WESTERN FRENEMIES

AND BALANCE OF
INTERNATIONAL
TRADE

WESTERN FRENEMIES AND BALANCE OF INTERNATIONAL TRADE

Submitted to:
Course Instructor: International Business Environment
BBA Program

Submitted by:
Group 2
Shadid Rahman (ZR-83)
Rubyena Shabnoom Huq (RH-93)
Amiya Dhara Halder (RH-121)
Moyukh Mahtab (ZR-126)
Batch: 21st, Section B

Institute of Business Administration

University of Dhaka

October 21, 2015

TABLE OF CONTENTS
THE OTHER SIDE OF INTERNATIONAL TRADE ............................................... 3
MODERN DAY COLONIALISM ................................................................................... 4
ENVIRONMENTAL AND RESOURCE EXPLOITATION .................................... 5
HUMAN RIGHTS VIOLATION ..................................................................................... 8
CHILD LABOR ................................................................................................................ 10
DEVELOPMENTAL AID .............................................................................................. 12
SUSTAINABLE DEVELOPMENT AND THE WEALTH GAP .......................... 13
UNEQUAL GAINS AND TRADE IMBALANCE .................................................... 14

THE OTHER SIDE OF INTERNATIONAL TRADE

A 2012 press briefing from the UN reporting on a General Assembly meeting
illustrates an important issue in international trade among developing and developed
countries. Trade imbalances have been a concern for theorists and statesmen from the
days of mercantilism. But the issue today is much more diverse, and with more actors
such as the WTO involved, there is much more at stake.
On the General Assembly meeting, the Algerian representative speaking on behalf of
the Group of 77 developing countries and China, said the turbulence in international
trade was costly and disruptive, especially for least developed countries and African
States. He described international trade as a vital tool for long-term sustainable
growth, emphasizing that developing countries should be spared from protectionist
barriers, especially agricultural subsidies, and calling for the extension of traderelated technical and capacity-building assistance to them.
His call was echoed from many other delegations. The issues came to prominence at a
time of global economic crisis the call for vigilance against protectionism, which
could mean devastation for the developing countries, was a pressing issue for many
countries.
The free market, with all its benefits for modern countries in the form of export led
development, rise in employment and GDP and per capita income to name a few, has
long been criticized on several grounds.
As opposed to a theoretical, economic model, in the real world, nations negotiate
agreements with their benefits in mind rather than the good of the whole world.
Despite WTO agreements, every nation utilizes protectionist policies in some form or
the other. Sociopolitical arguments against free trade cite social and political effects
that economic arguments do not capture, such as political stability, national security,
human rights and environmental protection.
Trade balance is the difference between a countrys output and its domestic demand.
Trade imbalance that is an unequal export and import between a developing and
developed country can have consequences on the economy of the country. As one
paper by Gary N. Horlick titled The WTO and Developing Countries shows, since
smaller economies like those of developing countries cannot deal with major shocks
from bigger economies, the imbalance can prove fatal if at any point, the bigger
economy decides to impose protectionist measure, like they did during the last
recession.
Thus we can see that although trading with more powerful economies can be
beneficial to developing and least developed countries, the trade can have its adverse
effects. Trade with such frenemies friend-enemies can often have both
dimensions. This extends to involvement of development organizations and
international NGOs as well.

We will try to delve into particulars of how foreign trade can affect a country
adversely, and with it see their relations to the issue of trade imbalance.
MODERN DAY COLONIALISM

Although colonization is deemed to be a thing of the past, on closer inspection, it can

