Globalization and Externalities

Globalization has a generally positive influence on welfare, but like any sort of economic activity or exchange, it is not free from externalities. One example of such an externality is the fact that increasing the distances at which we trade goods may be bad for the environment, as Yoram Bauman explains:
The idea is this: opening the border opens up the economy to all sorts of great opportunities for exchange, and increased consumer welfare like, say, increased supplies of natural gas might. However, increasing the volumes of those goods produced and consumed create "social costs" that aren't fully captured in the costs of production (or the costs of transporting) those goods. The individual firms' marginal costs do not accurately reflect the full resource costs to society (and thus the PPF is not properly reflected in firms' output decisions. In the case of trade, this might mean that we end up trading in the absence of a policy to address the externality. For global warming, the solution is relatively simple: tax the externality, or alternatively, design a global trading market (cap and trade) for pollution emissions.
A trickier example, derived from immigration, is the increase in human trafficking.
Here, modelling the externality is difficult, and devising a sensible policy is harder still: it would be unethical to suggest that we should "tolerate" certain low levels of human trafficking and sex slavery and simply "tax the externality." Instead, the solution lies more in our comprehensive approach to prostitution. As Sam Lee and Petra Peterson point out in a research paper and interview with Freakonomics, a better policy towards prostitution would be what they call a "safe harbor" approach, which combines a legal (but regulated, and possibly taxed) prostitution market with stiff penalties for "Johns" who attempt to purchase these services outside of the legal market. This would divert demand towards legal exchange, reduce the rents from illegal trafficking, and allow law enforcement to focus on involuntary sex trade, rather than enforcing laws against voluntary trade.