Depression 2008: Do We Really Need A New World Trade System?

INTRODUCTION

The world has travelled so far a long path from the agrarian level of development, the down south of development, where the level of life was not more than that required for mere subsistence, towards a life full of modernity, sophistication, luxury, satiety, satisfaction and scientific ideology, the high north of development. However, a part of the world comprised of so called developed economies has achieved a lot having reached a distant point on the upper north of development but the bigger part comprised of the so called poor and developing economies is still lagging far behind. These developing economies deserve not for competition with but for help from the developed economies. Therefore, instead of an at par cooperation of ‘equally give and take' position, a cooperation resulting a net flow of help from the developed to the developing will rather help the latter to cover the gap. Therefore, arrangements like globalisation confined to mere free trade can't be proved justified because the fruits of such an arrangement can never be distributed equally between developed and developing economies. This was well explained in detail by a number of economists, especially belonging to developing countries, in the later eighties when the developed economies together as a consortium started to blatantly advertise and rather insist the developing economies for coming under the globalization move so that the extra production of developed economies may find market in developing economies. But the voice of those thinkers was lost in the uproar of the initially increasing foreign exchange receipts in developing economies. In addition to this, the behest of IMF and World Bank too made the governments of developing member countries to neglect this type of criticisms.

CONSEQUENCE OF GLOBALISATION

Most of the developing countries accepted and made required changes in their economic policies to lift the trade barriers on their borders and rather to give thrust to the process of globalisation in the beginning of nineties. Thus the protectionism in foreign trade was said good-bye to and the overproduction of developed countries started finding market in the developing countries. There started but two processes, one of which was unwanted and another was unexpected. The unwanted process was that of the infant industries in developing countries becoming unable to compete with the superior quality foreign product coming to their home market. This made them to shrink in the want of adequate market whereby the situation started gaining a formation as if there would have been over production in the developing economies despite the existence of inflationary pressure on account of heavy autonomous investment made by the governments therein. The consequential cut in production of and employment in the infant industries made other industries to apprehend and worry about future economic environment. On the other hand, under the above said unexpected process, some countries like China started currency manipulations based on their  cheaply produced heavy exports mostly of the ‘use & throw' articles in a well planned way. The previous process instilled a feeling of depressive trend or economic meltdown in developing economies and the latter process rendered rigour to the depressive condition, firstly in the markets of the developing economies by dumping cheap exports therein, and secondly of developed economies by making big dent on their exports meant for releasing or rather defecating depressive pressure towards the markets of developing economies.

PRESENT SITUATION

The two processes discussed above and emerged as the aftermath of globalisation have now brought the world economy at a bi-path juncture of deciding whether the world economy should carry on with the free trade policy under the prevailing globalisation system or the abandoned policy of protective trade should be resorted to for proceeding further on the path of achieving the higher and higher development level of human life. The statement of the newly elected US President, Mr. Obama, regarding the relief in tax burden not extended to the companies practising outsourcing clearly indicates his tending to assimilate to some extent and in some form the policy of protected trade. In response thereto Indian Finance Minister, Mr. Mukharji, has reacted saying that protectionism in any way or in any form would not be accepted in the present globalisation era because it would be against the norms of globalisation. Similar reactions are expected to follow from other corners also. But I think that Mr. Obama will not care such reactions because he is perhaps going to use all ways and means to improve or at least keep prevented from being worsened the unemployment situation in US.

FUTURE PROSPECT

The pressing way of Obama's making the declaration, the rigour of meltdown situation in US and employment enhancement being the best way of mitigating the rate of falling demand provide sufficient ground to believe that obama would rest stuck with his ideology of placing barriers on the way of US's service imports like in the form of outsourcing. Once the import through outsourcing is checked other segments of US's foreign trade also will start demanding protective measures to some extent whereby US government would become unable to prevent the thread of protective measures from being spun further. Other economies, trading with US, will react and ultimately resort to the similar action by protecting their trade in some way and to some extent. If betided so, the return of protectionism would become certain, the system of globalisation would be shattered and US, the globalisation inaugurating country, would be blamed for causing the so downfall of globalisation. With the passing of time protectionism may once more attain fathom to unwanted depth and again the world trade may become badly hit. That would become not lesser ponderable a situation because it would again prevent the world economies from enjoying the advantages of globalisation.

CONCLUSION

The US economy is taken as the leader of world economies that is why it has become the US's responsibility to decide how to solve the prevailing problem of world depression and to which direction the world economies should be led in future. US should not at all try to get individuated to solve own depression problem leaving other economies aside. If US choose to solve depression problem individually by resorting to protectionism, it will veer the world economy towards the pre-globalisation situation having constricted trade and devoid of globalisation advantages. On the other hand, sticking to absolutely free trade under globalisation will probably either render more rigour to or, at least, be proved immaterial to help the economy come out of the meltdown. Therefore, similarly as in the case of free market capitalism versus fully regulated socialism, neither the prevailing totally free trade under globalisation nor the old and pre-globalisation highly protected trade would be a desirable course. Eventually, I would like to conclude and rather suggest that US should take leading economists and leading economies in confidence and find out a viable and sustainable trade arrangement by deciding the essential dose of protection in the prevailing globalised free trade. The leading economists should decide where, how, to what extent and for what articles tariffs should be imposed in the world economy taking all independent economies as different parts of a single economy. In this way arrived at trade system will not only prove significantly helpful in the struggle against the prevailing world depression 2008 but also prove sustainable for future.

_____________________________________________________________