be seen that colonialism is still prevalent to this day. Colonialism is the building and
maintaining of colonies in one territory by people from another territory a key
feature of mercantilist trade.
Relationships between the two territories are by default unequal; the native people are
essentially under the control of the colonizing territory. Colonialism nowadays is
much more discreet. Countries dont openly lay claim to other nations territories. The
process is much more subtle than it used to be before.
Colonialism in this day and age is termed as neo-colonialism. Generally, neocolonialism does not refer any type of direct colonization and free trade sometimes
seem to lead to neo-colonies. Even after formal independence has been achieved,
under neo-colonialism former or existing economic relationships such as the General
Agreement on Tariffs and Trade (GATT) and the Central American Free Trade
Agreement, are used to still retain control of the former colonies. It is a form of
economic imperialism; powerful countries involve themselves to a large extent in the
affairs of less powerful countries.
The clearest example of neo-colonialism at the moment is the phenomenon of land
grabbing. Millions of hectares of farmland, as well as forests and peat lands, in
developing countries are sold or leased off to other nations. The majority of the land
being sold off is in Africa and the buyers are various nations: the US, European
nations, rising BRIC nations of Brazil, Russia, India and China; and the Gulf States
are all participants in this race to grab land. Surprisingly, the most spectacular deals
are carried out not by multi-national corporations, but by governments and the
conglomerates they promote. Examples are, 1.5 million Sudanese prime farmland
leased to the Gulf States, Egypt and South Korea for 99 years; 130,000 hectares of
Cambodian rice fields leased to Kuwait; Egypt leasing 840,000 hectares of Ugandan
farmland.
Previously, it was the colonising nation that used to extol all the benefits it would
bring to the nation being colonised. Nowadays, it can be seen that the countries being
colonised not only tolerate, but also actively encourage it. The situations in these
countries are bleak. Famine, political problems, underdevelopment, such problems are
rampant to the extent that they would prefer to be colonised than continue as they are.
Sadly, the future is still uncertain. In making such deals, they may just be exchanging
one set of problems for another. The colonising nations may very likely leave them
depleted and worse off than before.
In theory free trade, but in actuality the difference of bargaining power between
countries tends to lead to this modern day colonialism. This also takes on the form of
cultural imperialism, as underdeveloped countries come under the sway of big
economies. In this case globalisation instead of uniting diversifies cultures, takes on

the form of one dominant culture over-ruling all native ones. So we see free trade
taking the form of an unequal gain between countries, not only in terms of resources
exchanges, but of cultural ideas too.
ENVIRONMENTAL AND RESOURCE EXPLOITATION
Even at the end of colonialism, developed countries continue to plunder the resources
of developing countries in overt and covert ways. Economists have generally argued
that free international trade benefits all participants by allowing countries to acquire
goods and services at a lower opportunity cost. In recent years, however, there have
been increasing concerns over the effect of international trade on the global
environment. Critics of the WTO commonly argue that open trade degrades the
environment as business relocates to take advantage of lax environmental protection,
and further places competitive pressures on environmental, labor, social and perhaps
other standards with the result that regulators must sacrifice regulatory goals in these
areas in the interest of national competitiveness.
Industry and production use resources that deplete our environment and emit byproducts that harm the environment.
The pollution haven hypothesis claims that countries with lax environmental
standards will attract pollution-intensive producers. Costs of production will be less in
those countries with more lenient standards, attracting potential producers. In 2002 a
report by Derek Hall identified a movement of dirty industries from Japan to less
developed countries in Southeast Asia.
While developed countries have achieved substantial economic growth and
development and can afford to focus on environmental goals because basic living
necessities have been achieved, halting environmental pollution may undermine
economic growth and competitiveness of developing countries whose economies
depends on natural resources.
Most developing countries, especially those in sub-Saharan Africa, depend majorly on
natural resources for revenue and foreign exchange. However, the exploitation and
processing of some of these resources result in environmental pollution and
degradation. For instance, the exploration of oil and the activities of multinational oil
companies in the Niger Delta region of Nigeria has caused substantial land, water and
air pollution. However, for Nigeria to maintain its current economic growth path and
sustain its drive for poverty reduction, oil exploration and production will continue to
be a dominant economic activity. This is also the case with a number of other
developing countries.
In the 1980s, the environmental regulations governing waste treatment in the
developed world became more stringent and the costs of domestic safe disposal
increased. This saw a simultaneous increase in the activities of the toxic terrorists in
shipping waste to the developed countries. A significant amount of hazardous waste
generated in industrialized countries has ended up in developing countries in the
1980s as a result of legal (or illegal) contracts to accept waste in exchange for cash.
In 1987, as a result of a deal between businessmen, 4000 tons of hazardous chemical

