Introduction
The global trading system, governed by a complex web of international trade laws, has far-reaching implications for the distribution of wealth and economic development around the world. However, the system is often criticized for exacerbating inequality between developed and developing countries. This article examines in detail how trade laws contribute to global inequality, highlighting the need for a fairer and more equitable economic environment.
Historical bases and imbalanced trade agreements
The dominant system of global trade dates back to the colonial era, when European countries colonized various territories, including African countries, and exploited their resources. Despite gaining independence, these countries are still struggling to escape the economic influence of their former colonizers. As a result, they are often forced to sign trade agreements favorable to Western countries.
Today, these agreements continue to hamper the economies of developing countries, trapping them in agreements that primarily benefit the West. These agreements usually force developing countries to remove tariffs and trade barriers, allowing Western products to dominate the market and eliminate local industries. Furthermore, agreements often focus on commodity exports, perpetuating cycles of subordination and underdevelopment.
The Subsidy Dilemma and the Implications of Dumping
Western trade policies such as subsidies can negatively affect developing countries. Developed countries provide financial support to domestic industries, allowing them to produce goods at artificially low costs. Subsidized products are exported to developing country markets and sold at prices that local industries cannot compete with. Known as dumping, this practice hurts local businesses and leads to economic downturns and mass unemployment.
For example, in the agricultural sector, Western subsidies have a devastating effect on farmers in developing countries. Surplus agricultural products from the West are often dumped into these markets, driving down prices and preventing local farmers from competing. This problem not only harms the agricultural sector, but also contributes to food insecurity and rural poverty.
Debt burden and risks in restructuring programs
Over time, many developing countries have accumulated significant debt due to unfavorable trade agreements and economic policies of developed countries. To resolve this debt, international financial institutions such as the International Monetary Fund (IMF) and the World Bank introduced the Restructuring Program (SAP). These programs require developing countries to implement economic reforms, including trade liberalization and privatization of state-owned enterprises.
But these reforms often have disastrous consequences for developing economies. As trade barriers were removed and cheap Western goods appeared, local industries declined and countless jobs were lost. Moreover, privatization of essential services such as health care and education leads to reduced access and increased inequality.
Conclusion
The world trade system dominated by the interests of developed countries perpetuates inequality between countries. Unfair trade practices, subsidies, dumping and debt are just some of the ways in which developing countries are exploited and penalized. To address this issue, a fairer global trading system that prioritizes the needs of developing countries and promotes sustainable development is urgently needed.
Efforts should focus on renegotiating unfair trade agreements, eliminating harmful subsidies, and reforming international financial institutions to better meet the needs of developing countries. In addition, these countries must be able to break the vicious cycle of dependency and underdevelopment, diversify their economies and develop local industries. Only then can we expect a fair and just world economy.
Author: Pooyan Ghamari, Swiss Economist
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