit labor, directly proportional to the need for workers to be able
to survive or survive to finance their own lives (Tyner, 2019). Moreover, for opponents of
capitalism, TNCs are believed to be a new worldwide method of exploitation that is
essentially "barbaric" and unacceptable (Waters, 2001). For example, a study conducted by
Doytch, Thelen, & Mendoza (2014) found the exploitation of child labor, with children forced
to work in fields for long hours, in a multinational tobacco company in Kazakhstan.
Therefore, for nationalist economic advocates, states must improve their ability to regulate
TNCs investing in their own countries (O'Brien and Williams, 2020).
However, for liberal supporters, there are The advantages offered by transnational
corporations with foreign direct investment. Epstein argues that this development can provide
more employment opportunities especially for developing countries, while also resulting in
wage increases because TNCs in developing countries have more productivity so they can pay
more (Epstein, 2003). In addition, TNCs with FDI can increase tax revenues through
increased economic activity in the host country and can help advance economic growth by
encouraging a more efficient division of labor (O'Brien & Williams, 2020, p. 137). Studies
conducted by Harrison in Mexico, Morocco and Venezuela show that TNCs help domestic
firms to break into export markets and they can improve workers' living standards as they pay
higher wages than domestic firms (Harrison, 1994).
Based on the explanation above, it can be seen that TNCs have a significant impact on
labor. One of the reasons TNCs with FDI are growing is that many developing countries are
implementing active policies to support industrialization and export to developed countries
(O'Brien and Williams, 2020). This is understandable because it will provide employment
opportunities in the country they are. Therefore, it is not surprising that many countries are
trying to attract TNCs to invest in their territories. With respect to the global division of labor,
TNCs will increase the demand for more skilled labor, as research conducted by Bruno, Crino
and Falzoni (2012) states that FDI increases the demand for more skilled labor in Poland.
Actors affected by the global political economy must make behavioral adjustments to
be able to face global competition which is currently increasing (O'Brien & Williams, 2020).
Coupled with technological advances in the form of machines, the value of labor has also
decreased because their portion of work can be replaced by machines (Tyner, 2019). The
higher demand for a more skilled workforce forces people to improve their abilities to
compete with others in the workplace. One of the reasons for this trend is to increase labor
productivity as it is a strong indicator of economic efficiency (Plasmans, 2003). In addition, it
is not surprising that TNCs promote division of labor to increase efficient production.
However, it seems that the labor market is shaped by TNC interests rather than national
interest.
International Trade, Transnational Production and Labor
One of the issues in relation to international trade and transnational production is not
respecting workers' rights. Many TNCs do not invest in their own countries because they want
to reduce their production costs. They tend to hire cheap labor and cut production costs with
forced labor in peripheral countries. As stated by Horvat (2020), the worst features of
exploitation are currently happening in all developing countries in the world.
In 2014, BBC News released a video inside the Apple assembly company. The video
shows that employees work under high pressure and for long, intensive periods of time. They
were forced to work standing up all day. In fact, the company installed electrical wires in t h e
machines so that employees could not lean back when tired. Employees work in a very
grueling environment. Although in 2010 there was a mass worker suicide at Foxconn, one of
the companies that manufactures Apple products, then Apple promised to improve facilitation
and working conditions, but the BBC video shows evidence to the contrary. For example,
everyone in China needs to carry an identity card. However, companies still take workers' IDs
directly when they enter the company (BBC News, 2014). Tyner (2019) also argues that
companies can collect profits not only from the products or services produced but also
through life insurance policies from workers who experience misfortune while performing
their duties.
However, not all TNCs tend to exploit labor for profit. A study analyzing foreign
direct investment and labor rights in 80 developing countries conducted by Busse,
Nunnenkamp, and Spatareanu showed different results. In terms of the correlation between
labor rights and TNCs, the study found that TNCs prefer to invest in countries that respect
labor rights (Busse, Nunnenkamp, & and Spatareanu, 2011). Moreover, labor violence in
potential host countries discourages TNCs from running their activities there, wherever it may
be (Busse, Nunnenkamp and Spatareanu, 2011). This condition shows that TNCs pay great
attention to labor rights, not only focus on their profits as well.
One solution to the above problem is to implement labor standards. Based on Heintz's
(2003) argument, the labor market should be for the larger society and should be governed by
rules, norms, and ethical standards that make allowance for the separate costs of
marketization. The International Labor Organization (ILO) is an organization that promotes
labor standards worldwide. The ILO holds conventions that cover basic human rights areas:
freedom of association and collective bargaining, elimination of forced labor, elimination of
child labor, and elimination of discrimination (Heintz, 2003; O'Brien and Willams, 2020).
However, the main problem in implementing labor standards is how to come up with labor
standards that can be applied worldwide. This is due to the disagreement among actors on the
purpose of labor standards. Furthermore, leaders in many liberal countries argue that
economic growth improves labor standards. Whereas, any interference in trade for labor
reasons will lower the gains from trade (O'Brien and Williams, 2020, p.195).
Conclusions
There are different perspectives on the global political economy. Economic
nationalists place the state as the main actor in the global political economy. This is related to
their concept of protectionism, protecting the economy from the global market. Meanwhile,
economic liberalists argue that states should collaborate with other actors in the global
economy. They believe that the global political economy involves multiple actors. Moreover,
the current global economy is more likely to adopt liberal values such as trade liberalization.
There are dynamics that shape the global political economy. They are international
trade and transnational production. Both dynamics have implications for the global division of
labor. International trade with the concept of 'comparative advantage' comparative advantage'
affects the specialization of labour. Whereas transnational production with TNCs has
implications in driving the division of labor around the world, especially in their host
countries. Both international trade and transnational production have benefits for the
participants. This is because TNCs can provide jobs and also improve the lives of workers.
However, there is skepticism about these dynamics. For example, they are believed to
play a role in wage inequality, especially between less skilled labor and more skilled labor.
Another example is the issue of worker exploitation, such as the Apple factory case and child
labor in tobacco factories. One solution that can be suggested is to enforce global labor
standards.
Results and Discussion of International Trade
According to Waters (2001) the primary and ongoing basis of economic
internationalization is trade. Trade itself is understood as the activity of two or more
individuals exchanging goods and services (O'Brien & Williams, 2020, p. 109). Such
activities would be called international trade if they are operated abroad. This international
trade can create relationships and interdependence between actors (Waters, 2001). As stated
by Ietto-Gillies (2003), that one evidence of state interconnectedness can be seen in
international trade activities in goods and services. Wallerstein and Marxist in Cohen (2017)
categorize countries into several levels, where there are dominant core countries, dependent
periphery countries and semi-fringe countries that are between the two categories. While core
countries enjoy a high level of technological development, selling sophisticated high-value
goods and services, the role of peripheral countries is simply to supply materials raw
materials, foodstuffs, and also cheap labor on the basis of highly unequal exchanges. Among
them, semi-periphery countries benefit from exploiting periphery countries even as they
themselves are exploited by core countries. This shows that international trade affects the
shape of the global political economy. One reason is that international trade has direct and
indirect effects on people and communities, for example, a family's consumption patterns are
affected by trade in goods (O'Brien & Williams, 2020).
One of the ways in which international trade affects the global economy is through a
free trade regime. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996). The theory of comparative advantage advises countries to
specialize in their most efficient products and services (O'Brien & Williams, 2020). The
ideology of comparative advantage serves to obscure uneven economic development progress
and unequal exchange between countries and regions (McBride & Shields, 1993). Therefore,
proponents of free trade believe that every country should engage in trade international and
reduce barriers.
Furthermore, according to liberal political economy, everyone can benefit from trade
as it can improve efficiency and increase productivity (O'Brien & Williams, 2020). For
example, Langenfeld and Nieberding (2005) estimate that trade growth has provided total
benefits to American consumers of about $2.3 trillion over the trade has provided total benefits
to American consumers of about $2.3 trillion during 1992-2002, or between $20,000 and
$22,000 per household in 2002. In contrast, nationalists believe that free trade is detrimental to
the national economy because it will weaken the economy unbalanced development and can
damage the environment (O'Brien & Williams, 2020). As in the case of Fiji, they are facing a
rapid and radical restructuring of the sugar or banana industry and this is potentially
disastrous for their economy as it is a fundamental commodity (Connel & Soutar, 2007).
Furthermore, in the international trading system, there are significant developments
that encourage trade liberalization. The emergence of the WTO (World Trade Organization),
the successor to the GATT (General Agreement on Tariffs and Trade), is believed to play an
important role in trade liberalization international. The WTO (and GATT before it) has
successfully liberalized trade and managed international trade through multilateral agreements
(Sampson, 2001). Jackson (1998) stated that the establishment of the WTO was the most
significant moment in the history of the world economy, even becoming a fundamental
institution in the international economy, especially with its dispute settlement procedures. The
WTO has changed the management of world trade in the following ways:
Change trade liberalization from being based on tariff adjustments to discussing
domestic policies, institutional practices and regulations.
Broaden the scope of trade and change the focus of negotiations from product
bargaining to policy.
Propose movement towards accession policies, for example, in the areas of subsidies
and trade-related investment measures and services (O'Brien & Williams, 2020).
Based on the above, it can be seen that the WTO has successfully played its role in
international trade, but there is the issue of many developing countries' interests not being
accommodated by the WTO (Sampson, 2001). In a d d i t i o n , countries developing
countries recognize the limitations of political influence in the international trade agreement
process (O'Brien & Williams, 2020). Another problem faced by developing countries is that
they lack the capacity to enforce WTO decisions as well as the high indirect costs of initiating
disputes with the WTO (Horlick, 2006, p. 220). For example, trade in agriculture, which is a
key interest of many developing countries, is particularly liberalized (Walter & Sen, 2009).
Apart from the role of the WTO, the influence of international trade on the global
political economy can be understood through its implications for the global division of labor
(Waters, 2001). The division of labor refers to the roles that people employ in the production
process (O'Brien & Williams, 2020). Waters (2001) states there are two types of division of
labour: social division of labour refers to occupational specialization, and technical division of
labour refers to task specialization. This condition is closely related to the concept of
comparative advantage by liberals who attach importance to the specialization of countries'
commodities to gain an advantage in the production process. In international trade. This means
that by engaging in trade, countries also shape their division of labor. Increase While trade
and mobility are expected to increase the elasticity of demand for human capital, they also
automatically reduce the bargaining power of labor (Perraton, 2003, p. 56). Moreover, in the
reduction of transaction costs due to technological advances, international agreements, non-
tariff barriers results in enormous specialization possibilities (Pomfret, 2014). A country can
choose the specific commodities or services offered in international trade which will also
affect the demand for labor from that country.
Another effect of international trade on labor can be seen in the inequality between
more skilled and less skilled labor. Trade liberalization leads to wage inequality due to
increased trade (Goldberg & Pavnick, 2004). It seems that recent international trade increases
the demand for more skilled workers to support the concept of specialization. Slaughter
(1998) believes that the demand for labor from the less skilled to the more skilled is a key
factor of wage inequality and it is actually happening in some countries such as the United
States and the United Kingdom. He added the argument that many countries with Such
inequality creates problems, such as higher unemployment rates and many job opportunities
avoiding less-skilled workers.
Transnational Production
There is general agreement that the growth of transnational production has shaped the
evolution of the global economy (O'Brien & Williams, 2020, p. 132). One of the main reasons
is that the global production system is a complex process. O'Brien and Williams (2013) argue
that this process involves multiple workers and workplaces with their integration with local,
national, regional and global systems. Because transnational production involves multi-level
actors. It becomes more complicated as it has to integrate different social, political and
economic backgrounds in the global economy. The main reason for the emergence of
transnational production is the innovation of communication and information technology
along with the advancement of transportation (Ietto-Gillies, 2003). This development
increases the possibility to separate production processes around the world.
A significant change affecting production processes across countries is the formation
of transnational companies (TNCs). As stated earlier, in the era of globalization, geographical
issues are no longer a big problem, therefore, TNCs can carry out production processes
separately in different parts of the world. Another reason TNCs invest abroad is because
production costs in developing countries are lower than in developed countries (O'Brien &
Williams, 2020). As stated by Ietto-Gillies (2003), there is a significant development of the
organization of production across countries due to the activities of transnational corporations.
In addition, it is argued that TNCs constitute a major part of the global production structure
and about 50 percent of world trade (O'Brien and Williams, 2020, p. 132). This fact shows the
impact of TNCs on the global production process. TNCs seem to be a key player in global
production.
TNCs play their role in the global economy through foreign direct investment (FDI).
Changes in the global production system are linked to increasing levels of FDI (O'Brien &
Williams, 2020). In addition, Perraton says that FDI by transnational corporations has grown
faster than trade (Perraton, 2003, p. 47). The success of TNCs to invest in many countries
around the world may be due to the recognition that TNCs are a good source of investment,
there is a transfer of technology, and there is an increase in the workforce (Waters, 2001, p.
46).
Indeed, there is skepticism towards transnational corporations and FDI. The concept of
transnational phenomena with interdependence between actors raises concerns of reduced
state sovereignty (Biersteker & Weber, 1996). This is also supported by the expansion of
capitalist companies that exploit labor, directly proportional to the need for workers to be able
to survive or survive to finance their own lives (Tyner, 2019). Moreover, for opponents of
capitalism, TNCs are believed to be a new worldwide method of exploitation that is
essentially "barbaric" and unacceptable (Waters, 2001). For example, a study conducted by
Doytch, Thelen, & Mendoza (2014) found the exploitation of child labor, with children forced
to work in fields for long hours, in a multinational tobacco company in Kazakhstan.
Therefore, for nationalist economic advocates, states must improve their ability to regulate
TNCs investing in their own countries (O'Brien and Williams, 2020).
However, for liberal supporters, there are The advantages offered by transnational
corporations with foreign direct investment. Epstein argues that this development can provide
more employment opportunities especially for developing countries, while also resulting in
wage increases because TNCs in developing countries have more productivity so they can pay
more (Epstein, 2003). In addition, TNCs with FDI can increase tax revenues through
increased economic activity in the host country and can help advance economic growth by
encouraging a more efficient division of labor (O'Brien & Williams, 2020, p. 137). Studies
conducted by Harrison in Mexico, Morocco and Venezuela show that TNCs help domestic
firms to break into export markets and they can improve workers' living standards as they pay
higher wages than domestic firms (Harrison, 1994).
Based on the explanation above, it can be seen that TNCs have a significant impact on
labor. One of the reasons TNCs with FDI are growing is that many developing countries are
implementing active policies to support industrialization and export to developed countries
(O'Brien and Williams, 2020). This is understandable because it will provide employment
opportunities in the country they are. Therefore, it is not surprising that many countries are
trying to attract TNCs to invest in their territories. With respect to the global division of labor,
TNCs will increase the demand for more skilled labor, as research conducted by Bruno, Crino
and Falzoni (2012) states that FDI increases the demand for more skilled labor in Poland.
Actors affected by the global political economy must make behavioral adjustments to
be able to face global competition which is currently increasing (O'Brien & Williams, 2020).
Coupled with technological advances in the form of machines, the value of labor has also
decreased because their portion of work can be replaced by machines (Tyner, 2019). The
higher demand for a more skilled workforce forces people to improve their abilities to
compete with others in the workplace. One of the reasons for this trend is to increase labor
productivity as it is a strong indicator of economic efficiency (Plasmans, 2003). In addition, it
is not surprising that TNCs promote division of labor to increase efficient production.
However, it seems that the labor market is shaped by TNC interests rather than national
interest.
International Trade, Transnational Production and Labor
One of the issues in relation to international trade and transnational production is not
respecting workers' rights. Many TNCs do not invest in their own countries because they want
to reduce their production costs. They tend to hire cheap labor and cut production costs with
forced labor in peripheral countries. As stated by Horvat (2020), the worst features of
exploitation are currently happening in all developing countries in the world.
In 2014, BBC News released a video inside the Apple assembly company. The video
shows that employees work under high pressure and for long, intensive periods of time. They
were forced to work standing up all day. In fact, the company installed electrical wires in t h e
machines so that employees could not lean back when tired. Employees work in a very
grueling environment. Although in 2010 there was a mass worker suicide at Foxconn, one of
the companies that manufactures Apple products, then Apple promised to improve facilitation
and working conditions, but the BBC video shows evidence to the contrary. For example,
everyone in China needs to carry an identity card. However, companies still take workers' IDs
directly when they enter the company (BBC News, 2014). Tyner (2019) also argues that
companies can collect profits not only from the products or services produced but also
through life insurance policies from workers who experience misfortune while performing
their duties.
However, not all TNCs tend to exploit labor for profit. A study analyzing foreign
direct investment and labor rights in 80 developing countries conducted by Busse,
Nunnenkamp, and Spatareanu showed different results. In terms of the correlation between
labor rights and TNCs, the study found that TNCs prefer to invest in countries that respect
labor rights (Busse, Nunnenkamp, & and Spatareanu, 2011). Moreover, labor violence in
potential host countries discourages TNCs from running their activities there, wherever it may
be (Busse, Nunnenkamp and Spatareanu, 2011). This condition shows that TNCs pay great
attention to labor rights, not only focus on their profits as well.
