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An easy-to-understand account of how world trade works.
The richer countries (also called the developed countries or Western countries) are mainly located in North America and Europe but also include Australia and Japan. These countries have the highest standards of living (at least for some of the population) and have strong currencies.
The poorer countries (also called the developing countries or third world countries) are essentially treated as sources of raw materials. These materials are sold cheaply to the richer countries where they are processed into goods that are sold around the world (including back to the poorer countries which supplied the materials). Poorer countries are often unable to process their own raw materials into goods. If they do and attempt to sell these products, the richer countries put charges (called tariffs) onto these goods to make them more expensive.
Some processing of raw materials does occur in the poorer countries. But this is usually controlled by companies owned by the richer countries. The reason they locate their processing plants in poorer countries is to benefit from cheap labour, lax safety laws, and a lenient tax regime. Some examples below.
|1996||UK imported $12 million worth of sporting goods from India where they are manufactured by bonded child labour.|
|1996||USA leisure and sporting companies use cheap labour and lax labour laws in Haiti.|
People in the poorer countries struggle to live on the megre profits made by selling their raw materials. They also pay the price in terms of pollution and bad work conditions. People in the richer countries pay far more than they should for goods. The beneficiaries of this system are the large companies owned by the richer countries and the people that run them.
This essay attempts to illustrate these points including a look at the language used to obscure what is actually happening.
These are some of the euphamisms that are used to obscure what is actually happening in the world of economics:
There are many methods of controlling trade and these are described in turn.
If poorer countries impose tariffs on goods from the West, they are demonised. They are often forced to remove their tariffs by threats of sanctions (boycotts) or worse. The world trade rules as enforced by international bodies (controlled by the richer countries) insist on poorer countries removing their tariffs.
A Subsidy is money given by a population to large companies to help them stay in business or produce goods at a low cost. Subsidies are given names to obscure what they really are:
Subsidies make the cost of goods artificially low. In many cases the cost becomes lower than the cost to produce the same goods in the poorer countries. Inefficient produces in the rich countries are paid to rpoduce goods that could be produced more efficiently in the poorer countries.
Surplusses of these goods can then be used politically. They are often sold cheaply to the poorer countries. This has the effect of putting the local produces or growers of these goods out of business. This is called dumping.
A poor country could resist dumping either by putting on a tarriff or subsidising its own industry. If they attempt this, however, they are accused by the West of having closed markets or hindering free trade. Poor countries have been forced by the West to remove their own tariffs and subsidies by threats of sanctions or suspension of aid.
No Western country is ever accused of "hindering free trade" in the Western media even though they impose tariffs on goods from poorer countries and subsidise their own industries.
Examples of these unfair trading practices are shown below.
|1950||Colombia||Dumping subsidised food.||USA||To destroy the country's agricultural industry. The country would become dependent on growing cash crops (to be sold to the USA).|
|1998||South Korea||Dumping subsidised food.||USA||To destroy the country's agricultural industry and make it dependent on imported food (from the USA).|
|Threats of economic sanctions.||USA|
|To force countries to import (and advertise) USA and UK tobacco products. At the same time the UK and USA are running programs to stop their own citizens smoking.|
|2002||China||Computer companies using poorer countries with lax pollution laws to dispose of waste products.||USA||USA wants to rid itself of waste.|
|2002||West Africa||High technology fishing.||Europe|
|Access to fish and seafood.|
|2002||Europe||Trade tariffs.||USA||Protect its own markets.|
|Large transnational companies make huge profits from coffee.|
|2003||Africa||Effects of subsidies and tariffs on several countries in Africa.||Rich Countries||Richer countries benefitting from unfair trade.|
|2003||Poor Countries||Effects of subsidies and tariffs on world trade.||Rich Countries||Richer countries benefitting from unfair trade.|
Sanctions are essentially a boycott of a country so that it cannot trade. Sanctions can be legally approved by the United Nations in cases where a rogue country is defying the world community.
More often, sanctions are imposed unilaterally by the richer countries on poorer nations and states. These sanctions are used for political or economic coersion. If sanctions do not work, some nations use economic sabotage (actions that affect the country's produce, infrastructure or economy - sometimes very violently) or offers of aid dependent on compliance (better known as bribes) to achieve their ends.
