Committee: G13 Summit Issue title: Reducing trade inequality Submitted by: Tamás Kocsis, President of G13 Summit Edited by: Kamilla Tóth, President of the General Assembly Introduction Trade: The phenomenon of trade affects the life of every people living on Earth. Its history originates from as early as the prehistoric times when communication became the part of the lives of our ancestors. Before the appearance of any kind of currency trade only involved the bartering of goods and services. Later trade developed as the result of regional economic differences. For the first century AD the Silk Road connected the already explored whole world thus creating a more sophisticated commercial network and laying the foundations of world trade. The Age of Discoveries extended world trade by the inclusion of the New World that contributed to the trade of new products such as cocoa, corn, potato that are enjoying great importance today as well. But unfortunately this age also boosted slave trade enhancing new crises throughout the world. When the English and French gained upper hand in world trade remarkable innovations (i.e. appearance of stock exchange and trading companies) arose that promoted European and later American dominance. This is the point when modern day trade started inheriting many characteristics from its past. In the Age of Imperialism European nations extended their spheres of influence by colonisation determining the long term future of other nations. Exploitation of resources and workforce resulted in extreme dependence on developed countries along with poverty, backwardness and dissatisfaction meanwhile in Europe and North America industry flourished and monopolies appeared. The best example for this is the "Scramble for Africa", although there were some endeavours to improve conditions in the undeveloped world i.e. the "White Man's Burden". These factors with other social and political ones ruled the system of world trade until World War II.
The rise of Japan, China, India and Brazil displayed radical changes but the most significant phenomenon that leads directly to the issue is the appearance of globalisation. Globalisation: Following the 1970s global trade and multinational companies appeared. The characteristics of globalisation are: international trade, companies operating in more countries i.e. subsidiaries, greater dependence on the global economy, Free movement of knowledge, capital, goods and services. The primary aim of globalisation is the reduction of expenses together with the increase of profit for the multinational companies. Besides the advantages of globalisation the numerous disadvantages have detrimental effects on especially the lives of farmers and workers in undeveloped and developing countries. Unfair trade and inequality of working conditions today raise a serious issue. Definition of Key Terms Trade: The action of buying and selling goods and services. Fair trade: Trade between companies in developed countries and producers in developing countries in which fair prices are paid to the producers. Globalization: The process by which businesses or other organizations develop international influence or start operating on an international scale. Protectionism: The theory or practice of shielding a country's domestic industries from foreign competition by taxing imports. Multinational companies: An enterprise operating in several countries but managed from one (home) country. Generally, any company or group that derives a quarter of its revenue from operations outside of its home country is considered a multinational corporation.
General Overview The exploitation of industrial workers and farmers in undeveloped and developing countries cause both social and economic difficulties that affect world economy and trade as well. Unfair treatment of the working force mainly in agriculture and manufacturing tossed millions of people into extreme poverty from where it is nearly impossible to escape. In 1990 almost 2 billion people lived in extreme poverty which by 2013 was reduced to less than 800 million showing a clear improvement, however, this number is still larger than 10% of the world population. The vast majority of the poor lives in Africa, South Asia and South America where low income is not the only sign of indigence. The coexistence of several factors together is blamed for the crisis that is mainly taking advantage of free world trade, globalisation and economic backwardness by multinational corporations. The appearance of globalisation besides its benefits (i.e. lower prices, inward investment, rapid flow of information and innovation and the diversity of available products for a wider segment of societies) has disadvantageous impacts as well. The negative side of globalisation are the removed profits, low wages, bad working conditions, limited fair competition between companies and environmental damages. The more developed a country the more positive and less negative impacts are present there. The biggest "losers" of globalisation are the countries where the leading industry is agriculture. There is a correlation in the percentage of agriculture as an industry contributing to economy and the ratio of extremely poor people in a society. The production of banana, coffee, chocolate, gold, beauty products, cotton, flowers and sugar is the segment of industry where exploitation and unfair treatment is the most visible. These goods are mostly produced in undeveloped countries. The economic backwardness, lack of investments, unexploited resources and cheap labour attracted and still attracts foreign investors (mainly from developed countries) with capital to set up factories and trade with agricultural or other goods produced. In exchange for jobs people have to accept hard conditions e.g.: low wages, 12 or more working hours, dangerous and insanitary workplaces, no social insurance, child labour and discrimination. In profitable industries e.g.: chocolate production the processing of the good is relocated to developed countries where 90% of the value of the product is added.