One solution to the above problem is to implement labor standards. Based on Heintz's
(2003) argument, the labor market should be for the larger society and should be governed by
rules, norms, and ethical standards that make allowance for the separate costs of
marketization. The International Labor Organization (ILO) is an organization that promotes
labor standards worldwide. The ILO holds conventions that cover basic human rights areas:
freedom of association and collective bargaining, elimination of forced labor, elimination of
child labor, and elimination of discrimination (Heintz, 2003; O'Brien and Willams, 2020).
However, the main problem in implementing labor standards is how to come up with labor
standards that can be applied worldwide. This is due to the disagreement among actors on the
purpose of labor standards. Furthermore, leaders in many liberal countries argue that
economic growth improves labor standards. Whereas, any interference in trade for labor
reasons will lower the gains from trade (O'Brien and Williams, 2020, p.195).
Conclusions
There are different perspectives on the global political economy. Economic
nationalists place the state as the main actor in the global political economy. This is related to
their concept of protectionism, protecting the economy from the global market. Meanwhile,
economic liberalists argue that states should collaborate with other actors in the global
economy. They believe that the global political economy involves multiple actors. Moreover,
the current global economy is more likely to adopt liberal values such as trade liberalization.
There are dynamics that shape the global political economy. They are international
trade and transnational production. Both dynamics have implications for the global division of
labor. International trade with the concept of 'comparative advantage' comparative advantage'
affects the specialization of labour. Whereas transnational production with TNCs has
implications in driving the division of labor around the world, especially in their host
countries. Both international trade and transnational production have benefits for the
participants. This is because TNCs can provide jobs and also improve the lives of workers.
However, there is skepticism about these dynamics. For example, they are believed to
play a role in wage inequality, especially between less skilled labor and more skilled labor.
Another example is the issue of worker exploitation, such as the Apple factory case and child
labor in tobacco factories. One solution that can be suggested is to enforce global labor
standards.
Results and Discussion of International Trade
According to Waters (2001) the primary and ongoing basis of economic
internationalization is trade. Trade itself is understood as the activity of two or more
individuals exchanging goods and services (O'Brien & Williams, 2020, p. 109). Such
activities would be called international trade if they are operated abroad. This international
trade can create relationships and interdependence between actors (Waters, 2001). As stated
by Ietto-Gillies (2003), that one evidence of state interconnectedness can be seen in
international trade activities in goods and services. Wallerstein and Marxist in Cohen (2017)
categorize countries into several levels, where there are dominant core countries, dependent
periphery countries and semi-fringe countries that are between the two categories. While core
countries enjoy a high level of technological development, selling sophisticated high-value
goods and services, the role of peripheral countries is simply to supply materials raw
materials, foodstuffs, and also cheap labor on the basis of highly unequal exchanges. Among
them, semi-periphery countries benefit from exploiting periphery countries even as they
themselves are exploited by core countries. This shows that international trade affects the
shape of the global political economy. One reason is that international trade has direct and
indirect effects on people and communities, for example, a family's consumption patterns are
affected by trade in goods (O'Brien & Williams, 2020).
One of the ways in which international trade affects the global economy is through a
free trade regime. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996). The theory of comparative advantage advises countries to
specialize in their most efficient products and services (O'Brien & Williams, 2020). The
ideology of comparative advantage serves to obscure uneven economic development progress
and unequal exchange between countries and regions (McBride & Shields, 1993). Therefore,
proponents of free trade believe that every country should engage in trade international and
reduce barriers.
Furthermore, according to liberal political economy, everyone can benefit from trade
as it can improve efficiency and increase productivity (O'Brien & Williams, 2020). For
example, Langenfeld and Nieberding (2005) estimate that trade growth has provided total
benefits to American consumers of about $2.3 trillion over the trade has provided total benefits
to American consumers of about $2.3 trillion during 1992-2002, or between $20,000 and
$22,000 per household in 2002. In contrast, nationalists believe that free trade is detrimental to
the national economy because it will weaken the economy unbalanced development and can
damage the environment (O'Brien & Williams, 2020). As in the case of Fiji, they are facing a
rapid and radical restructuring of the sugar or banana industry and this is potentially
disastrous for their economy as it is a fundamental commodity (Connel & Soutar, 2007).
Furthermore, in the international trading system, there are significant developments
that encourage trade liberalization. The emergence of the WTO (World Trade Organization),
the successor to the GATT (General Agreement on Tariffs and Trade), is believed to play an
important role in trade liberalization international. The WTO (and GATT before it) has
successfully liberalized trade and managed international trade through multilateral agreements
(Sampson, 2001). Jackson (1998) stated that the establishment of the WTO was the most
significant moment in the history of the world economy, even becoming a fundamental
institution in the international economy, especially with its dispute settlement procedures. The
WTO has changed the management of world trade in the following ways:
Change trade liberalization from being based on tariff adjustments to discussing
domestic policies, institutional practices and regulations.
Broaden the scope of trade and change the focus of negotiations from product
bargaining to policy.
Propose movement towards accession policies, for example, in the areas of subsidies
and trade-related investment measures and services (O'Brien & Williams, 2020).
Based on the above, it can be seen that the WTO has successfully played its role in
international trade, but there is the issue of many developing countries' interests not being
accommodated by the WTO (Sampson, 2001). In a d d i t i o n , countries developing
countries recognize the limitations of political influence in the international trade agreement
process (O'Brien & Williams, 2020). Another problem faced by developing countries is that
they lack the capacity to enforce WTO decisions as well as the high indirect costs of initiating
disputes with the WTO (Horlick, 2006, p. 220). For example, trade in agriculture, which is a
key interest of many developing countries, is particularly liberalized (Walter & Sen, 2009).
Apart from the role of the WTO, the influence of international trade on the global
political economy can be understood through its implications for the global division of labor
(Waters, 2001). The division of labor refers to the roles that people employ in the production
process (O'Brien & Williams, 2020). Waters (2001) states there are two types of division of
labour: social division of labour refers to occupational specialization, and technical division of
labour refers to task specialization. This condition is closely related to the concept of
comparative advantage by liberals who attach importance to the specialization of countries'
commodities to gain an advantage in the production process. In international trade. This means
that by engaging in trade, countries also shape their division of labor. Increase While trade
and mobility are expected to increase the elasticity of demand for human capital, they also
automatically reduce the bargaining power of labor (Perraton, 2003, p. 56). Moreover, in the
reduction of transaction costs due to technological advances, international agreements, non-
tariff barriers results in enormous specialization possibilities (Pomfret, 2014). A country can
choose the specific commodities or services offered in international trade which will also
affect the demand for labor from that country.
Another effect of international trade on labor can be seen in the inequality between
more skilled and less skilled labor. Trade liberalization leads to wage inequality due to
increased trade (Goldberg & Pavnick, 2004). It seems that recent international trade increases
the demand for more skilled workers to support the concept of specialization. Slaughter
(1998) believes that the demand for labor from the less skilled to the more skilled is a key
factor of wage inequality and it is actually happening in some countries such as the United
States and the United Kingdom. He added the argument that many countries with Such
inequality creates problems, such as higher unemployment rates and many job opportunities
avoiding less-skilled workers.
Transnational Production
There is general agreement that the growth of transnational production has shaped the
evolution of the global economy (O'Brien & Williams, 2020, p. 132). One of the main reasons
is that the global production system is a complex process. O'Brien and Williams (2013) argue
that this process involves multiple workers and workplaces with their integration with local,
national, regional and global systems. Because transnational production involves multi-level
actors. It becomes more complicated as it has to integrate different social, political and
economic backgrounds in the global economy. The main reason for the emergence of
transnational production is the innovation of communication and information technology
along with the advancement of transportation (Ietto-Gillies, 2003). This development
increases the possibility to separate production processes around the world.
A significant change affecting production processes across countries is the formation
of transnational companies (TNCs). As stated earlier, in the era of globalization, geographical
issues are no longer a big problem, therefore, TNCs can carry out production processes
separately in different parts of the world. Another reason TNCs invest abroad is because
production costs in developing countries are lower than in developed countries (O'Brien &
Williams, 2020). As stated by Ietto-Gillies (2003), there is a significant development of the
organization of production across countries due to the activities of transnational corporations.
In addition, it is argued that TNCs constitute a major part of the global production structure
and about 50 percent of world trade (O'Brien and Williams, 2020, p. 132). This fact shows the
impact of TNCs on the global production process. TNCs seem to be a key player in global
production.
TNCs play their role in the global economy through foreign direct investment (FDI).
Changes in the global production system are linked to increasing levels of FDI (O'Brien &
Williams, 2020). In addition, Perraton says that FDI by transnational corporations has grown
faster than trade (Perraton, 2003, p. 47). The success of TNCs to invest in many countries
around the world may be due to the recognition that TNCs are a good source of investment,
there is a transfer of technology, and there is an increase in the workforce (Waters, 2001, p.
46).
Indeed, there is skepticism towards transnational corporations and FDI. The concept of
transnational phenomena with interdependence between actors raises concerns of reduced
state sovereignty (Biersteker & Weber, 1996). This is also supported by the expansion of
capitalist companies that exploit labor, directly proportional to the need for workers to be able
to survive or survive to finance their own lives (Tyner, 2019). Moreover, for opponents of
capitalism, TNCs are believed to be a new worldwide method of exploitation that is
essentially "barbaric" and unacceptable (Waters, 2001). For example, a study conducted by
Doytch, Thelen, & Mendoza (2014) found the exploitation of child labor, with children forced
to work in fields for long hours, in a multinational tobacco company in Kazakhstan.
Therefore, for nationalist economic advocates, states must improve their ability to regulate
TNCs investing in their own countries (O'Brien and Williams, 2020).
However, for liberal supporters, there are The advantages offered by transnational
corporations with foreign direct investment. Epstein argues that this development can provide
more employment opportunities especially for developing countries, while also resulting in
wage increases because TNCs in developing countries have more productivity so they can pay
more (Epstein, 2003). In addition, TNCs with FDI can increase tax revenues through
increased economic activity in the host country and can help advance economic growth by
encouraging a more efficient division of labor (O'Brien & Williams, 2020, p. 137). Studies
conducted by Harrison in Mexico, Morocco and Venezuela show that TNCs help domestic
firms to break into export markets and they can improve workers' living standards as they pay
higher wages than domestic firms (Harrison, 1994).
Based on the explanation above, it can be seen that TNCs have a significant impact on
labor. One of the reasons TNCs with FDI are growing is that many developing countries are
implementing active policies to support industrialization and export to developed countries
(O'Brien and Williams, 2020). This is understandable because it will provide employment
opportunities in the country they are. Therefore, it is not surprising that many countries are
trying to attract TNCs to invest in their territories. With respect to the global division of labor,
TNCs will increase the demand for more skilled labor, as research conducted by Bruno, Crino
and Falzoni (2012) states that FDI increases the demand for more skilled labor in Poland.
Actors affected by the global political economy must make behavioral adjustments to
be able to face global competition which is currently increasing (O'Brien & Williams, 2020).
Coupled with technological advances in the form of machines, the value of labor has also
decreased because their portion of work can be replaced by machines (Tyner, 2019). The
higher demand for a more skilled workforce forces people to improve their abilities to
compete with others in the workplace. One of the reasons for this trend is to increase labor
productivity as it is a strong indicator of economic efficiency (Plasmans, 2003). In addition, it
is not surprising that TNCs promote division of labor to increase efficient production.
However, it seems that the labor market is shaped by TNC interests rather than national
interest.
International Trade, Transnational Production and Labor
One of the issues in relation to international trade and transnational production is not
respecting workers' rights. Many TNCs do not invest in their own countries because they want
to reduce their production costs. They tend to hire cheap labor and cut production costs with
forced labor in peripheral countries. As stated by Horvat (2020), the worst features of
exploitation are currently happening in all developing countries in the world.
In 2014, BBC News released a video inside the Apple assembly company. The video
shows that employees work under high pressure and for long, intensive periods of time. They
were forced to work standing up all day. In fact, the company installed electrical wires in t h e
machines so that employees could not lean back when tired. Employees work in a very
grueling environment. Although in 2010 there was a mass worker suicide at Foxconn, one of
the companies that manufactures Apple products, then Apple promised to improve facilitation
and working conditions, but the BBC video shows evidence to the contrary. For example,
everyone in China needs to carry an identity card. However, companies still take workers' IDs
directly when they enter the company (BBC News, 2014). Tyner (2019) also argues that
companies can collect profits not only from the products or services produced but also
through life insurance policies from workers who experience misfortune while performing
their duties.
However, not all TNCs tend to exploit labor for profit. A study analyzing foreign
direct investment and labor rights in 80 developing countries conducted by Busse,
Nunnenkamp, and Spatareanu showed different results. In terms of the correlation between
labor rights and TNCs, the study found that TNCs prefer to invest in countries that respect
labor rights (Busse, Nunnenkamp, & and Spatareanu, 2011). Moreover, labor violence in
potential host countries discourages TNCs from running their activities there, wherever it may
be (Busse, Nunnenkamp and Spatareanu, 2011). This condition shows that TNCs pay great
attention to labor rights, not only focus on their profits as well.
One solution to the above problem is to implement labor standards. Based on Heintz's
(2003) argument, the labor market should be for the larger society and should be governed by
rules, norms, and ethical standards that make allowance for the separate costs of
marketization. The International Labor Organization (ILO) is an organization that promotes
labor standards worldwide. The ILO holds conventions that cover basic human rights areas:
freedom of association and collective bargaining, elimination of forced labor, elimination of
child labor, and elimination of discrimination (Heintz, 2003; O'Brien and Willams, 2020).
However, the main problem in implementing labor standards is how to come up with labor
standards that can be applied worldwide. This is due to the disagreement among actors on the
purpose of labor standards. Furthermore, leaders in many liberal countries argue that
economic growth improves labor standards. Whereas, any interference in trade for labor
reasons will lower the gains from trade (O'Brien and Williams, 2020, p.195).
Conclusions
There are different perspectives on the global political economy. Economic
nationalists place the state as the main actor in the global political economy. This is related to
their concept of protectionism, protecting the economy from the global market. Meanwhile,
economic liberalists argue that states should collaborate with other actors in the global
economy. They believe that the global political economy involves multiple actors. Moreover,
the current global economy is more likely to adopt liberal values such as trade liberalization.
There are dynamics that shape the global political economy. They are international
trade and transnational production. Both dynamics have implications for the global division of
labor. International trade with the concept of 'comparative advantage' comparative advantage'
affects the specialization of labour. Whereas transnational production with TNCs has
implications in driving the division of labor around the world, especially in their host
countries. Both international trade and transnational production have benefits for the
participants. This is because TNCs can provide jobs and also improve the lives of workers.
However, there is skepticism about these dynamics. For example, they are believed to
play a role in wage inequality, especially between less skilled labor and more skilled labor.
Another example is the issue of worker exploitation, such as the Apple factory case and child
labor in tobacco factories. One solution that can be suggested is to enforce global labor
standards.
Results and Discussion of International Trade
According to Waters (2001) the primary and ongoing basis of economic
internationalization is trade. Trade itself is understood as the activity of two or more
individuals exchanging goods and services (O'Brien & Williams, 2020, p. 109). Such
activities would be called international trade if they are operated abroad. This international
trade can create relationships and interdependence between actors (Waters, 2001). As stated
by Ietto-Gillies (2003), that one evidence of state interconnectedness can be seen in
international trade activities in goods and services. Wallerstein and Marxist in Cohen (2017)
categorize countries into several levels, where there are dominant core countries, dependent
periphery countries and semi-fringe countries that are between the two categories. While core
countries enjoy a high level of technological development, selling sophisticated high-value
goods and services, the role of peripheral countries is simply to supply materials raw
materials, foodstuffs, and also cheap labor on the basis of highly unequal exchanges. Among
them, semi-periphery countries benefit from exploiting periphery countries even as they
themselves are exploited by core countries. This shows that international trade affects the
shape of the global political economy. One reason is that international trade has direct and
indirect effects on people and communities, for example, a family's consumption patterns are
affected by trade in goods (O'Brien & Williams, 2020).
One of the ways in which international trade affects the global economy is through a
free trade regime. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996). The theory of comparative advantage advises countries to
specialize in their most efficient products and services (O'Brien & Williams, 2020). The
ideology of comparative advantage serves to obscure uneven economic development progress
and unequal exchange between countries and regions (McBride & Shields, 1993). Therefore,
proponents of free trade believe that every country should engage in trade international and
reduce barriers.
Furthermore, according to liberal political economy, everyone can benefit from trade
as it can improve efficiency and increase productivity (O'Brien & Williams, 2020). For
example, Langenfeld and Nieberding (2005) estimate that trade growth has provided total
benefits to American consumers of about $2.3 trillion over the trade has provided total benefits
to American consumers of about $2.3 trillion during 1992-2002, or between $20,000 and
$22,000 per household in 2002. In contrast, nationalists believe that free trade is detrimental to
the national economy because it will weaken the economy unbalanced development and can
damage the environment (O'Brien & Williams, 2020). As in the case of Fiji, they are facing a
rapid and radical restructuring of the sugar or banana industry and this is potentially
disastrous for their economy as it is a fundamental commodity (Connel & Soutar, 2007).
