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definition, what does it create naturally within the market, how does it give nations an advantage?
removal of barriers to trade, limiting state intervention in economic and social interactions at the national and international level - recepie for greates social gains (supported by IMF and WTO)
creates fast, modern, econonomic growth...sparks competition which = technological innovation abd specialization
nations want to enhance their comparative advantage (David Ricardo) - each nation has an economic advantage relative to other nations for the production of some goods (produce different products and use it to your advantage --> win win situation)
Southern states have competitive advantage of low wages
"New Trade Theory"
argues that new communication and transportation technologies reduce historical need for industries to cluster together in regions close to consumer markets to minimize transportation costs
even less optimistic of the win win idea of free trade
Idea: it is necessari to use market regualtion to protect the weak not the strong ... and to create a more equal international trade system --> need protection from overpowering global market forces
How is national development restricted?
Restricted by the unequal exchange of lower-priced primary commodities, higher priced industrial goods,... remain dependent on the North for advanced technology services, investment of capital, core markets
Criticism of Free trade
focuses on abstract trade models rather than looking at actual political conditions under which comparative advantage is happening
Esp. textiles...free trade creates competition for poorer countires
Currently the main policy installed
Free trade vs Fair trade
role of the state? what does the state do thats beneficial?
contemplates whether or not the "state" should intervene in the "market" ... not so much the extent to which state should intervene in the market more/less, in what manner
Regardless, state remains essential in ensuring rules, by which markets operate, are followed --> Neo-liberal free traders oppose state intervention in hte market but not opposed to enforcement of free trade policies
General Agreement on Tarriffs and Trade
purpose? context? major players?
established to reduce trade barriers
After WWII regulations for international trade were developed by mainly rich northern countires (Bretton Woods System)
- dominated by the US --> Tarriffs and Trade established to reduce trade barriers
- IMF and World Bank formed to oversee the system
combines mixture of state intervention to control capital and investment flows with liberal trade objectives
Commodity control schemes
Was this successful? What UN conference did this lead to ... how were the goals of this conference implemented ... were these successful?
use of buffer stocks to be build up in times of surplus production, run down in times of shortage
(also developed at Bretton Woods --> system aimed for liberal trade bur formed regualtion too)
Wasnt that successful ... led to the first UN Conference on Trade and Development (UNCTAD) --> resolutions in favor of transferring wealth from North to South through aid, compensation and fairer trade
2 ways to do this:
1. Replace financial aid with fairere trade price ("trade not aid") and eliminate unfair protectionist policies towards Southern agricultural goods (not successful
2. more successful UNCTAD effort: promotion of compensatory finance schemes (rural producers receive compensation when commoditiy prices dropw below an agreed upon level)
what happened wiht influence fair trade/free trade and SAP's, GATT, WTO inthe 1970's
1970's - pinnacle of political influence of fair trade ideas --> embedded liberal policies abandoned --> tur to neo-liberal policies eliminating as much state intervention as possible
free trade not completely successful but still dominating international trade
Neo-liberal SAP's beginning to be implemented for highly indebted nations (cut public spending, reducing/eliminating trade barriers and capital controls, devaluing local currencies to make exports more competitive --> Ineffective!
- GATT agreements finally ratified in 1994
- WTO was formed ... successful and now working on FTAA (Free Trade Area of the Americas( - 34 members
Limits of Free Trade
Free trade not effective at eliminating trade barriers because they are not primarily concerned wiht trade, rather protecting property rights of transnational corporations and limiting rights of states to intervene ...
Elevates right of TNC's over social and environmental concerns of communities and citizens
Free trade possibly ideological tool to ensure "hegemonic" dominance of the world system by Northern Rich countries --> power/knowledge regime - get knowledge from organizations like the World Bank --> ensure the idea that "there is no connection between increased poverty in the South and increased wealth in the Northh" ... for them, knowledge is power
What will the future of international trade look like?
- Free trade?
- possiblity for deglobalization? Movements in this direction - fair trade network, ALBA?
- Free trade will continue to persevere but the image is dented --> many groups now protest it (environmental, womens rights, indigenous, ect)
- do we need to deglobalize? - eliminate the power of the World Bank, IMF, WTO and create a new system of global economic governance
- Movements in this direction ... ex: fair trade network - connects small farmers, workers, and craftspeople in the South with organizations and consumers inthe North through "fair trade" rules and priciples
ALBA (see chapter 6) - one of the more successful and promising movements but it faces an uphill policical battle for "power"
"both free and fair trade should be the extent to which they promote and enhance human development for the poorest people in the South. International trade should be merely a means to this end"