- It has been normal over the centuries for countries to protect their own industries and agriculture from outside competition, especially when they are still in a stage of development. This has been done with tariffs – a levy or tax on goods imported from other countries, or with subsidies, – additional payments to the producer or grower. The intention of the WTO is to do away with all tariffs and subsidies, and increase the overall volume of trade, thus creating increased wealth.
- Developing countries are recognised to be at a disadvantage, as to implement the final goal immediately would strip their fledgling economies of all support, and pit them immediately against worldwide suppliers whose advantages they could never hope to match. As an interim measure, developing economies are therefore allowed to retain their protection for a period of time, but at specified maximum levels.
- It remains to be seen whether this system will allow indigenous industries and agriculture to develop to a point where they can compete without protection, or whether they will eventually succumb to the overpowering persuasion of world market forces. The multinationals and the established players appear to have a decided advantage.
- In order to develop indigenous industries, agriculture and infrastructure, massive sums of money are required, which the developing nations for the most part simply don’t have. Money is made available to them in the form of loans from the IMF, for example, or from other such institutions. Before a loan is granted, however, the prevailing conditions in the country are evaluated, and recommendations made for improvement as thought necessary to safeguard the lender.
- Almost without exception, privatisation is not only recommended, but insisted upon. This involves deregulation and unbundling to enable businesses to be offered for sale to overseas buyers, who will bring their own capital in for further investment. To ensure that prospective buyers are attracted, there is often a range of concessions offered, and a minimum profitability stipulated.
- Another requirement is the strict adherence to Intellectual Property Rights agreements, and the clamp-down on counterfeiting operations and sales within the country.
- For the multinational companies, the result is increased profits – it must be, or it just wouldn’t happen!
- These profits result from various sources:- reduced labour costs, reduced or non-existent environmental regulations, reduced or non-existent worker protection regulations, tax concessions and ‘sweeteners’ from the recipient government, inducements and tax breaks from their own government. If the recipient government is another developed country, there may be research grants available, and often a flow of technical expertise back to the parent company.
- The ‘donor’ government gains influence in the recipient country, both directly via the multinational company and indirectly via the IMF or lending agency.
- The recipient government gains employment for a certain number of its population, and an influx of investment capital, providing further employment during any construction phase. Where the contract is a “Build-Operate-Transfer” agreement, the recipient government can also expect to inherit a building at the end of the term, but anything of value that can be shipped out again will probably be removed.
- The consumers in all probability lose, for prices almost inevitably increase substantially. For those with adequate incomes, such increases may be anything from an inconvenience to a minor disruption. For the poor, however, where sheer survival is a continual struggle, the choices can be excruciating:- money for water, for example, or money for their children’s education – but not both!