8.8B Global Trade Policies

• • Global borrowing rules and trade policies have been especially effective in delivering growth to the developed world, but the impact of Structural Adjustment Programmes (SAPs) and Heavily Indebted Poor Counties Schemes (HIPC) policies on the developing world’s economies and economic sovereignty is disputed 
• Structural Adjustment Programmes (SAPs):

  • Structural Adjustment Programmes (SAPs) are economic policies imposed by the IMF and the World Bank on developing countries as a condition for receiving loans or debt relief
  • The main components of SAP policies include fiscal austerity, trade liberalisation, privatisation, deregulation, and currency devaluation
  • The impact of SAP policies on the economies of the developing world has been controversial and debated
• Benefits of SAPs:

  • reduce Nigeria's dependency on oil and imports by diversifying the productive base of the economy through the revival agricultural .
  • SAPs help to shrink government budget deficits, eliminate hyperinflation, and maintain debt-payment schedules (Bolivia).
  • SAPs aim to attract foreign investment
  • SAPs aim to achieve long-term or accelerated economic growth by restructuring the economy & reducing government intervention.
  • SAPs facilitate the process of global economic integration by liberalising trade and investment policies and promoting exports.
• Costs of SAPs:

  • Reduced public spending on health, education, and social services, leading to increased poverty, inequality, and human suffering. (Zambia)
  • Increased vulnerability to external shocks, such as fluctuations in commodity prices, exchange rates, and interest rates. (Mexico)
  • Loss of policy autonomy and sovereignty, as the IMF and the World Bank dictate the economic agenda of the borrower countries.
  • Erosion of domestic industries and agriculture, as cheaper imports flood the market and undermine local production. (Ghana)
  • Increased social unrest and political instability
• Heavily Indebted Poor Countries (HIPC)

  • HIPCs are a group of 39 low-income countries that qualify for debt relief from the World Bank and the IMF
  • HIPC policies aim to reduce the debt burden of these countries and free up resources for poverty reduction and social development
  • The impact of HIPC policies on the economies of the developing world is mixed and controversial
• Benefits of HIPCs:

  • Reduced debt service payments and increased fiscal space for public spending on health, education, infrastructure and other sectors. (Uganda).
  • Improved macroeconomic stability and growth prospects, as well as enhanced creditworthiness and access to international markets. (Mozambique)
  • Strengthened governance and accountability (Ghana)
• Costs of HIPCs:

  • Insufficient debt relief and unsustainable debt levels, especially in the face of external shocks such as commodity price volatility, natural disasters and pandemics.
  • Conditionalities and policy prescriptions that may undermine national sovereignty and policy space
  • Trade-offs and opportunity costs between debt relief and other forms of development assistance, such as grants, concessional loans
• Criticisms of World Bank:

  • Its imposition of policies on developing countries (particularly the damaging SAPs)
  • Its assumption that LDEs cannot develop without outsider help and knowledge
  • The largest contributors (HDEs) have too much power over policies
  • That the head of the World Bank always comes from the US
  • That it focuses too much on GDP growth rather than improvement in living standards
  • Some development projects were environmentally damaging e.g. dams causing deforestation
  • Some projects involved expensive technology which countries cannot fund themselves
• Criticisms of IMF and SAPs

  • Reforms implemented too quickly
  • SAPs have been criticised for undermining social welfare, environmental protection, human rights and national sovereignty
  • SAPs have also been associated with increased poverty, inequality, unemployment, debt and social unrest in many countries
  • IMF has given loans to countries with military dictators 
  • Ignores human rights abuses and detrimental impacts of SAP conditions on employment, health and education
  • Negative impacts on the environment-damaging projects to get more cash
• Criticisms of WTO

  • many countries have been waiting for the WTO to conclude a long-awaited global trade deal, that is intended to cut subsidies, reduce tariffs and give a fairer deal to developing countries
  • The so-called Doha Round of Talks began in 2001, but a breakthrough is yet to happen
  • However, there are plenty of rows among the WTO’s key players over agricultural tariffs and subsidies which just goes to prove that there are no global players only global tantrums
• For the WTO:

  • It is democratic because the rules were written by its member states, many of which are democracies who also select its leaderships 
  • helps to raise living standards globally.
  • If a commodity or service is scarce and where the competition for those goods or services the producer country can exert influence on their cost 
  • However if there is an abundance or surplus supply of a good then the consumer country can negotiate a lower cost 
• Against the WTO:

  • The WTO is too powerful in that it can compelled sovereign states to change laws and regulations by declaring these to be in violation of free trade rules 
  • The WTO is run by the rich countries for the benefit of rich countries and large multinational corporation. These harm smaller countries which have less negotiation power.
  • WTO is indifferent to the impact of free trade on workers' rights, child labour, the environment, and health 
  • It lacks democratic accountability as any hearings on trade disputes are closed to the public and the media 
• Jamaica's SAP:

  • 1977 with the IMF to address the country's debt crisis, balance of payments problems and dependency on foreign capital 
  • It involved austerity measures such as wage freezes, devaluation, trade liberalisation, privatisation and deregulation  
  • The SAP was supported by loans from the IMF and the World Bank,
  • it helped to reduce inflation, stabilise the exchange rate, increase foreign reserves and improve fiscal discipline
  • it also contributed to low growth, high unemployment, poverty, inequality, social unrest and environmental degradation
• Jamaica's SAP:

  • According to some statistics, Jamaica's GDP growth rate averaged only 1.4% per annum in the 1980s and 1.3% per annum in the 1990s, compared to 2.2% and 3.0% for Latin America and the Caribbean respectively
  • Jamaica's debt-to-GDP ratio reached 147% in 2013, one of the highest in the world
  • Jamaica's poverty rate increased from 12.9% in 2007 to 19.9% in 2017
  • Jamaica's Human Development Index (HDI) value was 0.734 in 2019, ranking 96th out of 189 countries