Trade Policy, New Century: The WTO, FTAs and Asia Rising [Paperback]

Razeen Sally has written an eminently readable case for the furtherance of free trade. As I write, the turmoil in world financial markets has raised the volume of protectionist voices here in the United States such that I fear that once again that country is turning in on itself, continuing the trend that has been gathering apace since the attacks of 9/11.

Sally writes clearly and concisely about the case for free trade and reform in the world trading system building on a historical account of the improvement of manking which occurred through the extension of free trade.

He mourns the transformation of the GATT into the WTO and sees it as part of a regulationist movement which has expanded into the global institutions in the sixty years since the National health Service came into existance in Britain.

Dr. Sally explores the deterioration of full flight liberalisation and free trade into bi- and multilateral free trade agreements which are hedged with restrictions and limitations and which impede the betterment of the lives of the peoples involved. While lauding China for their progress in the unilateral area and praising India's stop-go attempts, Razeen highlights the rather scizophrenic situation of the United States who'se leadership in developing further free trade is central but where the dark forces of protectionism are strongest.

This is an excellent polemic from the IEA which is a must for all students and practitioners. Although the style is less formal than Hobart Papers of years past, it certainly adds to the ease and understandability of the subject. I can enthusiastically recommend this book.

The argument for free trade? Half the world's workers - 1.2 billion people, the highest number ever recorded - earn less than $2 a day. Over 190 million people worldwide are registered as unemployed, including 76 million young people. Due to trade liberalisation, Latin America lost more than 10 million jobs during the 1990s.

Trade liberalisation brings job losses and deindustrialisation. In Africa's manufacturing sector, employment decreased by 0.5% per year from 1981 to 1990 and real wages fell sharply throughout the 1980s. The share of manufacturing in the economy stagnated or declined in 18 of the 24 countries that underwent 'adjustment' between 1982 and 1988.

In Kenya, typically, full-scale trade liberalisation in 1993 caused huge job losses and a fall in total manufacturing employment. Overall, Kenya's manufacturing employment grew much faster in the 1970s, a decade of import-substituting industrialisation and significant government intervention in economic management, than in the 1980s and 1990s, the two `lost decades' of IMF and World Bank structural adjustment programmes and trade liberalisation.

In Zimbabwe, the result was that an increase in manufacturing output of 39%, in the decade before reforms, turned into a contraction of 14% in the first three years after reforms. Real earnings had increased by 1.2% per year in the five years before reforms but decreased by 9.9% per year in the five years after reforms.

In Mexico, according to the World Bank, an average tariff reduction of 20 percentage points reduced real wages by 5-6% on average.

Unemployment in the EU rose to 7.6% in January 2009 - a total of 18.4 million people, up from 6.8% in the same month a year earlier. Unemployment rates are particularly high for young people (more than one in seven of those aged under 25) and higher for women than men. Similarly, the OECD's own analysis showed that "foreign competition reduces employment in the most exposed industries" in its 30 member countries.

The EU admits that trade liberalisation causes `large-scale redundancies' and a `decline [in] employment terms and conditions' in the EU. In central and eastern European countries (in particular, the Czech Republic, Hungary, Poland, Slovakia and Slovenia), the long-term net effect of exports and imports on manufacturing wages has been negative, suggesting that the integration of these countries into the EU via trade liberalisation has been at the expense of labour.

The EU's `Global Europe' strategy, strongly supported by Brown, aims for even more trade liberalisation and deregulation. The EU predicts that its proposed Euro-Mediterranean Free Trade Area will destroy 3.4 million industrial jobs in Egypt, Morocco, Algeria, Tunisia, Syria, Jordan and Lebanon. Egypt alone is expected to lose 1.5 million jobs. Morocco and Algeria are predicted to suffer 790,000 and 620,000 jobs losses, respectively. The same goes for its other proposed trade agreements with Latin America, China and India.

World Bank economists have admitted, "during periods of trade liberalization ... job destruction rates can be expected to proceed at a much faster pace than job creation. Globalization could therefore be associated with higher unemployment rates."

But what is to be done? In 2005, a group of trade union representatives made a `call on WTO members to put a moratorium on the present negotiations'. This equals asking capitalists not to act in their own interests!

The neoliberal model of free markets and liberalised trade is crumbling in the face of global economic crisis. We must grasp the opportunity to replace it with a new way of thinking that prioritises the economic, social, political and environmental rights of people over the profits of transnational capital - which equals socialism.