Furthermore, in the international trading system, there are significant developments
that encourage trade liberalization. The emergence of the WTO (World Trade Organization),
the successor to the GATT (General Agreement on Tariffs and Trade), is believed to play an
important role in trade liberalization international. The WTO (and GATT before it) has
successfully liberalized trade and managed international trade through multilateral agreements
(Sampson, 2001). Jackson (1998) stated that the establishment of the WTO was the most
significant moment in the history of the world economy, even becoming a fundamental
institution in the international economy, especially with its dispute settlement procedures. The
WTO has changed the management of world trade in the following ways:
Change trade liberalization from being based on tariff adjustments to discussing
domestic policies, institutional practices and regulations.
Broaden the scope of trade and change the focus of negotiations from product
bargaining to policy.
Propose movement towards accession policies, for example, in the areas of subsidies
and trade-related investment measures and services (O'Brien & Williams, 2020).
Based on the above, it can be seen that the WTO has successfully played its role in
international trade, but there is the issue of many developing countries' interests not being
accommodated by the WTO (Sampson, 2001). In a d d i t i o n , countries developing
countries recognize the limitations of political influence in the international trade agreement
process (O'Brien & Williams, 2020). Another problem faced by developing countries is that
they lack the capacity to enforce WTO decisions as well as the high indirect costs of initiating
disputes with the WTO (Horlick, 2006, p. 220). For example, trade in agriculture, which is a
key interest of many developing countries, is particularly liberalized (Walter & Sen, 2009).
Apart from the role of the WTO, the influence of international trade on the global
political economy can be understood through its implications for the global division of labor
(Waters, 2001). The division of labor refers to the roles that people employ in the production
process (O'Brien & Williams, 2020). Waters (2001) states there are two types of division of
labour: social division of labour refers to occupational specialization, and technical division of
labour refers to task specialization. This condition is closely related to the concept of
comparative advantage by liberals who attach importance to the specialization of countries'
commodities to gain an advantage in the production process. In international trade. This means
that by engaging in trade, countries also shape their division of labor. Increase While trade
and mobility are expected to increase the elasticity of demand for human capital, they also
automatically reduce the bargaining power of labor (Perraton, 2003, p. 56). Moreover, in the
reduction of transaction costs due to technological advances, international agreements, non-
tariff barriers results in enormous specialization possibilities (Pomfret, 2014). A country can
choose the specific commodities or services offered in international trade which will also
affect the demand for labor from that country.
Another effect of international trade on labor can be seen in the inequality between
more skilled and less skilled labor. Trade liberalization leads to wage inequality due to
increased trade (Goldberg & Pavnick, 2004). It seems that recent international trade increases
the demand for more skilled workers to support the concept of specialization. Slaughter
(1998) believes that the demand for labor from the less skilled to the more skilled is a key
factor of wage inequality and it is actually happening in some countries such as the United
States and the United Kingdom. He added the argument that many countries with Such
inequality creates problems, such as higher unemployment rates and many job opportunities
avoiding less-skilled workers.
Transnational Production
There is general agreement that the growth of transnational production has shaped the
evolution of the global economy (O'Brien & Williams, 2020, p. 132). One of the main reasons
is that the global production system is a complex process. O'Brien and Williams (2013) argue
that this process involves multiple workers and workplaces with their integration with local,
national, regional and global systems. Because transnational production involves multi-level
actors. It becomes more complicated as it has to integrate different social, political and
economic backgrounds in the global economy. The main reason for the emergence of
transnational production is the innovation of communication and information technology
along with the advancement of transportation (Ietto-Gillies, 2003). This development
increases the possibility to separate production processes around the world.
A significant change affecting production processes across countries is the formation
of transnational companies (TNCs). As stated earlier, in the era of globalization, geographical
issues are no longer a big problem, therefore, TNCs can carry out production processes
separately in different parts of the world. Another reason TNCs invest abroad is because
production costs in developing countries are lower than in developed countries (O'Brien &
Williams, 2020). As stated by Ietto-Gillies (2003), there is a significant development of the
organization of production across countries due to the activities of transnational corporations.
In addition, it is argued that TNCs constitute a major part of the global production structure
and about 50 percent of world trade (O'Brien and Williams, 2020, p. 132). This fact shows the
impact of TNCs on the global production process. TNCs seem to be a key player in global
production.
TNCs play their role in the global economy through foreign direct investment (FDI).
Changes in the global production system are linked to increasing levels of FDI (O'Brien &
Williams, 2020). In addition, Perraton says that FDI by transnational corporations has grown
faster than trade (Perraton, 2003, p. 47). The success of TNCs to invest in many countries
around the world may be due to the recognition that TNCs are a good source of investment,
there is a transfer of technology, and there is an increase in the workforce (Waters, 2001, p.
46).
Indeed, there is skepticism towards transnational corporations and FDI. The concept of
transnational phenomena with interdependence between actors raises concerns of reduced
state sovereignty (Biersteker & Weber, 1996). This is also supported by the expansion of
capitalist companies that exploit labor, directly proportional to the need for workers to be able
to survive or survive to finance their own lives (Tyner, 2019). Moreover, for opponents of
capitalism, TNCs are believed to be a new worldwide method of exploitation that is
essentially "barbaric" and unacceptable (Waters, 2001). For example, a study conducted by
Doytch, Thelen, & Mendoza (2014) found the exploitation of child labor, with children forced
to work in fields for long hours, in a multinational tobacco company in Kazakhstan.
Therefore, for nationalist economic advocates, states must improve their ability to regulate
TNCs investing in their own countries (O'Brien and Williams, 2020).
However, for liberal supporters, there are The advantages offered by transnational
corporations with foreign direct investment. Epstein argues that this development can provide
more employment opportunities especially for developing countries, while also resulting in
wage increases because TNCs in developing countries have more productivity so they can pay
more (Epstein, 2003). In addition, TNCs with FDI can increase tax revenues through
increased economic activity in the host country and can help advance economic growth by
encouraging a more efficient division of labor (O'Brien & Williams, 2020, p. 137). Studies
conducted by Harrison in Mexico, Morocco and Venezuela show that TNCs help domestic
firms to break into export markets and they can improve workers' living standards as they pay
higher wages than domestic firms (Harrison, 1994).
Based on the explanation above, it can be seen that TNCs have a significant impact on
labor. One of the reasons TNCs with FDI are growing is that many developing countries are
implementing active policies to support industrialization and export to developed countries
(O'Brien and Williams, 2020). This is understandable because it will provide employment
opportunities in the country they are. Therefore, it is not surprising that many countries are
trying to attract TNCs to invest in their territories. With respect to the global division of labor,
TNCs will increase the demand for more skilled labor, as research conducted by Bruno, Crino
and Falzoni (2012) states that FDI increases the demand for more skilled labor in Poland.
Actors affected by the global political economy must make behavioral adjustments to
be able to face global competition which is currently increasing (O'Brien & Williams, 2020).
Coupled with technological advances in the form of machines, the value of labor has also
decreased because their portion of work can be replaced by machines (Tyner, 2019). The
higher demand for a more skilled workforce forces people to improve their abilities to
compete with others in the workplace. One of the reasons for this trend is to increase labor
productivity as it is a strong indicator of economic efficiency (Plasmans, 2003). In addition, it
is not surprising that TNCs promote division of labor to increase efficient production.
However, it seems that the labor market is shaped by TNC interests rather than national
interest.
International Trade, Transnational Production and Labor
One of the issues in relation to international trade and transnational production is not
respecting workers' rights. Many TNCs do not invest in their own countries because they want
to reduce their production costs. They tend to hire cheap labor and cut production costs with
forced labor in peripheral countries. As stated by Horvat (2020), the worst features of
exploitation are currently happening in all developing countries in the world.
In 2014, BBC News released a video inside the Apple assembly company. The video
shows that employees work under high pressure and for long, intensive periods of time. They
were forced to work standing up all day. In fact, the company installed electrical wires in t h e
machines so that employees could not lean back when tired. Employees work in a very
grueling environment. Although in 2010 there was a mass worker suicide at Foxconn, one of
the companies that manufactures Apple products, then Apple promised to improve facilitation
and working conditions, but the BBC video shows evidence to the contrary. For example,
everyone in China needs to carry an identity card. However, companies still take workers' IDs
directly when they enter the company (BBC News, 2014). Tyner (2019) also argues that
companies can collect profits not only from the products or services produced but also
through life insurance policies from workers who experience misfortune while performing
their duties.
However, not all TNCs tend to exploit labor for profit. A study analyzing foreign
direct investment and labor rights in 80 developing countries conducted by Busse,
Nunnenkamp, and Spatareanu showed different results. In terms of the correlation between
labor rights and TNCs, the study found that TNCs prefer to invest in countries that respect
labor rights (Busse, Nunnenkamp, & and Spatareanu, 2011). Moreover, labor violence in
potential host countries discourages TNCs from running their activities there, wherever it may
be (Busse, Nunnenkamp and Spatareanu, 2011). This condition shows that TNCs pay great
attention to labor rights, not only focus on their profits as well.
One solution to the above problem is to implement labor standards. Based on Heintz's
(2003) argument, the labor market should be for the larger society and should be governed by
rules, norms, and ethical standards that make allowance for the separate costs of
marketization. The International Labor Organization (ILO) is an organization that promotes
labor standards worldwide. The ILO holds conventions that cover basic human rights areas:
freedom of association and collective bargaining, elimination of forced labor, elimination of
child labor, and elimination of discrimination (Heintz, 2003; O'Brien and Willams, 2020).
However, the main problem in implementing labor standards is how to come up with labor
standards that can be applied worldwide. This is due to the disagreement among actors on the
purpose of labor standards. Furthermore, leaders in many liberal countries argue that
economic growth improves labor standards. Whereas, any interference in trade for labor
reasons will lower the gains from trade (O'Brien and Williams, 2020, p.195).
Conclusions
There are different perspectives on the global political economy. Economic
nationalists place the state as the main actor in the global political economy. This is related to
their concept of protectionism, protecting the economy from the global market. Meanwhile,
economic liberalists argue that states should collaborate with other actors in the global
economy. They believe that the global political economy involves multiple actors. Moreover,
the current global economy is more likely to adopt liberal values such as trade liberalization.
There are dynamics that shape the global political economy. They are international
trade and transnational production. Both dynamics have implications for the global division of
labor. International trade with the concept of 'comparative advantage' comparative advantage'
affects the specialization of labour. Whereas transnational production with TNCs has
implications in driving the division of labor around the world, especially in their host
countries. Both international trade and transnational production have benefits for the
participants. This is because TNCs can provide jobs and also improve the lives of workers.
However, there is skepticism about these dynamics. For example, they are believed to
play a role in wage inequality, especially between less skilled labor and more skilled labor.
Another example is the issue of worker exploitation, such as the Apple factory case and child
labor in tobacco factories. One solution that can be suggested is to enforce global labor
standards.
Results and Discussion of International Trade
According to Waters (2001) the primary and ongoing basis of economic
internationalization is trade. Trade itself is understood as the activity of two or more
individuals exchanging goods and services (O'Brien & Williams, 2020, p. 109). Such
activities would be called international trade if they are operated abroad. This international
trade can create relationships and interdependence between actors (Waters, 2001). As stated
by Ietto-Gillies (2003), that one evidence of state interconnectedness can be seen in
international trade activities in goods and services. Wallerstein and Marxist in Cohen (2017)
categorize countries into several levels, where there are dominant core countries, dependent
periphery countries and semi-fringe countries that are between the two categories. While core
countries enjoy a high level of technological development, selling sophisticated high-value
goods and services, the role of peripheral countries is simply to supply materials raw
materials, foodstuffs, and also cheap labor on the basis of highly unequal exchanges. Among
them, semi-periphery countries benefit from exploiting periphery countries even as they
themselves are exploited by core countries. This shows that international trade affects the
shape of the global political economy. One reason is that international trade has direct and
indirect effects on people and communities, for example, a family's consumption patterns are
affected by trade in goods (O'Brien & Williams, 2020).
One of the ways in which international trade affects the global economy is through a
free trade regime. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996). The theory of comparative advantage advises countries to
specialize in their most efficient products and services (O'Brien & Williams, 2020). The
ideology of comparative advantage serves to obscure uneven economic development progress
and unequal exchange between countries and regions (McBride & Shields, 1993). Therefore,
proponents of free trade believe that every country should engage in trade international and
reduce barriers.
Furthermore, according to liberal political economy, everyone can benefit from trade
as it can improve efficiency and increase productivity (O'Brien & Williams, 2020). For
example, Langenfeld and Nieberding (2005) estimate that trade growth has provided total
benefits to American consumers of about $2.3 trillion over the trade has provided total benefits
to American consumers of about $2.3 trillion during 1992-2002, or between $20,000 and
$22,000 per household in 2002. In contrast, nationalists believe that free trade is detrimental to
the national economy because it will weaken the economy unbalanced development and can
damage the environment (O'Brien & Williams, 2020). As in the case of Fiji, they are facing a
rapid and radical restructuring of the sugar or banana industry and this is potentially
disastrous for their economy as it is a fundamental commodity (Connel & Soutar, 2007).
Furthermore, in the international trading system, there are significant developments
that encourage trade liberalization. The emergence of the WTO (World Trade Organization),
the successor to the GATT (General Agreement on Tariffs and Trade), is believed to play an
important role in trade liberalization international. The WTO (and GATT before it) has
successfully liberalized trade and managed international trade through multilateral agreements
(Sampson, 2001). Jackson (1998) stated that the establishment of the WTO was the most
significant moment in the history of the world economy, even becoming a fundamental
institution in the international economy, especially with its dispute settlement procedures. The
WTO has changed the management of world trade in the following ways:
Change trade liberalization from being based on tariff adjustments to discussing
domestic policies, institutional practices and regulations.
Broaden the scope of trade and change the focus of negotiations from product
bargaining to policy.
Propose movement towards accession policies, for example, in the areas of subsidies
and trade-related investment measures and services (O'Brien & Williams, 2020).
Based on the above, it can be seen that the WTO has successfully played its role in
international trade, but there is the issue of many developing countries' interests not being
accommodated by the WTO (Sampson, 2001). In a d d i t i o n , countries developing
countries recognize the limitations of political influence in the international trade agreement
process (O'Brien & Williams, 2020). Another problem faced by developing countries is that
they lack the capacity to enforce WTO decisions as well as the high indirect costs of initiating
disputes with the WTO (Horlick, 2006, p. 220). For example, trade in agriculture, which is a
key interest of many developing countries, is particularly liberalized (Walter & Sen, 2009).
Apart from the role of the WTO, the influence of international trade on the global
political economy can be understood through its implications for the global division of labor
(Waters, 2001). The division of labor refers to the roles that people employ in the production
process (O'Brien & Williams, 2020). Waters (2001) states there are two types of division of
labour: social division of labour refers to occupational specialization, and technical division of
labour refers to task specialization. This condition is closely related to the concept of
comparative advantage by liberals who attach importance to the specialization of countries'
commodities to gain an advantage in the production process. In international trade. This means
that by engaging in trade, countries also shape their division of labor. Increase While trade
and mobility are expected to increase the elasticity of demand for human capital, they also
automatically reduce the bargaining power of labor (Perraton, 2003, p. 56). Moreover, in the
reduction of transaction costs due to technological advances, international agreements, non-
tariff barriers results in enormous specialization possibilities (Pomfret, 2014). A country can
choose the specific commodities or services offered in international trade which will also
affect the demand for labor from that country.
Another effect of international trade on labor can be seen in the inequality between
more skilled and less skilled labor. Trade liberalization leads to wage inequality due to
increased trade (Goldberg & Pavnick, 2004). It seems that recent international trade increases
the demand for more skilled workers to support the concept of specialization. Slaughter
(1998) believes that the demand for labor from the less skilled to the more skilled is a key
factor of wage inequality and it is actually happening in some countries such as the United
States and the United Kingdom. He added the argument that many countries with Such
inequality creates problems, such as higher unemployment rates and many job opportunities
avoiding less-skilled workers.
Transnational Production
There is general agreement that the growth of transnational production has shaped the
evolution of the global economy (O'Brien & Williams, 2020, p. 132). One of the main reasons
is that the global production system is a complex process. O'Brien and Williams (2013) argue
that this process involves multiple workers and workplaces with their integration with local,
national, regional and global systems. Because transnational production involves multi-level
actors. It becomes more complicated as it has to integrate different social, political and
economic backgrounds in the global economy. The main reason for the emergence of
transnational production is the innovation of communication and information technology
along with the advancement of transportation (Ietto-Gillies, 2003). This development
increases the possibility to separate production processes around the world.
A significant change affecting production processes across countries is the formation
of transnational companies (TNCs). As stated earlier, in the era of globalization, geographical
issues are no longer a big problem, therefore, TNCs can carry out production processes
separately in different parts of the world. Another reason TNCs invest abroad is because
production costs in developing countries are lower than in developed countries (O'Brien &
Williams, 2020). As stated by Ietto-Gillies (2003), there is a significant development of the
organization of production across countries due to the activities of transnational corporations.
