trade liberalization:the 'trickle down'
myth
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Contrary to popular belief, most
trade liberalization does not lead to
poverty reduction; in fact neoliberal
policies often contribute to the
global system of unsustainable
production and consumption that
benefits giant corporations but fails
people. The United Nations Conference
on Trade and Development's Least
Developed Countries Report 2004
clearly demonstrates the fact that
wealth is not ‘trickling down' to the
poor. There has been little
correlation between export growth and
sustained poverty eradication in
least developed countries, many of
which undertook far-reaching
liberalization measures in the 1990s.
The biggest losers from the World
Trade Organization's Uruguay Round of
trade negotiations, for example, were
Sub-Saharan African countries,
already among the poorest in the
world.
Harvard University Professor Dani
Rodrik has conducted empirical
studies to show that trade
liberalization does not necessarily
lead to economic growth. In fact, he
argues the causal relationship is the
other way round: countries grow first
and then integrate into the global
economy.
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This is the case for China and India ,
which have been careful to retain
significant amounts of government
protection rather than simply following the
WTO's prescriptions for liberalization and
privatization. On the other hand, those
countries that fully embraced the WTO's
liberalization/privatization/globalization
agenda in the 1990s, particularly those in
Latin America , have faced financial crises
and disappointing economic performances.
The benefits of unlimited economic
growth are also questionable from an
environmental point of view. Economic
growth is based on the possibility of
limitless expansion, but ecosystems have
finite boundaries and will collapse if
overstressed. Multilateral, regional and
bilateral free trade agreements that open
markets for penetration by transnational
corporations often increase the
exploitation of forests, fisheries,
minerals, water and biodiversity,
increasing poverty amongst those who depend
on these resources for their
livelihoods.
The World Trade Organization and other
free trade agreements also reduce the space
for governments to regulate in favor of
people, local economies and the
environment, both at the national level and
internationally. The interests of
communities are ignored, as they have no
access to the negotiators deciding on rules
and agreements, and the environment loses
as international trade and investment flows
take precedence over the protection of our
natural resources. Furthermore, neoliberals
insist on the use of the market to resolve
various environmental problems, ignoring
the fact that unfettered markets are very
often part of the problem.
In particular, current negotiations in
the WTO and regional and bilateral trade
agreements that aim to liberalize trade in
goods and services relating to water,
energy, forests and fisheries should be
stopped. Ultimately, the WTO should not be
involved in the regulation of trade in food
and agriculture. These changes would
directly contribute to poverty eradication
by allowing rural people to continue to
manage and sustainably use their natural
resources to meet their basic needs. In
addition, trade liberalization negotiations
must not be permitted to stop governments
legislating in favor of social and
environmental well-being and local economic
development.
