World Trade Organization and international trade negotiations

International Trade

Current Issues in International Trade

The issue of international trade and increased globalization is one of the most controversial subjects in the worlds of business and politics today. Proponents of globalization claim that there are direct economic benefits for all involved, and point to both higher wages in developing countries and reduced costs worldwide as evidence of this fact. Their calls for reduced tariffs and increased free trade, however, are met with vociferous opposition in the streets and in the halls of government by those who see free trade as simply a new method of exploitation. Human rights violations and environmental degradation, as well as assertions that the complex economic effects of free trade cannot be appropriately analyzed in a reduction to wage and employment rate comparisons, are often cited as reasons that free trade should be curbed, with more control in the hands of the developing world.

The Doha Rounds

The Doha Rounds of World Trade Organization negotiations, which were meant to establish a new era of global free trade, feel apart in 2006 after a bumpy ride nearly decade long. Form the perspective of political realism, it could be said that neither side was willing to concede its own continued security for the greater good of the global system. Countries like the United States demanded the same type of free and open markets exist in all countries that signed onto the free trade deal, whereas developing countries sought better protection for their own markets. This was the essential impasse that brought the talks to a halt.

Liberalist thinkers might place the failure of tehse talks on related issues, but from a different perspective. Rather than the continued security and prosperity of nations as a whole, much liberal criticism of free trade agreements and areas has centered on the degradation of rural ways of life, particularly farming and agriculture. Free markets have shown a tendency to create jobs in the manufacturing sector in developing countries, and measurable wages definitely show an increase by most measures, but liberal theorists point out that rural farmers and others who find subsistence in traditional (and therefore largely un-measurable) economies are forced to change their way of life when the economy of their country changes. Though providing greater economic benefits from a Western perspective, the individual economic choices are limited, or at least shifted, by free trade.

Both realism and liberalism present related but different possible reasons for the breakdown of the Doha Round of globalization talks, and an examination of domestic politics theories leads to yet another understanding. Domestic self-interest rarely (if ever) completely aligns with global free markets; even if the benefits outweigh the detriments, it is disingenuous to suggest that there aren't any problems associated with globalization and free trade. Without significant compromises by both developed and developing nations as far as their immediate and direct self-interests are concerned, no real free trade agreement can be reached. Domestic self-interest, that is, is not fully compatible with global interests.

Comparative Advantage and Free Trade

The differences between individual domestic interests and overall global interests are what create the differences over time (and in various countries) in attitudes towards free trade. Economists such as Helen Milner posit that despite changing economic and hegemonic landscapes, global economic interdependence will continue to expand, and that protectionism is almost entirely a thing of the past. In drawing this conclusion, she compares the economic situations of the 1920s and the 1970s, and notes the lack of protectionism in the latter period despite similar conditions. Essentially, she argues, "firms with a global web of production and trade will view trade barriers, even at home, as a new cost" (Milner 1988, pp. 361). For this reason, global economic interdependence once found would never rationally be given up, form a purely economic point-of-view. Due to the growth of globalization in the twentieth century then, the twenty-first is not likely to see anything different.

The problem with this argument is that the world is not purely economical in its activities or its planning. The notion that state -- i.e. political -- entities have ceased to matter in global trade issues, though increasingly popular among certain scholars and pundits, is a perspective that is at best "profoundly misleading" (Krasner 1976, pp. 317). The fact is, states act according to perceived threats both to their security and to their sovereignty. These reactions are not always purely rational, at least not from an economic sense of the word, and therefore the pure rationality of economics cannot be used to predict state action -- which is still hugely important -- in the area of free trade (Krasner 1976). Despite the hegemonic decline of the United States that Milner notes, it is still a country with an enormous amount of international clout that can easily appear threatening in international bargaining.

Free Trade and the Poor

The primary breakdown in the global free trade talks exists because of the perceived disparity of globalization's effects on poor countries and those that are already sufficiently economically developed. As Frank ( points out, the misconception that underdeveloped countries are merely at an earlier stage of development and simply need to "catch up" to the developed world is demonstrably false; South America has shown cycles of regional development and underdevelopment that essentially amounts to a stagnation, and this process is observable in many other "developing" regions of the world. Dollar and Kray (2002) are quick to point out that the most rapid economic growth in recent decades has occurred in some of the world's poorest areas, but this sidesteps the real issue. Their growth might be outpacing the developed world's currently, but the sustainability of that growth and the distribution of its effects to the truly poor are matters of debate.

This outlines a key difference between a country and its people in economic terms. Free trade is likely to be beneficial to many poor countries, especially those that that have abundant natural and raw materials to offer for export, and those that have large populations of willing and capable workers. But it is often governments and the already well-off in these countries that reap the majority of globalization's benefits. This can often lead to reduced opportunities for these nation's poor, and thus create greater injustices and disparities in wealth. An economy growing on paper does little to help a farmer priced out of his crop.