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Trade reforms needed for global peace

States such as Afghanistan, Angola and Sierra Leone have been damaged by years of civil war. Increasing international trade, levying international taxes to fund environmental protection and global justice, abolishing agricultural subsidies in rich countries and increasing aid, may help many such countries to recover.

It is a common belief that globalisation creates conflict in many parts of the developing world. A working paper from the World Institute for Development Economics Research, however, claims that international trade is essential to generating economic growth. It also argues that state-building is central to poverty reduction, increased stability and the development of democracy, particularly in poor countries recovering from conflict.

The problem for war-torn states, according to this research is how they interact within the global economy. Flows of finance and goods often include trading in illegally-produced minerals and narcotics, transferring national assets offshore, and trafficking in women and children. The challenge is to change the nature of these economic interactions, to facilitate peace and poverty reduction.

Post-conflict countries commonly face several obstacles to economic growth:

Exports are dominated by a few primary commodities (such as oil and minerals), leaving them vulnerable to volatile world prices, mismanagement and bribery.
Exports often include ‘conflict-commodities’ such as diamonds, illegally-logged timber and drugs, which fund warlords.
Rich-country agricultural subsidies depress crop prices and slow down agricultural growth in poor countries.
Post-conflict countries lack resources to create the global public goods essential for poverty reduction and political stability, such as the instruments of justice, environmental protection and public health.

Each of these obstacles must be overcome if economic recovery is to succeed, decrease inequality and go hand-in-hand with peace. Otherwise revenue from international trade will rebuild pre-war societies and resurrect old inequalities. Problems such as HIV/AIDS epidemics could also create further inequalities and provoke new conflicts.

The research offers several suggestions for the reform of global economic policy to make post-conflict recovery easier:

strict prosecution of overseas bribery by rich countries
creation of two-tier markets for drugs and diamonds in which illegal products receive lower prices and producers’ profits are reduced
an end to United States and European Union agricultural subsidies
increased transparency of resource-use by developing country governments which will force them to channel more revenue into development
increased international taxes to fund global public goods (along the lines of the carbon-tax and the Tobin tax on currency flows)
increased aid to poor countries.

The generalisation that economic development creates peace is risky. This paper admits that although state-building may decrease civil war, it could increase inter-state wars. There is a need for good politics, to steer disagreements to peaceful resolution. Yet a strong state is needed to deliver political promises and public services.

Source(s):
‘Post-Conflict Recovery: Does the Global Economy Work for Peace?’ United Nations University World Institute for Development Economics Research (WIDER), Discussion Paper No. 2005/05, by Tony Addison, February 2005 Full document.

Funded by: United Nations University World Institute for Development Economics Research (UNU-WIDER)

id21 Research Highlight: 31 January 2006

Further Information:
Tony Addison
World Institute for Development Economics Research (WIDER)
Katajanokanlaituri 6 B00160
Helsinki

Tel: +358 (0)9 61599239
Fax: +358 (0)9 61599333
Contact the contributor: Addison@wider.unu.edu

World Institute for Development Economics Research (WIDER)

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