Examples can be seen from the table below.
|1956||Egypt||Economic sanctions and invasion.||UK|
|Egypt under Adbul Nasser had nationalised (taken ownership of) the Suez Canal. The canal had been built by Western powers in Egypt while the country was a colony.|
|1959||Cuba||Sanctions against sugar.||USA||Previous pro-USA dictatorship of Fulgencio Batista had been removed by a popular uprising lead by Fidel Castro. The USA continues its boycott of Cuba (to 2006), encouraging or threatening other nations to comply. A 1993 report describes the economic effects.|
|1960||Cuba||Trade embargo. Threats to other countries trading with Cuba.||USA||USA wanted a pro-West government and economic influence in Cuba.|
|1962||Cuba||Undercover operations against sugar and turkeys. Industrial sabotage.||USA||USA wanted a pro-West government and economic influence in Cuba.|
|1963||Indonesia||Suspension of aid.||UK||Government controlled access of UK companies to the country.|
|1971||Cuba||Sabotage of pig industry.||USA||USA wanted a pro-West government and economic influence in Cuba.|
|1974||Vietnam||Trade embargo.||USA||To weaken the country.|
|1975||Vietnam||Suspension of aid by World Bank. $70 million assets frozen.||USA||Vietnam had defeated the USA. Vietnam is eventually forced to repay South Vietnam's debt (incurred while it was a USA puppet).|
|1979||Vietnam||Suspention of aid for children by European Community. Continuation of trade boycott.||UK|
|Vietnam had defeated the USA.|
|1980||Cambodia||Economic aid to the Khmer Rouge.||USA||This brutal ex-government opposed the new government in Cambodia that was supported by Vietnam.|
|1981||Tanzania||Campaign to force the country to change its economic policies.||USA||USA companies wanted access to raw materials and markets of the country.|
|Economic sabotage.||South Africa||South Africa wanted to crush independence and democracy movements in the region. The USA and UK ignore UN approved sanctions against South Africa.|
|Denial of aid to help with seed storage and bee keeping.||USA||The USA disapproved of the three governments.|
|1982||Mozambique||Economic sabotage. Destruction of oil pipelines.||South Africa||South Africa wanted to crush independence and democracy movements in the region. The USA and UK ignore UN approved sanctions against South Africa and secretly trade. The USA secures a $1,1000 million IMF loan for South Africa.|
|1983||Nicaragua||Economic sabotage. Destruction of agricultural collectives. Mining of ports. Blocking of previously agreed loans from the World Bank.||USA||A popular uprising had removed the previous government, a USA backed dictatorship.|
|1984||Mozambique||Holding back of food aid during a famine.||USA||The USA wanted the country to sign a treaty with South Africa.|
|1985||New Zealand||Withdrawal of concessions for military equipment.||USA||New Zealand had supported the declaration of the Pacific Ocean as a Nuclear Free Zone.|
|1986||Nicaragua||Refusal to pay $17 million when ordered by the World Court.||USA||The USA had been found guilty in the World Court for economic sabotage.|
|1988||Iran||Bombing of oil facilities; shooting down commercial airliner.||USA||USA companies had been expelled from Iran. These companies had been allowed into Iran by the previous, unelected and USA backed dictatorship.|
|1989||Cambodia||Arms and training to Khmer Rouge.||USA|
|Cambodia's government supported by Vietnam.|
|1990||Nicaragua||Promise of aid and an end to the (USA-backed) insurgency if the presidential candidate preferred by the USA wins election. $9 million in election funds for preferred party.||USA||To gain a favourable environment for USA companies.|
|1991||Iraq||Severe sanctions imposed until leadership acceptible to the West is in place.||USA|
|Former favourite of the USA and UK, Saddam Hussein is out of favour after invading Kuwait. The sanctions would kill 1000 children a month for the next 12 years.|
|1992||Albania||Albanians are promised aid if the Communist Party does not win the elections it had won previously.||USA||To gain a favourable environment for USA companies.|
|1992||Angola||Insurgents financed and armed.||USA||Government refuses to allow access to country's oil and diamonds.|
|1994||Palestinian Territories||Economic blockade.||Israel||To crush resistance to occupation.|
|1994||Jordan||Promise of aid if Jordan will deny the right of Palestinians to return to lands they were expelled from by Israel.||USA||To protect the existance of Israel.|