In addition, it is argued that TNCs constitute a major part of the global production structure
and about 50 percent of world trade (O'Brien and Williams, 2020, p. 132). This fact shows the
impact of TNCs on the global production process. TNCs seem to be a key player in global
production.
TNCs play their role in the global economy through foreign direct investment (FDI).
Changes in the global production system are linked to increasing levels of FDI (O'Brien &
Williams, 2020). In addition, Perraton says that FDI by transnational corporations has grown
faster than trade (Perraton, 2003, p. 47). The success of TNCs to invest in many countries
around the world may be due to the recognition that TNCs are a good source of investment,
there is a transfer of technology, and there is an increase in the workforce (Waters, 2001, p.
46).
Indeed, there is skepticism towards transnational corporations and FDI. The concept of
transnational phenomena with interdependence between actors raises concerns of reduced
state sovereignty (Biersteker & Weber, 1996). This is also supported by the expansion of
capitalist companies that exploit labor, directly proportional to the need for workers to be able
to survive or survive to finance their own lives (Tyner, 2019). Moreover, for opponents of
capitalism, TNCs are believed to be a new worldwide method of exploitation that is
essentially "barbaric" and unacceptable (Waters, 2001). For example, a study conducted by
Doytch, Thelen, & Mendoza (2014) found the exploitation of child labor, with children forced
to work in fields for long hours, in a multinational tobacco company in Kazakhstan.
Therefore, for nationalist economic advocates, states must improve their ability to regulate
TNCs investing in their own countries (O'Brien and Williams, 2020).
However, for liberal supporters, there are The advantages offered by transnational
corporations with foreign direct investment. Epstein argues that this development can provide
more employment opportunities especially for developing countries, while also resulting in
wage increases because TNCs in developing countries have more productivity so they can pay
more (Epstein, 2003). In addition, TNCs with FDI can increase tax revenues through
increased economic activity in the host country and can help advance economic growth by
encouraging a more efficient division of labor (O'Brien & Williams, 2020, p. 137). Studies
conducted by Harrison in Mexico, Morocco and Venezuela show that TNCs help domestic
firms to break into export markets and they can improve workers' living standards as they pay
higher wages than domestic firms (Harrison, 1994).
Based on the explanation above, it can be seen that TNCs have a significant impact on
labor. One of the reasons TNCs with FDI are growing is that many developing countries are
implementing active policies to support industrialization and export to developed countries
(O'Brien and Williams, 2020). This is understandable because it will provide employment
opportunities in the country they are. Therefore, it is not surprising that many countries are
trying to attract TNCs to invest in their territories. With respect to the global division of labor,
TNCs will increase the demand for more skilled labor, as research conducted by Bruno, Crino
and Falzoni (2012) states that FDI increases the demand for more skilled labor in Poland.
Actors affected by the global political economy must make behavioral adjustments to
be able to face global competition which is currently increasing (O'Brien & Williams, 2020).
Coupled with technological advances in the form of machines, the value of labor has also
decreased because their portion of work can be replaced by machines (Tyner, 2019). The
higher demand for a more skilled workforce forces people to improve their abilities to
compete with others in the workplace. One of the reasons for this trend is to increase labor
productivity as it is a strong indicator of economic efficiency (Plasmans, 2003). In addition, it
is not surprising that TNCs promote division of labor to increase efficient production.
However, it seems that the labor market is shaped by TNC interests rather than national
interest.
International Trade, Transnational Production and Labor
One of the issues in relation to international trade and transnational production is not
respecting workers' rights. Many TNCs do not invest in their own countries because they want
to reduce their production costs. They tend to hire cheap labor and cut production costs with
forced labor in peripheral countries. As stated by Horvat (2020), the worst features of
exploitation are currently happening in all developing countries in the world.
In 2014, BBC News released a video inside the Apple assembly company. The video
shows that employees work under high pressure and for long, intensive periods of time. They
were forced to work standing up all day. In fact, the company installed electrical wires in t h e
machines so that employees could not lean back when tired. Employees work in a very
grueling environment. Although in 2010 there was a mass worker suicide at Foxconn, one of
the companies that manufactures Apple products, then Apple promised to improve facilitation
and working conditions, but the BBC video shows evidence to the contrary. For example,
everyone in China needs to carry an identity card. However, companies still take workers' IDs
directly when they enter the company (BBC News, 2014). Tyner (2019) also argues that
companies can collect profits not only from the products or services produced but also
through life insurance policies from workers who experience misfortune while performing
their duties.
However, not all TNCs tend to exploit labor for profit. A study analyzing foreign
direct investment and labor rights in 80 developing countries conducted by Busse,
Nunnenkamp, and Spatareanu showed different results. In terms of the correlation between
labor rights and TNCs, the study found that TNCs prefer to invest in countries that respect
labor rights (Busse, Nunnenkamp, & and Spatareanu, 2011). Moreover, labor violence in
potential host countries discourages TNCs from running their activities there, wherever it may
be (Busse, Nunnenkamp and Spatareanu, 2011). This condition shows that TNCs pay great
attention to labor rights, not only focus on their profits as well.
One solution to the above problem is to implement labor standards. Based on Heintz's
(2003) argument, the labor market should be for the larger society and should be governed by
rules, norms, and ethical standards that make allowance for the separate costs of
marketization. The International Labor Organization (ILO) is an organization that promotes
labor standards worldwide. The ILO holds conventions that cover basic human rights areas:
freedom of association and collective bargaining, elimination of forced labor, elimination of
child labor, and elimination of discrimination (Heintz, 2003; O'Brien and Willams, 2020).
However, the main problem in implementing labor standards is how to come up with labor
standards that can be applied worldwide. This is due to the disagreement among actors on the
purpose of labor standards. Furthermore, leaders in many liberal countries argue that
economic growth improves labor standards. Whereas, any interference in trade for labor
reasons will lower the gains from trade (O'Brien and Williams, 2020, p.195).
Conclusions
There are different perspectives on the global political economy. Economic
nationalists place the state as the main actor in the global political economy. This is related to
their concept of protectionism, protecting the economy from the global market. Meanwhile,
economic liberalists argue that states should collaborate with other actors in the global
economy. They believe that the global political economy involves multiple actors. Moreover,
the current global economy is more likely to adopt liberal values such as trade liberalization.
There are dynamics that shape the global political economy. They are international
trade and transnational production. Both dynamics have implications for the global division of
labor. International trade with the concept of 'comparative advantage' comparative advantage'
affects the specialization of labour. Whereas transnational production with TNCs has
implications in driving the division of labor around the world, especially in their host
countries. Both international trade and transnational production have benefits for the
participants. This is because TNCs can provide jobs and also improve the lives of workers.
However, there is skepticism about these dynamics. For example, they are believed to
play a role in wage inequality, especially between less skilled labor and more skilled labor.
Another example is the issue of worker exploitation, such as the Apple factory case and child
labor in tobacco factories. One solution that can be suggested is to enforce global labor
standards.
Results and Discussion of International Trade
According to Waters (2001) the primary and ongoing basis of economic
internationalization is trade. Trade itself is understood as the activity of two or more
individuals exchanging goods and services (O'Brien & Williams, 2020, p. 109). Such
activities would be called international trade if they are operated abroad. This international
trade can create relationships and interdependence between actors (Waters, 2001). As stated
by Ietto-Gillies (2003), that one evidence of state interconnectedness can be seen in
international trade activities in goods and services. Wallerstein and Marxist in Cohen (2017)
categorize countries into several levels, where there are dominant core countries, dependent
periphery countries and semi-fringe countries that are between the two categories. While core
countries enjoy a high level of technological development, selling sophisticated high-value
goods and services, the role of peripheral countries is simply to supply materials raw
materials, foodstuffs, and also cheap labor on the basis of highly unequal exchanges. Among
them, semi-periphery countries benefit from exploiting periphery countries even as they
themselves are exploited by core countries. This shows that international trade affects the
shape of the global political economy. One reason is that international trade has direct and
indirect effects on people and communities, for example, a family's consumption patterns are
affected by trade in goods (O'Brien & Williams, 2020).
One of the ways in which international trade affects the global economy is through a
free trade regime. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996). The theory of comparative advantage advises countries to
specialize in their most efficient products and services (O'Brien & Williams, 2020). The
ideology of comparative advantage serves to obscure uneven economic development progress
and unequal exchange between countries and regions (McBride & Shields, 1993). Therefore,
proponents of free trade believe that every country should engage in trade international and
reduce barriers.
Furthermore, according to liberal political economy, everyone can benefit from trade
as it can improve efficiency and increase productivity (O'Brien & Williams, 2020). For
example, Langenfeld and Nieberding (2005) estimate that trade growth has provided total
benefits to American consumers of about $2.3 trillion over the trade has provided total benefits
to American consumers of about $2.3 trillion during 1992-2002, or between $20,000 and
$22,000 per household in 2002. In contrast, nationalists believe that free trade is detrimental to
the national economy because it will weaken the economy unbalanced development and can
damage the environment (O'Brien & Williams, 2020). As in the case of Fiji, they are facing a
rapid and radical restructuring of the sugar or banana industry and this is potentially
disastrous for their economy as it is a fundamental commodity (Connel & Soutar, 2007).
Furthermore, in the international trading system, there are significant developments
that encourage trade liberalization. The emergence of the WTO (World Trade Organization),
the successor to the GATT (General Agreement on Tariffs and Trade), is believed to play an
important role in trade liberalization international. The WTO (and GATT before it) has
successfully liberalized trade and managed international trade through multilateral agreements
(Sampson, 2001). Jackson (1998) stated that the establishment of the WTO was the most
significant moment in the history of the world economy, even becoming a fundamental
institution in the international economy, especially with its dispute settlement procedures. The
WTO has changed the management of world trade in the following ways:
Change trade liberalization from being based on tariff adjustments to discussing
domestic policies, institutional practices and regulations.
Broaden the scope of trade and change the focus of negotiations from product
bargaining to policy.
Propose movement towards accession policies, for example, in the areas of subsidies
and trade-related investment measures and services (O'Brien & Williams, 2020).
Based on the above, it can be seen that the WTO has successfully played its role in
international trade, but there is the issue of many developing countries' interests not being
accommodated by the WTO (Sampson, 2001). In a d d i t i o n , countries developing
countries recognize the limitations of political influence in the international trade agreement
process (O'Brien & Williams, 2020). Another problem faced by developing countries is that
they lack the capacity to enforce WTO decisions as well as the high indirect costs of initiating
disputes with the WTO (Horlick, 2006, p. 220). For example, trade in agriculture, which is a
key interest of many developing countries, is particularly liberalized (Walter & Sen, 2009).
Apart from the role of the WTO, the influence of international trade on the global
political economy can be understood through its implications for the global division of labor
(Waters, 2001). The division of labor refers to the roles that people employ in the production
process (O'Brien & Williams, 2020). Waters (2001) states there are two types of division of
labour: social division of labour refers to occupational specialization, and technical division of
labour refers to task specialization. This condition is closely related to the concept of
comparative advantage by liberals who attach importance to the specialization of countries'
commodities to gain an advantage in the production process. In international trade. This means
that by engaging in trade, countries also shape their division of labor. Increase While trade
and mobility are expected to increase the elasticity of demand for human capital, they also
automatically reduce the bargaining power of labor (Perraton, 2003, p. 56). Moreover, in the
reduction of transaction costs due to technological advances, international agreements, non-
tariff barriers results in enormous specialization possibilities (Pomfret, 2014). A country can
choose the specific commodities or services offered in international trade which will also
affect the demand for labor from that country.
Another effect of international trade on labor can be seen in the inequality between
more skilled and less skilled labor. Trade liberalization leads to wage inequality due to
increased trade (Goldberg & Pavnick, 2004). It seems that recent international trade increases
the demand for more skilled workers to support the concept of specialization. Slaughter
(1998) believes that the demand for labor from the less skilled to the more skilled is a key
factor of wage inequality and it is actually happening in some countries such as the United
States and the United Kingdom. He added the argument that many countries with Such
inequality creates problems, such as higher unemployment rates and many job opportunities
avoiding less-skilled workers.
Transnational Production
There is general agreement that the growth of transnational production has shaped the
evolution of the global economy (O'Brien & Williams, 2020, p. 132). One of the main reasons
is that the global production system is a complex process. O'Brien and Williams (2013) argue
that this process involves multiple workers and workplaces with their integration with local,
national, regional and global systems. Because transnational production involves multi-level
actors. It becomes more complicated as it has to integrate different social, political and
economic backgrounds in the global economy. The main reason for the emergence of
transnational production is the innovation of communication and information technology
along with the advancement of transportation (Ietto-Gillies, 2003). This development
increases the possibility to separate production processes around the world.
A significant change affecting production processes across countries is the formation
of transnational companies (TNCs). As stated earlier, in the era of globalization, geographical
issues are no longer a big problem, therefore, TNCs can carry out production processes
separately in different parts of the world. Another reason TNCs invest abroad is because
production costs in developing countries are lower than in developed countries (O'Brien &
Williams, 2020). As stated by Ietto-Gillies (2003), there is a significant development of the
organization of production across countries due to the activities of transnational corporations.
In addition, it is argued that TNCs constitute a major part of the global production structure
and about 50 percent of world trade (O'Brien and Williams, 2020, p. 132). This fact shows the
impact of TNCs on the global production process. TNCs seem to be a key player in global
production.
TNCs play their role in the global economy through foreign direct investment (FDI).
Changes in the global production system are linked to increasing levels of FDI (O'Brien &
Williams, 2020). In addition, Perraton says that FDI by transnational corporations has grown
faster than trade (Perraton, 2003, p. 47). The success of TNCs to invest in many countries
around the world may be due to the recognition that TNCs are a good source of investment,
there is a transfer of technology, and there is an increase in the workforce (Waters, 2001, p.
46).
Indeed, there is skepticism towards transnational corporations and FDI. The concept of
transnational phenomena with interdependence between actors raises concerns of reduced
state sovereignty (Biersteker & Weber, 1996). This is also supported by the expansion of
capitalist companies that exploit labor, directly proportional to the need for workers to be able
to survive or survive to finance their own lives (Tyner, 2019). Moreover, for opponents of
capitalism, TNCs are believed to be a new worldwide method of exploitation that is
essentially "barbaric" and unacceptable (Waters, 2001). For example, a study conducted by
Doytch, Thelen, & Mendoza (2014) found the exploitation of child labor, with children forced
to work in fields for long hours, in a multinational tobacco company in Kazakhstan.
Therefore, for nationalist economic advocates, states must improve their ability to regulate
TNCs investing in their own countries (O'Brien and Williams, 2020).
However, for liberal supporters, there are The advantages offered by transnational
corporations with foreign direct investment. Epstein argues that this development can provide
more employment opportunities especially for developing countries, while also resulting in
wage increases because TNCs in developing countries have more productivity so they can pay
more (Epstein, 2003). In addition, TNCs with FDI can increase tax revenues through
increased economic activity in the host country and can help advance economic growth by
encouraging a more efficient division of labor (O'Brien & Williams, 2020, p. 137). Studies
conducted by Harrison in Mexico, Morocco and Venezuela show that TNCs help domestic
firms to break into export markets and they can improve workers' living standards as they pay
higher wages than domestic firms (Harrison, 1994).
Based on the explanation above, it can be seen that TNCs have a significant impact on
labor. One of the reasons TNCs with FDI are growing is that many developing countries are
implementing active policies to support industrialization and export to developed countries
(O'Brien and Williams, 2020). This is understandable because it will provide employment
opportunities in the country they are. Therefore, it is not surprising that many countries are
trying to attract TNCs to invest in their territories. With respect to the global division of labor,
TNCs will increase the demand for more skilled labor, as research conducted by Bruno, Crino
and Falzoni (2012) states that FDI increases the demand for more skilled labor in Poland.
Actors affected by the global political economy must make behavioral adjustments to
be able to face global competition which is currently increasing (O'Brien & Williams, 2020).
Coupled with technological advances in the form of machines, the value of labor has also
decreased because their portion of work can be replaced by machines (Tyner, 2019). The
higher demand for a more skilled workforce forces people to improve their abilities to
compete with others in the workplace. One of the reasons for this trend is to increase labor
productivity as it is a strong indicator of economic efficiency (Plasmans, 2003). In addition, it
is not surprising that TNCs promote division of labor to increase efficient production.
However, it seems that the labor market is shaped by TNC interests rather than national
interest.
International Trade, Transnational Production and Labor
One of the issues in relation to international trade and transnational production is not
respecting workers' rights. Many TNCs do not invest in their own countries because they want
to reduce their production costs. They tend to hire cheap labor and cut production costs with
forced labor in peripheral countries. As stated by Horvat (2020), the worst features of
exploitation are currently happening in all developing countries in the world.
