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MANIFESTATIONS OF ECONOMIC INTERDEPENDENCES. INTERNATIONAL TRADE, BETWEEN FREE AND FAIR


Anca DINICU
Nicolae Blcescu Land Forces Academy, Sibiu, Romania

Each national economy is part of the global economic context; it has to initiate and continually develop exchanges with other economies. This necessity is determined by the objectives of the economic development and the instruments and results of the whole process of integration into the world economic gear, confer each state a certain place in the global competition and hierarchy. International economic interdependences become thus, simultaneously, cause and effect in relation to the evolution of globalization, stimulating essential changes in the content of the economic activities and in that of the market, within economies and within the relationships between them.

ABSTRACT

Keywords: economic globalization; capitalist system; polarized structure; liberalization Economic Globalization and Supporting Processes A globalized economy is one in which patterns of production, exchange and consumption are becoming more powerfully separated from a geography of territorial distances and territorial borders [1] so that the finances and trade are no longer interpreted in terms of state borders and distance. In this situation, the number of trade documents and the volume of trade between states may not matter so much, but what matters most is the way in which trade becomes part of the production processes across borders and helps create networks of global markets. At the same time, it is not only the amount of money circulating between states that counts, but also the instantaneous nature of the way in which the funds are transferred. Economic globalization, at the stage it is today, would not have been possible in the absence of processes such as: internationalization (increase of transactions between countries in the form of trade, investment and capital flows) and integration (relaxation of government border control regarding the transfer of resources between states); liberalization (government policies to reduce the role of the state in economy, such as those on privatization of state enterprises, mitigating and eliminating trade barriers and taxes, deregulating and opening the financial sector to foreign investors); technological revolution (the economic actors can operate globally without encountering too many problems regarding location or distance) and deterritorialization (reducing the importance of spatial aspects).

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The increase of global markets is not a last minute issue, the same way as its merits were not noticed only by the classic representatives of economic liberalism. Karl Marx (1818-1883) and Friedrich Engels (1820-1895), while criticizing the bourgeoisie, showed the aspects that were to underpin the development of the capitalist system [2]: the big industry created the world market which, in turn, led to the development of trade, navigation and land communication; the need for increasing sales resulted in finding new markets, by establishing relations everywhere; production and consumption acquired a cosmopolitan character, since industry no longer functioned on a national territory; the introduction of industries (industrialization) became a vital issue for all the nations; raw materials started being brought from all regions of the world, there appeared new needs that were met by products of the most remote countries and of the most varied climates; the multilateral exchange and interdependence of nations developed; the spiritual products of various nations became common property; all nations started to be involved in civilization, including the barbarian ones, which were brought thus into a state of dependency; enormous cities were created; ownership became concentrated into fewer hands; independent provinces were incorporated into a single nation with a single government, a single law, a single national class interest, a single customs border. Both for the liberals and the traditional Marxists, the integration into the world economy presents positive aspects for achieving the development and welfare of the nation. However, while the liberals emphasize the internal sources of growth, assisted of course by trade and capital flows, the Marxists (due to the constant class struggle at national and international level they promote) consider these external activities as the forces capable of promoting economic development and destruction of the conservative social structures.

The development of global markets was meant to be a process that would serve to promote efficiency through competition and division of labor, specializations that would enable the economies, the nations, the companies and the individuals to focus on what they could do best. The global markets were created in order to offer everyone a better chance regarding the access to capital, technology, cheap imports and advantageous exports. Nevertheless, markets do not automatically ensure that the benefits of greater efficiency will be for everyone and equal for everyone. The solution would be to implement the necessary policies and, where appropriate, to offer aid from the international community. The globalization of markets unaccompanied by a solid construction of international social and political agreements leads to an uneven social development, which could mean that having excessive confidence in the market mechanism could represent a great danger, the importance of the political process at a national and supranational level becoming evident. Globalization means freedom and the possibility of accumulating wealth by participating in the game on the international markets, which are often amoral allowing the pursuit of self-interest, which is not always something to be blamed. Markets are capable to create wealth, but are not intended to address other needs although they also create poverty, crises, and social convulsions. Markets are not able to provide for collective needs because they do not have the power to make social justice [3], which requires regulation. The Role of International Trade in Ensuring Economic Growth In the context of global economic interdependences, the international trade represents a crucial element of economic growth. It has developed over time under the influence of a system of natural, economic, political, technical-scientific,

