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The
economics of failure: The real cost of 'free' trade for poor countries
Christian
Aid
June
2005
http://www.christianaid.org.uk/indepth/506liberalisation/index.htm
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Introduction
As
a major part of its remit to challenge systems that perpetuate poverty,
Christian Aid has for many years given a voice to those harmed by
trade liberalisation. We have highlighted the plight of farmers
who are no longer able to sell their crops when cheap imports flood
in and of people made jobless when factories close. These stories
of the casualties of unfettered liberalisation need to be told,
and we are proud of our role in giving a platform to those who otherwise
would not have a voice in international debates.
However, supporters
of liberalisation have always argued that these cases represent
an unfortunate, but small, minority. They claim that the majority
benefit from the new opportunities created by liberalisation. In
this briefing, Christian Aid shows that this is not the case. Complementing
our previous case studies, which show the devastation trade liberalisation
wreaks on individuals, we demonstrate that whole countries would
be much richer today if they had not been forced to open their markets.
Christian Aid
commissioned an expert in econometrics to work out what might have
happened had trade not been liberalised, using economic modelling.
The work was reviewed by a panel of academics. The model looked
at what trade liberalisation has meant for 32 countries, most in
Africa but some in Asia and Latin America.1
The data came
from the World Bank, International Monetary Fund, United Nations
and academic studies. We established the year each country began
to liberalise and the extent of its trade liberalisation. We used
evidence on the impact of trade liberalisation on imports and exports,
and the effect of this on national income, to estimate how much
income was lost given the extent of liberalisation. The results
suggested that:
- imports tend
to rise faster than exports following trade liberalisation
- this results
in quantifiable losses in income for some of the poorest countries
in the world.
We are not arguing
that countries which liberalise do not grow, or that some people
in them do not become less poor – but we are saying that without
liberalisation, growth could have been higher and poverty reduction
faster.
This report
shows the true cost of the policies that have been forced on the
developing world by donor countries and international institutions.
The devastation import liberalisation has caused agricultural and
industrial production in developing countries and the way it has
severely limited their prospects of future development is well documented.
This report puts a value on that loss.
________________________________
1. The countries
in the study were: Bangladesh, Benin, Bhutan, Botswana, Burkina
Faso, Cambodia, Cameroon, Cape Verde, Ethiopia, the Gambia, Ghana,
Guinea, Guinea-Bissau, Haiti, India, Indonesia, Kenya, Lao PDR,
Madagascar, Malawi, Mali, Mauritania, Nepal, Nicaragua, Pakistan,
Senegal, South Africa, Sudan, Tanzania, Togo, Uganda, Republic of
Yemen and Zambia.
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