Trade liberalisation is the gradual removal of government intervention to increase market competition. It has been held up as a panacea for the developing world by some economists, but the reality is more mixed.
During more than 20 years of global economic liberalisation in the 1980s and 1990s, Africa actually saw its share of world trade drop from 6% to 2%.
How does trade liberalisation work?
Liberalisation reduces the economic choices a government can make. It bans governments from helping infant industries and poor farmers, and stops them regulating how international companies behave.
Liberalisation deals also often phase out taxes or limits on imports coming into a country, which means goods from wealthy countries can enter more cheaply and might start to undercut domestically produced goods.
How it affects poor countries
The economic and health consequences of following these policies can be enormous. Free trade between economies at different stages of development can make life impossible for the poor.
Removing government support and protection for developing country farmers and traders before they are ready to compete can threaten the livelihoods of millions. This can affect people’s ability to pay for shelter, food and medical treatment. Trade rules can also change the availability or cost of drugs.
Trade rules often affect the tax revenue available to governments to fund public services including health. As a result, a new trade deal can affect the health of millions of people, with the weakest and most vulnerable usually suffering first.
Not just goods
A General Agreement on Trade in Services (GATS) has been negotiated which aims to open up public services like healthcare, water and sanitation services, and education to global free market forces. There is a fear that this agreement could also encourage an expansion of private healthcare, undermining national health systems. What’s more, privatisation of essential public services, such as water supplies, could result in new or higher charges, exacerbating poverty and threatening the health of the poorest sections of society.
Some trade rules also risk encroaching on the freedom of governments to regulate areas like health, the environment and food. There are fears that national restrictions on the marketing of alcohol and tobacco, or rules governing private hospitals, for example, could be banned by the GATS agreement. The result could be that government public health policies are deemed ‘unnecessary’ trade barriers.
So why do developing countries agree to these deals?
Usually there are threats to cut aid, or other pressure applied which can be hard to resist. Many countries are also being pushed into signing bilateral trade deals alongside multilateral deals. It is much harder for an individual country to withstand pressure to sign up when they are negotiating alone with a very unequal partner.
Of particular relevance to health are the extremely tough rules on patents, which the US is negotiating in trade deals with a variety of countries. These push for much stricter patent rules than agreed in multilateral deals.
Our view
- Wealthy countries must stop pushing their strict diet of free trade and privatisation, and let developing countries make their own decisions, free from bullying or one-sided advice.
- Wealthy countries must also take their own free trade advice, and stop the massive subsidies many give to farmers and producers.
Last modified: 12/01/2011
