Unfair trade between developed and undeveloped countries

I come from Burma, where market economy has not developed much yet. So the country is in pristine beauty. The country is poor but it has a charm with which nothing can compete because it still possesses wide area of forests, the water in the rivers is pure and it smells very much like nature. This situation cannot be described to one heart’s content; one has to see for oneself. When I came to Thailand, I was pleasantly surprised to see that the whole economy was fully open and people can go shopping for every product one can possibly want (not-need). The Bangkok city is vibrant and skyscrapers are everywhere. For one instant, it is very impressive. Looking into the deep scene will present another story.

Thailand has integrated itself into the world economy. In another world, it has been assimilated into the international trade system. Thailand imports a lot of products from different countries and exports varieties of products back. Trading is an important aspect of this developing country. When someone goes shopping, sometimes it is hard to distinguish which product is from which country. Not long ago, the phrase ‘made in a country’ is an important part of a product. For example, ‘made in Thailand, or made in India’ matters. However, it does not matter anymore with the advance of globalization trade network. The whole economic system is netted so confusingly. An American product will come from China and Japan product from Malaysia. Some people argue that this is the result of ‘free trade’.

Anti-globalization protesters argued that the volume of world trade has increased significantly since 1950 from $320 billion to $6.8 trillion. The amount of money invested in the trade has surged to the extent that the real money cannot be implied in the financial transactions. Digital numbers are represented as money instead of conventional one. Some people assert that trade lifted people’s lives from poverty. People usually point to China where millions of people rose out of poverty line, even though Chinese government is still criticized for the stark contrast that exists in China between rich and poor.

Some people still hope that trade will lift people’s lives out of poverty. However, when we talk about trade, we have to observe the bigger picture, which means international trade. Looking at one country will not give us a clear picture of actual happenings. The whole world is trading among nations under the concept of ‘free trade’. So what actually is free trade? Britannica Online Encyclopedia defines ‘free trade’ as a policy by which a government does not discriminate against imports or interferes with exports by applying tariffs (to imports) or subsidies (to exports). (Free trade, BOE) It also explicitly emphasized that a free-trade policy does not necessarily imply that a country abandons all control and taxation of imports and exports.

However, no matter how much people argue that the economic system established by the United States by the end of Second World War brings the concept of ‘free trade’ and ‘prosperity’, there is a serious setback that affects the majority of the people in the world. International trade may bring about prosperity for the people in the rich countries but deepen the poverty in the poor nations. As Global Ministries Organization argues –

“Most free trade agreements are not equal and result in unfair trade practices by giving some countries, such as large industrial countries like the United States, Canada and some countries in the European Union, more opportunities than others and putting some countries, such as ones in Latin America, Africa and Asia, at risk.  Free trade is trade without restrictions while fair trade is an equitable and fair partnership between trading countries.” (Global ministries organization, fair trade vs. free trade) 

In the past, the British established unfair trade treaties with the countries across the globe. One of them would be the famous Bowring treaty that was forcefully established between Britain and Thailand in 1855. Nowadays there were various forms trade agreements.  These include bilateral free trade agreements (FTA) between two countries and larger multilateral agreements such as the World Trade Organization (WTO), which is an agreement among 135 nations.  There are also regional trade agreements which encompass the establishment of a free trade zone among many countries in the same region.  Countries across the globe establish several different kinds of trade agreements to support their economies.

However, the rich countries are the ones that pursued aggressive trade negotiations with the other poor countries. Office of the United States Representative states on its homepage that Trade Agreements can create opportunities for Americans and help to grow the U.S. economy. At this moment one might want to stop for a while and think. U.S. economy is the biggest economy in the world and it is also three or four times bigger than the second economy in the world – now China, formerly Japan. Still, the U.S. is seeking to grow its economy which is a bit irony, because if this phenomenon is not affecting others, it is deemed to be appropriate; however, as we will see in the later part of this paper, a lot of trade activities are not fair in relation to poor nations.

The gap between developed countries and developing countries is very big and some scholars conclude that this gap exists due to the unfair practices that are inherent in the system. For example, the U.S. controls their tariff system very high for other countries while forcing other people’s economies to open up so that American goods can be imported. In one mockery of US unfair trade practices, one analyst from Newsweek magazine outlines – “Fair (unfair) trade often consists of some politician or bureaucrat picking a number out of thin air and imposing it on foreign businesses and American consumers. Fair (unfair) trade means that Jamaica is allowed to sell the United States only 950 gallons of ice cream a year, that Mexico may sell Americans only 35,292 bras a year, that Poland may ship us only 350 tons of alloy tool steel a year and that Haiti is allowed to sell the United States only 7,730 tons of sugar. Fair (unfair) trade means permitting each American citizen to consume the equivalent of only one teaspoon of foreign ice cream per year, two foreign peanuts per year and one pound of imported cheese per year. Fair (unfair) trade means that the U.S. Congress can dictate more than 8,000 different taxes on imports, with tariffs as high as 458 percent.”