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social-cultural, internal and/or external factors. However, international trade contributes to development only when the growth of a country is stimulated by the exports it achieves. Unlike the advanced states, most of the Global South countries have failed to transform international trade into an element to support their economic development, both because of customs duties, standards of quality and quantity restrictions imposed by the developed countries, and because of the relatively narrow international specialization, their exports having a structure that is not very diversified. Reflecting all the import and export transactions, ranked by country, by groups of countries, areas or regions, by categories of market or material goods and services, the international trade has now reached manifestation rhythms that are unprecedented in history, providing, at the same time, the picture of striking contrasts and differences [4]. Growth, in the contemporary period, taking place at a greater rate of the international trade compared with the dynamics of production, is explained by the increase of the physical volume of exports and by the increase of the world market prices that took place during the postwar period, showing that a relatively growing proportion of the national production is export-orientated, and a growing proportion of the import contributes to covering the consumption needs of the country. Openness to trade determines an increased production of those goods for which the producing state receives a comparative advantage (concept defined for the first time by David Ricardo, in the 19th century) and, automatically, a reduced production of those goods in case a relative disadvantage appears. Thus, economic liberalization generates a higher economic efficiency since it reallocates productive resources to those areas with a greater relative advantage. The international trade establishes, by means of the comparative advantage, which products or sectors are growing, which are in demand,

and which are in decline, ensuring that efficiency and productivity are higher in the industries that are expanding. Regionalization and Globalization of International Trade International trade is a dual one because the intra-industry trade on the North-North relation (the flows of goods and services responding to demands where markets and tastes are similar) is opposed to the polarized structure of the flow on the North-South direction (the rich North exporting manufactured goods with a high degree of processing and the poor South, supplier of raw materials and energy products). South-South trade emerged from the periphery of global trade, becoming more central qualitatively and quantitatively [5]. As the developing states of the Global South, particularly those with large populations and dynamic economies, have accelerated their rhythm of development and have diversified their productive base, they have gained importance among the markets of manufactured goods and services in the area. This fact has favored further economic growth, the meeting of needs of energy and food sources and infrastructure building. If within this new type of South-South economic interdependence, trade and cooperation are guided in such a way so as to ensure mutual benefits, it will function as a transmission belt of development. From among the states that are dynamic from the point of view of growth, trade and investments, which produce and sell high added value products on the world markets, we mention Brazil, China, India and South Africa, countries that use the perfect combination to achieve commercial competitiveness: cheap labor force and advanced technology. The Global South is developing its intra-regional and inter-regional trade, the latter being the engine of the change of trade geography in this part of the world. The globalization of trade ensures the connection between national markets that are situated at great distances from one another, between national and international

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markets. Despite the recorded accelerated pace of the process of globalization, there persists a polarization of the international trade between the North and the South, a North in which the states make exchanges especially among themselves and a South that makes exchanges particularly with the rich North, and less with one other. If the North is important for the South, the South is not equally important for the North. The liberalization process is at the basis of the globalization of the trade, the freedom of the international trade being an essential ingredient in the recipe of economic freedom [6]. Trade liberalization was possible due to the progressive reduction of customs duties and the elimination of non-tariff barriers (i.e. elimination of the government measures that distort the volume, composition and direction of trade), and also due to the increase of the degree of transparency and predictability of trade arrangements. The more an economy is based on trade in order to ensure its development, the more it has to deal with economic turbulences when they occur. The same happens in the case when the greater the integration and dependence on international trade, the more the chances to benefit from higher gains when the international trade is flourishing. Thus, the commercial performance of a state is affected by current global circumstances directly related to the dependence on international markets, by the composition of the export and by fluctuating exchange rates. Except some industrialized economies of Asia and some very dynamic developing countries, the natural resources and some manufactured goods (textiles, clothing) continue to have the highest share of the total exports of developing states, providing them with most of the revenue values, revenues that are also directly conditioned by the prices imposed by the beneficiary, usually a developed country and by the fluctuations (mostly negative) of the prices on the world market when a crisis arises.

Although the degree of dependence (to ensure economic development) to the international trade of the advanced states is lower than that of developing countries, this type of activity is not, implicitly, a matter of minor importance, the international trade being for any type of economy a financial source and a stimulus for growth. Thus, ensuring the international trade flow is a global priority if we take into consideration its importance for the increase of national wealth and for ensuring development. A Free Trade or a Fair Trade? Trade restrictions and taxes continue to exist, despite the process that started after the Second World War to eliminate them gradually. Some developed states even have a duplicitous behavior as far as this issue is concerned while advocating trade liberalization, promoting its benefits, they work for removing barriers and reducing subsidies only for those goods that hold a comparative advantage and prove more reticent regarding the degree of openness of their own markets and the elimination of subsidies for the situations when the developing states hold a comparative advantage. Thus, the American government protects its textile industry and provides substantial subsidies for agriculture; the Japanese government rejected, during the postwar period, the free trade and the largescale foreign investments, protecting their national companies by providing the necessary framework and support for its own capitalist development; in South Korea, once part of the third world, capitalism generated high growth rates due to government involvement, not due to free trade (when in the 1990s, South Korea and other East Asian countries fell under the pressure of Washington and IMF in order to open their markets, including the financial ones, the result was a great disaster). Hence, for now, we can speak about a multilateral liberalization since the wellfounded disillusionment in the developing countries combines with growing protectionist sentiment in the developed