In 2014, BBC News released a video inside the Apple assembly company. The video
shows that employees work under high pressure and for long, intensive periods of time. They
were forced to work standing up all day. In fact, the company installed electrical wires in t h e
machines so that employees could not lean back when tired. Employees work in a very
grueling environment. Although in 2010 there was a mass worker suicide at Foxconn, one of
the companies that manufactures Apple products, then Apple promised to improve facilitation
and working conditions, but the BBC video shows evidence to the contrary. For example,
everyone in China needs to carry an identity card. However, companies still take workers' IDs
directly when they enter the company (BBC News, 2014). Tyner (2019) also argues that
companies can collect profits not only from the products or services produced but also
through life insurance policies from workers who experience misfortune while performing
their duties.
However, not all TNCs tend to exploit labor for profit. A study analyzing foreign
direct investment and labor rights in 80 developing countries conducted by Busse,
Nunnenkamp, and Spatareanu showed different results. In terms of the correlation between
labor rights and TNCs, the study found that TNCs prefer to invest in countries that respect
labor rights (Busse, Nunnenkamp, & and Spatareanu, 2011). Moreover, labor violence in
potential host countries discourages TNCs from running their activities there, wherever it may
be (Busse, Nunnenkamp and Spatareanu, 2011). This condition shows that TNCs pay great
attention to labor rights, not only focus on their profits as well.
One solution to the above problem is to implement labor standards. Based on Heintz's
(2003) argument, the labor market should be for the larger society and should be governed by
rules, norms, and ethical standards that make allowance for the separate costs of
marketization. The International Labor Organization (ILO) is an organization that promotes
labor standards worldwide. The ILO holds conventions that cover basic human rights areas:
freedom of association and collective bargaining, elimination of forced labor, elimination of
child labor, and elimination of discrimination (Heintz, 2003; O'Brien and Willams, 2020).
However, the main problem in implementing labor standards is how to come up with labor
standards that can be applied worldwide. This is due to the disagreement among actors on the
purpose of labor standards. Furthermore, leaders in many liberal countries argue that
economic growth improves labor standards. Whereas, any interference in trade for labor
reasons will lower the gains from trade (O'Brien and Williams, 2020, p.195).
Conclusions
There are different perspectives on the global political economy. Economic
nationalists place the state as the main actor in the global political economy. This is related to
their concept of protectionism, protecting the economy from the global market. Meanwhile,
economic liberalists argue that states should collaborate with other actors in the global
economy. They believe that the global political economy involves multiple actors. Moreover,
the current global economy is more likely to adopt liberal values such as trade liberalization.
There are dynamics that shape the global political economy. They are international
trade and transnational production. Both dynamics have implications for the global division of
labor. International trade with the concept of 'comparative advantage' comparative advantage'
affects the specialization of labour. Whereas transnational production with TNCs has
implications in driving the division of labor around the world, especially in their host
countries. Both international trade and transnational production have benefits for the
participants. This is because TNCs can provide jobs and also improve the lives of workers.
However, there is skepticism about these dynamics. For example, they are believed to
play a role in wage inequality, especially between less skilled labor and more skilled labor.
Another example is the issue of worker exploitation, such as the Apple factory case and child
labor in tobacco factories. One solution that can be suggested is to enforce global labor
standards.
Results and Discussion of International Trade
According to Waters (2001) the primary and ongoing basis of economic
internationalization is trade. Trade itself is understood as the activity of two or more
individuals exchanging goods and services (O'Brien & Williams, 2020, p. 109). Such
activities would be called international trade if they are operated abroad. This international
trade can create relationships and interdependence between actors (Waters, 2001). As stated
by Ietto-Gillies (2003), that one evidence of state interconnectedness can be seen in
international trade activities in goods and services. Wallerstein and Marxist in Cohen (2017)
categorize countries into several levels, where there are dominant core countries, dependent
periphery countries and semi-fringe countries that are between the two categories. While core
countries enjoy a high level of technological development, selling sophisticated high-value
goods and services, the role of peripheral countries is simply to supply materials raw
materials, foodstuffs, and also cheap labor on the basis of highly unequal exchanges. Among
them, semi-periphery countries benefit from exploiting periphery countries even as they
themselves are exploited by core countries. This shows that international trade affects the
shape of the global political economy. One reason is that international trade has direct and
indirect effects on people and communities, for example, a family's consumption patterns are
affected by trade in goods (O'Brien & Williams, 2020).
One of the ways in which international trade affects the global economy is through a
free trade regime. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996). The theory of comparative advantage advises countries to
specialize in their most efficient products and services (O'Brien & Williams, 2020). The
ideology of comparative advantage serves to obscure uneven economic development progress
and unequal exchange between countries and regions (McBride & Shields, 1993). Therefore,
proponents of free trade believe that every country should engage in trade international and
reduce barriers.
Furthermore, according to liberal political economy, everyone can benefit from trade
as it can improve efficiency and increase productivity (O'Brien & Williams, 2020). For
example, Langenfeld and Nieberding (2005) estimate that trade growth has provided total
benefits to American consumers of about $2.3 trillion over the trade has provided total benefits
to American consumers of about $2.3 trillion during 1992-2002, or between $20,000 and
$22,000 per household in 2002. In contrast, nationalists believe that free trade is detrimental to
the national economy because it will weaken the economy unbalanced development and can
damage the environment (O'Brien & Williams, 2020). As in the case of Fiji, they are facing a
rapid and radical restructuring of the sugar or banana industry and this is potentially
disastrous for their economy as it is a fundamental commodity (Connel & Soutar, 2007).
Furthermore, in the international trading system, there are significant developments
that encourage trade liberalization. The emergence of the WTO (World Trade Organization),
the successor to the GATT (General Agreement on Tariffs and Trade), is believed to play an
important role in trade liberalization international. The WTO (and GATT before it) has
successfully liberalized trade and managed international trade through multilateral agreements
(Sampson, 2001). Jackson (1998) stated that the establishment of the WTO was the most
significant moment in the history of the world economy, even becoming a fundamental
institution in the international economy, especially with its dispute settlement procedures. The
WTO has changed the management of world trade in the following ways:
Change trade liberalization from being based on tariff adjustments to discussing
domestic policies, institutional practices and regulations.
Broaden the scope of trade and change the focus of negotiations from product
bargaining to policy.
Propose movement towards accession policies, for example, in the areas of subsidies
and trade-related investment measures and services (O'Brien & Williams, 2020).
Based on the above, it can be seen that the WTO has successfully played its role in
international trade, but there is the issue of many developing countries' interests not being
accommodated by the WTO (Sampson, 2001). In a d d i t i o n , countries developing
countries recognize the limitations of political influence in the international trade agreement
process (O'Brien & Williams, 2020). Another problem faced by developing countries is that
they lack the capacity to enforce WTO decisions as well as the high indirect costs of initiating
disputes with the WTO (Horlick, 2006, p. 220). For example, trade in agriculture, which is a
key interest of many developing countries, is particularly liberalized (Walter & Sen, 2009).
Apart from the role of the WTO, the influence of international trade on the global
political economy can be understood through its implications for the global division of labor
(Waters, 2001). The division of labor refers to the roles that people employ in the production
process (O'Brien & Williams, 2020). Waters (2001) states there are two types of division of
labour: social division of labour refers to occupational specialization, and technical division of
labour refers to task specialization. This condition is closely related to the concept of
comparative advantage by liberals who attach importance to the specialization of countries'
commodities to gain an advantage in the production process. In international trade. This means
that by engaging in trade, countries also shape their division of labor. Increase While trade
and mobility are expected to increase the elasticity of demand for human capital, they also
automatically reduce the bargaining power of labor (Perraton, 2003, p. 56). Moreover, in the
reduction of transaction costs due to technological advances, international agreements, non-
tariff barriers results in enormous specialization possibilities (Pomfret, 2014). A country can
choose the specific commodities or services offered in international trade which will also
affect the demand for labor from that country.
Another effect of international trade on labor can be seen in the inequality between
more skilled and less skilled labor. Trade liberalization leads to wage inequality due to
increased trade (Goldberg & Pavnick, 2004). It seems that recent international trade increases
the demand for more skilled workers to support the concept of specialization. Slaughter
(1998) believes that the demand for labor from the less skilled to the more skilled is a key
factor of wage inequality and it is actually happening in some countries such as the United
States and the United Kingdom. He added the argument that many countries with Such
inequality creates problems, such as higher unemployment rates and many job opportunities
avoiding less-skilled workers.
Transnational Production
There is general agreement that the growth of transnational production has shaped the
evolution of the global economy (O'Brien & Williams, 2020, p. 132). One of the main reasons
is that the global production system is a complex process. O'Brien and Williams (2013) argue
that this process involves multiple workers and workplaces with their integration with local,
national, regional and global systems. Because transnational production involves multi-level
actors. It becomes more complicated as it has to integrate different social, political and
economic backgrounds in the global economy. The main reason for the emergence of
transnational production is the innovation of communication and information technology
along with the advancement of transportation (Ietto-Gillies, 2003). This development
increases the possibility to separate production processes around the world.
A significant change affecting production processes across countries is the formation
of transnational companies (TNCs). As stated earlier, in the era of globalization, geographical
issues are no longer a big problem, therefore, TNCs can carry out production processes
separately in different parts of the world. Another reason TNCs invest abroad is because
production costs in developing countries are lower than in developed countries (O'Brien &
Williams, 2020). As stated by Ietto-Gillies (2003), there is a significant development of the
organization of production across countries due to the activities of transnational corporations.
In addition, it is argued that TNCs constitute a major part of the global production structure
and about 50 percent of world trade (O'Brien and Williams, 2020, p. 132). This fact shows the
impact of TNCs on the global production process. TNCs seem to be a key player in global
production.
TNCs play their role in the global economy through foreign direct investment (FDI).
Changes in the global production system are linked to increasing levels of FDI (O'Brien &
Williams, 2020). In addition, Perraton says that FDI by transnational corporations has grown
faster than trade (Perraton, 2003, p. 47). The success of TNCs to invest in many countries
around the world may be due to the recognition that TNCs are a good source of investment,
there is a transfer of technology, and there is an increase in the workforce (Waters, 2001, p.
46).
Indeed, there is skepticism towards transnational corporations and FDI. The concept of
transnational phenomena with interdependence between actors raises concerns of reduced
state sovereignty (Biersteker & Weber, 1996). This is also supported by the expansion of
capitalist companies that exploit labor, directly proportional to the need for workers to be able
to survive or survive to finance their own lives (Tyner, 2019). Moreover, for opponents of
capitalism, TNCs are believed to be a new worldwide method of exploitation that is
essentially "barbaric" and unacceptable (Waters, 2001). For example, a study conducted by
Doytch, Thelen, & Mendoza (2014) found the exploitation of child labor, with children forced
to work in fields for long hours, in a multinational tobacco company in Kazakhstan.
Therefore, for nationalist economic advocates, states must improve their ability to regulate
TNCs investing in their own countries (O'Brien and Williams, 2020).
However, for liberal supporters, there are The advantages offered by transnational
corporations with foreign direct investment. Epstein argues that this development can provide
more employment opportunities especially for developing countries, while also resulting in
wage increases because TNCs in developing countries have more productivity so they can pay
more (Epstein, 2003). In addition, TNCs with FDI can increase tax revenues through
increased economic activity in the host country and can help advance economic growth by
encouraging a more efficient division of labor (O'Brien & Williams, 2020, p. 137). Studies
conducted by Harrison in Mexico, Morocco and Venezuela show that TNCs help domestic
firms to break into export markets and they can improve workers' living standards as they pay
higher wages than domestic firms (Harrison, 1994).
Based on the explanation above, it can be seen that TNCs have a significant impact on
labor. One of the reasons TNCs with FDI are growing is that many developing countries are
implementing active policies to support industrialization and export to developed countries
(O'Brien and Williams, 2020). This is understandable because it will provide employment
opportunities in the country they are. Therefore, it is not surprising that many countries are
trying to attract TNCs to invest in their territories. With respect to the global division of labor,
TNCs will increase the demand for more skilled labor, as research conducted by Bruno, Crino
and Falzoni (2012) states that FDI increases the demand for more skilled labor in Poland.
Actors affected by the global political economy must make behavioral adjustments to
be able to face global competition which is currently increasing (O'Brien & Williams, 2020).
Coupled with technological advances in the form of machines, the value of labor has also
decreased because their portion of work can be replaced by machines (Tyner, 2019). The
higher demand for a more skilled workforce forces people to improve their abilities to
compete with others in the workplace. One of the reasons for this trend is to increase labor
productivity as it is a strong indicator of economic efficiency (Plasmans, 2003). In addition, it
is not surprising that TNCs promote division of labor to increase efficient production.
However, it seems that the labor market is shaped by TNC interests rather than national
interest.
International Trade, Transnational Production and Labor
One of the issues in relation to international trade and transnational production is not
respecting workers' rights. Many TNCs do not invest in their own countries because they want
to reduce their production costs. They tend to hire cheap labor and cut production costs with
forced labor in peripheral countries. As stated by Horvat (2020), the worst features of
exploitation are currently happening in all developing countries in the world.
In 2014, BBC News released a video inside the Apple assembly company. The video
shows that employees work under high pressure and for long, intensive periods of time. They
were forced to work standing up all day. In fact, the company installed electrical wires in t h e
machines so that employees could not lean back when tired. Employees work in a very
grueling environment. Although in 2010 there was a mass worker suicide at Foxconn, one of
the companies that manufactures Apple products, then Apple promised to improve facilitation
and working conditions, but the BBC video shows evidence to the contrary. For example,
everyone in China needs to carry an identity card. However, companies still take workers' IDs
directly when they enter the company (BBC News, 2014). Tyner (2019) also argues that
companies can collect profits not only from the products or services produced but also
through life insurance policies from workers who experience misfortune while performing
their duties.
However, not all TNCs tend to exploit labor for profit. A study analyzing foreign
direct investment and labor rights in 80 developing countries conducted by Busse,
Nunnenkamp, and Spatareanu showed different results. In terms of the correlation between
labor rights and TNCs, the study found that TNCs prefer to invest in countries that respect
labor rights (Busse, Nunnenkamp, & and Spatareanu, 2011). Moreover, labor violence in
potential host countries discourages TNCs from running their activities there, wherever it may
be (Busse, Nunnenkamp and Spatareanu, 2011). This condition shows that TNCs pay great
attention to labor rights, not only focus on their profits as well.
One solution to the above problem is to implement labor standards. Based on Heintz's
(2003) argument, the labor market should be for the larger society and should be governed by
rules, norms, and ethical standards that make allowance for the separate costs of
marketization. The International Labor Organization (ILO) is an organization that promotes
labor standards worldwide. The ILO holds conventions that cover basic human rights areas:
freedom of association and collective bargaining, elimination of forced labor, elimination of
child labor, and elimination of discrimination (Heintz, 2003; O'Brien and Willams, 2020).
However, the main problem in implementing labor standards is how to come up with labor
standards that can be applied worldwide. This is due to the disagreement among actors on the
purpose of labor standards. Furthermore, leaders in many liberal countries argue that
economic growth improves labor standards. Whereas, any interference in trade for labor
reasons will lower the gains from trade (O'Brien and Williams, 2020, p.195).
Conclusions
There are different perspectives on the global political economy. Economic
nationalists place the state as the main actor in the global political economy. This is related to
their concept of protectionism, protecting the economy from the global market. Meanwhile,
economic liberalists argue that states should collaborate with other actors in the global
economy. They believe that the global political economy involves multiple actors. Moreover,
the current global economy is more likely to adopt liberal values such as trade liberalization.
There are dynamics that shape the global political economy. They are international
trade and transnational production. Both dynamics have implications for the global division of
labor. International trade with the concept of 'comparative advantage' comparative advantage'
affects the specialization of labour. Whereas transnational production with TNCs has
implications in driving the division of labor around the world, especially in their host
countries. Both international trade and transnational production have benefits for the
participants. This is because TNCs can provide jobs and also improve the lives of workers.
However, there is skepticism about these dynamics. For example, they are believed to
play a role in wage inequality, especially between less skilled labor and more skilled labor.
Another example is the issue of worker exploitation, such as the Apple factory case and child
labor in tobacco factories. One solution that can be suggested is to enforce global labor
standards.
Results and Discussion of International Trade
According to Waters (2001) the primary and ongoing basis of economic
internationalization is trade. Trade itself is understood as the activity of two or more
individuals exchanging goods and services (O'Brien & Williams, 2020, p. 109). Such
activities would be called international trade if they are operated abroad. This international
trade can create relationships and interdependence between actors (Waters, 2001). As stated
by Ietto-Gillies (2003), that one evidence of state interconnectedness can be seen in
international trade activities in goods and services. Wallerstein and Marxist in Cohen (2017)
categorize countries into several levels, where there are dominant core countries, dependent
periphery countries and semi-fringe countries that are between the two categories. While core
countries enjoy a high level of technological development, selling sophisticated high-value
goods and services, the role of peripheral countries is simply to supply materials raw
materials, foodstuffs, and also cheap labor on the basis of highly unequal exchanges. Among
them, semi-periphery countries benefit from exploiting periphery countries even as they
themselves are exploited by core countries. This shows that international trade affects the
shape of the global political economy. One reason is that international trade has direct and
indirect effects on people and communities, for example, a family's consumption patterns are
affected by trade in goods (O'Brien & Williams, 2020).