|1994||Argentina||$10 million bribe to stop the investigation into the bombing of a Jewish centre in Buenos Aires.||Iran||Unknown.|
|1994||Burma||USA oil company (Unocal) pays ruling military for its security.||USA||The military forceably relocate people living in the path of a pipeline being constructed.|
|1995||Mexico||Aid to suppress popular revolt by indigenous people.||USA||USA companies want land inhabited by indigenous people for cash crops and access to oil and minerals.|
|1995||Iran||Oil and trade embargo imposed.||USA||Iran's government does not allow USA companies access to its oil.|
|1996||Iraq||Millions of dollars to the Iraqi National Accord, a group that uses terror tactics to distabilase the government of Saddam Hussein.||USA||USA would like a compliant governmnet for guaranteed access to oil.|
|1996||Cuba||Agricultural sabotage.||USA||USA wanted a pro-West government and economic influence in Cuba.|
|1997||Iraq||The United Nations (under USA and UK pressure) continue sanctions that have killed over 1,200,000 people.||UK|
|Control of oil.|
|1998||Sudan||Missile attack on a pharmaceutical factory.||USA||"An error" according to USA.|
|1998||World Heath Organisation||Threatened with withdrawal of funding if the organisation examines the effects of trade conditions on world health.||USA||The USA wants to continues its business practices regardless of their human effects.|
|1999||Cuba||For the eighth year running, the United Nations fails to pass a resolution condemning the USA economic embargo.||USA||Cuba is outside the USA economic sphere.|
|Aid, trade and arms sales in return for support of USA attack on Afghanistan.||USA||To install a pro-West government in Afghanistan that will facilitate access to Central Asian oil.|
|2002||Palestine||Destruction of economic facilities supplied by Europe.||Israel||To break resistance to the Israeli occupation.|
|2002||China||Airline company places bugs in government minister's air craft.||USA||Unknown.|
|2002||Angola||Former USA backed rebel, Jonas Savimbi, killed once concessions received.||USA||The USA had used Savimbi to destabilise Angola until they received concessions on the country's oil and diamonds.|
|2002||Lebanon||Threats to attack a water pipleine.||Israel||Unknown.|
|Economic threats and inducements in return for supporting an invasion of Iraq.||USA||Access to miltary bases and oil once a pro-West regime is installed.|
|2003||Palestine||Destruction of 62 shops and a vegetable market.||Israel||To break resistance to the Israeli occupation.|
|2003||78 Countries||Threats to stop aid, trade and military support unless the USA is excempt from being prosecuted under the International Criminal Court.||USA||USA does not want international laws to apply to itself.|
|2003||171 Countries||Excemption forced from a treaty to curtail tobacco advertising.||USA||USA wants to sell tobacco products to other countries as anti-smoking laws affect profits in the USA.|
|2003||Europe||Attempt to force testing of potentially toxic chemicals to be abandoned.||USA||USA wants to protect its exports from from regulations.|
|2004||Syria||Economic sanctions.||USA||USA disagrees with Syria's support of Palestinians.|
|Palestinians had elected a government not to the West's liking.|
|1995||The World Trade Organisation||Founded by 134 countries.|
|1997||International Monetary Fund||Privatisation of schools.|
|1998||The World Trade Organisation||Canada forced to accept a dangerous petrol additive.|
|1998||The World Trade Organisation||Activities to help USA companies in India, Bangladesh, South Africa and Europe.|
|1999||The World Trade Organisation||Activities to help USA banana companies in Europe.|
|1999||International Monetary Fund||Effects on the environment and AIDS in Brazil.|
|2001||The World Trade Organisation||Attempts to over-ride local laws of Colombia, Brunei, Pakistan, Brazil, Venezuela, UK and France.|
|2001||International Monetary Fund||Countries are forced to remove trade barriers, sell national assets to foreign investors, slash social spending.|
Large transnational companies set up front organisations to further their interests and discredit information about unfair trade, exploitation of workers (including children in some countries), excessive pollution and other human rights violations. An example is The Global Climate Coalition. In 1996 they campaigned to discredit global warming scientists.
