Sunday 6 January 2013

Global Trade



Introduction
Global trade has increased remarkably in the past decade especially after the global economic crunch that nearly brought most economies to their knees. The global financial crisis undermined economies growth and development processes and also hampered efforts that sought to broaden opportunities and improve the living standards of the populace. However, global trade has since steered away from the crisis. It has played a cardinal role in boosting sustainable growth of the least developed countries (LDCs). Alongside global trade, the increased flow of capital investment across international borders will largely ignite economic growth and development and rapidly reduce the vicious cycles of poverty in developing economies. Moreover, the global transfer and subsequent division of labor are expected to foster changes related to distribution in most economies. Liberalization and free trade are important components necessary for enhanced global trading. In addition, the economic policy makers of most countries rely on the cocktail to enhance their aggregate standing economically. Trade liberalization is believed to have been a central ingredient in the growth of developed economies (Sidhu, 2007). This report seeks to dissect issues related to global trade with a view of pinpointing key policy lapses and adopted strategies that might foster trading between economies. In addition, it seeks to advance a number of issues that aim to address the undying issues of poverty in the developing economies.
Thesis Statement
            Global review of liberalization and free trade policies are paramount in enhancing trading across borders. The problems related to the place of agriculture in global trade is a crucial problem that needs to be addressed swiftly as a way of laying economic foundation for developing economies. Most developing economies are experiencing distortions in the agriculture business due to gagging protectionist measures. The citizens of developing countries are languishing in abject poverty because of the rigidity of these protectionist measures employed by their governments and partners. Therefore, the disbandment of these rules and subsequent formulation of friendlier ones will foster not only the region food security but also improve the foreign receipts of economies.  In addition, their eradication will bring down poverty levels in record numbers while enhancing equity between citizens. Furthermore, the issues are a key to the realization of the millennium development goals.
            Issues related to global agricultural trade in less developed countries (LDCs) have been in existence since independence although other scholars assert that some of these problems existed even before independence. During the mid-20th century, these issues were a major source of concern globally. However, in the late 1980s, interest on the subject declined rapidly. The United Nations Conference on Trade and Development (UNCTAD) removed the issue from their priority least in relation to other important global agendas (Robbins, 2003). The aforementioned move is one of the very unfortunate scenarios as it has had devastating effects on quite a number of the Less Developing Economies (LDCs).
Global Trade and Development
            The primary challenge facing policy makers in the 21st century is the formulation of sound policies that will fully address the issue of vicious cycle of poverty. A world where there is a wide gap between the rich states and the poor economies is unacceptable. The developing economies are often associated with these populations who survive on less than a dollar a day. Adam smith asserted that no society will be accredited as flourishing and happy while quite a number of its citizens are poor and very miserable (Sidhu, 2007). In the late 19th and the entire 20th century, quite a number of proposals and schemes that sought to foster economic growth and development of economies were advanced. Issues related to donor funding, population control and capital investment was captured by these papers. However, all these schemes have failed or in the verge of failing to spur growth and development or even unlock prosperity doors of developing economies (Zurich, 2011). The failings of these schemes hyped the search of a singular measure that brings together the different ideas envisaged in the schemes although in an idealistic and rational manner. The singular measure that incorporated the entire scheme policies was seen as an ultimate guarantee of development in the least developed economies (LDCs).
            The amalgamation of policies in the past decade brought out a giant measure internationally, global trade. Policy makers assert that economies who embrace global trade are able to spur their development and break their vicious cycles of poverty. There are quite a number of ways that economies can use to maximize the benefits associated with global trade, however, they are all dependent on the liberalization of both domestic and international policies. Despite the posing grave challenges to the political governance of an economy, trade liberation positions a country to harness more from increased levels of economic activities (Dhabi, 2012).
The increased levels of revenues that result from global trade are vital in the realization of developmental objectives of an economy. A good example of these developmental objectives is the Millennium goals commonly known as MDGs. The MDGs seek to address issues related to poverty eradication, education, child mortality issues among others. The realization of these goals relies largely on the economic performance of an economy. This implies that economies that have embraced global trade are able to realize them much faster than those that are yet to harness the benefits associated to international trade (Blaise, 2003).
Global trade is not an end in itself, but a vehicle that is paramount for the improvement of living standards through rational utilization of national economic resources. Therefore, it is apparent that trade liberalization is a keen to the enhancement of economic state of a Least developed economy. Countries need to relook further into their trade policies to ensure that they meet the international standard level. In addition, it should seek to engage in many trade negotiations to ensure that the borders of its trading partners are not restrictive. This will foster the free flow of goods and services across borders. On the other hand, developing economies need to adopt only sound policies that will encourage their development (Zurich, 2011). This will ensure that those trade policies that pose threats to economic development are put at bay or at least contained.
Global Trade Liberalization
Sound trade and economic policies that open up economies for trade need to be formulated to enhance increased levels of trade and capital investment. Countries that have been able to make major strides in the past have embraced such feasible policies. In the recent past for example, no single economy was able to thrive economically i.e. improving its citizen’s living standards singlehandedly without embracing other economies. In the contrary, global trade liberalization has played a cardinal role in the success of East Asia economies. For example, East Asia has seen a remarkable drop of import tariff to 10% from a record 20% in a period of twenty years (Sidhu, 2007).  Developing economies have not been left behind either on matters liberalization. The opening up of their boundaries to accommodate other states has boosted their competitive advantage. In addition, trade liberalization opens up an economy to foreign direct investment (FDI). These investments are robust avenues for employment to the local citizens. Foreign direct investments have rapidly reduced the unemployment rates and are accredited for breaking the vicious cycles of poverty. According to OECD (2000), the poverty levels declined by a record 14% between the year 1993 and 1998.