waste from Europe found itself in the port of Koko in Nigeria. In the same year, the
Mexican navy had to prevent by force unsanctioned dumping in Mexico by an
American barge. In fact between 1989 and 1994 there were 693 proposals from
developed countries to export waste to the Third World.
Developed countries under the guise of Ricardos comparative advantage theory have
often justified the role of developing countries to produce cash crops for export even
though they have high local environmental costs and render the economy of these
countries dependent on the fluctuating prices in the international markets. Emphasis
on export production means a shift towards cash crop production, harming availability
of food crops for the poor, and clearing of forests and dislocation of the local people.
The case of banana prices grown for exports in Latin America hitting rock-bottom and
the resulting economic consequences suffered highlight the flaws in application of
popular economic models. The environmental disaster caused by the emergence of
rich cacao farms in parts of Brazil and their collapse due to sharp decline in worlds
chocolate prices is yet another example of artificially induced unsustainable
development patterns in developing countries.
A look at the environmental conventions debated at the international level provides
useful insights of the skews in how the global environment agenda is defined. The
actively debated conventions are those that strengthen and safeguard the interests of
developed countries or which concerns them directly. Issues like global warming, loss
of ozone layer, preservation of whales and dolphins are the priority global
environmental issues and they attract a high proportion of global funds.
Environmental issues raised by developing countries are often left on the backburner
due to lack of interest among the developed countries. For example, the Convention
on Combating Desertification and the Convention on Habitat and Settlements are little
debated and even less funded as they have directly to do with environmental issues
faced by developing countries.
National sovereignty has always dominated the policies and actions of developed
countries in environmental matters. The Bush administration declined to sign the
Convention on Biodiversity not because it simply disagreed with its objectives but it
required the signatory governments of developed countries to alter their systems of
patent protection to transfer technology to the governments of developing countries
on most favorable terms. Developed countries have always found it much easier to
change the policies of the developing countries to make way for their externalities
rather than change their own domestic policies to cause less environmental damage.
Countries like US, would rather have Amazon rainforest cut down to make way for
cattle ranches to provide beef in McDonald's burgers rather than bring about a change
in their domestic policies.
One of the most valuable resources essential for human survival the environment
continues to be exploited and appropriated by the west even beyond their national
borders. Allowing over-consumption and non-payment of environmental debts has
become a rigid element of their policies. The world does not lack the financial
resources to establish a healthy environment on planet Earth. What is lacking is the
attitude and the need to change the resource flow equations and bring about policy
changes.

On top of a disregard for environmental consequences, another closely related factor

is the exploitation of resources by powerful economies. Due to the uneven distribution
of scarce resources all over the world, resource rich countries get the advantage of
utilizing these resources to create products of value or exporting them and earning
foreign currency. This definitely gives these countries an edge over the ones with
little or no resources, who have to depend on others for production. The nations with
abundant resources usually utilize these resources and depend on them to fuel their
economy and it makes sense for them to do so.
Globalization has led to a drastic increase in market size of the natural resources. To
accelerate economic growth and have a positive effect on the balance of payments,
countries often do not take the necessary steps required for a sustainable growth but
go for short-term benefits.
The developing world has seen a phenomenal rise in FDI inflow in the recent years.
Low costs of transportation and communication, cheap labor and nearness to the
market has led to the birth of MNCs. As of 2009, 82,000 MNCs along with 810,000
of their subsidiaries operated all over the world. Their operations are so large and are
usually so powerful that they often influence the government of the developing
nations to ignore the law when it comes to them. And due to the massive economic
benefits the MNCs usually bring to the nation, the governments have no choice but to
agree to their conditions.
The consequences of economic growth and increased exploitation of resources not
only effects the environment of the resource-rich nation but also its neighbors e.g. The
dry season burning of trees and peat bogs in Indonesia and Malaysia to make way for
plantations spreads haze throughout Southeast Asia and the Southern Pacific islands,
and releases vast amounts of carbon dioxide (CO2) into the atmosphere. Creating and
operating large hydropower dams in South and Southeast Asia usually involves the
destruction of large tracts of carbon-absorbing forests, and their reservoirs can give
off more CO2 than thermal power plants.
The developed countries always push for lower prices do deal with the everincreasing competition. If the developing nations refuse to comply, they threaten to
move to more cost effective locations, which now can be easily done due to
globalization. Due to this, the resource rich nations resort to unethical practices, deny
the labor force proper compensation and safety equipment.
In short, due to the need of investment and business for these developing countries,
they have to sacrifice their environmental concerns. Due to the wealth gap between
the developing and developed countries, an imbalance of bargaining power exists,
which allows superior economies to practically dictate business terms in poorer
countries. But this imbalance manifests not only in a devastated environment, but also
through he flouting of human rights and labor laws.

