Academic journal article Journal of Third World Studies

International Free Trade, the WTO, and the Third World/global South

Academic journal article Journal of Third World Studies

International Free Trade, the WTO, and the Third World/global South

Article excerpt

INTRODUCTION

International flee trade is the bedrock foundation of the neoliberal globalization project. The World Trade Organization (WTO), established in 1995 to promote and manage international free trade, together with the World Bank (WB) and the International Monetary Fund (IMF), have come to be the global enforcers of neoliberal economic policies. The agreement establishing the WTO (1995) listed the following objectives the organization serves:

   raising standards of living, ensuring full employment and a
   large and steadily growing volume of real income and
   effective demand, and expanding the production of and trade
   in goods and services, while allowing for the optimal use of
   the world's resources in accordance with the objective of
   sustainable development, seeking both to protect and
   preserve the environment and to enhance the means for
   doing so in a manner consistent with their respective needs
   and concerns at different levels of economic development. (1)

Dani Rodrik points out that "it is clear from this preamble that the WTO's framers placed priority on raising standards of living and on sustainable development. Expanding trade was viewed as a means toward the end, rather than an end in itself.... In practice, however, these two goals promoting development and maximizing trade--have come to be viewed as synonymous by the WTO and multilateral lending agencies, such that the latter substitutes for the former .... However, the net result is a confounding of ends and means. Trade becomes the lens through which development is perceived, rather than the other way around." (2)

Still the distinction between promoting development and maximizing trade, with the former as the end and the latter as the means, serves as an excellent analytical lens to study the theory, the history, and the practice of international free trade. Development in the Third World/Global South is the lens and the goal through which to view and evaluate free trade.

THE THEORY

William J. Bernstein writes that "few other historical inquiries tell us as much about the world we live in today as does the search for the origins of world trade ... While other animals, particularly primates, groom and share food with each other, systematic exchanges of goods and services, particularly over great distances, have not been observed in any species besides Homo sapiens.... Ultimately, two deceptively simple notions anchor this book. First, trade is an irreducible and intrinsic human impulse, as primal as the needs for food, shelter, sexual intimacy, and companionship. Second, our urge to trade has profoundly affected the trajectory of the human species." (3)

The systematic explanation and scientific justification for international free trade, however, came with Adam Smith (1723-1790) and David Ricardo (1772-1823). Smith's theory of absolute advantage says that everyone's economic interests are served if each country specializes in those commodities that its endowments (natural resources, skilled labor, technology, etc.) allow it to produce most efficiently, then trades with other countries for their commodities that they, in turn, produce most efficiently. Trade therefore is founded on the division of labor and specialization of skills. England produces more efficiently woolens than port, while Portugal produces port more efficiently than woolens, so England specializes in woolens and Portugal specializes in port, rather than both countries trying to produce both products. The result is more efficiency and productivity with no additional inputs from their endowments.

Ricardo's theory of comparative advantage is not immediately intuitive. Instead of assuming, as Smith did, that England is more productive in cloth and Portugal is more productive in wine, Ricardo assumed that Portugal is more productive in both cloth and wine. Based on Smith's intuition, trade would not be advantageous for England. …

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