Erasmus :World trade is one of the most important civilizing and modernising influences in the world today. Although trade has occurred throughout the world thousands of years, it is only recently that the volume of goods and food transferred has reached epic proportions.
The development of containerisation has spurred the growth of trade by speeding the loading and unloading of ships, facilitating the transfer of goods between countries. Suddenly after the Second World War it became possible to trans-ship very large volumes of goods literally across the face of the globe. With the shipment of larger volumes, larger numbers of people can essentially be employed by people who are remote from those people.
This results in the disbursement of technology and improvement of incomes of many people in poor countries. With improvement of incomes and standards of living, more choices are available to people in poorer parts of the world (developing countries). A developing middle-class demands education for its children, electronic goods, a wider range of foods, and better communication. Everyone benefits.
Erasmus : It comes back to one of my beliefs about work. Everyone is entitled to work. World trade means that people in remote places with poor resources can work for people in richer parts of the globe and get paid for their work.
This results in a redistribution of wealth from richer to poorer societies. This results in people in richer societies enjoying a better life than could otherwise be achieved. Although wealth is dispersed from richer countries to poorer countries, the standard of living in wealthier countries rises. This becomes a win-win situation where everyone on both sides of the trade equation benefits.
Erasmus : Many countries in the world today are currently in the process of negotiating “free trade agreements”. With these sorts of agreements impediments to trade are reduced. However, much of the value of these agreements is that goods arrive in the destination countries much cheaper than could be produced locally.
Also in a complex world as exists today, there exist many specialised goods. Computers, CPU chips and mobile phone chipsets are produced in only a few parts of the globe. However, they are dispersed across the planet through the influence of trade. African countries with poor infrastructure, little industrialisation and minimal technology can enjoy the fruits of the technical world as much as anyone in a Western country. Mobile phones have spread across the planet as have computers.
Over time this means that many more people can be engaged in a new technological civilisation. The world becomes a richer place with more people working to solve more problems for everyone. People stop Living at subsistence level (working only for themselves) and begin to contribute to the world economy in general. Essentially we all begin to work for each other.
While the Western world has led the process of industrialisation starting in the 1800s, world trade has resulted in the benefits of the technological and industrial era becoming available to people throughout the planet. In the last decade, it has been judged that world trade growth is expanding more than twice as rapidly gross domestic product.
Kinkajou : Has world trade resulted in any other changes?
Erasmus :World trade has initiated the process of countries talking to each other and cooperating with each other to a much greater extent than has occurred in the past. As countries trade with each other they learn to live with each other. International laws are developed. The value of human rights becomes disseminated across the planet. The need to trade also drives the need to work together.
Major “world” organisations work with developing country governments to help them benefit from world trade. Trade demands agreements on finance, customs and the movement of capital. Organisations include the World Bank, the ICC (International Chamber of Commerce), World Customs Organisation (WCO), the International monetary fund (IMF), the United Nations and its affiliated organisations, multiple world banks and organisations such as “Crown agents”.
World trade has created a need for cooperation between countries on issues such as public private partnerships, public financial management, governance, financial services, Supply change management and public procurement.
Container Ship Charters
Erasmus : Protectionism is the enemy of world trade and globalisation. There are many unfair barriers on exports from developing countries especially on agricultural produce, clothing and textiles. Technical standards for goods are also often used to legitimise protectionism.
These need to be addressed another mechanism of protectionism is through export subsidies and domestic subsidies (such as for agricultural production). In some countries, anti-dumping measures can be abused to prevent importation of foodstuffs. Existing rules on patents and copyrights may also be used in protectionist policies.
In all these examples there must be a balance between the interests of those who produce and interests of those who use goods, produce and services.
Kinkajou : Other impediments to world trade?
Erasmus :Yes. Studies have shown that in some developing countries dependence on the revenue from import duties can be as high as 70% of the country’s total revenue base. This means the countries have a strong incentive to protect their revenue base. However, import duties encourage a number of adverse practices.
This includes commercial fraud, corruption and adverse customs tariffs and border procedures. In worst-case scenarios and some developing countries over a dozen signatures may be required to obtain customs clearance of goods, all of which require “informal payments”.