HUMAN RIGHTS VIOLATION

Supporters of free trade argue that countries that liberalize their economies achieve
higher levels of economic growth. According to this argument, increased growth in
turn raises living standards for everyone since increased growth results in higher
incomes and standards of living and ultimately more respect for and enjoyment of
many human rights.
Trade liberalization has indeed assisted some countries to improve their human
development status. It is not always the case, though, that it will and each situation
needs to be assessed on its own terms. Paul Krugman, the Nobel-prize winning
economist has argued that the policy prescription that free trade will make all
countries achieve mutually beneficial exchanges is not necessarily true.
An information sheet developed by the Regional Office for the Pacific of the Office
of the High Commissioner for Human Rights and the United Nations Development
Programme (UNDP) Pacific Centre, states that:
Trade agreements invariably affect human rights of consumers, residents, workers,
those in poverty and others, and the ability of States to regulate to protect the human
rights of their people. However, trade agreements are often negotiated without
reference to their impact on the rights to health, education, food, work, water,
sanitation and so on.
Multilateral, regional and bilateral trade agreements are often regarded as primarily
economic or commercial in nature and therefore are often not assessed for their
impact on human rights. Thus, the effect of these agreements on the enjoyment of
human rights of consumers and individuals in general is not often an explicit or even
significant consideration in the negotiation and implementation of the agreements.
Trade liberalization is usually accompanied by calls for a state to open up markets and
de-regularize areas such as health, education and other social programs. This can lead
to reduced levels of government spending and reduced space for government
regulation in these areas. In this regard, such liberalization has a potential to
undermine efforts to protect the right to health, education and other human rights.
In the Pacific, for example, the situation of small island states needs to be taken into
account. Small islands states and least developed countries (LDCs), where producers
cannot compete equally with producers from technologically advanced economies,
may not follow the positive examples cited in favor of trade liberalization.
The integration of global goods and services markets facilitated first by the General
Agreement on Tariffs and Trade (GATT) and subsequently by the World Trade
Organization (WTO) is correlated with economic prosperity and a fall in poverty
according to Harrison (2007). Nevertheless, news of labor and human rights
violations in global-supply chains abound. Violations of the most egregious sort such
as human trafficking, child enslavement, mortally hazardous conditions of work,
verbal and physical abuse, exhausting hours of work, nonpayment of wages, etc. are

