Free Trade, Essay Example

International trade is basically the process of exchange of goods and services between countries. This type of trade gives consumers from all over the world to have access to goods and services which may not be originally available within their own countries. Free trade is referred to as a theory or type of international trade, which involves laissez-faire approach with no restrictions on trade provided. The principle of free trade was first discovered by Adam Smith who claimed that the division of labor among countries leads to specialization, higher efficiency, and higher aggregate production. The primary point is that demand and supply factors operate on a global scale, thus ensuring efficient production. Consequently, nothing is really necessary to be done in order to promote trade and growth, for market forces will automatically do it. However, nothing is perfect, as well as free trade approach, having its problems and disadvantages. The major contemporary issue is agricultural argument between European Union (EU), Unites States, and World Trade Organization (WTO).

European Union Common Agricultural Policy (CAP) was built upon deal between the Unites States and EU and it still creates problems across the Atlantic. According to it, EU had to focus on cereal production and the U.S. was bound to concentrate on protein crops. EU imports increasing amounts of soya beans without any tariff limitations applied, thus most of European animal production is build upon these imports. Therefore, European Union was given a chance to protect its cereal manufacture against cheaper imports, but immediately reached its growing production selling limits on the internal market. Consequently, the imported protein crops proved to be cheaper. As a result, this deal was confirmed in “Blair House Agreement” between United States and European Union in 1992.(Deese, 116) According to this document European Union was required to keep its own protein manufacture at a respectively low level, thus fixing its almost 80% deficit. Meat and milk surplus production in demanding European breading industries is supported by cheap protein imports, thus provoking new subsidized exports. This deal did not really benefit farmers, but created strings of dependence through trade with very negative effects on European and United States farming. EU and U.S. conflict in the WTO as to whether EU should accept genetically modified soya and corn imports from the U.S., thus demonstrating how the solution of farm policy disputes are limited by strong dependencies from trade agreements. So, Blair House Agreement creates strong imbalances of crop and animal production at the expense of their farmers in favor of transitional trade, which cannot be controlled.

Another issue would be the problem developing countries face the EU, U.S., and WTO, for they are compelled to open their markets in order to import agricultural products from EU and U.S. surplus manufacture. They were promised to obtain access to the markets of the North in return. However, it did not come true for developing countries, because of “Marrakesh Agreement” which was established in 1995.(World Bank, 39) In fact WTO claims that poor farmers from South would actually benefit from global development of agriculture in developing countries. However, free trade environment is fully dominated by transnational like Cargill and Archer Daniels, who control almost 40% of world trade in the main crops, thus gaining any possible profit from export of coffee, corn or other bulk products. As these companies obtain more market access it translates into market displacement of small farmers, as they depend on local and regional markets’ income. In Mexican example the opening of North American Free Trade area (NAFTA) has tripled Mexican imports of subsidized low quality corn from United States, thus causing the loss of 1.7 million jobs in the countryside.(Sicker, 43)

In order to solve this issue, the developing countries must look for partner to establish fair trade with high quality food products, thus defending their right to food security. In order for it to be accomplished, any agreement must be build on the principle that every country must be given an opportunity to establish a strong food security system which may not be determined by any dumping policies of any partners. Providing the access to land, natural resources, and local marketing for poor people will definitely end hunger. The EU should contribute adequate food and development aid to the process of agrarian reforms in the developing countries, thus balancing the enormous asymmetries of production and income of farmers between the North and South. Farmers would be able to shift towards more sufficient farm practices and food security with combined limited quantity access to a high price market. Thus the developing countries must not abandon their struggle against unfair market access agreement and concentrate on non-reciprocal special agreements of a limited amount of high quality products.

On the other hand, WTO should implement full democratic control and entrust agricultural issue to a new United Nations (UN) World Food Assembly. So, if WTO is not capable of addressing the rights and values linked to this area, they should leave it out of the contemporary negotiation program. Consequently, WTO is not legitimate to interfere with such fields as food security and food sovereignty of its members, not being subjected to democratic control. Therefore, the EU along with its potential partners for fair trade in agriculture should initiate the assembly of the international government bodies dealing with agriculture and food security like FAO (Food and Agriculture Organization), UNDP (United Nations Development Program), and the UN World Food Program accompanied by NGO and Civil Society community, which is active in this issue to elaborate on the non-trade aspect in the future. Contemporary food security systems and fair trade practice in North and South have to be analyzed, thus spreading the success stories. The FAO has already made an enormous contribution towards the conversation with the NGO community. As a result, the UN and WTO members disappointed by the current negotiation process on agriculture advance to question and challenge the limited and restricted way the WTO is managing food and agriculture. Society can directly benefit the consensus building process through the Convention of the Future of Europe and European Agricultural Convention, thus making WTO to learn how to manage the agricultural sphere or to give up on dealing with it.

If we refer to United Kingdom, as an opened economy the country definitely benefits from it because of the liberalized world trade system, thus creating more opportunities to enhance trade with other developing or developed countries. It supports the development of a forceful system for intellectual property rights, with copyrights, trademarks, and patents included.

Bibliography

Bhagwati, Jagdish. Free Trade Today. Princeton University Press, 2003.

Blim, Michael. Equality and Economy. Rowman Altamira, 2005.

Deese, David. World Trade Politics. Routledge, 2007.

Deutsch, Klaus-Gunter, and Bernhard Speyer. The World Trade Organization Millennium Round: Freer Trade in the Twenty-first Century. Routledge, 2001.

Howse, Robert. The Regulation of International Trade. Routledge, 2005.

Miller, Arnold. Free Trade: Current Issues and Prospects. Nova Publishers, 2004.

Narlikar, Amrita. International Trade and Developing Countries. Routledge, 2003.

Sicker, Martin. The Political Economy of Work in the 21 Century. Greenwood Publishing Group, 2002.

Toye, Richard. The UN and Global Political Economy: Trade, Finance, and Development. Indiana University Press, 2004.

World Bank. International Trade and Climate Change. World Bank Publications, 2007.