Unelected governments are loaned money by Western banks for projects that often do not benefit the population. Most of the money disappears into secret bank accounts. Even if the country later becomes democratic, the people of these countries still have to repay the debt even though it was taken out without their consent by an unrepresentitive government.
The West has often removed governments that were not helpful to Western business interests. These were usually replaced with more compliant regimes, many with dreadful human rights records. Economically compliant regimes are normally referred to by many names that obscure their relationship with the West or their own people:
Non-compliant regimes are demonised.
The West also has a long history of supporting repressive regimes if its business interests are served.
Examples are shown in the table below.
|Year||Country||Event||Perpetrators||Reasons / Benefits|
|1953||Iran||Replacement of democratic leader, Mohammed Mossadeq with dictatoirship of the Shah, Reza Pahlavi.||USA|
|The new regime gave access to oil for Anglo-American companies. The USA trained the Iranian secret police to oppress dissidents.|
|1953||British Guyana||Removal of democratic leader, Cheddi Jagan and preventing him from taking power after being re-elected.||UK|
|UK companies gained access to sugar and bauxite (an ore of aluminium).|
|1954||Guatemala||Removal of democratic leader, Juan José Arévalo by a military coup.||USA||USA companies gained access to banana plantations, cheap labour and lax labour laws. The USA financed the military which brutally crushed all dissent and union activity.|
|1954||Paraguay||Removal of the Ache people from their land under a newly established dictatorship.||USA|
|Access forests and mines.|
|1960||Congo||Assassination of popular leader, Patrice Lumumba and the placement of brutal dictator, Moise Tshombe, in his place.||Belgium|
|Western companies gained access to minerals like uranium. The exesses of the dictator were used as propaganda against black rule in Africa.|
|1960||Iraq||Attempted assassination of Abdul Karim Kassem. Destabilisation of country by funding minority Kurdish population.||USA||Karim had helped found OPEC to control oil prices and production for the benefit of the producers.|
|1963||Dominican Republic||Military intervention to protect newly installed military government.||USA||To protect USA business interests and set up an economic system suitable for the USA. A 1989 report describes the economic results.|
|1963||Honduras||Aid to the military after they take power in a coup.||USA||USA companies gained access to raw materials and plantations.|
|1963||Iraq||Overthrow and execution of Abdul Karim Kassem by the Ba'ath Party.||USA|
|Karim had wanted to nationalise Iraq's oil whicxh was controlled by USA and UK companies.|
|1964||Brazil||Economic and political support for new military government.||USA||The previous government had passed laws helping workers and limiting the profits that could be taken out of Brazil by trans-national companies. The new government reversed these changes. A 1989 report describes the economic results.|
|1965||Dominican Republic||Military intervention to prevent previously elected Juan Bosch from taking power and keep the military in power.||USA||To protect USA business interests.|
|1965||Indonesia||Political and undercover support for coup.||USA|
|To gain UK and USA access to the country's resources.|
|1965||Congo (Zaire)||Support for Mobutu Sese Seko who had taken power in a coup.||USA||To gain USA access to cobalt, copper, and diamonds.|
|1966||Central Africa||Political and economic support for Bokassa who had come to power in a military coup.||France|
|To keep Western concessions on uranium mining.|
|1966||Ghana||Removal of Kwame Nkrumah from power.||USA||Nkrumah had wanted to lessen his country's economic and political dependece on the West.|
|1969||West Papua||Annexation by Indonesia.||Indonesia|
|The West wanted control by a friendly government of the copper mining industry which was worth $1,400 million and partly owned by a UK company.|
|1970||Bolivia||Military coup to remove Juan Jose Torres.||USA||Torres had nationalised oil and the tin mines.|
|1973||Chile||Military coup to remove Salvador Allende.||USA||USA did not like socialist economic policies of the elected government. The USA had attempted to sabotage Allende's election campaign in 1964 (successfully) and 1970 (unsuccessfully). A 1989 report describes the economic results.|
|1975||East Timor||Invasion by Indonesia.||Australia|
|The West wanted access to oil in the region and preferred a friendly dictator ruling the area rather than an independent state.|