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world [7], the more so as this intertwining blending took place within the context of a global crisis. In fact, the capitalist states have achieved economic success by means of serious and extensive governmental regulations regarding their international trade and not by means of free trade. The impact of trade liberalization is explained differently, and in this case, just like in many others, the doctrinal school to which the analyst belongs, the country of origin, the position occupied in the bureaucratic hierarchy, the practical or theoretical commitment to solving the major problems Mankind faces are of the utmost importance. Thus, according to some opinions, if trade liberalization did not lead to the significant growth of developing economies, this is due to those same countries that failed to sufficiently open their markets, according to the fast pace of globalization, in order to practice free trade. Developing countries sin by the lack of internal reforms, tolerance to corruption and lack of interest in improving the legislation to attract foreign investors. For others, the mechanism of globalization is constructed in such a way so that it favors the already developed countries, undermines the sovereignty of the least developed ones, the negative effects generated by globalization being more visible, thus more than the positive ones. There also exists a third category, for which guilt is collective and free trade generates both positive and negative consequences for all states. Final Considerations If the central idea of the need for trade liberalization is that development and unprecedented prosperity will be fostered in such a way, the conclusions drawn after the application of the process are mixed. It is true that by the means of international trade the number of markets increases and new opportunities for economic growth and human development are created. Nevertheless, trade liberalization does not ensure human development and trade expansion does not always have positive or

at least neutral effects on human development. Trade liberalization may prove to be advantageous for a country as a whole, but it may lead to the worsening of the situation of certain social groups. Opening to the world trade does not guarantee immediate economic growth, the internal and external institutional regulations, the social conditions at the moment of the expansion representing a major influence on the extent to which a country or nation benefits from liberalization. Growth and development are the elements that have created the possibility of economic integration of a state in the global economy and not the other way around. Maintaining an optimum level of competition requires more than trade liberalization which does not always create wealth, but, on the contrary, (ever more) poverty. International trade should be interpreted in light of the globalization process, which is based on and generates competition. Trade freedom, generated by the freedom brought about by globalization, radicalizes international competition causing as an immediate effect the decreased number of jobs due to the closing down of inefficient enterprises. Creating unemployment, trade liberalization generates opposition against it. Contrary to those advocated by the fundamentalist defenders and promoters of liberalization, the covering of this deficit by creating new jobs with a higher productivity, is virtually impossible in the poorest of the developing states. This represents a demarche that requires capital, which will be provided by bank financing and entrepreneurial spirit, a spirit that is missing due to lack of education. The liberalization process per se is not negligible; it can produce many more positive effects. What is worrying is the manner of promoting it that is the pressure put on the states that are weak from all points of view to become liberalized. One should not forget the fact that the advanced states, until they managed to create (relatively) strong economies, had protected various branches of

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activity, preparing them to cope with the pressure coming from outside. For now, free trade and fair trade seem to be not two separate issues, but two scenarios for the evolution of world trade and their intercrossing is impossible. For the advocates of fair trade (which is difficult to define precisely), the exchanges between the developed states and the less developed ones are carried out on uneven bases and they should be made more equitable in order to protect the weaker countries. However, supporters of free trade promote the idea that, in the long run, the markets will be able to correct imbalances, both the rich states and the poor ones benefiting from mutual access to their markets, which could transform free trade into a fair one. However, as far as the developed countries are concerned, trade is already fair. The idea is to establish the international fair trade that would bring benefits especially for manufacturers and retailers in deprived areas of the world by means of instruments such as fair prices, work safety, as well as responsible environmental practices. The reason for which free trade and fair trade cannot coexist is that one represents the alternative of the other. In theory, free trade represents the economic system characterized by the laws specific to the market economy through which each nation develops economically in such a way that the benefits can be felt by each participant/individual. An open international market should be based on and generate

stability and security, should operate in a transparent environment based on access to information, so that predictability should be possible. In practice, however, international trade produces unevenly distributed rewards due to the existence of protectionism, of the different levels of political, economic and cultural development of the states. REFERENCES [1] John Baylis, Steve Smith, and Patricia Owens, The Globalization of World Politics. An Introduction to International Relations, (Oxford University Press, 4th edition, 2008), 456. [2] Karl Marx, and Friedrich Engels, Manifestul Partidului Comunist, (Bucharest: Editura Politic, 1969), 38-41. [3] George Soros, Despre globalizare, (Iai: Editura Polirom, 2002), 25-26. [4] Sorin Burnete, Elemente de economia i politica comerului internaional, (Bucharest: Editura ASE, 2007), 331. [5] http://www.unctad.org/en/docs/ ditc20071_en.pdf (Globalization for Development: The International Trade Perspective). [6] Cosmin Marinescu (coord.), Economia de pia. Fundamentele instituionale ale proprietii, (Bucharest: Editura ASE, 2007), 281. [7] Joseph E. Stiglitz, Making Globalization Work, (N.Y.: W.W.Norton & Company, 2007), 81.

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