Sustainability Of The International Trade Regime - Term Paper Example

Domination or Cooperation How to Ensure the Sustainability of the International Trade Regime The international trade regime has often been taken for granted in the present day. Most of the citizens in the world live and breathe the global capitalist enterprise, enjoying its benefits and having their lives regulated (for better or for worse) by the market, without pondering how this international trade system came to be and who is responsible for its success in ensuring global order. History will tell us that the development of the international trade regime was not one that took place by happenstance. It was the product of deliberate agenda and vision – an agenda and vision that can primarily be credited to the United States. It was the United States that shepherded the world trade system to what it is today and invested the intellectual energies and capital to get it off the ground. However, sustaining the system and keeping it afloat is the result of shared efforts among many countries. In order to maintain the stability of the system, it is necessary to develop a consensus and to balance competing interests in order to sustain the system for the long-term. This paper therefore argues that while the United States was primarily responsible for setting up the international trade regime, the maintenance of it relies upon many countries working together and pursuing similar trajectories of growth. This is because precisely as a result of the success of the United States-driven project, countries are more integrated than they ever were, and it is necessary that international cooperation be secured rather than have a hegemonic force dominating the rest of the world. We must begin by trying to understand the framework of this international trade system. The logic of economic efficiency is perhaps central to neo-classical discourse: the main objective being the allocation of resources (in this case, land) to its most efficient use, and by most efficient use, we mean that which will generate the highest profit margin. Milton Friedman was one of the most famous advocates of the free markets – keeping the market free and unencumbered by regulation from the government is the best way to achieve economic efficiency and development. Important in neo-classical thought is the notion of “comparative advantage” which was made famous by David Ricardo. The theory of comparative advantage has been used as the underlying rationale for free trade, because it operates on the logic that if countries specialize in what they can get at a cheaper cost and import when will be expensive for them to produce, then everybody benefits. Basing on this premise, this paper provides two reasons as to why international cooperation, rather than hegemony sustains the international trade regime. The first reason is that the developing countries are as necessary to sustain the international trade regime now, as the developed countries/dominant countries. This is primarily because the international trade regime and the capitalist project are largely dependent on labor and natural resources – assets which the developing countries have in abundance. The second is that the viability and sustainability of the international trade regime depends as much on trade as well as on issues such as the environment and climate change. The debates created by a diverse international community has preserved rather than compromise the international trade regime. To this end, I will give the example of the debate between the US and Europe on biotechnology. A. The developing countries are as necessary to the international trade regime as the developed countries Krasner has argued that a “potentially dominant state has symbolic, economic and military capabilities that can be used to entice or compel others to accept an open trading structure.” (page 27). There is of course logic to this assertion as we have seen the many ways in which asymmetrical power relations were used to compel adherence to the principles of liberalization. He has also discussed the unfair and unjust ways that the developed nations might have taken advantage of developing nations in order to establish their lead, as for example, using protectionist policies to get ahead and then demanding openness and trade liberalization once a chasm has been created. I argue however, that taking this as premise, the leap forward of developed countries was not without cost to themselves. The urbanization that accompanied industrialization and development has resulted in a massive loss of agricultural land and rural workers, and thus there was a need to look towards other options if food security and renewable fuel for the populations in the first world are to be guaranteed. It became necessary to turn to the developing world, which had the resources necessary to carry out the objectives of securing food and fuel. There are of course some problems that attend the use of land and resources in the third world – for example, corruption and ineffective governance in governments of the third world, lack of transparency and accountability, poor people being made to work under conditions that do not promote their welfare. However an alternative way of looking at it is that developing countries become more integrated to the capitalist global economy than ever before, and such integration demands that their needs be taken into account. This also means that the developing nations are coalescing and becoming a potent bloc to press for demands. Winham (2011) in Ravenhill’s Global Political Economy noted a turning point at the Uruguay Rounds, wherein the agreements that had been clinched served the interests of the developing countries. To quote, “..despite the reality that developing countries continued to be economically disadvantaged