Issues related to free trade across the globe have been debated at this year's Munich Economic Summit. The gathering provided ample input for policy-makers having to deal with the pros and cons of unfettered trade.
World trade today is more economical than ever before. A vessel containing 1,800 laptops, sent across the Atlantic, costs only around $2,500 (1830 euros). That means each laptop's carrying cost is only $1.40 - regardless of its size. That was only one of the astoninshing facts that Hans-Werner Sinn, director of the German Ifo Institute, presented at the conference in Munich.
Free world trade
Participants from 20 countries came to the Munich Economic Summit to discuss free world trade, which they said was closely linked with affluence. German per-capita income would be 50 percent lower, if the country didn't have access to international markets, Sinn pointed out.
“It's very surprising that a country like Germany that profits so much from world trade has so many critics of free world trade,” marveled the Ifo chief before supplying further numbers.
“The 28 countries of the European Union comprise only 7.2 percent of the world population, but they account for 17.2 percent of all exports. It will not remain that way, if Europeans are closed off rather than open.”
“Global trade liberalization is urgently needed,” emphasized Nakgyoon Choi, secretary-general of UNCTAD, the United Nations Conference on Trade and Development. The Korean comes from a country that has profited enormously from trade liberalization and, like Germany, is strongly dependent on exports.
Bali a flop
How successful and meaningful are trade agreements in reality? Economist Paul Donovan from UBS Investment in London criticized the historic agreement that was made last December in Bali, which aimed to lessen global trade barriers and subsidies on agricultural products.
“Bali has not registered with financial markets,” said Donovan. “Bali is the deal that has not really happened.”
Opposition to and emotions stirred by the Bali deal were high. “The agreements in Bali were even an important discussion theme in the Indian election campaign,” emphasized Karl-Ernst Brauner, acting general secretary of the World Trade Organization (WTO), and an advocate of liberalized world trade.
India had long refused to accept that subsidies should be limited for a certain period of time. In the end, a compromise was reached whereby under specific terms agricultural aid would continue to be possible. The Bali agreement was celebrated worldwide as a historical breakthrough.
Free trade means expanding affluence. This is a formula that not everyone follows. Since the financial crisis, it has been clear to many what an absence of rules can cause. Numerous business experts from developing and developed countries were especially critical of trade dominance exerted by Americans and Europeans.
“There is a great unequal weight in international trade,” said William Y. Zhang, CEO of the China Elderly Foundation, a large pension fund.
“Let's be frank, developed countries want mechanisms protecting and possibly advancing their status, while developing countries want ways to protect their fragile internal markets.”
“This is not the end of the story though,” emphasized Zhang with a laugh. “Freedom of trade has brought huge rewards for everybody. Although this wealth had spread unevenly, and some countries had benefitted more than others, he added.
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