Unfair trade in an unfair world

People have been engaged in trade since millennia. Yet, increasing technological innovations have allowed ever closer integration of the global economy which in turn has helped exponentially boost production and trade. Such economic processes have generated staggering amounts of wealth. So, it is entirely reasonable to expect that global wealth production should have helped overcome the problem of poverty around the world. Yet, our world remains highly unequal. Prevailing lopsided rules of international trade remain a major reason why so many people are still so poor.

Scholars have long been pointing to inbuilt mechanisms for appropriation which create a global divide between the have and have-nots. The dependency theory, for instance, famously asserted that underdevelopment and development are two sides of the same coin. Such an assertion considers underdevelopment to be the direct outcome of exploitative processes which enable development to take place. Dependency theorists have pointed to the history of colonial exploitation which enabled European nations to become industrialised but only on the back of massive appropriation of raw materials and labour provided by their colonies in Asia, Africa and South America.

The appropriation of resources from the global South was not just a matter of past, but something which continues to take place at present. Rich countries and multinational corporations based within them leverage their geopolitical and commercial dominance to depress or cheapen the prices of resources and labour in the global South. This phenomenon is known as ‘the process of unequal exchange’.

Consider, for instance, the simple fact that while no cappuccino can be made without coffee beans and no fancy cotton shirt can come into existence without cotton; it is the most vital ingredients within consumer goods that are priced at a rate that keeps their producers hovering around the poverty line. The price of any consumer item is based on economic notions such as utility and value, and it is set via market mechanisms such as demand and supply. Yet, these seemingly neutral terms obscure the fact that the above economic notions are not natural or objective occurrences. Instead, powerful nations and the global institutions created by them, such as World Bank, IMF, and WTO, have helped formulate the so-called market mechanism and the rules by which it abides.

Two decades ago, the international NGO, Oxfam, launched an advocacy campaign called ‘Make Trade Fair’ which had called for changing the inequalities in world trade rules. Oxfam had estimated that for every $1 given to poor countries in aid, poor countries lose $2 to wealthy countries because of unfair trade rules. This situation has not improved over these past twenty years. Consider, another recent study undertaken by the economic anthropologist Jason Hickle, and his colleagues, pointing to a staggering appropriation of resources from the global South between 1990 and 2015 amounting to over $10 trillion per year. Such a drain far outstrips the amount of aid provided to the countries of the global South. In fact, for every dollar of aid the South receives, poor countries are estimated to lose $30 in drain through unequal exchange. It is thus not inaccurate to assert that poor countries help further ‘develop’ rich countries, not the other way around.

It is also worth noting that the net appropriation of land, energy and human resources mobilised around servicing consumption in the global North has many other related adverse implications. Producing goods catering to export markets causes depletion of natural resources and worsens pollution, and this in turn has negative social and health impacts on the local populace in poorer countries. Thus, the patterns of unequal exchange do not only deprive poor workers of adequate remuneration needed to meet basic needs, but the price of consumption patterns and economic growth within richer countries is effectively offshored to poorer countries in the form of social costs and ecological devastation.

While elite capture and bad governance within poor countries are major problems as well, narrow elite interests align well with the overarching extractive structure of the global economy, which continues perpetuating inequities plaguing our world today.