common occurrences. The competitive pressures that result from open trade cause
regulators to lose control over local regulatory matters and precipitate a race to the
bottom over matters such as social welfare standards, environmental standards, and
worker protection legislation. Consequently, open trade exacerbates inequality in the
distribution of income.
Foreign direct investment and trade liberalization can have significant repercussions
for workers rightsfor better or for worse. They can help developing countries insert
themselves into the global economy and reach larger markets, creating more demand
for their labor and allowing workers to leave low-income occupations, such as
subsistence agriculture, and move up the income ladder. While these positive
outcomes have been achieved in some countries, many other developing countries
have had far less optimal experiences.
Overseas sweatshops and plantations where workers are forced to work up to 80 hours
each week, in unsafe conditions and with minimal pay, are also a common feature of
the global economy. All too frequently, foreign-invested firms are among the
sweatshop operators, particularly in export agriculture and in labor-intensive
industries such as garments, footwear and toys.
From October 2010 to June 2011, through an investigation of ten global brand
supplier electronics factories, China Labor Watch discovered multiple violations of
Chinas Labor Law, which was recently instituted in 2008, and brand companies
Corporate Social Responsibility Codes of Conduct, who contract production out to the
Chinese factories. The majority of these violations fall under five general categories:
overtime, wages, labor intensity, contracts, and discrimination. The multinational
companies that contract production to these Chinese factories claim that the factories
bear the sole responsibility for these abuses. However, in this report, CLW posits that
many of these abuses are firmly entrenched in the global supply chain system.
Because most production costs, including distribution and physical materials are to a
great extent inelastic, the only way factories are able to offer a competitive advantage
is to lower the manufacturing costs, which often translates directly into lowering labor
costs. This burden is eventually passed down to workers, who are forced to work long
hours at a high intensity. When these external pressures become too great, and
workers suffer from accidents or tragedies such as suicides occur, blame is often
directed at factories, while international companies at most publish a press release,
and vow to implement reform.
Similarly, field research by Students and Scholars against Corporate Misbehavior
(SACOM) shows that Wal-Mart Chinas eighth largest trading partner
consistently fails to catch and stop serious labor violations in its Chinese supplier
factories, including wage and hour violations, unsafe working conditions, unsanitary
worker housing, hash punishments and heavy fines, deprivation of labor contract
protection, non-provision of social security, illegal firings and suppression by factory
management.
A report by the Human Rights Watch in April 2015, two years after the Rana Plaza
collapse, the deadliest garment-factory accident in history, continue to work in poor
conditions and face anti-union tactical tussles with their employers, including assault
on union organizers. The report said efforts were underway to make Bangladesh
factories safer, but the government and western retailers had not done enough to

enforce international labor standards to protect workers rights, including the right to
form unions, and advocate for better working conditions.
Indonesias Peoples Tribunal found evidence of systematic violation of the
fundamental right to a life lived with human dignity in a 2014 wage trial on
garments factory worker abuse. These cases related to suspension of minimum wage
payments, illegal compulsory overtime, inhuman productivity measures, systematic
denial of social security payments, gender discrimination, and active suppression of
the right to freedom of association in the industry. All global brands mentioned in the
testimonies were invited, such as Nike, GAP and Walmart. Only H&M and Adidas
were present to respond to the witnesses. H&M had focused its submission on
speaking about their Roadmap to a fair living wage. However, they admitted never
having tried to calculate a living wage figure. Adidas' representative caused an uproar
among the audience when responding to one of the witnesses by saying 'no factory is
perfect'.
Global brands and developing countries must acknowledge their complicity in rights
violation, even if they are not directly involved with a company which stitches their
clothing or assembles their electronic devicesthey are still responsible for the
conditions in those factories. There is need for institutional evolution in the
international system, a need to understand the effects of trade laws and policies in the
broadest sense, and a need to evolve new laws and policies in a manner that
overcomes the post-war legacy of isolation between human rights institutions and
economic institutions, including those preoccupied with the trading system.
As the Rana Plaza incident comes to show, no party wants to carry the responsibility
of labor right related accidents. Issues such as the developed country turning a blind
eye are swept under the rug and the onus remains on the poor country with its lack of
resources and need for investment. In this case, terms, treaties can be forced on to
them not all bad necessarily but the balance of power is never equal. Free trade
remains a game where developed countries and MNCs dictate and change the rules to
suit themselves.
CHILD LABOR
According to ILO, the term child labor is often defined as work that deprives
children of their childhood, their potential and their dignity, and that is harmful to
physical and mental development.
In its most extreme forms, child labor involves children being enslaved, separated
from their families, exposed to serious hazards and illnesses and/or left to fend for
themselves on the streets of large cities often at a very early age. Whether or not
particular forms of work can be called child labor depends on the childs age, the
type and hours of work performed, the conditions under which it is performed and the
objectives pursued by individual countries. The answer varies from country to
country, as well as among sectors within countries.
Even though the usage of child labor was prevalent since a long time back, it has
come to the spotlight quite recently. Regarded as one of the most heinous sins in the