One of the ways in which international trade affects the global economy is through a
free trade regime. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996). The theory of comparative advantage advises countries to
specialize in their most efficient products and services (O'Brien & Williams, 2020). The
ideology of comparative advantage serves to obscure uneven economic development progress
and unequal exchange between countries and regions (McBride & Shields, 1993). Therefore,
proponents of free trade believe that every country should engage in trade international and
reduce barriers.
Furthermore, according to liberal political economy, everyone can benefit from trade
as it can improve efficiency and increase productivity (O'Brien & Williams, 2020). For
example, Langenfeld and Nieberding (2005) estimate that trade growth has provided total
benefits to American consumers of about $2.3 trillion over the trade has provided total benefits
to American consumers of about $2.3 trillion during 1992-2002, or between $20,000 and
$22,000 per household in 2002. In contrast, nationalists believe that free trade is detrimental to
the national economy because it will weaken the economy unbalanced development and can
damage the environment (O'Brien & Williams, 2020). As in the case of Fiji, they are facing a
rapid and radical restructuring of the sugar or banana industry and this is potentially
disastrous for their economy as it is a fundamental commodity (Connel & Soutar, 2007).
Furthermore, in the international trading system, there are significant developments
that encourage trade liberalization. The emergence of the WTO (World Trade Organization),
the successor to the GATT (General Agreement on Tariffs and Trade), is believed to play an
important role in trade liberalization international. The WTO (and GATT before it) has
successfully liberalized trade and managed international trade through multilateral agreements
(Sampson, 2001). Jackson (1998) stated that the establishment of the WTO was the most
significant moment in the history of the world economy, even becoming a fundamental
institution in the international economy, especially with its dispute settlement procedures. The
WTO has changed the management of world trade in the following ways:
Change trade liberalization from being based on tariff adjustments to discussing
domestic policies, institutional practices and regulations.
Broaden the scope of trade and change the focus of negotiations from product
bargaining to policy.
Propose movement towards accession policies, for example, in the areas of subsidies
and trade-related investment measures and services (O'Brien & Williams, 2020).
Based on the above, it can be seen that the WTO has successfully played its role in
international trade, but there is the issue of many developing countries' interests not being
accommodated by the WTO (Sampson, 2001). In a d d i t i o n , countries developing
countries recognize the limitations of political influence in the international trade agreement
process (O'Brien & Williams, 2020). Another problem faced by developing countries is that
they lack the capacity to enforce WTO decisions as well as the high indirect costs of initiating
disputes with the WTO (Horlick, 2006, p. 220). For example, trade in agriculture, which is a
key interest of many developing countries, is particularly liberalized (Walter & Sen, 2009).
Apart from the role of the WTO, the influence of international trade on the global
political economy can be understood through its implications for the global division of labor
(Waters, 2001). The division of labor refers to the roles that people employ in the production
process (O'Brien & Williams, 2020). Waters (2001) states there are two types of division of
labour: social division of labour refers to occupational specialization, and technical division of
labour refers to task specialization. This condition is closely related to the concept of
comparative advantage by liberals who attach importance to the specialization of countries'
commodities to gain an advantage in the production process. In international trade. This means
that by engaging in trade, countries also shape their division of labor. Increase While trade
and mobility are expected to increase the elasticity of demand for human capital, they also
automatically reduce the bargaining power of labor (Perraton, 2003, p. 56). Moreover, in the
reduction of transaction costs due to technological advances, international agreements, non-
tariff barriers results in enormous specialization possibilities (Pomfret, 2014). A country can
choose the specific commodities or services offered in international trade which will also
affect the demand for labor from that country.
Another effect of international trade on labor can be seen in the inequality between
more skilled and less skilled labor. Trade liberalization leads to wage inequality due to
increased trade (Goldberg & Pavnick, 2004). It seems that recent international trade increases
the demand for more skilled workers to support the concept of specialization. Slaughter
(1998) believes that the demand for labor from the less skilled to the more skilled is a key
factor of wage inequality and it is actually happening in some countries such as the United
States and the United Kingdom. He added the argument that many countries with Such
inequality creates problems, such as higher unemployment rates and many job opportunities
avoiding less-skilled workers.
Transnational Production
There is general agreement that the growth of transnational production has shaped the
evolution of the global economy (O'Brien & Williams, 2020, p. 132). One of the main reasons
is that the global production system is a complex process. O'Brien and Williams (2013) argue
that this process involves multiple workers and workplaces with their integration with local,
national, regional and global systems. Because transnational production involves multi-level
actors. It becomes more complicated as it has to integrate different social, political and
economic backgrounds in the global economy. The main reason for the emergence of
transnational production is the innovation of communication and information technology
along with the advancement of transportation (Ietto-Gillies, 2003). This development
increases the possibility to separate production processes around the world.
A significant change affecting production processes across countries is the formation
of transnational companies (TNCs). As stated earlier, in the era of globalization, geographical
issues are no longer a big problem, therefore, TNCs can carry out production processes
separately in different parts of the world. Another reason TNCs invest abroad is because
production costs in developing countries are lower than in developed countries (O'Brien &
Williams, 2020). As stated by Ietto-Gillies (2003), there is a significant development of the
organization of production across countries due to the activities of transnational corporations.
In addition, it is argued that TNCs constitute a major part of the global production structure
and about 50 percent of world trade (O'Brien and Williams, 2020, p. 132). This fact shows the
impact of TNCs on the global production process. TNCs seem to be a key player in global
production.
TNCs play their role in the global economy through foreign direct investment (FDI).
Changes in the global production system are linked to increasing levels of FDI (O'Brien &
Williams, 2020). In addition, Perraton says that FDI by transnational corporations has grown
faster than trade (Perraton, 2003, p. 47). The success of TNCs to invest in many countries
around the world may be due to the recognition that TNCs are a good source of investment,
there is a transfer of technology, and there is an increase in the workforce (Waters, 2001, p.
46).
Indeed, there is skepticism towards transnational corporations and FDI. The concept of
transnational phenomena with interdependence between actors raises concerns of reduced
state sovereignty (Biersteker & Weber, 1996). This is also supported by the expansion of
capitalist companies that exploit labor, directly proportional to the need for workers to be able
to survive or survive to finance their own lives (Tyner, 2019). Moreover, for opponents of
capitalism, TNCs are believed to be a new worldwide method of exploitation that is
essentially "barbaric" and unacceptable (Waters, 2001). For example, a study conducted by
Doytch, Thelen, & Mendoza (2014) found the exploitation of child labor, with children forced
to work in fields for long hours, in a multinational tobacco company in Kazakhstan.
Therefore, for nationalist economic advocates, states must improve their ability to regulate
TNCs investing in their own countries (O'Brien and Williams, 2020).
However, for liberal supporters, there are The advantages offered by transnational
corporations with foreign direct investment. Epstein argues that this development can provide
more employment opportunities especially for developing countries, while also resulting in
wage increases because TNCs in developing countries have more productivity so they can pay
more (Epstein, 2003). In addition, TNCs with FDI can increase tax revenues through
increased economic activity in the host country and can help advance economic growth by
encouraging a more efficient division of labor (O'Brien & Williams, 2020, p. 137). Studies
conducted by Harrison in Mexico, Morocco and Venezuela show that TNCs help domestic
firms to break into export markets and they can improve workers' living standards as they pay
higher wages than domestic firms (Harrison, 1994).
Based on the explanation above, it can be seen that TNCs have a significant impact on
labor. One of the reasons TNCs with FDI are growing is that many developing countries are
implementing active policies to support industrialization and export to developed countries
(O'Brien and Williams, 2020). This is understandable because it will provide employment
opportunities in the country they are. Therefore, it is not surprising that many countries are
trying to attract TNCs to invest in their territories. With respect to the global division of labor,
TNCs will increase the demand for more skilled labor, as research conducted by Bruno, Crino
and Falzoni (2012) states that FDI increases the demand for more skilled labor in Poland.
Actors affected by the global political economy must make behavioral adjustments to
be able to face global competition which is currently increasing (O'Brien & Williams, 2020).
Coupled with technological advances in the form of machines, the value of labor has also
decreased because their portion of work can be replaced by machines (Tyner, 2019). The
higher demand for a more skilled workforce forces people to improve their abilities to
compete with others in the workplace. One of the reasons for this trend is to increase labor
productivity as it is a strong indicator of economic efficiency (Plasmans, 2003). In addition, it
is not surprising that TNCs promote division of labor to increase efficient production.
However, it seems that the labor market is shaped by TNC interests rather than national
interest.
International Trade, Transnational Production and Labor
One of the issues in relation to international trade and transnational production is not
respecting workers' rights. Many TNCs do not invest in their own countries because they want
to reduce their production costs. They tend to hire cheap labor and cut production costs with
forced labor in peripheral countries. As stated by Horvat (2020), the worst features of
exploitation are currently happening in all developing countries in the world.
In 2014, BBC News released a video inside the Apple assembly company. The video
shows that employees work under high pressure and for long, intensive periods of time. They
were forced to work standing up all day. In fact, the company installed electrical wires in t h e
machines so that employees could not lean back when tired. Employees work in a very
grueling environment. Although in 2010 there was a mass worker suicide at Foxconn, one of
the companies that manufactures Apple products, then Apple promised to improve facilitation
and working conditions, but the BBC video shows evidence to the contrary. For example,
everyone in China needs to carry an identity card. However, companies still take workers' IDs
directly when they enter the company (BBC News, 2014). Tyner (2019) also argues that
companies can collect profits not only from the products or services produced but also
through life insurance policies from workers who experience misfortune while performing
their duties.
However, not all TNCs tend to exploit labor for profit. A study analyzing foreign
direct investment and labor rights in 80 developing countries conducted by Busse,
Nunnenkamp, and Spatareanu showed different results. In terms of the correlation between
labor rights and TNCs, the study found that TNCs prefer to invest in countries that respect
labor rights (Busse, Nunnenkamp, & and Spatareanu, 2011). Moreover, labor violence in
potential host countries discourages TNCs from running their activities there, wherever it may
be (Busse, Nunnenkamp and Spatareanu, 2011). This condition shows that TNCs pay great
attention to labor rights, not only focus on their profits as well.
One solution to the above problem is to implement labor standards. Based on Heintz's
(2003) argument, the labor market should be for the larger society and should be governed by
rules, norms, and ethical standards that make allowance for the separate costs of
marketization. The International Labor Organization (ILO) is an organization that promotes
labor standards worldwide. The ILO holds conventions that cover basic human rights areas:
freedom of association and collective bargaining, elimination of forced labor, elimination of
child labor, and elimination of discrimination (Heintz, 2003; O'Brien and Willams, 2020).
However, the main problem in implementing labor standards is how to come up with labor
standards that can be applied worldwide. This is due to the disagreement among actors on the
purpose of labor standards. Furthermore, leaders in many liberal countries argue that
economic growth improves labor standards. Whereas, any interference in trade for labor
reasons will lower the gains from trade (O'Brien and Williams, 2020, p.195).
Conclusions
There are different perspectives on the global political economy. Economic
nationalists place the state as the main actor in the global political economy. This is related to
their concept of protectionism, protecting the economy from the global market. Meanwhile,
economic liberalists argue that states should collaborate with other actors in the global
economy. They believe that the global political economy involves multiple actors. Moreover,
the current global economy is more likely to adopt liberal values such as trade liberalization.
There are dynamics that shape the global political economy. They are international
trade and transnational production. Both dynamics have implications for the global division of
labor. International trade with the concept of 'comparative advantage' comparative advantage'
affects the specialization of labour. Whereas transnational production with TNCs has
implications in driving the division of labor around the world, especially in their host
countries. Both international trade and transnational production have benefits for the
participants. This is because TNCs can provide jobs and also improve the lives of workers.
However, there is skepticism about these dynamics. For example, they are believed to
play a role in wage inequality, especially between less skilled labor and more skilled labor.
Another example is the issue of worker exploitation, such as the Apple factory case and child
labor in tobacco factories. One solution that can be suggested is to enforce global labor
standards.
Results and Discussion of International Trade
According to Waters (2001) the primary and ongoing basis of economic
internationalization is trade. Trade itself is understood as the activity of two or more
individuals exchanging goods and services (O'Brien & Williams, 2020, p. 109). Such
activities would be called international trade if they are operated abroad. This international
trade can create relationships and interdependence between actors (Waters, 2001). As stated
by Ietto-Gillies (2003), that one evidence of state interconnectedness can be seen in
international trade activities in goods and services. Wallerstein and Marxist in Cohen (2017)
categorize countries into several levels, where there are dominant core countries, dependent
periphery countries and semi-fringe countries that are between the two categories. While core
countries enjoy a high level of technological development, selling sophisticated high-value
goods and services, the role of peripheral countries is simply to supply materials raw
materials, foodstuffs, and also cheap labor on the basis of highly unequal exchanges. Among
them, semi-periphery countries benefit from exploiting periphery countries even as they
themselves are exploited by core countries. This shows that international trade affects the
shape of the global political economy. One reason is that international trade has direct and
indirect effects on people and communities, for example, a family's consumption patterns are
affected by trade in goods (O'Brien & Williams, 2020).
One of the ways in which international trade affects the global economy is through a
free trade regime. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996). The theory of comparative advantage advises countries to
specialize in their most efficient products and services (O'Brien & Williams, 2020). The
ideology of comparative advantage serves to obscure uneven economic development progress
and unequal exchange between countries and regions (McBride & Shields, 1993). Therefore,
proponents of free trade believe that every country should engage in trade international and
reduce barriers.
Furthermore, according to liberal political economy, everyone can benefit from trade
as it can improve efficiency and increase productivity (O'Brien & Williams, 2020). For
example, Langenfeld and Nieberding (2005) estimate that trade growth has provided total
benefits to American consumers of about $2.3 trillion over the trade has provided total benefits
to American consumers of about $2.3 trillion during 1992-2002, or between $20,000 and
$22,000 per household in 2002. In contrast, nationalists believe that free trade is detrimental to
the national economy because it will weaken the economy unbalanced development and can
damage the environment (O'Brien & Williams, 2020). As in the case of Fiji, they are facing a
rapid and radical restructuring of the sugar or banana industry and this is potentially
disastrous for their economy as it is a fundamental commodity (Connel & Soutar, 2007).
Furthermore, in the international trading system, there are significant developments
that encourage trade liberalization. The emergence of the WTO (World Trade Organization),
the successor to the GATT (General Agreement on Tariffs and Trade), is believed to play an
important role in trade liberalization international. The WTO (and GATT before it) has
successfully liberalized trade and managed international trade through multilateral agreements
(Sampson, 2001). Jackson (1998) stated that the establishment of the WTO was the most
significant moment in the history of the world economy, even becoming a fundamental
institution in the international economy, especially with its dispute settlement procedures. The
WTO has changed the management of world trade in the following ways:
Change trade liberalization from being based on tariff adjustments to discussing
domestic policies, institutional practices and regulations.
Broaden the scope of trade and change the focus of negotiations from product
bargaining to policy.
Propose movement towards accession policies, for example, in the areas of subsidies
and trade-related investment measures and services (O'Brien & Williams, 2020).
Based on the above, it can be seen that the WTO has successfully played its role in
international trade, but there is the issue of many developing countries' interests not being
accommodated by the WTO (Sampson, 2001). In a d d i t i o n , countries developing
countries recognize the limitations of political influence in the international trade agreement
process (O'Brien & Williams, 2020). Another problem faced by developing countries is that
they lack the capacity to enforce WTO decisions as well as the high indirect costs of initiating
disputes with the WTO (Horlick, 2006, p. 220). For example, trade in agriculture, which is a
key interest of many developing countries, is particularly liberalized (Walter & Sen, 2009).
Apart from the role of the WTO, the influence of international trade on the global
political economy can be understood through its implications for the global division of labor
(Waters, 2001). The division of labor refers to the roles that people employ in the production
process (O'Brien & Williams, 2020). Waters (2001) states there are two types of division of
labour: social division of labour refers to occupational specialization, and technical division of
labour refers to task specialization. This condition is closely related to the concept of
comparative advantage by liberals who attach importance to the specialization of countries'
commodities to gain an advantage in the production process. In international trade. This means
that by engaging in trade, countries also shape their division of labor. Increase While trade
and mobility are expected to increase the elasticity of demand for human capital, they also
automatically reduce the bargaining power of labor (Perraton, 2003, p. 56). Moreover, in the
reduction of transaction costs due to technological advances, international agreements, non-
tariff barriers results in enormous specialization possibilities (Pomfret, 2014). A country can
choose the specific commodities or services offered in international trade which will also
affect the demand for labor from that country.
Another effect of international trade on labor can be seen in the inequality between
more skilled and less skilled labor. Trade liberalization leads to wage inequality due to
increased trade (Goldberg & Pavnick, 2004). It seems that recent international trade increases
the demand for more skilled workers to support the concept of specialization. Slaughter
(1998) believes that the demand for labor from the less skilled to the more skilled is a key
factor of wage inequality and it is actually happening in some countries such as the United
States and the United Kingdom. He added the argument that many countries with Such
inequality creates problems, such as higher unemployment rates and many job opportunities
avoiding less-skilled workers.
