Trade with the Rest of the World

(This is an archived extract from the book Patterns of Power: Edition 2)

Some changes are needed if poorer countries are to be able to trade fairly with the rest of the world:

·      If there were a genuine concern to help poorer countries, the wealthy countries would dismantle their tariff barriers against them – particularly for agricultural products.  The EU Common Agricultural Policy, for example, was designed to benefit its own farmers even though the EU also gives aid to poorer countries.  This policy doubly damages the farmers in poor countries: putting them at a disadvantage in exporting while destroying their home market by the dumping of food aid.  Current unfair trading practices by rich countries are supported by a flawed World Trade Organisation (WTO) negotiation process that favours the strong.[1]

·      It can also be argued that there is justification for providing at least temporary protection for emerging economies, just as the wealthy economies once protected themselves during the early stages of industrialisation,[2] but there is some disagreement on this point.[3]

These arguments are not purely humanitarian.  Wealthier countries would benefit:

·      By dismantling tariff barriers against poorer countries, European and American consumers could have lower cost food and clothing.  This would enable them to spend more on other goods and services and their economies would grow. 

·      As poor countries become wealthier, they create demand for products and services that are designed or made in wealthy countries (  This could help the world to recover from the 2008 economic crisis; Carlota Perez has analysed previous cycles, where the collapse of an economic bubble is followed by a step forward in global prosperity, and has described a new “Golden Age” that could be brought about by harnessing modern capabilities to meet the demand from developing countries without damaging the environment.  She compares this vision to the effect of increased economic demand after the Second World War:[4] 

“Revamping transport, energy, products and production systems to make them sustainable is equivalent to post-war reconstruction and suburbanisation.

Full internet access at low cost is equivalent to electrification and suburbanisation in facilitating demand (plus education).

Incorporating successive new millions into sustainable consumption patterns is equivalent to the Welfare State and government procurement in terms of demand creation.”

Governments in wealthy countries need to take more account of the benefits to the whole population and pay less attention to the pressure from their farmers (who already have the inbuilt advantages of being able to offer food as ‘home-grown' and having access to quicker and cheaper transport).

© PatternsofPower.org, 2014

[1] Chapter 3 of Stiglitz’s book Making Globalisation Work is entitled Making Trade Fair.

[2] Ha-Joon Chang put the argument for protecting poorer economies in his book Bad Samaritans – Rich Nations, Poor Policies and the Threat to the Developing World.  He published an article on the same subject in Prospect magazine in July 2007, which was still downloadable in April 2014 from http://www.prospectmagazine.co.uk/magazine/ha-joon-chang-global-poor-free-trade/.

[3] Leland B. Yeager wrote:

“Shelter from the competition of foreign manufactures ranks very low if at all on the list of things that a “backward” country needs to promote economic development. More necessary are…”

He then continued by listing some necessary measures, as quoted in ( This appeared in Free Trade: America’s Opportunity, section 4, in a section entitled Infant Industries And Economic Development. This was available in April 2014 from The Online Library of Liberty at http://oll.libertyfund.org/index.php?option=com_staticxt&staticfile=show.php%3Ftitle=2038&layout=html.

The example of India, quoted in (, provides further evidence that open markets might be more beneficial than shelter from competition.  It seems that there is no prescription to cover all cases, and that it is necessary to approach each circumstance with an open mind.

[4] Professor Carlota Perez gave a lecture at the LSE on 18 May 2010, entitled Full Globalisation as a Positive-Sum Game: Green Demand as an Answer to the Financial Crisis, for which the audio and video recordings were available in April 2014  at http://www2.lse.ac.uk/newsAndMedia/videoAndAudio/channels/publicLecturesAndEvents/player.aspx?id=659 and the slides were available then at http://www2.lse.ac.uk/publicEvents/pdf/20100518_CarlotaPerez.pdf.  She summarised the three components of a “Global Golden Age” on slide 21.  Her book, which more fully explains her analysis, is entitled Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages.