Is trade liberalisation a panacea for poverty?

Many accidents have occurred, the worst accident being in 1998, when more than 500 farmers took their own lives in Warangal village, the number of incidents has continued to increase ever since (Stone 2002). This case study therefore suggests that while multinational companies take the advantages of free trade in developing countries, farmers in rural India continue to suffer despite the increasing economic growth.

Second, opponents of trade liberalisation also argue that trade liberalisation indirectly contributes to ever increasing in human rights violations in developing countries. Since the accession of China to trade liberalisation in the 1980s, the Chinese economy grew considerably (Lardy 2003). Low cost labour in China, attractive tax incentives and sound financial systems have attracted significant numbers of multinational companies to invest in the country and to further contribute to its economic growth (Xinhua, cited in China Daily 2007). Though this rapid economic growth, to some extent, may contribute to improving the living standards of many Chinese, their individual liberty has been constantly curtailed by the state.

Under the disguise of economic growth, the Chinese government limits individual rights such as freedom of expression and freedom of assembly. Furthermore, the suppressions of workers and democratic movement groups in China have been widely reported. The Chinese government regards economic progress takes precedence over individual rights and freedom of expression (Human Right Watch 2009; 2005). In contrast, the international community, especially at government levels is reluctant to criticise the Chinese human right violations due to strong economic ties with China (Human Right Watch 2009).

It can be argued that all though trade liberalisation brings economic benefits to China, the fundamental rights of individuals have been curtailed in the name of economic growth. Furthermore, strong western business interests in China dissuade developed countries from taking strong criticisms against the Chinese notorious human rights violations.

Lastly, it is further suggested that another unintended consequence of trade liberalisation is the impact on the environment. Trade liberalisation has allowed the free movement of multinational companies to conduct business globally, especially in developing countries. As previously discussed, the main reasons for moving to developing countries are cheap labor, low taxes and fewer regulations. These factors encourage both foreign and national companies to conduct business in the developing world, which consequently lead to job creations and fast growth of economy. Despite this, the operations of national and international corporations also pose serious threats to environment and biodiversity. According to Blacksmith (2007) most industrial cities located in the northern part of China are heavily polluted. Patients suffering from air and water related diseases such as bronchitis, pneumonia, and lung cancer have been also widely reported.

World Bank report (2007b) indicates that despite incredible economic achievement over the past few years, China is home to 20 of the world’s 30 most polluted cities due to the increase use of coal for energy. Problems like soil erosion, acid rain and polluted waterways affect the millions of lives.

Despite the fact that currently China is taking serious actions to address the environmental problems including issuing fines to a number of multinational corporations for violating environmental laws (World Watch Institutes 2006; Harney 2008), environmental problems remain the biggest challenges facing the country.

This seems to suggest that the increase of trade liberalisation has led to environmental problems. These environmental problems do not only pose threats to China, but also contribute to worldwide environmental problems.

In conclusion, it is clear the acceptance of trade liberalisation by developing countries poses risks as well as benefits. While, it is argued that trade liberalisation brings economic benefits to developing countries, trade liberalisation can also create poverty and inequality in many developing countries. This is clearly demonstrated through the increasing gap between rich and poor, the increasing in human rights violations and the causing of environmental degradation.

Despite the fact that during the last few years India and China have enjoyed considerable economic growth brought about by trade liberalisation, poverty and inequality remain ubiquitous problems. These considerable drawbacks have drawn strong criticisms from some developing countries. These countries argue that trade liberalisation brings more economic benefits to developed countries and that it only benefits a few people in developing countries.

It is, therefore, suggested that if developed countries are serious about tackling poverty and inequality in developing countries, it is important to use trade liberalisation to promote fair trade competition, human rights values, and environmental sustainability as any failure to address these problems will further exacerbate poverty and inequality in developing countries.