in comparison to developed countries, the agreements reached at the Uruguay Round were favourable to the interests of the former. Developing countries as a group benefited from agreements on agriculture, textiles and clothing (and probably services), while they may have lost out on intellectual property and anti-dumping practices. Most important, however, developing countries were advantaged by the institutional arrangements resulting from the Uruguay Round Agreements, namely the strong dispute settlement mechanism and the creation of the World Trade Organization itself.” (156) The benefits to developing countries did not stop there. Because developing countries had land and wage labor for the wealthy countries, there was a powerful economic incentive for the wealthy countries to ensure that the developing countries were adequately protected, so that they stay in the game, so to speak. Right now, important organizations working to enhance the current international trade regime, such as the WTO, attempt to address the widespread criticism leveled against these farmland leases, and the emerging evidence of their social costs particularly to the rural poor. This is because of the recognition of developing countries as key stakeholders whose interests have to be protected. Assimilation and not hegemony of one dominant country has helped these countries reap the rewards of integration. I argue that this demonstrates clearly not only one of the benefits of integration for developing countries, but also the tremendous impacts on the international trade regime as a whole. Protecting the interests of developing countries means a more efficient system, because they will cooperate better. We are now past the stage when one country can determine the agenda and direction of the capitalist project – it is now an agenda with multiple stakeholders. B. The issues of the international trade regime are not only economic, but social as well. These issues are better threshed out on a multilateral level. It is all too easy to frame the issue as simply one of economics, ignoring the myriad of social issues such as the environment that surface as a result of decisions made in international trade regimes. In truth, what makes the international trade regime sustainable is the fact that important issues aside from economics are addressed, and they are addressed in a manner where there is adequate debate and discussion between many countries, rather than just one country dictating. It is important to note that, as stated by Winham (2011: 138) in Ravenhill’s Global Political Economy, The global trade regime of the late twentieth and early twenty-first centuries is based on three components: trade, national regulations, and international agreements. Trade and national regulations have been a theme and counterpoint throughout much of history, in the sense that when national regulations receded, trade flourished; and when those regulations intensified, trade languished. A good example of this is the US-EU conflict on biotechnology, which is basically an example of national regulations having an impact on trade. Quoting from Winham (2011: 156), “the structure of the contemporary international trade regime is centered mainly around the US-EU bilateral relationship... (h)owever, this was not always the case. Until the early 1960s, the United States held a preponderant position in relation to other members of the GATT.” The presence of the EU as a co-dominant partner, may have brought in beneficial effects. With regard to biotechnology, Countries from Europe and from the developing world found themselves forming an alliance to push for the precautionary principle (essentially stating that lack of definitive scientific evidence of the risk of biotech products should not bar governments from taking their own ‘precautions’ and regulating the distribution of these products), whilst top agricultural exporters such as the United States, Canada and Argentina raised objections that the principle, especially if codified in a Convention, was not in consonance with trade rules under the WTO. In the end, however, the an agreement had been brokered and was named the Cartagena Protocol, a supplement to the Convention on Biological Diversity. According to Article 4 of the Protocol, it shall “apply to the transboundary movement, transit, handling and use of all living modified organisms that may have adverse effects on the conservation and sustainable use of biodiversity.” I argue that it is these principles, the evolution of trade towards more humane practices, that ensure its continuity and sustainability, rather than make it languish. It might not have been possible under a US-dominated arrangement. Conclusion In conclusion, this paper supports the vision of a multilateral cooperation rather than a US-led project, where international trade regimes are concerned. There is so much at stake in the global economy, we are more integrated now than we have ever been at any stage in history. Shocks and setbacks in the economy of one country have the potential to affect citizens of another country a thousand miles away. There is an absolute necessity that the international trade regime works and the wheels of the capitalist economy keep grinding towards development and improvement of human lives. It is cooperation and not domination that ensures this. It is the US that must be credited for jumpstarting the project, but it is the whole world that has to commit to its propagation. References Krasner, S. (1995). “State Power and the Structure of International Trade” in A. Frieden and D. Lake (eds.) International Poltiical Economy: Global Power and Wealth. New York: Saint Martin’s Press. Winham, G. (2011). “The Evolution of the Global Trade Regime” in J. Ravenhill (ed.) Global Political Economy. Oxford: Oxford University Press. Read More