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business arena, child labor was, and in some instances still, found to be associated
with even the top brands from the west, who are known to be against the concept.
The International Labor Organization estimates that 215 million children between the
ages of 5 and 17 were working under conditions that are considered illegal,
hazardous, or extremely exploitative as of 2012.
Poor governance and lack of enforcement of laws are the main reasons for the
widespread use of child labor in the developing countries. The western developed
countries are quite vocal about it and have quite effectively stopped it in their own
country but are indirectly responsible for its existence in other parts of the world.
NGOs tell us (as does the UN convention on Childrens Rights) to listen to children
and may go further in appreciating the work that children do and support their efforts
for better working conditions, moving away from simple solutions like banning
childrens employment. But countries like the US are not flexible on this matter.
Harkins Bill (The Child Labor Deterrence Act 1993) proposes a ban on imports to
the United States from counties that use child labor at any stage of production. Any
instance of child labor will result in loss of export market for the companies.
Despite these strict threats given by one the major importers, why do developing
countries still use child labor to run the factories? It is because of the stubbornness of
the west to increase prices. Despite constant calls from the developing countries to
increase prices to accommodate the rising wages, organizations from the west refuses
to increase the prices they are willing to pay even by a couple of cents. Instead of
cooperating, the organizations threaten to move to more cost effective locations where
the factories will be able to produce their goods at a lower cost. As a result, the
management is forced to resort to these unethical and illegal practices for keeping
their clients and surviving in the market.
Sometimes, the MNCs are not aware that the work outsourced involves child labor in
the production process. Some are not even bothered to know how the countries
manage such cheap costs. Others turn a blind eye because at the end of the day, it is
all about making money. They are always striving to keep the costs down and in the
process neglect the involvement of child labor in their product. If customers raise
questions/awareness, they claim that their suppliers do not engage in such
malpractices; they were never aware such crimes could be committed; and/or they
change suppliers.
High profile companies like Nestle, Nike, PMI and Victorias Secret have been
known to be involved in the usage of child labor at some point of time. While
companies and consumers all over the world are becoming more conscious and the
main problem still remains. The developing nations do need to tighten their laws and
provide their citizens with at least the minimum standard of living they deserve to get,
it would be impossible to do so without the help and cooperation of the west. But the
responsibility ultimately lies on these powerful economies to fix fair prices since they
control the flow of trade.

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DEVELOPMENTAL AID
Development aid is financial aid given by governments and other agencies to support
the economic, environmental, social, and political development of developing
countries. It is distinguished from humanitarian aid by focusing on alleviating poverty
and illiteracy and improving living conditions in the long term, rather than a short
term response.
Aid may be bilateral: given from one country directly to another; or it may
be multilateral: given by the donor country to an international organization such as
the World Bank or the United Nations Agencies (UNDP, UNICEF, UNAIDS, etc.)
which then distributes it among the developing countries. The proportion is currently
about 70% bilateral 30% multilateral.
About 80-85% of developmental aid comes from government sources as official
development assistance (ODA). The remaining 15-20% comes from private
organizations such as "non-governmental organizations" (NGOs), foundations and
other development charities (e.g., Oxfam).
Most ODA comes from the 28 members of the Development Assistance
Committee (DAC). This alone illustrates the amount of influence members of this
committee wield.
Many economists are against the concept of foreign aids. Economist Peter Bauer
describes foreign aid as an excellent method for transferring money from poor people in rich countries to
rich people in poor countries
Research has shown that developed nations are more likely to give aid to nations who
have the worst economic situations and policies so that they can become developed
and begin to turn these policies around. It has also been found that aid relates to the
population of a nation as well, and that the smaller a nation is, the more likely it is to
receive funds from donor agencies.
But it can be seen that a developing nation with a lack of resources, policies, and good
governance will rarely be able to utilize incoming aid money in order to get on their
feet and begin to turn the damaged economy around. This is due to the poor
governance, level of education and awareness of the citizens and the widespread
corruption prevalent within the country.
The donors are also often responsible for the ineffectiveness of the aids given. Lack of
understanding of the recipients problems and external environment often leads to the
donors projecting their own problems and environment onto the developing nation,
while formulating the projects. This leads to funds being allocated to unnecessary
projects that harm the recipients more than helping them.
Sometimes, tied-aids may require the recipients to spend the resources on countries
that are neither cost effective, nor the ones with the best technology. This not only
results in wastage but also promotes inefficiency, which hampers the development of
the nations.