Often multiple government agencies play a role at the border acting independently. (Unfortunately often for the benefit only of individuals working at specific sites).
Erasmus : Corruption represents a major factor limiting poverty reduction in developing countries. The issue is so important that the Kyoto convention underpinned a framework of standards to secure and facilitate global trade. (Developed by the WCO: World Customs Organisation). Modernisation of the customs systems in Turkey serve as a case study for the effects of world trade.
Turkey consolidated 18 autonomous border gates and introduced a single IT clearance system. This led to an increase in tax revenues and a decrease in clearance time for goods passing into or out of the country. Delays in clearance through customs increases in the cost of goods in the recipient country to the detriment of everyone. Many people miss out on access to goods that they no longer can afford.
Container Ship Gantry
Many countries have moved towards introducing value added taxes (VAT) or goods and services taxes (GST). By shifting the revenue base from the borders to the people benefiting from the goods, government revenue is preserved but more people have access to cheaper goods.
Erasmus :World trade leads to modernisation, via access to goods that cannot be produced within the country itself. Modernisation in turn drives social evolution and cooperation. Traditional societies develop more beneficial attitudes to their people and their partners in trade.
Modernisation theory suggests that modern states become wealthier and more powerful, and that their citizens are able to enjoy a high standard of living in an increased level of freedoms. Modernisation also leads to urbanisation and industrialisation as well as to the increasing availability of education.
Modern communication through TV, radio, newspapers or the Internet leads people to be exposed to increasing number of views and to develop richer understanding of the world. The individual becomes increasingly important as the fundamental unit of society, so benefits of world trade become directed to the individual: himself or herself.
With benefits come incentives, People begin to work together for mutual benefit. With globalisation comes the trend towards democratic behaviour (which occurs even in authoritarian regimes). This trend aims to enrich all individuals and to spread the benefits to all members of a society or country.
The downside for some countries is that traditional religious beliefs and cultural traits become less important as modernisation spreads. However, many traditional beliefs and cultural traits are the root of many conflicts. Conflict or war is unproductive and wastes time, effort and money. It took over 40 years for Britain to pay off debts incurred from World War II as result of its lend lease program to obtain war materiel from America. Many European countries spent decades recovering from the damages caused by World War II.
Erasmus :Globalisation arises from world trade. Globalisation represents the integration of individual countries at economic, political, social, financial, and legal levels. Globalisation allows the introduction of technology, innovations in society and broad social gain. Globalisation drives modernisation. For example, the cell phone, TV, radio and the Internet allows widely dispersed populations to become connected to each other, facilitating business to business communication and improvement in literacy and education.
World trade and globalisation has driven the trend towards the availability of modern healthcare across the globe.
Erasmus :Modern healthcare is not merely an advancement in technology or of Western scientific practices, it also represents a reorganisation of political and social factors towards increasing funding for public health.
There comes a focus on prevention strategies rather than curative solutions for the individual. Again public health benefits everyone. The availability of clean water, sewerage, electricity and communications significantly changes the delivery of public health care.
Erasmus : The Internet is an incredible resource for health care as it encourages the dissemination of knowledge from professional individuals to the community. Information is important as it allows people to understand how many factors affect their health.
Simple issues such as understanding how parasites spread and understanding the need for washing hands makes a much bigger impact on disease than many of us realise. The Internet allows culturally embedded ideas and practices to be examined and scrutinised with the benefit of knowledge potentially from across the globe.
Global trade and modernisation drove the Soviet Union to join the world economy. It is by cooperation not isolation that we best enrich ourselves. Global trade sanctions and modernisation brought South Africa back into the world fold with the abandonment of apartheid.
Kinkajou : A glowing tribute. But I think other people throughout the world might have a different point of view.
Erasmus : The number of people especially in developing countries view globalisation as a cause of many of the world’s problems. Some People believe there are significant deep-seated and persistent imbalances in how our global economy works. They blame the process of globalisation of the world economy for unethical practices and for reducing expectations of ordinary people for access to jobs and for a better future for their children.
Kinkajou : It is a fact that the income gap between the world’s richest and poorest countries has widened in recent decades. Economic output has declined in over 20 developing nations. The growth of foreign investment and increases in world trade has bypassed many countries, especially in Africa.
