Globalisation is most important factor that affects world economy. According to Brittan (1998) globalisation is defined “as a whirlwind of relentless and disruptive change which leaves governments helpless and leaves a trail of economic, social cultural and environmental problems in its wake.”

Some of the issues will be dealt in this paper are the impact of globalisation on unemployment, the impact of globalisation on the international distribution of income, the impact of globalisation on world trade. Besides that, there are two models in this paper, which is Feenstra and Hanson’s model and Zhu and Trefler’s model.

The process of globalisation is a reality. Globalisation has created many opportunities for growth and increase the level of standard livings. It is depends on the countries who can follow the trend and take the opportunity in order to improve themselves.

2.0 The impact of globalisation on labour

2.1 The impact of globalisation on unemployment

Some opponents of globalisation argue that the developing countries will have higher level of unemployment because of the globalisation. But other economists are thinking that there will have a competition among the low wages countries, this will lead to unemployment in developing countries. It is because developed countries will create the working opportunities to the low wages developing countries.

Brittan (1998) says that it is overly simplistic view that globalisation has lead the high unemployment in the developing countries. He thinks that this is because the demand of unskilled labours are decline because of the advanced of technology. Therefore, the demands of skilled labours are increasing because the company need workers who can work and operate the machine and this will improve their productivity compare to using low skilled workers.

But Nader (1993) and Brecher en Costello (1994)have the different views with Brittan, they states that the workers has less bargaining power in the global company because of globalisation. This is true because of the fact that the border between countries is still real to workers. There exist limitations in the labour mobility of workers. According to Scholte (1997), there is an uncertainty on the job security and lower wages because of the cross border production. Therefore, globalisation is not necessarily bad to the workers.

2.2 The impact of globalisation on wages and labour standards.

The second labour related issued is regards to the impact of globalisation on wages and labour standards. In order to improve their competitiveness advantages, developing countries will lower their labour wages, taxes and regulations.

Brittan (1998) agrees that if developing countries became more interdependent, it is necessary to protect their workers’ right. Therefore, developing countries have to increase the labour wages, but this will increase the labour standards and this will reduce the levels of participation of developing countries in the world nation.

Litan en Herring (1995:5) indicated that there is a limit in the way that countries can compete in a competition in laxity. The companies who specialised in the customer’s financial services will still prefer to deal with the countries that the financial services are proper regulated.

From this review, it can be seen that developing countries need to find a way to increase their competitive advantages in order to compete in this changing world economy. Likewise, the Economic Intelligence Unit (2002) has indicated that developing countries cannot ignore the workers right to increase their international competitiveness. It is because developed countries still need to find the lower labour wages countries in order to lower their manufacturing cost. This is the opportunity for developing countries to be competitive in the world economy

3.0 The impact of globalisation on the international distribution of income

Mander en Goldsmith (1996) has indicated that the distribution of worldwide income is still unbalanced. But other economists has the different view with Mander, they argues that since 1960, there is an increase in the income between the countries. Todaro agrees with this view, he also indicated that between 1960 and 1982, developing countries only experienced GDP growth of 1.1% per annum.