Transnational Production
There is general agreement that the growth of transnational production has shaped the
evolution of the global economy (O'Brien & Williams, 2020, p. 132). One of the main reasons
is that the global production system is a complex process. O'Brien and Williams (2013) argue
that this process involves multiple workers and workplaces with their integration with local,
national, regional and global systems. Because transnational production involves multi-level
actors. It becomes more complicated as it has to integrate different social, political and
economic backgrounds in the global economy. The main reason for the emergence of
transnational production is the innovation of communication and information technology
along with the advancement of transportation (Ietto-Gillies, 2003). This development
increases the possibility to separate production processes around the world.
A significant change affecting production processes across countries is the formation
of transnational companies (TNCs). As stated earlier, in the era of globalization, geographical
issues are no longer a big problem, therefore, TNCs can carry out production processes
separately in different parts of the world. Another reason TNCs invest abroad is because
production costs in developing countries are lower than in developed countries (O'Brien &
Williams, 2020). As stated by Ietto-Gillies (2003), there is a significant development of the
organization of production across countries due to the activities of transnational corporations.
In addition, it is argued that TNCs constitute a major part of the global production structure
and about 50 percent of world trade (O'Brien and Williams, 2020, p. 132). This fact shows the
impact of TNCs on the global production process. TNCs seem to be a key player in global
production.
TNCs play their role in the global economy through foreign direct investment (FDI).
Changes in the global production system are linked to increasing levels of FDI (O'Brien &
Williams, 2020). In addition, Perraton says that FDI by transnational corporations has grown
faster than trade (Perraton, 2003, p. 47). The success of TNCs to invest in many countries
around the world may be due to the recognition that TNCs are a good source of investment,
there is a transfer of technology, and there is an increase in the workforce (Waters, 2001, p.
46).
Indeed, there is skepticism towards transnational corporations and FDI. The concept of
transnational phenomena with interdependence between actors raises concerns of reduced
state sovereignty (Biersteker & Weber, 1996). This is also supported by the expansion of
capitalist companies that exploit labor, directly proportional to the need for workers to be able
to survive or survive to finance their own lives (Tyner, 2019). Moreover, for opponents of
capitalism, TNCs are believed to be a new worldwide method of exploitation that is
essentially "barbaric" and unacceptable (Waters, 2001). For example, a study conducted by
Doytch, Thelen, & Mendoza (2014) found the exploitation of child labor, with children forced
to work in fields for long hours, in a multinational tobacco company in Kazakhstan.
Therefore, for nationalist economic advocates, states must improve their ability to regulate
TNCs investing in their own countries (O'Brien and Williams, 2020).
However, for liberal supporters, there are The advantages offered by transnational
corporations with foreign direct investment. Epstein argues that this development can provide
more employment opportunities especially for developing countries, while also resulting in
wage increases because TNCs in developing countries have more productivity so they can pay
more (Epstein, 2003). In addition, TNCs with FDI can increase tax revenues through
increased economic activity in the host country and can help advance economic growth by
encouraging a more efficient division of labor (O'Brien & Williams, 2020, p. 137). Studies
conducted by Harrison in Mexico, Morocco and Venezuela show that TNCs help domestic
firms to break into export markets and they can improve workers' living standards as they pay
higher wages than domestic firms (Harrison, 1994).
Based on the explanation above, it can be seen that TNCs have a significant impact on
labor. One of the reasons TNCs with FDI are growing is that many developing countries are
implementing active policies to support industrialization and export to developed countries
(O'Brien and Williams, 2020). This is understandable because it will provide employment
opportunities in the country they are. Therefore, it is not surprising that many countries are
trying to attract TNCs to invest in their territories. With respect to the global division of labor,
TNCs will increase the demand for more skilled labor, as research conducted by Bruno, Crino
and Falzoni (2012) states that FDI increases the demand for more skilled labor in Poland.
Actors affected by the global political economy must make behavioral adjustments to
be able to face global competition which is currently increasing (O'Brien & Williams, 2020).
Coupled with technological advances in the form of machines, the value of labor has also
decreased because their portion of work can be replaced by machines (Tyner, 2019). The
higher demand for a more skilled workforce forces people to improve their abilities to
compete with others in the workplace. One of the reasons for this trend is to increase labor
productivity as it is a strong indicator of economic efficiency (Plasmans, 2003). In addition, it
is not surprising that TNCs promote division of labor to increase efficient production.
However, it seems that the labor market is shaped by TNC interests rather than national
interest.
International Trade, Transnational Production and Labor
One of the issues in relation to international trade and transnational production is not
respecting workers' rights. Many TNCs do not invest in their own countries because they want
to reduce their production costs. They tend to hire cheap labor and cut production costs with
forced labor in peripheral countries. As stated by Horvat (2020), the worst features of
exploitation are currently happening in all developing countries in the world.
In 2014, BBC News released a video inside the Apple assembly company. The video
shows that employees work under high pressure and for long, intensive periods of time. They
were forced to work standing up all day. In fact, the company installed electrical wires in t h e
machines so that employees could not lean back when tired. Employees work in a very
grueling environment. Although in 2010 there was a mass worker suicide at Foxconn, one of
the companies that manufactures Apple products, then Apple promised to improve facilitation
and working conditions, but the BBC video shows evidence to the contrary. For example,
everyone in China needs to carry an identity card. However, companies still take workers' IDs
directly when they enter the company (BBC News, 2014). Tyner (2019) also argues that
companies can collect profits not only from the products or services produced but also
through life insurance policies from workers who experience misfortune while performing
their duties.
However, not all TNCs tend to exploit labor for profit. A study analyzing foreign
direct investment and labor rights in 80 developing countries conducted by Busse,
Nunnenkamp, and Spatareanu showed different results. In terms of the correlation between
labor rights and TNCs, the study found that TNCs prefer to invest in countries that respect
labor rights (Busse, Nunnenkamp, & and Spatareanu, 2011). Moreover, labor violence in
potential host countries discourages TNCs from running their activities there, wherever it may
be (Busse, Nunnenkamp and Spatareanu, 2011). This condition shows that TNCs pay great
attention to labor rights, not only focus on their profits as well.
One solution to the above problem is to implement labor standards. Based on Heintz's
(2003) argument, the labor market should be for the larger society and should be governed by
rules, norms, and ethical standards that make allowance for the separate costs of
marketization. The International Labor Organization (ILO) is an organization that promotes
labor standards worldwide. The ILO holds conventions that cover basic human rights areas:
freedom of association and collective bargaining, elimination of forced labor, elimination of
child labor, and elimination of discrimination (Heintz, 2003; O'Brien and Willams, 2020).
However, the main problem in implementing labor standards is how to come up with labor
standards that can be applied worldwide. This is due to the disagreement among actors on the
purpose of labor standards. Furthermore, leaders in many liberal countries argue that
economic growth improves labor standards. Whereas, any interference in trade for labor
reasons will lower the gains from trade (O'Brien and Williams, 2020, p.195).
Conclusions
There are different perspectives on the global political economy. Economic
nationalists place the state as the main actor in the global political economy. This is related to
their concept of protectionism, protecting the economy from the global market. Meanwhile,
economic liberalists argue that states should collaborate with other actors in the global
economy. They believe that the global political economy involves multiple actors. Moreover,
the current global economy is more likely to adopt liberal values such as trade liberalization.
There are dynamics that shape the global political economy. They are international
trade and transnational production. Both dynamics have implications for the global division of
labor. International trade with the concept of 'comparative advantage' comparative advantage'
affects the specialization of labour. Whereas transnational production with TNCs has
implications in driving the division of labor around the world, especially in their host
countries. Both international trade and transnational production have benefits for the
participants. This is because TNCs can provide jobs and also improve the lives of workers.
However, there is skepticism about these dynamics. For example, they are believed to
play a role in wage inequality, especially between less skilled labor and more skilled labor.
Another example is the issue of worker exploitation, such as the Apple factory case and child
labor in tobacco factories. One solution that can be suggested is to enforce global labor
standards.
Results and Discussion of International Trade
According to Waters (2001) the primary and ongoing basis of economic
internationalization is trade. Trade itself is understood as the activity of two or more
individuals exchanging goods and services (O'Brien & Williams, 2020, p. 109). Such
activities would be called international trade if they are operated abroad. This international
trade can create relationships and interdependence between actors (Waters, 2001). As stated
by Ietto-Gillies (2003), that one evidence of state interconnectedness can be seen in
international trade activities in goods and services. Wallerstein and Marxist in Cohen (2017)
categorize countries into several levels, where there are dominant core countries, dependent
periphery countries and semi-fringe countries that are between the two categories. While core
countries enjoy a high level of technological development, selling sophisticated high-value
goods and services, the role of peripheral countries is simply to supply materials raw
materials, foodstuffs, and also cheap labor on the basis of highly unequal exchanges. Among
them, semi-periphery countries benefit from exploiting periphery countries even as they
themselves are exploited by core countries. This shows that international trade affects the
shape of the global political economy. One reason is that international trade has direct and
indirect effects on people and communities, for example, a family's consumption patterns are
affected by trade in goods (O'Brien & Williams, 2020).
One of the ways in which international trade affects the global economy is through a
free trade regime. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996). The theory of comparative advantage advises countries to
specialize in their most efficient products and services (O'Brien & Williams, 2020). The
ideology of comparative advantage serves to obscure uneven economic development progress
and unequal exchange between countries and regions (McBride & Shields, 1993). Therefore,
proponents of free trade believe that every country should engage in trade international and
reduce barriers.
Furthermore, according to liberal political economy, everyone can benefit from trade
as it can improve efficiency and increase productivity (O'Brien & Williams, 2020). For
example, Langenfeld and Nieberding (2005) estimate that trade growth has provided total
benefits to American consumers of about $2.3 trillion over the trade has provided total benefits
to American consumers of about $2.3 trillion during 1992-2002, or between $20,000 and
$22,000 per household in 2002. In contrast, nationalists believe that free trade is detrimental to
the national economy because it will weaken the economy unbalanced development and can
damage the environment (O'Brien & Williams, 2020). As in the case of Fiji, they are facing a
rapid and radical restructuring of the sugar or banana industry and this is potentially
disastrous for their economy as it is a fundamental commodity (Connel & Soutar, 2007).
Furthermore, in the international trading system, there are significant developments
that encourage trade liberalization. The emergence of the WTO (World Trade Organization),
the successor to the GATT (General Agreement on Tariffs and Trade), is believed to play an
important role in trade liberalization international. The WTO (and GATT before it) has
successfully liberalized trade and managed international trade through multilateral agreements
(Sampson, 2001). Jackson (1998) stated that the establishment of the WTO was the most
significant moment in the history of the world economy, even becoming a fundamental
institution in the international economy, especially with its dispute settlement procedures. The
WTO has changed the management of world trade in the following ways:
Change trade liberalization from being based on tariff adjustments to discussing
domestic policies, institutional practices and regulations.
Broaden the scope of trade and change the focus of negotiations from product
bargaining to policy.
Propose movement towards accession policies, for example, in the areas of subsidies
and trade-related investment measures and services (O'Brien & Williams, 2020).
Based on the above, it can be seen that the WTO has successfully played its role in
international trade, but there is the issue of many developing countries' interests not being
accommodated by the WTO (Sampson, 2001). In a d d i t i o n , countries developing
countries recognize the limitations of political influence in the international trade agreement
process (O'Brien & Williams, 2020). Another problem faced by developing countries is that
they lack the capacity to enforce WTO decisions as well as the high indirect costs of initiating
disputes with the WTO (Horlick, 2006, p. 220). For example, trade in agriculture, which is a
key interest of many developing countries, is particularly liberalized (Walter & Sen, 2009).
Apart from the role of the WTO, the influence of international trade on the global
political economy can be understood through its implications for the global division of labor
(Waters, 2001). The division of labor refers to the roles that people employ in the production
process (O'Brien & Williams, 2020). Waters (2001) states there are two types of division of
labour: social division of labour refers to occupational specialization, and technical division of
labour refers to task specialization. This condition is closely related to the concept of
comparative advantage by liberals who attach importance to the specialization of countries'
commodities to gain an advantage in the production process. In international trade. This means
that by engaging in trade, countries also shape their division of labor. Increase While trade
and mobility are expected to increase the elasticity of demand for human capital, they also
automatically reduce the bargaining power of labor (Perraton, 2003, p. 56). Moreover, in the
reduction of transaction costs due to technological advances, international agreements, non-
tariff barriers results in enormous specialization possibilities (Pomfret, 2014). A country can
choose the specific commodities or services offered in international trade which will also
affect the demand for labor from that country.
Another effect of international trade on labor can be seen in the inequality between
more skilled and less skilled labor. Trade liberalization leads to wage inequality due to
increased trade (Goldberg & Pavnick, 2004). It seems that recent international trade increases
the demand for more skilled workers to support the concept of specialization. Slaughter
(1998) believes that the demand for labor from the less skilled to the more skilled is a key
factor of wage inequality and it is actually happening in some countries such as the United
States and the United Kingdom. He added the argument that many countries with Such
inequality creates problems, such as higher unemployment rates and many job opportunities
avoiding less-skilled workers.
Transnational Production
There is general agreement that the growth of transnational production has shaped the
evolution of the global economy (O'Brien & Williams, 2020, p. 132). One of the main reasons
is that the global production system is a complex process. O'Brien and Williams (2013) argue
that this process involves multiple workers and workplaces with their integration with local,
national, regional and global systems. Because transnational production involves multi-level
actors. It becomes more complicated as it has to integrate different social, political and
economic backgrounds in the global economy. The main reason for the emergence of
transnational production is the innovation of communication and information technology
along with the advancement of transportation (Ietto-Gillies, 2003). This development
increases the possibility to separate production processes around the world.
A significant change affecting production processes across countries is the formation
of transnational companies (TNCs). As stated earlier, in the era of globalization, geographical
issues are no longer a big problem, therefore, TNCs can carry out production processes
separately in different parts of the world. Another reason TNCs invest abroad is because
production costs in developing countries are lower than in developed countries (O'Brien &
Williams, 2020). As stated by Ietto-Gillies (2003), there is a significant development of the
organization of production across countries due to the activities of transnational corporations.
In addition, it is argued that TNCs constitute a major part of the global production structure
and about 50 percent of world trade (O'Brien and Williams, 2020, p. 132). This fact shows the
impact of TNCs on the global production process. TNCs seem to be a key player in global
production.
TNCs play their role in the global economy through foreign direct investment (FDI).
Changes in the global production system are linked to increasing levels of FDI (O'Brien &
Williams, 2020). In addition, Perraton says that FDI by transnational corporations has grown
faster than trade (Perraton, 2003, p. 47). The success of TNCs to invest in many countries
around the world may be due to the recognition that TNCs are a good source of investment,
there is a transfer of technology, and there is an increase in the workforce (Waters, 2001, p.
46).
Indeed, there is skepticism towards transnational corporations and FDI. The concept of
transnational phenomena with interdependence between actors raises concerns of reduced
state sovereignty (Biersteker & Weber, 1996). This is also supported by the expansion of
capitalist companies that exploit labor, directly proportional to the need for workers to be able
to survive or survive to finance their own lives (Tyner, 2019). Moreover, for opponents of
capitalism, TNCs are believed to be a new worldwide method of exploitation that is
essentially "barbaric" and unacceptable (Waters, 2001). For example, a study conducted by
Doytch, Thelen, & Mendoza (2014) found the exploitation of child labor, with children forced
to work in fields for long hours, in a multinational tobacco company in Kazakhstan.
Therefore, for nationalist economic advocates, states must improve their ability to regulate
TNCs investing in their own countries (O'Brien and Williams, 2020).
However, for liberal supporters, there are The advantages offered by transnational
corporations with foreign direct investment. Epstein argues that this development can provide
more employment opportunities especially for developing countries, while also resulting in
wage increases because TNCs in developing countries have more productivity so they can pay
more (Epstein, 2003). In addition, TNCs with FDI can increase tax revenues through
increased economic activity in the host country and can help advance economic growth by
encouraging a more efficient division of labor (O'Brien & Williams, 2020, p. 137). Studies
conducted by Harrison in Mexico, Morocco and Venezuela show that TNCs help domestic
firms to break into export markets and they can improve workers' living standards as they pay
higher wages than domestic firms (Harrison, 1994).
Based on the explanation above, it can be seen that TNCs have a significant impact on
labor. One of the reasons TNCs with FDI are growing is that many developing countries are
implementing active policies to support industrialization and export to developed countries
(O'Brien and Williams, 2020). This is understandable because it will provide employment
opportunities in the country they are. Therefore, it is not surprising that many countries are
trying to attract TNCs to invest in their territories. With respect to the global division of labor,
TNCs will increase the demand for more skilled labor, as research conducted by Bruno, Crino
and Falzoni (2012) states that FDI increases the demand for more skilled labor in Poland.
Actors affected by the global political economy must make behavioral adjustments to
be able to face global competition which is currently increasing (O'Brien & Williams, 2020).