Erasmus : I think there are a few trends here we need to understand.
With inflation the figures for average earnings are multiplied. This means that there does seem to be an increasing income gap between the haves and have-nots.
Some countries especially the African countries, have incredible population increases.
A friend of mine from Somalia has eight children. When his brother died in Somalia he became responsible for his brother’s 10 children. The situation is actually worse than this. Because he did not live in Somalia, he was unable to physically provide food, water or shelter to any of his brother’s children.
So the brother’s children stayed with relatives. So while he was living in Australia, he now became responsible for supporting not only his brother’s children but also the relatives who are looking after them. His Social Security check in Australia was effectively financially supporting approximately 30 people.
Syrian Refugee Immigrants
I think there is a substantial issue here with natural population increase, as opposed to population increase through immigration. If a man and his wife have 5 children, when they die approximately 1/5 or 20% of their estate passes to each of the children. If a man and his wife have only two children, when they die approximately a half or 50% of the estate passes to each of the children.
50% of an estate compromises a substantial asset. 20% of an estate is unlikely to contribute to the capacity of each of the five children to purchase a house, invest in a business, or to change their life or social circumstances.
In summary, of course the average earnings between those living in richer nations will increase compared to those living in poor nations. (Generally in line with CPI/inflation effects and also the effect of smaller family sizes).
World trade may deliver a doubling of the average earnings for the people of the country. But if it is distributed amongst five children versus two parents, it only represents an increase in earnings of 20% per person. Contrast this situation to the effect of world trade doubling the average earnings for say two parents in a developed country. Because there are only two children, they benefit from a 50% increase in average earnings and a substantial increase in their standards of living.
Kinkajou : What about corruption? This is effect growth in earnings.
Erasmus :Yes. Corruption takes from the many and concentrates money to the few who are able to take advantage of events or situations occurring around them. This means that money is not available for public use but is sequestered for private use only. Strong media presence in the developed world restricts the opportunities for corruption to more “legal” methods.
In developed countries, corruption is rife through the use of both “legal “and “illegal” methodologies. This affects the flow of money and of capital into a country. Why would you send money to country to set up a business if you knew that it would most likely be stolen or appropriated by individuals in the country? Capital requires security. No security-no capital. This is an issue which bedevils much of the developing world.
Kinkajou : What happens in the globalised world, when people to move from country to country i.e. migrants?
Erasmus : Through globalisation people learn about other countries and the lifestyle the people in those countries listen. Many people decide that the circumstances another country are far better than those in their own. They decide to smuggle themselves into new homes in other nations. In effect they become economic refugees.
Globalisation has had the effect of removing the barriers to the transfer of food, goods, services and money between nations. However, most countries restrict the movement of people. Migration becomes a problem for people in both the sending and receiving countries. It can represent a loss of skills and training that are especially valued in developing countries.
Goo : Yes I believe I have heard that the past decade more than 10 million people annually across international borders to live in a country that is not their own.
Kinkajou : Yes I can see that traffic facilities have become cheaper and more reliable enabling people to even cross oceans. The widening gap between the rich and poor parts of the world spurs people to seek the better economic opportunities available to other countries. People seeking a better life provide opportunities for the trafficking of humans. This can of a result in men women and children being exploited and trapped in the degrading situations.
When skilled workers leave the country they take with them their skills, often paid for by the governments of the country they are leaving. This effectively amounts to a transfer of resources from developing country to a developed country.
Goo : Migrants often send money home to their relatives and friends. This can amount to billions of dollars, far more than any development aid sent to these countries.
Kinkajou : I wonder about whether these migrant workers are really fairly treated in the countries to which they migrate?
Erasmus : If you think about it there are ways to encourage people to return to their country of origin. This provides a method to return both schools and the resources represented by training back to their original homes.
If migrants are offered dual citizenship, and tax incentives or other incentives were available to encouragement to return home, this could actually improve circulation of skills between sending and receiving nations. Labour shortage in key sectors such as health, education, science and technology could be filled by temporary migrant workers. There would be less chance of people being exploited.