|1976||Jamaica||Attempted assassination of Michael Manley.||USA||Manley had established ties with Cuba and wanted more control of the island's aluminium.|
|1980||Liberia||Economic and political support for Samuel Doe who took power in a military coup.||USA||USA companies gain access to rubber.|
|1983||Grenada||Removal of Maurice Bishop and replacing him with a pro-West government.||USA||The island became a tax and off-shore banking haven.|
|1983||Guatemala||Loans by the World Bank to build the Chixoy Dam even though the government (which is unelected) is forceably removing and killing indigenous people who live on the site of the dam.||World Bank||This increases the country's debt.|
|1988||Iraq||Secretly selling machine parts and propellant to oppressive dictatorship that had just used poison gas on its Kurdish population.||UK||Iraq was fighting Iran with Western backing. The USA also increased its trade with the regime.|
|1988||Burma||Oil companies involved with the military government to remove opposition to oil exploration and to procure cheap labour.||USA|
|For access to the country's oil.|
|1988||Colombia||Subsidised arms sales to a brutal regime that crushes opponents and human rights activists.||USA||For access to the country's oil and coffee.|
|1989||El Salvador||$1 million per day in aid to a military regime.||USA||For access to the country's coffee.|
|1989||China||$300 million business contracts approved with regime that had massacred thousands of students at Tienanmen Sqaure.||USA||For access to the country's huge markets.|
|1993||Nigeria||Support for military coup.||UK||Regime promises to honour oil concessions to UK companies.|
|1994||Haiti||Military action to keep elected leader, Jean-Bertrand Aristide, from taking power.||USA||To gain access to agricultural land and a dispossessed population that will provide cheap labour for USA companies.|
|1994||Nigeria||Providing wealth to a military regime by processing its oil.||UK|
|Regime facilitates extraction of oil by oppressing the inhabitants of the Ogoni region.|
|1995||Afghanistan||Offering the authoritarian Taliban 15%. on all oil and gas transported through a proposed pipeleine from Central Asia to Pakistan.||USA||Since the collapse of the Soviet Union, the USA has wanted access to the oil and gas reserves in Central Asia.|
|1996||Turkey||Supply of weapons used in oppression of the Kurdish population.||NATO||Turkey has a pro-West government and houses USA military bases. Arms providers are USA, Germany, Italy, France, Netherlands, UK, Spain, Canada and Belgium|
|1996||Burma||Support for tourist industry.||UK||Military government uses slave labour to build tourist infrastructure for luxury tours run by UK companies.|
|1996||East Timor||Trade treaty with Indonesia, the occupying power that had killed 200,000 people.||Australia||To exploit oil and fishing. Western countries continue to arm Indonesia during this period.|
|1997||Indonesia||Trading and arming a brutal dictatorship. Companies collude with military to surpress dissent.||USA|
|To build a paper mill and access to oil and minerals.|
|Trading with brutal dictatorship. Companies collude with military to surpress dissent.||UK||Access to oil, minerals.|
|1998||Afghanistan||Financing and supporting theocratic government.||USA|
|The West hopes to get an oil pipeline across the country to link Central Asia with the Persian Gulf.|
|1998||Turkey||Military aid to a country that oppresses its Kurdish population.||USA||The USA has military bases in (Kurdish) eastern Turkey.|
|1998||Burma||Trading with a brutal military regime that uses slave labour.||France|
|For the region's oil and minerals.|
|1999||East Timor||Military aid to Indonesia while it continues oppressing East Timor.||UK||UK has oil interests.|
|1999||Guatemala||Military aid to brutal regime that keeps workers in virtual slavery.||USA||USA owned coffee plantations.|
|2000||Kyrgyzstan||Finance to a country that oppresses oponents.||USA||To gain political influence in Central Asia and its oil.|
|2000||Turkey||Selling arms which are used to oppress the Kurdish population.||UK||To maintain arms industry.|
|2001||Afghanistan||Funding opposing warlords, each with dreadful human rights records.||Pakistan|
|To gain influence in a strategic region.|
|2001||Colombia||Funding the military government which oppresses its own people.||USA||Protecting USA oil interests.|
|2001||Israel / Palestine||$1,800 million annually in aid to a country that has been occupying Palestinian land since 1967.||USA||Support for an ally in the Middle East.|
|2001||Sudan||Oil companies helping military to depopulate areas wanted for oil exploration.||Canada|
|Access to the country's oil.|
|Suppying arms to regimes with bad human rights records.||UK||Support for arms industry.|
