The Broader Picture

Trade has been a substantial part of human society since time immemorial. We have moved from the most basic level, at which each clan produced rudimentary goods for personal consumption, to a developed society dependent on an ever-increasing sphere of trade.

Nowadays, the world market works according to the principle of free trade, a concept that is hailed both as the non plus ultra of civilization and the most base institution of imperialism. According to the economist’s argument free trade is beneficial because it promotes the division of labor and allows everybody to specialize in production according to their comparative advantages. This process guarantees maximum efficiency resulting in the highest rate of production.

Free trade allows us to enjoy a far more varied and abundant supply of goods and services. Globalization with its new economic possibilities, such as outsourcing and off-shoring in all sectors, has given transnational corporations (TNCs) the opportunity to produce their goods abroad at lower labor costs. The diminished cost of labor in turn results in a less expensive final product. This process provides a clear advantage to the global North, but the benefits to the off-shored South are arguable. Many TNCs do not comply with the International Labor Organization’s (ILO) labor standards and do not operate under environmentally-sound conditions.

Crucial questions are: How fair is free trade?
How much does foreign direct investment (FDI) really contribute to a country’s long-term sustainable development?
Are the TNCs merely opportunistic, or do they offer serious global solutions?
How much do the workers of a maquiladora in Mexico really benefit?
Trade that depends on the exploitation of the marginalized is not beneficial to all parties and, therefore, it is not sustainable.

The promotion of sustainable development is an imperative in today’s world. As human and natural resources are being exploited in the name of profit maximization, it becomes increasingly difficult to meet the demands of present and future generations. Poor terms of employment, unhealthy and hazardous working conditions, environmental pollution and the scarcity of natural resources are problems that have been acknowledged by the international community. Yet, many international companies only exacerbate these existing problems. At present the majority of businesses do not internalize the costs of their social as well as environmental impacts.

Globalization and liberalization of markets have an increasing impact on peoples’ lives all over the world. The inter-connectivity of societies has advanced at an incredible speed over the last several decades due to the rapid development of technology. More and more people use the internet, airline travel becomes cheaper and therefore more accessible, and the cost of international communication has plummeted. Today technical and financial barriers to trade are being overcome. Through outsourcing and/or off-shoring, companies can save, not only on labor costs, but also gain time working across different time zones. Additionally, financial markets in New York and Tokyo are able to simultaneously respond to new economic developments.

Yet despite our global advancements, progress is not equally distributed. There are many people in the South with no access to the technology that has revolutionized the global economy. To those who have not benefited from the fruits of free trade, poverty, inequality, and isolation are still a way of life.
The ongoing debate in the United States about the winners (consumers enjoying lower prices, stockholders who see profits rising) and losers (workers whose jobs are displaced, owners of firms whose contracts get transferred abroad) of the new trade possibilities can be easily stretched to encompass the North-South conflict.

The world has seen a growing polarization between the rich and poor countries in the global economy that is still continuing. The share of international trade involving developing countries barely changed in the last decade. Of the least 48 developed countries, 29 are members of the WTO. Since 1960 their share of global trade has fallen by 80%; Africa’s share is 1.8%, tendency falling. Moreover, Africa and South West Asia are regions that are nearly excluded from flows of foreign direct investment (Data from Free Trade: Winners and Losers).
About 80% of FDI and 70% of world trade is controlled by the approximately 500 top TNCs. This fact highlights the importance of TNCs, and the extent of their power and responsibility. Sub-human working conditions in TNCs and the sweat shops they subcontract, the fast movement of capital, and the tax exemptions contrast with the TNCs potential to provide an engine of growth, employment, and trade. However, generally speaking little technology and knowledge is transferred to the community and the innovative jobs remain in the North. Of course TNCs are not evil as such and there are many examples of ethical business codes and respect of workers' conditions. To contribute to sustainable development, it is imperative for TNC’s to act responsibly towards all members who have a stake in their activities.

The need to challenge conventional thinking and address the multifaceted nature of inequality is widely acknowledged. Alternative trade movements campaigning for global trade reform, such as Trade Justice or Fair Trade, gain momentum and consumer support as more and more consumers become aware of their power. Fair Trade products give consumers the chance to act responsible and put pressure on companies that do not comply to Fair Trade standards.

Everybody who would like to find out more about an alternative approach to trade focusing on fairness, acknowledging the dignity of all links in the supply chain, and encouraging ethical consumption, is encouraged to find out more about Fair Trade.

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