Furthermore if re-entry restrictions were eased, it will be much easier for people to return home. If people spend a lifetime working in the receiving country, they should be entitled to receive a pension payment of some description if they return home.
Goo :Yes some friends of mine from New Zealand came to Australia. They had been here for many years working in Australia and paying taxes to the Australian government. They are now unable to become Australian citizens. They are unable to receive basic benefits available to Australian citizens such as healthcare. When the circumstances deteriorated, they were required to return home to New Zealand. This does not seem fair or equitable.
Bank Money Transfers
Erasmus : The high costs of money transfers charged by banks also limit the repatriation of earnings by workers to their country of origin. In European countries, low-cost alternatives have developed to the fees imposed by banks and money transfers. This involves matching funds I in two countries to facilitate the transfer.
Goo : I can see we need to make some rules for transfer of migrants, taking into account the interests of both sending and receiving countries. The process of economic migration should be more orderly, predictable and legal. Migrant workers should be protected. Migration should be seen as a process which helps economies to function and not as an opportunity to exploit people. I think people trafficking would be substantially reduced if we had a system in place to look after economic migrants.
Kinkajou :Yes. I can see we have some rules in place there will be a lot of other benefits as well. Migrating people carrying with them expectations for social services, healthcare and freedom. This could reduce corruption in countries of origin. It would also allow the integration of systems between countries, melding them into a world community and a global economy. A sort of “global conscience” would develop, in areas such as climate change, child labour, environmental degradation and poverty.
Kinkajou : How is the flow of capital and goods affect world globalisation?
Erasmus : industrial parts could be machine produced in one part of the world and the labour intensive process of assembly can be completed in another part of the world. Cheap and fast transport of bulk goods and rapid communication helps make markets global. People live better lives by accessing goods produced in “cheaper” countries.
An example of this occurs in China. In This country economic growth over the past 15 years has lifted several hundred million people out of poverty in a very short time. This is spurred by foreign investment and foreign capital providing the wherewithal to construct factories, import machines and to create goods.
Kinkajou : I think in the long-term that building factories and giving people a chance to work on developing countries is far more useful than simply providing aid. The old saying goes if you give a man a fish you feed a family for a day. If you give and the “means to fish”, you give him the chance to feed his family for life.
Goo: But don’t countries need to consider some of their own economic and security issues first?
Erasmus :National security is an interesting issue. Countries such as Japan wish to retain the capacity for the production of basic foodstuffs such as rice. In the global market, countries sell excess food to their needs. In the event of a food crisis, rules of the transfer of foods at a country can be rapidly introduced. This means that receiving countries such as Japan confine themselves in some circumstances with the loss of ability to feed their population.
I think this is the process that drives many food production subsidies in the developed world. Farmers also form substantial lobby groups which pressurise governments to make decisions to keep their industries (i.e. food production) viable. The developed world gives few choices about how much money a worker is paid.
And for good reason. The worker needs an economically viable source of income to sustain himself and his family. So in some specific industries facing global competition, the costs are workers and high wage countries need to be underwritten by government.
Inequities arise. I can understand why essential food production industries are subsidised. However many luxury food commodities are subsidised as well. Perhaps this needs to be addressed.
Food Subsidy In Trade
Kinkajou : Apparently Nostradamus predicted that the world would face a massive food shortage within the next 30 years. Food production is one area where there is just enough produced to meet the needs of the people. Food Production has a substantial lag phase due to the need to allow food time to grow. So widespread shortages can be difficult to backfill, unless there is backup food production in the country itself. Also sending countries in such a crisis can ill afford to send foodstuffs to other countries. Feeding other countries leads to starvation in your own country.
Erasmus : Unfortunately these subsidies restrict the global market in food and help to depress world commodity prices that many people in developing countries depend on for cash income. I can see this also helps the heroin and cocaine (drug) industries to flourish.
Erasmus :International rules are also unbalanced, with not nearly enough emphasis on the rights and needs of people within the next 30 years.
Kinkajou : Some countries also have restrictions on the importation of textiles and clothing. I think the sort of goods don’t fall within the critical Category of foodstuffs.
