Winners and Losers in the Contemporary International Trade Regime

Topics: World Trade Organization, International trade, Free trade Pages: 8 (2924 words) Published: April 25, 2012
Who are the winners and losers in the contemporary international trade regime and how do international institutions affect this distribution?

This essay will provide an analysis on the nature and consequences of winning and losing in the global trading regime, not limited to the international distribution of gains and losses from trade, but also looking at domestic distribution of wealth as a consequence from e ngaging in the traditionally neo-liberal global trading regime. Such an analysis will be done through specific cases, and will illustrate how free trade reforms impact people of different countries in different ways. This essay will also continuously examine the importance of the international institutions in not only how they facilitate and promote the contemporary international trading regime, but also in how they are distributing the gains and losses of trade, and particular attention will be put on how the structure of the World Trade Organisation and the World Bank support the current trading regime in maintaining the status quo of the neo-liberal trading regime, and how they attempt to redistribute the share of world trade, and in extension, how they a ttempt to change the distribution of wealth in the global economy.

Firstly, the theory which the current global trading regime rests upon is one of the first things that an economist learns upon entry into academia. The theory of Comparative Advantage was first introduced by Torrens in 1815, in his “an Essay on External Corn Trade” (Ruffin, 2002: 732) - but made famous through the mathematical proof by David Ricardo in 1817, in his book “On the Principles of Political Economy and Taxation”, explains and describes how all actors in an economy will benefit from specialization of production and engagement in trade – and by extension, strict theorists of neo-liberal economics, such as Milton Friedman (1997), have argued that all trade between states and nations must be unregulated and therefore without government intervention in order to allow for the market to be clear of market failures, or in other terms, free of inefficiencies. It was with the support and encourage from economists such as Friedman, that the Thatcher and Nixon governments of the UK and the US respectively, adopted neoliberal reforms, including free trade reforms.

Free trade reforms are changes to the current democratic and bureaucratic procedures that exist surrounding the exchange of goods and services across borders. Grinspun and Kreklewich (Consolidating Neoliberal Reforms: "Free Trade" as a Conditioning Framework, 1994: 33) suggests that such reforms would include the privatization of state capital, deregulation of markets and a liberalization of the economy – all of which are measures that mean to decrease the influence the state has over the economy. Looking specifically at privatization and market de-regulation, an assumption is made that these efforts all lead to a liberalization of the economy, and therefore an analysis of other pro-liberalization reforms will not be considered in this essay. Burton (1987: 22) defines privatization of capital as “any measure by which transfers to private owners hip of previously governmentally-owned resources occurs”, such as the selling of public housing or stateowned firms. Privatization is an act that is very closely linked to the deregulation of markets, as expressed by Pirie (Burton, 1987: 22) – where he argues that the change of ownership is insufficient to acknowledge it as privatization, but that “the other, more important one, is competition”. In order to increase competition in markets, market de-regulation became an increasingly important tool, and a prime example of market de-regulation pursued by a government would be the Airline Deregulation Act of 1978 (Derthick and Quirk, 1985: 5) in the United States, where the market had previously experienced high barriers to entry through the requirements imposed by the Civil Aeronautics...
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