Why is trade such a vital third world issue?
by Deirdre Sheehan
Developing countries depend on foreign exchange earnings to fuel their development efforts and pay off their international debts.
�For millions of the world�s poorest people trade is a part of daily life and a cruel determinant of welfare�Trade has the power to create opportunities and support livelihoods and it has the power to destroy them�
Oxfam Report, (1995)
Problems with trade in the Third World:
- Dependency on the export of primary commodities.
- Drop in prices on the international market of these commodities.
- Global supply far outstrips global demand.
- Overproduction and low prices under development issues.
Statistics:
- 51 Third World countries depend on the export of three or fewer primary commodities for over 70% of their export earnings.
- Another 15 countries depend on the export of three or fewer primary commodities for over 85% of their export earnings.
- The richest 20% of the world�s people control 84% of all world trade while the poorest 20% control just 9%.
- In 1980, the 3rd World had a 27.9% share of world exports. By 1990 this had decreased to 17.8%.
- In 1965 the NICs had a 30.8% share of 3rd World exports, which by 1990 had increased to 82.8%. This is an increase of 250%.
The Role of Transnational Corporations:
The survival of primary commodity exports depends upon commercial decisions taken by TNCs.
TNCs play a leading role in all stages of the production and trade of the various primary commodities.
Developing countries are chosen as locations for production because of relative costs. They do not gain the advantages or the environment for developing new technology.
Manufacturing:
Although the share of overall 3rd World exports of manufactured goods has increased from 10% in 1965 to 55% in 1990 most of this increase is due to exports from the NICs.
Trade Barriers:
The World Bank estimates that trade barriers cost 3rd World countries between $50 billion and $100 billion each year. One of the worst offenders is the US. Losses through trade barriers by the US are roughly equivalent to total US aid to the LDCs.
Barriers to trade include tariffs on exports, which increase with the degree of processing.
�In areas where they have a capacity to export, LDCs face higher tariffs than other countries including developed market economies�.
Oxfam Report, (2001).
There are an almost infinite number of non-tariff trade barriers:
One of the main ones has been the Multi-Fibre Agreement. The UN Development Programme estimates the MFA alone cost developing countries $24bn a year in lost earnings.
The Uruguay Round Agreement:
Became effective in 1995 and implementation continues.
- Developed nations will cut tariffs on average by 40%.
- Developing nations will still face tariffs higher than the global average.
- MFA quotas are to disappear by 2005 mostly towards the end of that period.
�Get �something- in- return� proposals by developed countries:
Proposals stem from advances in technology, and information and communications systems, which have transformed the services sector.
- Technology rich countries want developing countries to deregulate their policies so they can expand their services industries.
- They want increased foreign investment opportunities so need the LDCs to reduce constraints on TNCs.
- They want to protect their technologies from adaptation or imitation so want to include Intellectual Property Rights in international trade policy.
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