This phenomenon is maintained partly by imposing heavy tariffs on imported processed goods by developed nations. Around 80% of global trade is transacted between the developed countries (approximately 66% between multinational companies) that includes only circa 15% of the total population of the Earth, a great example for the inequality of trade. Major Parties Involved Undeveloped countries: Central and South American, African, South and South- Western Asian nations. Home to exploited workers and farmers. Dependence on the developed nations. Controlling only a small segment of trade. Developed countries: North-American and European nations, Japan, South-Korea, Australia. Home to most of multinational companies, making investments in the undeveloped countries. Controlling the majority of trade. Influence in decision making about trade policies. Multinational companies: The party by which exploitation is executed. Great influence on the economy of undeveloped nations. Timeline of Events Date: Event: 1870-1914 Age of Imperialism 1945 General Agreement on Tariffs and Trade (GATT) End of 20th century Globalisation 1989 World Fair Trade Organisation (WFTO) 1992 The Fairtrade Foundation 1995 World Trade Organisation (WTO)
Previous Attempts to Solve the Issue Fair trade The appearance of WFTO and the Fairtrade Foundation greatly contributed to the elimination of extreme poverty, exploitation and unfair trade in third world countries. Fair trade is a trading partnership, based on dialogue, transparency and respect, that seeks greater equity in international trade. It offers better trading conditions and rights to marginalized producers and workers especially in the South. It is a tangible endeavour to the fight against poverty, climate change and economic crisis. By changing the way how trade works better prices and decent working conditions are available in developing countries. Fair trade works with businesses, consumers and campaigners. Farmers and workers have an equal say in what the organisations do. WFTO prescribes 10 Principles that Fair Trade Organisations must follow in their day-today work and carries out monitoring to ensure these principles are upheld. However, a study from the Institute of Economic Affairs says the high cost of joining the scheme prevents many of the poorest farmers from becoming members. Less than 25% of the price premium paid by shoppers for Fair trade food, such as coffee and chocolate, reaches the farmer. The certification charge to join the organisation starts at 1,570 in the first year, which the IEA says is a huge sum for producers in the poorest countries. Possible Solutions and Approaches Remodelling Fair trade policies Focusing on the weaknesses of current policies and actions delegates may offer more efficient solutions for the issue. This could include the making of Fair trade products more popular and the extending of their market. Other approach is to ensure that receiving a certification for producers is available for everyone regardless of their wealth. Furthermore the strengthening of the execution of these policies would possibly have a vital effect on achieving a fairer world trade.
Protectionism The phenomenon of protectionism may threaten global economy as it discourages free trade which is crucial for future development as concerns over globalisation have fuelled populist movements in the US and Europe. The UK voted to leave the European Union in 2016, while the Trump administration has increased trade rhetoric against countries such as China, Canada and Mexico. Useful Documents and Sources https://wfto.com/fair-trade/10-principles-fair-trade Questions to consider Is the impact of global trade in the country positive or negative? Which countries profit from global trade and which countries do not? According to your country global trade or local trade is better? What are their effects on equality? Popularity of fair trade products is rising or decreasing in your country? What does the country do to make fair trade products more attractive? What does the country do to ensure competitiveness of fair trade products? How can the country help countries affected by unfair trade? Bibliography https://wfto.com/fair-trade/10-principles-fair-trade https://wfto.com/fair-trade/definition-fair-trade http://www.fairtrade.org.uk/what-is-fairtrade/what-fairtrade-does https://en.oxforddictionaries.com/definition/trade https://en.oxforddictionaries.com/definition/fair_trade
https://en.oxforddictionaries.com/definition/globalization https://en.oxforddictionaries.com/definition/protectionism https://en.wikipedia.org/wiki/trade#history http://www.historyworld.net/wrldhis/plaintexthistories.asp?groupid=1925&historyid=a b72>rack=pthc http://www.businessdictionary.com/definition/multinational-corporation-mnc.html http://www.dailymail.co.uk/news/article-1326354/unfair-trade-ethical-food-lifting- Third-World-farmers-poverty.html https://www.csmonitor.com/world/making-a-difference/change- Agent/2012/0905/Six-solutions-to-lifting-the-world-s-farm-workers-out-of-poverty http://news.bbc.co.uk/2/hi/business/3372305.stm http://www.bbc.com/news/business-37554634 http://www.bbc.com/news/business-41053741 http://www.imf.org/external/datamapper/ngdpdpc@weo/oemdc/advec/weow ORLD https://www.wto.org/english/res_e/booksp_e/anrep_e/anrep14_chap3_e.pdf
Annex