Globalization Institute Report - Trade Justice or Free Trade?

On 2nd November campaigners will be outside Britain's Houses of Parliament calling for "trade justice not free trade". A recent Globalization Institute report argues the opposite -- that free trade, not "trade justice", is the solution to world poverty. The report, Trade Justice or Free Trade? points out that countries that have followed 'trade justice' have stayed poor, while those - like Hong Kong - which have adopted free trade have become rich.

The report counters the argument that poor countries need to protect infant industries, and shows that while such protection might sound good in principle, such policies never work in practice. It points out the failure of such policies in India, and how infant industry protection was merely a way for the rich to profit at the expense of ordinary Indians.

The report demonstrates that the Trade Justice Movement's support for managed trade, with price supports and quotas, is shown to cause poverty by reducing the world economy's ability to create wealth. The report concludes by arguing that "trade justice" is not just. According to the report, the only truly just system of trade is based not on fixed prices and quotas, but on free trade.

The Trade Justice Movement Calls for Change

According to the Trade Justice Movement's website:

The international trade system stands at a crossroads. In one direction lie politically difficult and complex choices concerning equity, sustainability and poverty eradication which could make the trade system work for people and the environment and also, in the long run, save it. The other direction offers clearer-cut, perhaps easier options to stick with the status-quo, ignore complex problems and pursue trade liberalisation as an end in itself. However, this could exacerbate current disaffection and bring the trade system to its knees.

For the world's poor, free trade - though challenging and disruptive to traditional ways of life - brings hope.

The international trade regime needs fundamental change if it is to succeed and benefit us all. The world needs international trade rules, but to date these have favoured the narrow commercial interests of the most powerful trading nations and the largest corporations, at the expense of the wider public interest and smaller economic enterprises. In order to rebalance the global trading system, international trade rules and institutions must take their place within the broad system of international agreements aimed at sustainable development, poverty eradication and the promotion of human rights, and recognise the importance of local and regional trade as an engine for sustainable development and poverty eradication.

There is an increasing gap between many of the stated objectives of the world trading regime and the global reality of growing inequalities and environmental degradation. The benefits of the international trade system have gone to those who already have the most, while many of the poorest have failed to benefit fully and some have even been made poorer. The environment has also suffered. Increasing consumption and transport related to increased volumes of international trade, particularly in the industrialised world, have contributed to increasing pressure on the world's natural resources and habitats. The growing importance of trade and competitiveness to national economic decision-making has also had a 'chilling' effect on the development of environmental and social policy in some countries.

The report calls for the freedom to choose the best policies for poor people in services such as water, health and education and policies that will protect vulnerable farm sectors and promote national industries.

The WTO trade agreements are seriously flawed because they largely prioritise liberalisation and deregulation in the private interest over national (and potentially international) regulation in the public interest. Ironically, in areas where certain 'liberalisation' policies could potentially have a range of social and environmental benefits (e.g. in policy areas such as export support, fisheries subsidies, market access for textiles and the flexible use of intellectual property rights), exceptions have been made in practice and the trade system has again been used to benefit the few, rather than the many.

The challenge facing the international community is to make the trade system reflect the concerns of civil society and work for poverty eradication and sustainable development. It is essential that governments adopt a new approach in the trade negotiations launched in Doha and that this marks the beginning of a new era in trade policy-making, which puts the needs of people and the environment at its heart.

The "Trade Justice or Free Trade?" Report also Calls for Change -- Towards Real Free Trade, Not Protectionism that Damages Poor and Rich Nations Alike

According to Alex Singleton, the report's author: "The Trade Justice Movement thinks the world economy would work better if it were centrally planned. We saw central planning in the Soviet Union and all it produced was poverty. The only trade that has ever lifted countries out of poverty is free trade." The change advocated by the report is that there be less "unfree, managed trade".

The report is also critical of the anti-China stance of supporters of 'trade justice', especially the organization Christian Aid. The report argues that the poor in China deserve the chance to compete in the textiles industry just as much as everyone else. It goes on to say that the short-term grief now faced by countries like Cambodia is caused by past attempts at 'trade justice'. But had free trade been allowed in the first place, the transitional pain would not have occurred. The report concludes by arguing that the only truly just system of trade is based not on fixed prices and quotas, but on free trade.

The challenge facing the international community is to make the trade system reflect the concerns of civil society and work for poverty eradication and sustainable development.

Where the Two Arguments Meet

The Trade Justice Movement argues that there are instances where free trade can help economically disadvantaged countries. However, wealthy nations maintain exceptions that favor their own protectionism while disallowing others to protect their own markets. In reaction to this, the Trade Justice Movement proposes additional civil society and government regulation of the trade regime.

On the other hand, the Globalization Institute report and its author argue that the Trade Justice Movement does not always correctly identify what free trade is. The report points out that their movement labels protectionism as a part of the free trade system, when in fact it is a part of the regulation of international trade and has nothing to do with actual free trade. The Trade Justice Movement argues that central planning and regulation would favor the disadvantaged, when many times, it allows for nepotism.

It seems like these two camps could meet in the middle and carry out a very effective lobbying campaign that advocates for real, protectionist-free, free trade as just trade. Where there is management of a system there is always room for inequity: the controlling interests tilt the policies in their favor. Seeing as the rich countries do control our international economic framework, it is in the interest of poor nations to advocate for free trade -- an economic policy that will force all countries to lower their trade barriers.




This article contains information from The Globalization Institute regarding the release of the report "Trade Justice or Free Trade?", commentary on the report from A World Connected, information from The Trade Justice Movement's website and analysis from Global Envision.

To read another Global Envision article about the merits of Free Trade, see Free Trade Versus Fair Trade.



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