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 You are in: Special Report: 1999: 11: 99: Battle for Free Trade
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Tuesday, 23 November, 1999, 17:52 GMT
Finding a way through the trade morass


BBC Economics Reporter Chris Giles urges people to take a sceptical view of the various claims that will be made by pressure groups during the latest round of trade talks.

The battle for free trade
Keep your wits about you - the new round of global trade talks starting in Seattle will throw up plausible sounding arguments from all sides.

National governments, international trading blocks, trade unions, environmentalists, farmers, multinational companies and many other pressure groups will be represented and will try to convince the world their vision of the future for world trade is best.

They'll all try to paint themselves as the good guys, but they can't all be right.

How can you pick your way through this mess? You could do worse than bear the following points in mind. And all the time remember, when it comes to trade, there are generally no good guys or bad guys - just interested parties out for the best deal for themselves.

Trade is generally good

Trade enables countries to produce more of what they are good at and buy other products in return.

That's what economics tells us and how it's been in practice.

The periods of rapid economic growth and rising living standards have coincided with rising trade. Periods of rising barriers to trade such as the 1930s have been associated with low economic growth and rising tensions between nations.

Watch out for protectionism

Many of the arguments against trade are protectionism in disguise.

The US shows great concern for labour standards in developing countries and is threatening to bar goods from countries without labour protection laws. But this is more a sop to their unions to protect jobs in America rather than to improve the lot of poorer nations.

The American argument isn't complete rubbish. Labour stands are terrible in many countries. But perhaps it's worth asking what would happen to people if labour protection measures were enforced. Many working children in developing countries would find their only livelihoods killed off immediately.

The same questions and issues apply to the environment. Are trade rules the correct way to achieve environmental objectives, or is the real purpose to secure protection for countries that have already developed their industries?

Why gains? Who loses?

Trade does affect the distribution of income.

Even though trade is generally good - it is unlikely to be good for everyone.

Inefficient producers find they lose their market share when faced with cheaper foreign imports. But consumers gain significantly if they can purchase goods more cheaply than before.

Different sectors of the economies, the rich and the poor within countries and different countries are all affected by trade.

Some will gain, some lose. Even if the overall effect is for trade to be good, the losers from the process will complain bitterly.

It is an extremely difficult policy task to determine when and whether the losers should be protected or compensated.

No such thing as free trade

There is no such thing as completely free trade.

Even though countries are generally moving towards free trade, it should be recognised the world is miles away from that objective.

Barriers to trade don't just consist of tariffs. There are also non-tariff barriers, customs inspections, safety regulations and the like, that limit free trade.

And until every country in the world has the same laws, standards and currency, genuinely free trade will not exist.

How to manage trade

If totally free trade is not on the agenda, then trade we have must be managed.

And even though the WTO will come under fire from many pressure groups, it's the only management system for world trade we have.

If trade rules were based on bilateral negotiations between countries rather than global rules, the system would be much less transparent, much more complex and inefficient.

The WTO can be changed and improved but criticising everything the WTO stands for might mean the world ends up with a much worse system of managing its trade, completely dominated by the world's big trading blocs.

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Links to other Battle for Free Trade stories are at the foot of the page.


Links to more Battle for Free Trade stories