Erasmus :I can see that trade liberalisation should not be regarded as an end in itself. It should be used as a means to achieve global objectives such as improving economic growth in developed countries, improving quality of life and people across the world, allowing people to work and reducing poverty.
Kinkajou : The developed world does tend to exploit the developing world though. The developing countries are:
- forced to reduce regulations,
- restrict taxation and national income- reducing opportunities to provide services and infrastructure for people throughout the country,
- to abandon environmental protection and
- To allow their labour to be exploited, open (as in sweatshops).
Erasmus : Over the years many proposals favouring global trade have failed because they did not adequately protect the interests of host countries and their workers.
Kinkajou: So what about the workers?
Erasmus : Current world economic institutions though the developed world. This is because votes are distributed based on the economic contribution of the donor countries to these institutions. There is a small allowance to give economically small countries some disproportionate voice in the running of these institutions. However, I can’t see the way past this type of representation.
The people who own the money need to be able to protect their capital and to decide how their capital should be allocated. It has been seen recently in many countries such as Spain and Greece, that there are opportunities for national governments to build the lifestyles of the people is economically unsustainable. Why should people in rich countries subsidise the excesses of National governments in poorer countries?
Kinkajou : One Story I Have Heard described the situation where everybody on the planet is given and exactly equal proportion of the available money and assets.
No one would argue with the assertion that within a few years money would concentrate in the hands of a few. This forms the natural development of economics within a society. Some people do not want to work. Some people through illness or disability cannot work.
Some people have a high work ethic and a drive to succeed which enables them to disproportionately accumulate income and assets. It is this economic imperative which drives many people to do their fair share of the work. I think without the need to feed themselves and to provide themselves with pleasurable activities and goods and services, many people would live lives of languid ease.
Then the burden of productivity would fall on only a few shoulders.
This describes a situation as occurred in the old Soviet Union. Why would you work hard to dig up a truckload of potatoes when you get paid just as much to produce just a few buckets’ worth of potatoes? Incentives and economic imperatives will always form the basis of our economic system. Without them the situation would mirror that within the old Soviet Union.
People would queue for days to purchase foodstuffs or goods such as clothing when they become available. In the capitalist world these goods are freely available, but you must work to earn money to enable you to buy them. Everyone benefits. Everyone works for the common good. And we are all enriched by this process.
Goo : I think there are many situations where economic imperatives exploit people. While the capitalist ethic is valuable in many ways, it can be used in an unethical and immoral way to take advantage of people. What’s your opinion on this?
Erasmus : Again this comes back to the globalisation of economies. If the world economy is truly globalised, labour rules need to be globalised as well. This allows the rewards of the global economy to be properly distributed to workers, and not concentrated in the hands of a few.
Kinkajou : This situation mirrors the situation in 19th century with industrialisation in England. Children were often forced to work up to 14 hours a day in dirty and dangerous environments to feed themselves. The rich became richer and the poor merely earned a subsistence living with very few services provided such as healthcare, education or pensions.
Erasmus : This inequity in workers’ rights arises because existing international bodies are unable to enforce standards and rights within a nation’s boundaries. Globalisation and world trade arose in an ethical and moral vacuum. Hence again few international rules. Resentment arises amidst developing countries that globalisation puts markets first and people second. Global media and communications ensures awareness in developing countries of the growing gulf between winners and losers in world trade and globalisation.
Kinkajou : Hence the major rights and protests at G7 meetings and at meetings of major trade organisations.
Erasmus : Unfortunately in any meeting of people there will always be winners and losers. The issue is really about universally shared values providing the poor and socially disadvantaged with a reasonable reward for their labour, to reduce property and provide access to fundamental rights.
There are also some substantial international issues. These include reducing corruption, promoting education, facilitating international healthcare such as access to HIV drugs for the poor nations, and promoting the appreciation in developed countries of the effect that the national policies have on the economy is of other nations.
There is responsibility to ensure that environmental damage does not occur due to the unethical and unsafe practices of international industrial companies. (As in the Bhopal incident i in India). An opportunity also exists to pressure countries to accept international standards for the treatment of their citizens. (For example, in Myanmar the ruling military junta effectively isolated the country from the world economy, accentuating poverty and restricting access to universal human rights).
