Causing More Divide and Inequality Because of the Global Trade System
There are many large, worldwide apparatuses that have far reaching impact on the world, and one such system is the global trade system. The global trading system, governed by a complex web of international trade laws, has far-reaching implications for the distribution of wealth and economic development around the world. However, the system is often criticized for exacerbating inequality between developed and developing countries. This article takes a closer look at how trade laws contribute to global inequality and highlights the need for a fairer and more equitable economic environment.
Historical bases and imbalanced trade agreements
The dominant system of world trade dates back to the colonial era, when European countries colonized African and other countries and exploited their resources. Despite gaining independence, these countries are still struggling to escape the economic influence of their former colonizers. As a result, they are often forced to sign trade agreements favorable to Western countries.
Today, these agreements hold back the economies of developing countries, locking them into agreements that primarily benefit the West. These agreements typically force developing countries to remove tariffs and trade barriers, allowing Western products to dominate their markets and destroy local industries. Moreover, agreements often focus on commodity exports, perpetuating cycles of scarcity and underdevelopment.
The Subsidy Dilemma and the Implications of Dumping
Western trade policies such as subsidies can negatively affect developing countries. Developed countries provide financial support to domestic industry and allow production at artificially low prices. Subsidized products are exported to developing country markets and sold at prices that local industries cannot match. Known as dumping, this practice hurts local businesses and leads to economic decline and mass unemployment.
Western agricultural subsidies, for example, have devastating effects on farmers in developing countries. Western agricultural surpluses are often dumped into these markets, driving down prices and preventing local farmers from competing. This problem not only harms the agricultural sector, but also contributes to food insecurity and rural poverty.
Debts and risks in restructuring programs
Over time, many developing countries have accumulated significant debt due to unfavorable trade agreements and economic policies of developed countries. To pay this debt, international financial institutions such as the International Monetary Fund (IMF) and the World Bank introduced a restructuring program (SAP). These programs require developing countries to implement economic reforms, including trade liberalization and privatization of state-owned enterprises.
But these reforms often have disastrous consequences for developing countries. As trade barriers were removed and cheap Western products became available, local industries collapsed and countless jobs were lost. Moreover, privatization of essential services such as health care and education leads to reduced access and increased inequality.
Final Words
The world trade system dominated by the interests of developed countries perpetuates inequality between countries. Unfair trade practices, subsidies, dumping and debt are just some of the ways developing countries are exploited and punished. To address this issue, a fairer global trading system that prioritizes the needs of developing countries and promotes sustainable development is urgently needed.
Efforts should focus on renegotiating unfair trade agreements, eliminating harmful subsidies, and reforming international financial institutions to better meet the needs of developing countries. At the same time, these countries must be able to break the cycle of dependency and underdevelopment, diversify their economies and develop local industries. Only then can we expect a fair and just world economy.
Author: Pooyan Ghamari, Swiss Economist