The economic prosperity of an economy relies largely on the formulation and subsequent adoption of feasible trade and investment policies. According to Robbins (2003), over a billion jobs currently enjoyed by the global populace are in one way or another derived from global trade. This implies that global trade is the backbone of most economies as it not only creates avenues for employments but is also responsible for foreign receipts. The rationale behind full realization of global trade benefits is the elimination of trade barriers. Trade barriers minimize the movement of goods and services between states. Therefore, their dismantling enhances economic growth and subsequent macroeconomic stability of an economy. That is possible as exchange between economies is eased. Developing economies need to support the World Trade Organization (WTO) on matters trade liberalization.
The least developed economies often benefit more from freeing trade. Developing economies accrue subsidies from developed economies that are channeled to liberal economies. In addition the increased economic growth and development that is often associated with free trade brings with it an increase in income. Therefore, citizens from these developing economies are able to improve their living standards through an increase of income. Moreover, increased foreign investments lead to establishment of new firms that brings with them new jobs. The unskilled populaces are able to secure new jobs which transform them to middle class people (Blaise, 2003). The general improvement people welfare guarantees economic growth of a state. In addition, it aids in breaking the vicious cycles of poverty. From the above, it is noteworthy that open economies are able to accrue more benefits from global trade than their counterparts who are exercising trade protectionism. Indeed, the benefits associated with liberation outshine the costs associated with the opening up of an economy to other states. A guess in point is India and Uganda; these two economies have been able to rapidly grow their economy by opening up their markets. In addition, the above move has slashed poverty by larger margins. According to OECD (2000), on average, less developed countries (LDCs) that embrace trade liberalization in the late 20th century realized massive growth than those who did not.
Trade liberalization has brought with it a lot of benefits to both the developed and the developing economies. Despite the magnitude of these gains, developing economies are not able to fully enjoy these gains. That is largely because they still over depend on developed economies for aid. For example, of all the liberalization gains, the less developed economies (LDCs) only enjoy a 30% with the developed economies going with the other percentage. However, the developing economies can still tighten its borrowing policies to ensure that it equally enjoys the benefits from trade liberalization and free market. Despite the amount of benefits harnessed from accessing the market of a trading partner, countries are better placed to benefit massively by freeing their own markets. However, industrial economies are well placed to accrue more gains given they remove protectionism policies in their agricultural markets (Robbins, 2003).Industrial economies have often been lambasted for not liberalizing the agriculture. These economies are associated with high protection measures that are often derived from high tariff levels. According to FAO (2003), agriculture has the highest average of tariff when compared with manufacturing i.e. it is nine times higher. This showcases agriculture as one of the areas that need a lot of consideration in matters liberalization. The developing economies are also better placed to benefit from the liberalization of agriculture. However, those economies with relatively low income have great potential of gaining a lot from the liberalization of Agriculture. This is relatively because they are largely depended on it for survival and growth. In addition, a good number of its citizens are dependent on agriculture meaning the sector affects them directly.
Global Agriculture trade
            The livelihood of most developing countries is agriculture. That is, their foreign receipts are largely inclined towards agriculture. This is so because agricultural produce make up a major part of their exports. For agricultural exports, protectionism and tariffs pose a major threat to the survival and subsequent thriving of the economies. Developing countries look up to agriculture to address the United Nations Millennium development goals. The global agriculture trade is a cardinal issue that cannot be brushed off easily when it comes to international trade. This is because the subject has elicited a lot of significant debate that collapsed World trade Organization conferences back in 2003 (Raynolds, 2012). Problems associated with global trading of agricultural produce have advanced effects on developing economies simply because agriculture is their primary source of export. In addition, agriculture is the source of livelihood for most citizens in these countries. Therefore, enhance global trade, issues surrounding agriculture need to be solved. This will enable developing countries contain the acute poverty levels as well as position themselves well globally by enhancing sound relations with their trading partners.
            Developing economies are faced with acute problems that are often interrelated. First is the issue of global market instability. Instability in the global market largely hampers the development capabilities of developing economies. Decline in the export price of agricultural produce jeopardizes the competitiveness of the third world countries. This is because it their foreign exchange receipts are largely affected. In addition, considering these economies rely primarily on agriculture, its citizens will not be able to meet the ever rising cost of living. Secondly, the capacity of these economies also does not match the international demands. This alienates them from the derivation of enough benefits from their exports. Thirdly, developing economies have continually tightened their protection policies related to agriculture. This rapidly hampers their chances of benefiting from global trade because the policies curtail free movement of goods from other trading states. Finally, developing countries lack the production capacity that is able to quench global market thirst. This is a cardinal reason why the less developed economies are unable to accrue full benefits from global trade. From the aforementioned, it is apparent that even if the global agricultural market was liberal, the developing economies could still be disadvantaged because of the dent in their supply. To harness the full benefits of global trade, developing economies need to formulate sound and rational policies related to exports (FAO, 2003).
            To address these impending problems related to agricultural trade, the World Trade Organization needs to exert more pressure on developing economies. This will see them drop their protectionism measures and ease the movement of products across borders. In addition, financial bodies i.e. the World Bank and the IMF need to align their loan condition with the teething problems facing the agricultural sector.  Tight financial conditions have seen a number of nations rethink their policies in the past (OECD, 2000).