|2001||Chad||Finance for a pipeline to a government that had won fraudulent elections.||USA|
|Access to the country's oil.|
|Oil and mining activities that adversly affect local people and the environment.||Canada|
|Access to the countries' oil and minerals.|
|2002||Botswana||Diamond mining on Bushman land after they were encoraged to leave by the government cutting off their water supply.||South Africa|
|Access to the country's diamonds.|
|Companies trading with countries that violate human rights.||USA|
|Access to markets and raw materials.|
|2002||Africa||Effects of unfair trade on Africa.||Rich Countries||Access to markets and raw materials.|
|Banks finance dam that will displace people and affect water supplies.||UK|
|Banks finance various projects that will adversly affect local people.||UK||Banking.|
|2002||Burma||Tobacco factory (partly owned by ruling Burmese military) pays less than poverty wages.||UK|
|2002||Sudan||Depopulation in areas being explored for oil.||UK|
|Selling arms to undemocratic, authoritarian or oppressive regimes.||UK||Arms trade.|
|2003||Algeria||Selling arms and trading with an undemocratic oppressive regime.||USA|
|2003||Congo||Selling arms and financing countries with troops in the Congo war.||UK||Trade and arms sales to Rwanda, Uganda, Angola, Namibia and Burundi.|
|2003||Indonesia||Selling arms to a country that is brutally repressing the Aceh region.||UK||The arms trade.|
|2004||Haiti||Replacement of democratically elected leader (Jean-Bertrand Aristide) who would not privatise all the country's resources.||USA|
|Mainly plantations and cheap labour.|
USA, UK and French oil companies have long traded with unelected or authoritarian governments, like Saudi Arabia (an absolute monarchy), Iran (under the Shah between 1953 and 1979), Iraq (before 1989). Oil is sold at a cheap rate to run the economies of the richer countries. When the oil producing countries attempted to set up a cartel to get a better price, this was opposed by the Western countries, often with violence.
Western Banks invested heavilly in apartheid South Africa (before 1991) and loaned money to military dictatorships in South America. These loans are expected to be repaid by the populations of these countries who had no say in the taking out of the loans in the first place.
This is rarely true when governments are involved.
Most Western aid comes from "government money". This is really money from the people of the Western country involved. This money is used to allow a poorer country to buy goods or a service that are provided by a company from a Western country. Often it is a condition of the aid that the doner country can nominate the company that provides the goods or service.
The majority of the aid money often goes from a government bank account to the company's bank account without going anywhere the country receiving the aid. There will be some benefit (called a commission or a consultancy fee) to the company officials who have brokered the deal which may include politicians from the two countries.
The people of the Western country pay the monetary cost of the "aid". The majority of the people of the poorer country get very little. These types of government aid projects are for dams, military goods, airports and other high profile items. Much aid has a political purpose as it is to countries with a strategic value rather than the poorest countries that might need aid.
Many poorer countries have amassed an enormous debt which they are struggling to pay. Many are even struggling to pay the interest on the debt. Social services and infrastructure are sacrificed to service the debt.
In a large number of cases, it is unelected governments that were loaned money by Western banks. Often the money is used for projects that fail to benefit the population. Much of the money disappears into secret bank accounts, enriching members of the government and their families. Even if the country later becomes democratic, the people of these countries still have to repay the debt even though it was taken out without their consent by an unrepresentitive government.
|1989||Poor Countries||11 million children die every year from easily preventable deseases.|
|1994||Poor Countries||500,000 children die every year due to debt repayments.|
|1994||Malaysia||A UK company (Balfour Beatty) to build a dam at Pergau in return for Malaysia buying arms worth $1,000 million from UK companies.|
|All countries that recieve a large amount of UK aid even though they are not the poorest in their regions. They are also important purchasers of UK arms.|
© 2004 KryssTal
Covers fair trade, the WTO, IMF and other trade issues.
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