Free market: at what cost? International trade and sustainable development

Trade liberalisation used to be uncontroversial. Today, it is blamed for many of the world's ills. What went wrong? This study assesses the evidence and suggests that we need an international trading system that contributes to sustainable development. It should be built from the bottom-up and all nations should take part in defining it.

Until recently, trade liberalisation was uncontroversial. It appeared to stimulate economic growth and to consolidate co-operative relations among peoples. Yet in the seven years since the conclusion of the Uruguay Round and the establishment of the World Trade Organisation (WTO), trade policy has become increasingly vexed, and the number of people who hold a negative view of it is growing rapidly.

This study by the International Institute For Environment and Development (IIED) examines the issues behind the new fears. It finds that trade liberalisation carries much of the blame in the public eye for the dislocation and negative impacts of globalisation. Globalisation itself is associated with the increasingly discredited macroeconomic paradigm known as the Washington consensus, which suggested that rapid opening of domestic markets to trade, and capital flows, would offer a sure road to prosperity.

This promise has not been fulfilled. It is now clear that:

• Any benefits derived from globalisation depend on: (1) access to investment and technology, (2) adequate policy, regulatory and institutional infrastructure and (3) the human capacity to understand how it may be exploited. In the absence of these, trade liberalisation increases the inequities among and within countries.
• Trade policy has moved aggressively into areas once the preserve of domestic decision-making such as (1) food safety, (2) intellectual property rights and (3) product standards.
• Many of the benefits promised to developing countries have been undermined, due to agreements that are (1) flawed, such as Trade Related Intellectual Property Rights, (2) implemented in bad faith, such as Textiles, and (3) blocked by a few powerful members, such as Anti-Dumping.

However, the study suggests that trade liberalisation can still be positive for development and for the environment:

• It can open countries to currents of democracy, good governance and respect for human rights – the foundation of modern development.
• It can lead to the replacement of inefficient, polluting technology with more modern equipment.
• It can generate the wealth needed to address development problems, and a rising standard of living will usually lead to a stronger demand for environmental quality.

The research concludes that the sense of threat felt by people in the social and environment fields is very real. For an international trade system to be sustainable the following recommendations should be noted:

• Harness trade and economic growth so that they support the fundamental principles of sustainable development – greater social equity and the sustainable use of natural resources.
• Ensure that the trade policy process is open to all legitimate stakeholders, not just narrow commercial interests.
• Increase support to developing countries to enable them to take advantage of more open trade.
• Develop initiatives such as the Sustainable Trade Centre which can demonstrate that sustainable development is a means to greater equity in world trade, not a barrier.
• Use the Johannesburg Summit as an opportunity to advocate these changes, and insist that sustainable development represents the only legitimate goal for international trade policy.

Source(s):
‘Striking a Balance for Trade and Sustainable Development’, Opinion: World Summit on Sustainable Development, IIED in collaboration with the Regional and International Networking Group, RING, by Nicola Borregaard and Mark Halle, May 2001

Funded by: Swedish International Development Co-operation Agency (SIDA)

id21 Research Highlight: 17 February 2003

Further Information:
Tom Bigg
WSSD Co-ordinator
International Institute For Environment and Development
3 Endsleigh Street
London WC1H ODD
UK

Tel: + 44 (0)207 388 2117
Fax: + 44 (0)207 388 2836
Contact the contributor: wssd@iied.org

International Institute for Environment and Development (IIED), UK

Other related links:
View the full texts from the Uruguay Round Final Act

'Liberalisation is good for poverty alleviation, but how can we help the losers?'

'Pros and cons of liberalisation - manufacturing in Tanzania'

'Can Africa afford free trade? Liberalisation, industrial change and prosperity don't always mix'

'Central America's free trade flop. Why liberalisation failed to boost agricultural performance'

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