Coupled with technological advances in the form of machines, the value of labor has also
decreased because their portion of work can be replaced by machines (Tyner, 2019). The
higher demand for a more skilled workforce forces people to improve their abilities to
compete with others in the workplace. One of the reasons for this trend is to increase labor
productivity as it is a strong indicator of economic efficiency (Plasmans, 2003). In addition, it
is not surprising that TNCs promote division of labor to increase efficient production.
However, it seems that the labor market is shaped by TNC interests rather than national
interest.
International Trade, Transnational Production and Labor
One of the issues in relation to international trade and transnational production is not
respecting workers' rights. Many TNCs do not invest in their own countries because they want
to reduce their production costs. They tend to hire cheap labor and cut production costs with
forced labor in peripheral countries. As stated by Horvat (2020), the worst features of
exploitation are currently happening in all developing countries in the world.
In 2014, BBC News released a video inside the Apple assembly company. The video
shows that employees work under high pressure and for long, intensive periods of time. They
were forced to work standing up all day. In fact, the company installed electrical wires in t h e
machines so that employees could not lean back when tired. Employees work in a very
grueling environment. Although in 2010 there was a mass worker suicide at Foxconn, one of
the companies that manufactures Apple products, then Apple promised to improve facilitation
and working conditions, but the BBC video shows evidence to the contrary. For example,
everyone in China needs to carry an identity card. However, companies still take workers' IDs
directly when they enter the company (BBC News, 2014). Tyner (2019) also argues that
companies can collect profits not only from the products or services produced but also
through life insurance policies from workers who experience misfortune while performing
their duties.
However, not all TNCs tend to exploit labor for profit. A study analyzing foreign
direct investment and labor rights in 80 developing countries conducted by Busse,
Nunnenkamp, and Spatareanu showed different results. In terms of the correlation between
labor rights and TNCs, the study found that TNCs prefer to invest in countries that respect
labor rights (Busse, Nunnenkamp, & and Spatareanu, 2011). Moreover, labor violence in
potential host countries discourages TNCs from running their activities there, wherever it may
be (Busse, Nunnenkamp and Spatareanu, 2011). This condition shows that TNCs pay great
attention to labor rights, not only focus on their profits as well.
One solution to the above problem is to implement labor standards. Based on Heintz's
(2003) argument, the labor market should be for the larger society and should be governed by
rules, norms, and ethical standards that make allowance for the separate costs of
marketization. The International Labor Organization (ILO) is an organization that promotes
labor standards worldwide. The ILO holds conventions that cover basic human rights areas:
freedom of association and collective bargaining, elimination of forced labor, elimination of
child labor, and elimination of discrimination (Heintz, 2003; O'Brien and Willams, 2020).
However, the main problem in implementing labor standards is how to come up with labor
standards that can be applied worldwide. This is due to the disagreement among actors on the
purpose of labor standards. Furthermore, leaders in many liberal countries argue that
economic growth improves labor standards. Whereas, any interference in trade for labor
reasons will lower the gains from trade (O'Brien and Williams, 2020, p.195).
Conclusions
There are different perspectives on the global political economy. Economic
nationalists place the state as the main actor in the global political economy. This is related to
their concept of protectionism, protecting the economy from the global market. Meanwhile,
economic liberalists argue that states should collaborate with other actors in the global
economy. They believe that the global political economy involves multiple actors. Moreover,
the current global economy is more likely to adopt liberal values such as trade liberalization.
There are dynamics that shape the global political economy. They are international
trade and transnational production. Both dynamics have implications for the global division of
labor. International trade with the concept of 'comparative advantage' comparative advantage'
affects the specialization of labour. Whereas transnational production with TNCs has
implications in driving the division of labor around the world, especially in their host
countries. Both international trade and transnational production have benefits for the
participants. This is because TNCs can provide jobs and also improve the lives of workers.
However, there is skepticism about these dynamics. For example, they are believed to
play a role in wage inequality, especially between less skilled labor and more skilled labor.
Another example is the issue of worker exploitation, such as the Apple factory case and child
labor in tobacco factories. One solution that can be suggested is to enforce global labor
standards.
Results and Discussion of International Trade
According to Waters (2001) the primary and ongoing basis of economic
internationalization is trade. Trade itself is understood as the activity of two or more
individuals exchanging goods and services (O'Brien & Williams, 2020, p. 109). Such
activities would be called international trade if they are operated abroad. This international
trade can create relationships and interdependence between actors (Waters, 2001). As stated
by Ietto-Gillies (2003), that one evidence of state interconnectedness can be seen in
international trade activities in goods and services. Wallerstein and Marxist in Cohen (2017)
categorize countries into several levels, where there are dominant core countries, dependent
periphery countries and semi-fringe countries that are between the two categories. While core
countries enjoy a high level of technological development, selling sophisticated high-value
goods and services, the role of peripheral countries is simply to supply materials raw
materials, foodstuffs, and also cheap labor on the basis of highly unequal exchanges. Among
them, semi-periphery countries benefit from exploiting periphery countries even as they
themselves are exploited by core countries. This shows that international trade affects the
shape of the global political economy. One reason is that international trade has direct and
indirect effects on people and communities, for example, a family's consumption patterns are
affected by trade in goods (O'Brien & Williams, 2020).
One of the ways in which international trade affects the global economy is through a
free trade regime. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996). The theory of comparative advantage advises countries to
specialize in their most efficient products and services (O'Brien & Williams, 2020). The
ideology of comparative advantage serves to obscure uneven economic development progress
and unequal exchange between countries and regions (McBride & Shields, 1993). Therefore,
proponents of free trade believe that every country should engage in trade international and
reduce barriers.
Furthermore, according to liberal political economy, everyone can benefit from trade
as it can improve efficiency and increase productivity (O'Brien & Williams, 2020). For
example, Langenfeld and Nieberding (2005) estimate that trade growth has provided total
benefits to American consumers of about $2.3 trillion over the trade has provided total benefits
to American consumers of about $2.3 trillion during 1992-2002, or between $20,000 and
$22,000 per household in 2002. In contrast, nationalists believe that free trade is detrimental to
the national economy because it will weaken the economy unbalanced development and can
damage the environment (O'Brien & Williams, 2020). As in the case of Fiji, they are facing a
rapid and radical restructuring of the sugar or banana industry and this is potentially
disastrous for their economy as it is a fundamental commodity (Connel & Soutar, 2007).
Furthermore, in the international trading system, there are significant developments
that encourage trade liberalization. The emergence of the WTO (World Trade Organization),
the successor to the GATT (General Agreement on Tariffs and Trade), is believed to play an
important role in trade liberalization international. The WTO (and GATT before it) has
successfully liberalized trade and managed international trade through multilateral agreements
(Sampson, 2001). Jackson (1998) stated that the establishment of the WTO was the most
significant moment in the history of the world economy, even becoming a fundamental
institution in the international economy, especially with its dispute settlement procedures. The
WTO has changed the management of world trade in the following ways:
Change trade liberalization from being based on tariff adjustments to discussing
domestic policies, institutional practices and regulations.
Broaden the scope of trade and change the focus of negotiations from product
bargaining to policy.
Propose movement towards accession policies, for example, in the areas of subsidies
and trade-related investment measures and services (O'Brien & Williams, 2020).
Based on the above, it can be seen that the WTO has successfully played its role in
international trade, but there is the issue of many developing countries' interests not being
accommodated by the WTO (Sampson, 2001). In a d d i t i o n , countries developing
countries recognize the limitations of political influence in the international trade agreement
process (O'Brien & Williams, 2020). Another problem faced by developing countries is that
they lack the capacity to enforce WTO decisions as well as the high indirect costs of initiating
disputes with the WTO (Horlick, 2006, p. 220). For example, trade in agriculture, which is a
key interest of many developing countries, is particularly liberalized (Walter & Sen, 2009).
Apart from the role of the WTO, the influence of international trade on the global
political economy can be understood through its implications for the global division of labor
(Waters, 2001). The division of labor refers to the roles that people employ in the production
process (O'Brien & Williams, 2020). Waters (2001) states there are two types of division of
labour: social division of labour refers to occupational specialization, and technical division of
labour refers to task specialization. This condition is closely related to the concept of
comparative advantage by liberals who attach importance to the specialization of countries'
commodities to gain an advantage in the production process. In international trade. This means
that by engaging in trade, countries also shape their division of labor. Increase While trade
and mobility are expected to increase the elasticity of demand for human capital, they also
automatically reduce the bargaining power of labor (Perraton, 2003, p. 56). Moreover, in the
reduction of transaction costs due to technological advances, international agreements, non-
tariff barriers results in enormous specialization possibilities (Pomfret, 2014). A country can
choose the specific commodities or services offered in international trade which will also
affect the demand for labor from that country.
Another effect of international trade on labor can be seen in the inequality between
more skilled and less skilled labor. Trade liberalization leads to wage inequality due to
increased trade (Goldberg & Pavnick, 2004). It seems that recent international trade increases
the demand for more skilled workers to support the concept of specialization. Slaughter
(1998) believes that the demand for labor from the less skilled to the more skilled is a key
factor of wage inequality and it is actually happening in some countries such as the United
States and the United Kingdom. He added the argument that many countries with Such
inequality creates problems, such as higher unemployment rates and many job opportunities
avoiding less-skilled workers.
Transnational Production
There is general agreement that the growth of transnational production has shaped the
evolution of the global economy (O'Brien & Williams, 2020, p. 132). One of the main reasons
is that the global production system is a complex process. O'Brien and Williams (2013) argue
that this process involves multiple workers and workplaces with their integration with local,
national, regional and global systems. Because transnational production involves multi-level
actors. It becomes more complicated as it has to integrate different social, political and
economic backgrounds in the global economy. The main reason for the emergence of
transnational production is the innovation of communication and information technology
along with the advancement of transportation (Ietto-Gillies, 2003). This development
increases the possibility to separate production processes around the world.
A significant change affecting production processes across countries is the formation
of transnational companies (TNCs). As stated earlier, in the era of globalization, geographical
issues are no longer a big problem, therefore, TNCs can carry out production processes
separately in different parts of the world. Another reason TNCs invest abroad is because
production costs in developing countries are lower than in developed countries (O'Brien &
Williams, 2020). As stated by Ietto-Gillies (2003), there is a significant development of the
organization of production across countries due to the activities of transnational corporations.
In addition, it is argued that TNCs constitute a major part of the global production structure
and about 50 percent of world trade (O'Brien and Williams, 2020, p. 132). This fact shows the
impact of TNCs on the global production process. TNCs seem to be a key player in global
production.
TNCs play their role in the global economy through foreign direct investment (FDI).
Changes in the global production system are linked to increasing levels of FDI (O'Brien &
Williams, 2020). In addition, Perraton says that FDI by transnational corporations has grown
faster than trade (Perraton, 2003, p. 47). The success of TNCs to invest in many countries
around the world may be due to the recognition that TNCs are a good source of investment,
there is a transfer of technology, and there is an increase in the workforce (Waters, 2001, p.
46).
Indeed, there is skepticism towards transnational corporations and FDI. The concept of
transnational phenomena with interdependence between actors raises concerns of reduced
state sovereignty (Biersteker & Weber, 1996). This is also supported by the expansion of
capitalist companies that exploit labor, directly proportional to the need for workers to be able
to survive or survive to finance their own lives (Tyner, 2019). Moreover, for opponents of
capitalism, TNCs are believed to be a new worldwide method of exploitation that is
essentially "barbaric" and unacceptable (Waters, 2001). For example, a study conducted by
Doytch, Thelen, & Mendoza (2014) found the exploitation of child labor, with children forced
to work in fields for long hours, in a multinational tobacco company in Kazakhstan.
Therefore, for nationalist economic advocates, states must improve their ability to regulate
TNCs investing in their own countries (O'Brien and Williams, 2020).
However, for liberal supporters, there are The advantages offered by transnational
corporations with foreign direct investment. Epstein argues that this development can provide
more employment opportunities especially for developing countries, while also resulting in
wage increases because TNCs in developing countries have more productivity so they can pay
more (Epstein, 2003). In addition, TNCs with FDI can increase tax revenues through
increased economic activity in the host country and can help advance economic growth by
encouraging a more efficient division of labor (O'Brien & Williams, 2020, p. 137). Studies
conducted by Harrison in Mexico, Morocco and Venezuela show that TNCs help domestic
firms to break into export markets and they can improve workers' living standards as they pay
higher wages than domestic firms (Harrison, 1994).
Based on the explanation above, it can be seen that TNCs have a significant impact on
labor. One of the reasons TNCs with FDI are growing is that many developing countries are
implementing active policies to support industrialization and export to developed countries
(O'Brien and Williams, 2020). This is understandable because it will provide employment
opportunities in the country they are. Therefore, it is not surprising that many countries are
trying to attract TNCs to invest in their territories. With respect to the global division of labor,
TNCs will increase the demand for more skilled labor, as research conducted by Bruno, Crino
and Falzoni (2012) states that FDI increases the demand for more skilled labor in Poland.
Actors affected by the global political economy must make behavioral adjustments to
be able to face global competition which is currently increasing (O'Brien & Williams, 2020).
Coupled with technological advances in the form of machines, the value of labor has also
decreased because their portion of work can be replaced by machines (Tyner, 2019). The
higher demand for a more skilled workforce forces people to improve their abilities to
compete with others in the workplace. One of the reasons for this trend is to increase labor
productivity as it is a strong indicator of economic efficiency (Plasmans, 2003). In addition, it
is not surprising that TNCs promote division of labor to increase efficient production.
However, it seems that the labor market is shaped by TNC interests rather than national
interest.
International Trade, Transnational Production and Labor
One of the issues in relation to international trade and transnational production is not
respecting workers' rights. Many TNCs do not invest in their own countries because they want
to reduce their production costs. They tend to hire cheap labor and cut production costs with
forced labor in peripheral countries. As stated by Horvat (2020), the worst features of
exploitation are currently happening in all developing countries in the world.
In 2014, BBC News released a video inside the Apple assembly company. The video
shows that employees work under high pressure and for long, intensive periods of time. They
were forced to work standing up all day. In fact, the company installed electrical wires in t h e
machines so that employees could not lean back when tired. Employees work in a very
grueling environment. Although in 2010 there was a mass worker suicide at Foxconn, one of
the companies that manufactures Apple products, then Apple promised to improve facilitation
and working conditions, but the BBC video shows evidence to the contrary. For example,
everyone in China needs to carry an identity card. However, companies still take workers' IDs
directly when they enter the company (BBC News, 2014). Tyner (2019) also argues that
companies can collect profits not only from the products or services produced but also
through life insurance policies from workers who experience misfortune while performing
their duties.
However, not all TNCs tend to exploit labor for profit. A study analyzing foreign
direct investment and labor rights in 80 developing countries conducted by Busse,
Nunnenkamp, and Spatareanu showed different results. In terms of the correlation between
labor rights and TNCs, the study found that TNCs prefer to invest in countries that respect
labor rights (Busse, Nunnenkamp, & and Spatareanu, 2011). Moreover, labor violence in
potential host countries discourages TNCs from running their activities there, wherever it may
be (Busse, Nunnenkamp and Spatareanu, 2011). This condition shows that TNCs pay great
attention to labor rights, not only focus on their profits as well.
One solution to the above problem is to implement labor standards. Based on Heintz's
(2003) argument, the labor market should be for the larger society and should be governed by
rules, norms, and ethical standards that make allowance for the separate costs of
marketization. The International Labor Organization (ILO) is an organization that promotes
labor standards worldwide. The ILO holds conventions that cover basic human rights areas:
freedom of association and collective bargaining, elimination of forced labor, elimination of
child labor, and elimination of discrimination (Heintz, 2003; O'Brien and Willams, 2020).
However, the main problem in implementing labor standards is how to come up with labor
standards that can be applied worldwide. This is due to the disagreement among actors on the
purpose of labor standards. Furthermore, leaders in many liberal countries argue that
economic growth improves labor standards. Whereas, any interference in trade for labor
reasons will lower the gains from trade (O'Brien and Williams, 2020, p.195).
Conclusions
There are different perspectives on the global political economy. Economic
nationalists place the state as the main actor in the global political economy. This is related to
their concept of protectionism, protecting the economy from the global market. Meanwhile,
economic liberalists argue that states should collaborate with other actors in the global
economy. They believe that the global political economy involves multiple actors. Moreover,
the current global economy is more likely to adopt liberal values such as trade liberalization.
There are dynamics that shape the global political economy. They are international
trade and transnational production. Both dynamics have implications for the global division of
labor. International trade with the concept of 'comparative advantage' comparative advantage'
affects the specialization of labour. Whereas transnational production with TNCs has
implications in driving the division of labor around the world, especially in their host
countries. Both international trade and transnational production have benefits for the
participants. This is because TNCs can provide jobs and also improve the lives of workers.
However, there is skepticism about these dynamics. For example, they are believed to
play a role in wage inequality, especially between less skilled labor and more skilled labor.
Another example is the issue of worker exploitation, such as the Apple factory case and child
labor in tobacco factories. One solution that can be suggested is to enforce global labor
standards.