In conclusion, global trade has done remarkably well in improving the economic state of most less developed economies (LDCs). The trade has increased the level of capital investments that have consequently opened up growth opportunities. Moreover, economies have been able to break the vicious cycles of poverty. The aforementioned was made possible by the sprouting of new companies that created employment avenues to the masses. However, the ultimate gains associated with international trade are yet to be fully realized. That is so because quite a number of developing economies still embrace protective policies. In the other hand, some who have embrace free market are not able to derive the full benefits as they are still gagged by foreign debt burden. As from the discussion above, agriculture which is the backbone of most economies is experiencing a lot of problems in the international spheres. Instability in agricultural market and other associated problems of pricing jeopardizes development plans of developing economies. Therefore, World Trade Organizations needs to prioritize the underlying issues of agriculture to salvage the developing economies.

References
Blaise, C. (2003).  The cotton submission by West and Central African countries. Address by President of Burkina Faso to the WTO Trade Negotiations Committee
Dhabi, A (2012, November 09). Free trade is necessary for a global recovery. UAE Daily:
FAO .(2003, March). Some trade policy issues relating to trends in agricultural imports in the context of food security.
Raynolds, L. (2012). Fair Trade: Social Regulation in Global Food Markets. Journal of Rural Studies, 28(3), 276-287.
Robbins, P. (2003).  Stolen Fruit: The Tropical Commodities Disaster.  London: Zed Books.
Sidhu, R. (2007). GATS and the New Developmentalism: Governing Transnational EducationComparative Education Review, 51(2), 203-227.
  Zurich, W. (2011, March 24). Global trade recovery takes uneven course, says ICC Survey. Arabia 2000.

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