As we can see here, many developing countries are finding themselves unhelpful amid the American economic imposition. Most developing countries produce agricultural products and these products do not find any way out of their country to sell in other countries. In fact, they face hardship to sell them in the developing countries because of high tariffs walls of the developed countries on the agricultural and manufactured goods they seek to sell.  Worst of all, developed countries practice subsidizing game on their agriculture at a rate of $1 billion a day, which is a whole lot of money while developing countries spend very little money for agriculture even if it is their main economic sector. Therefore because of this money, agricultural producers in the developed countries can produce their goods below production cost and with access to the markets of developing countries they are able to sell their produce at extremely low prices. This selling and exporting is ensured through trade agreements and trade negotiations.

This unfair competition forces international prices to drop in an artificial manner and causes rural farmers in developing countries to collapse. This was how the U.S. defeated Burma in the rice market while Burma in 1960 was the biggest rice exporter in the world. U.S. now is still one of the biggest rice exporters in the world along with Thailand and Vietnam. At some point U.S. gave out free rice to people in Asia as ‘development aid’. This is a major blow to rice exporting countries. How can these countries negotiate with U.S. if they are this aggressive?

Moreover, the US exports wheat at 46% below the production cost and corn at 20% below production. In May 2003, World Bank President James D. Wolfensohn stated that “the average European cow receives more subsidies than the entire average income of a person in Africa.”  This means that local producers can not compete in their own domestic markets and the result is major losses in income.

Another major agricultural product is Coffee and again U.S is involved in this issue. It is stated that coffee is the world’s second most valuable traded commodity.  There are about 25 million farmers and coffee workers in over 50 countries that produce coffee.  The United States’ largest food import and second most valuable commodity is coffee.  The U.S. imported 2.72 billion pounds of coffee from September 2001 to September 2002.  The U.S. imports coffee mainly from Brazil, Colombia, Mexico, Guatemala and Vietnam. Unfortunately, many coffee farmers receive less money for their harvest than the cost of its production, forcing them into a cycle of poverty and debt.  Why is that? The reason lies behind the corporations that sell and buy coffee from local people. In Guatemala for example, coffee pickers have to pick a 100-pound quota in order to get the minimum wage of less than $3/day. A recent study of plantations in Guatemala showed that over half of all coffee pickers don’t receive the minimum wage, in violation of Guatemalan labor laws. Who is responsible for all these unfair practices? The root causes will lie in the trade and the concept of ‘comparative advantage’. Why do not these people farm paddy or wheat in the first place? It is because the idea of ‘cash crop’ forces them to seek out dollars instead of survival crops.

One major area against free trade and multinational companies is the issue of HIV medicines. Patent law in the international trade system is affecting dying people in the developing world. Pharmaceutical companies are producing HIV medicines with a high price so that people in the developing countries cannot afford it. Oxfam, a British NGO is trying to combat this issue. At an international level, they continue to challenge trade organizations, governments, drug companies, and others to make decisions that will help to improve the health of millions of poor people by providing access to affordable generic medicines.

The patent issue is a major problem in the trading system. I am going to mention one specific story about US patent on “the use of turmeric in wound healing.” Graham Dutfield (2002) argued that the US Mississippi medical center received the above mentioned patent on the ‘method’ of using turmeric in wound healing. As people would imagine, this patent laws have gone a bit too far. One point they did not know is that Indians have used this method to heal wounds since time immemorial. The Council of Scientific and Industrial Research of India had to request the US patent and Trademark Office to revoke the patent on the basis that turmeric powder is widely known about and used in India for its wound-healing properties, and that a great deal of scientific research has been carried out by Indian scientists that confirms the existence of these properties. Finally, the patent was revoked. (p-65)

As mentioned above, there are varieties of unfair trade practices in the international trading system. To address these issues require someone to have a look at the underlying philosophy of the whole economic system. The concept of comparative advantage has pushed a lot of countries to produce things which they do not actually need and afterwards trading has to be done. A case in point would be the coffee production, cotton production and tobacco production. In some instances, a lot of countries trade their produce at the expense of local population. Frances Moore Lappe and Joseph Collins (1988) argues that Brazil produced and exported soybeans to feed Japanese and European livestock at the cost of Brazilians’ hunger. (p-77). Likewise, Thailand traded cassava, frozen fruit and poultry products with the west and the rest of the world while Thai preschools are undernourished. (Lappe and Collins 1988: 76-77)

Most of the times, the national governments are involved in the exploiting the poor while engaging in the international trade. They exported food while people were hungry at home. It seems to me that these governments are orchestrating with the international economic system while ignoring the poor people. Encouraging the fair trade needs reconsidering a number of factors such as scrutinizing the trade treaties, pressuring the governments through civil networks groups and resisting the American hegemony when it comes to unfair trade.