International institutions have a role in addressing climate change, protectionism, controlling disputes, guaranteeing critical food supplies to countries and difficulty, improving food safety, addressing security issues between countries and in reducing conflict.
Kinkajou : Access to reasonably paid employment and decent work conditions would certainly be one of those fundamental rights. There is a situation in Kuwait with the building of infrastructure for the world soccer cup. Many workers are employed in substandard and dangerous conditions.
So many workers have died that many countries have suggested that the world soccer cup should be moved to a country with more equitable and safe labour laws. It is not appropriate that people should die in poor working conditions to provide enjoyment from others. Especially where the right to hold the world soccer cup has been obtained through corruption and bribery.
Very sources stated over 200 million children worldwide are involved in child labour, or bonded labour or forced labour. There continues to be reports of imprisonment and aggression against trade unionists who try to protect the rights of workers.
Industrial Revolution England
Erasmus : Where components can be produced in one country from raw materials and assembled in another there exists the opportunity for subcontracting. Subcontracting facilitates the delivery of substandard conditions to workers in many industries such as building and especially in labour intensive industries such as manufacturing, clothing and textile and footwear industries. These activities have also spread to service industries through activities such as outsourcing of answering phones, handling insurance claims or providing technical support in the electronics/computer industry.
Kinkajou : Yes I believe some of the major footwear companies have been involved in sweatshop slave labour practices. It is only when these activities have been exposed by the global media that changes have occurred.
Erasmus : The appearance of the international company also allows for substandard provision of working conditions. While the footwear manufacturers have been “outed” by global media, many companies hide in anonymity, and proceed to deny workers basic rights such as reasonable pay and reasonable working conditions. Unfortunately, the unavailability of capital in developing countries is responsible for some of the economic pressure which creates and sustains these industries.
Kinkajou : I think that without creating an appreciation of workers’ rights and ability in developing countries to provide education and social security, many people in the developing world will view will trade and globalisation as a new form of colonial domination and exploitation.
Kinkajou : Onto the next topic I think legal and governance issues are important for world trade. Currently the industrialised developed world dominates the global financial system through the medium of the World Bank and the International monetary. These institutions have a major influence on the economic and financial policies of developing countries.
Erasmus :Yes but this is the old story. It’s the owners and investors who make the rules for the use of capital. It does not make sense for the borrowers to be able to make their own rules for the use of money.
The only reason the major institutions can dictate to developing countries is because they have inappropriately used funding supplied to them. If the money is used for investment and growth, everyone benefits and investors are happy. If the money is used for a party, there comes a day when it needs to be paid back. The day of reckoning has proven ugly one of the country such as Greece.
Also the World Bank and the IMF do not attempt to exploit developing countries. They tempt to institute reforms which enable these countries to be responsible can tripping members of the world economy.
Usury and Borrowing Money
I think a bigger factor in the inability of many people to develop and expand the business is a lack of funds. Some religions such as Islam discourage borrowing. The Catholic Church meanwhile has reformed its stance on the borrowing of money. In the days of the Roman Empire, the borrowing of money was often known as usury. It was morally and ethically unacceptable.
However with the advent of industrialisation, it became increasingly obvious that people needed access to funds/capital to create business enterprises to enable them to escape poverty. Quite reasonably, the borrowers expected their money to be returned to them.
Erasmus : In many parts of the world, the lack of property rights (lack of ownership of the land on which they live or work or farm) dictates that these people are unable to borrow money. Without ownership, the land cannot be used as collateral for a loan. This discourages investment and growth.
To address this issue recently, many national governments have instituted a system of microloans to enable many small businesses to have the capital to start up. These loans can be very micro indeed. For example of poor Indian woman may buy enough money to purchase a sewing machine and some cloth. A simple loan to provide these things may be all that is needed to lift her and her family from poverty.
I think the World Bank and International Monetary Fund (IMF) as institutions do attempt to represent both developed and developing nations. However, as in many negotiations the interests of both parties are different. Institutionalise corruption in many developing countries is more a threat to development and growth of our global institutions. However, global institutions such as the World Bank and the IMF are easier to target and to denigrate.