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Lack of power and authority the developed countries have on foreign soil might lead
to abuse of the funds. Even if the donors earmark funds for a specific project, they
cant do much if the local organizations abuse the resources and invest it for their
personal gain.
But the issue that ties developmental aid does not stop at its effectiveness or lack
thereof, but on the influence these aid has on developing or poor nations. Hungry for
aid, they are willing to sacrifice national priorities. This imbalance of power is also a
factor for the imbalance of trade ultimately the developed countries tend to use aid
as a tool for furthering their national interests.
SUSTAINABLE DEVELOPMENT AND THE WEALTH GAP
A development centred free trade has taken on the call for sustainable development.
To help developing economies grow, and mostly take advantage of their cheaper
resources, developed nations invest in such countries.
Since, most host countries have little to no bargaining leverage over the MNCs; they
are unable to prevent such incidents of exploitation.
During the time foreign companies operate in the host countries, they usually meet
their promises of increased employment, good salaries, benefits, and so on. However,
after they have finished their operations, i.e. extracted all they could, they just pack up
and leave. What they leave as parting presents are most of time barren, polluted
landscapes filled with unemployed people. Examples of places where such incidents
have taken place are the island nations of Malta and the Philippines. The culprits in
both instances were mining companies.
While, developed nations usually stress on how important safety standards are to
them, where developing host countries are concerned, they often prove quite shortsighted. For example, in Costa Rica, most of the forests have been cleared out for
banana plantations where the use of pesticides such as PCB, DDT, mercury, etc. is the
norm. These chemicals are banned in western countries as they have been linked to
cancer. Although, this use is causing harm to the eco-system, animals such as the
beluga whale and young polar bears are dying, no hue and cry is being made.
Lastly, globalization aims to decrease the gap between the rich and the poor. Sadly,
this statement is far from true. 10% of the worlds population consumes around 80%
of the world output, while 20% suffer from poverty and hunger. Furthermore, the rich
keep on gaining wealth, while the poor more or less stay at the same level they were
in before. Instead of closing the gap, it seems that the gulf between the rich and poor
keeps on widening.
The same result can be seen in the case of energy consumption. The developed
nations are the ones consuming the most energy and producing the most greenhouse
gases. The country emitting by far the most greenhouse gases is USA. These gases are
the main contributors to global warming. If this continues, it may well tip the fine
balance in the atmosphere, which is essential for life here on earth.

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UNEQUAL GAINS AND TRADE IMBALANCE

On top of the reasons mentioned in this essay, other factors such as bargaining power,
lack of resources in dealing with disputes in the WTO, lack of leverage to enforce
WTO rulings are all responsible for the exploitation of developing countries by
developed countries and MNCs. In the end, free trade is not so free with bigger
economies calling the shots. While bigger and powerful economies can enforce tariffs
disregarding WTO rulings, for smaller countries to take such measure can be
economically devastating.
Access to foreign markets. While the average level of protection in the industrial
countries is relatively low, there are serious barriers to entry in certain sectors of
particular interest to developing countries - including agriculture, textiles, clothing
and fish and fish products. Developing countries have also expressed concern about
preference erosion, tariff escalation and the risks in being left out of the proliferating
free trade areas and customs unions.
All of this factors combined give rise to the imbalance of trade in developing
countries. When a country does not have the power to negotiate terms beneficial to
itself, has to sell labor and resources at a lower price, they cannot gain entry to all
markets with all their products. Although all the factors might not directly influence
the balance of trade, the bargaining power gained through a lot of factor help
determine the dependence of many small economies.
If free trade is to work to its theoretical potential, the WTO needs to be empowered to
stand for the developing economies. International trade disputes need to be settled
more efficiently and where the weaker economy do not have the power to bargain for
itself, the WTO needs to give resources for their benefit. Since these countries rely on
powerful economies not only for investment and aid but also for basic necessities
such as medicine and fuel, they need to be able better combat any form of neocolonialism if they are to fully reap the benefits of the free market.

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