How can disparities be reduced?

Discuss the different ways in which disparities can be reduced with an emphasis on the following: • Trade & Market Access, • Aid• Debt Relief• Remittances. • Which solutions might lead to a self-sustaining economy?

Trade and Market Access• Perhaps the best way to alleviate poverty and reduce disparities is to promote global trade?

This would seemingly encourage processing and manufacturing of goods…..leading to real economic growth rather than dependency on aid:

Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a

lifetime.

• Trade: The exchange of goods and/or services. The exchange maybe for other goods and/or services but is normally for money.

• Exports: Goods and/or services produced within a country and then sold overseas.

Imports: Goods and/or services purchased overseas and brought into a country.

•One of the biggest barriers to free and open trade is protectionist policies:• Protectionism: Attempts to protect domestic markets by making

foreign goods less competitive. This is most commonly done through tariffs and quotas placed on foreign goods and subsidies given to domestic goods.• Free trade: When trade is totally free and fair - there are no

protectionist policies in place. It is the aim of the WTO to promote free trade around the world.• WTO: The World Trade Organisation is an organisation aimed at

protecting free global trade. It replaced GATT in 1995 and has 153 members. To join the WTO you have to demonstrate how your country promotes and practices free trade.

• In theory free trade sounds like a great idea because it reduces:

• Tariffs: Tax/duties placed on imported products to make them more expensive and reduce demand for them.

Quotas: A limit placed on foreign goods to reduce the supply of them, therefore forcing the price up reducing the demand for them.

• But………………………………………………..

Is “FREE” trade “FAIR” trade?• Why do countries have protectionist policies?

• Why do countries have favourable trade relationships with some countries but not others?

Arguments in favour for Free Trade: -a level playing field is created. All player under the same rules -tariffs are eliminated which can reduce the cost of goods. Elimination of trade wars -free trade encourages competition which can strengthen industries -encourages companies to innovate -Protectionism may cause special interest group to have undue influence -Protected industries may price goods at artificially high prices

Arguments against Free Trade: -does removing tariffs and protectionism really create a level playing field (eg David and Goliath if David didn’t have a sling, Canada vs US, HIPC vs MEDC) -prices for world commodities are controlled by markets in MEDC -WTO voting is dominated by MEDC’s even though it is a one vote one country policy. MEDC’s have much greater bargaining chips to offer in negotiations. -Free trade does not ensure a balanced distribution of wealth along the production chain

-Does free trade allow countires to escape dependency on TNC’s and MNC’s

What is Fair Trade?

Article criticizing Fair Trade:

• https://alternalists.wordpress.com/2012/08/27/top-10-reasons-fairtrade-is-unfair/

• A trailer from Black Gold:• https://www.youtube.com/watch?v=B7o1KKgLe9M

Video explaining the WTO with maps…..• https://www.youtube.com/watch?v=3Gqq2sBWai4

• Video criticizing the WTO..• https://www.youtube.com/watch?v=MFwydNu4CaM

Development Aid:

• Development aid (also developmentassistance, technical assistance, internationalaid, overseas aid, official developmentassistance (ODA), or foreign aid) is financialaid given by governments and other agencies to support the economic, environmental, social, and political development ofdeveloping countries.

Types of aid:•Emergency or short-term aid - needed after sudden disasters such as the 2000 Mozambique floods or the 2004 Asian tsunami.

•Conditional or tied aid - when one country donates money or resources to another (bilateral aid) but with conditions attached. These conditions will often be in the MEDC's favour, eg the controversial Pergau Dam project in Malaysia, where Britain used aid to secure trade deals with Malaysia.

•Charitable aid - funded by donations from the public through organisations such as OXFAM.

•Long-term or development aid - involves providing local communities with education and skills for sustainable development, usually through organisations such as Practical Action.

•Multilateral aid - given through international organisations such as the World Bank rather than by one specific country.

• Bilateral aid is assistance given by a government directly to the government of another country. It is when the capital flows from a developed nation to a developing nation.  It is often directed according to strategic political considerations as well as humanitarian ones.

What is Debt Relief?

• The reorganization of debt in any shape or form, so as to provide the indebted party with a measure of relief, either fully or partially, from a huge debt burden. Debt relief can take a number of forms: reducing the outstanding principal amount (either partly or fully), lowering the interest rate on loans due, extending the term of the loan and so on.

Creditors may only be willing to consider debt relief measures when the repercussions of debt default by the indebted party or parties are perceived as being so severe that debt mitigation is a better alternative. Debt relief may be extended to any highly-indebted party, from individuals and small businesses, to large companies, municipalities and sovereign nations.

(http://www.investopedia.com/terms/d/debt-relief.asp)

• Article describing the IMF Debt relief program

• https://www.imf.org/external/np/exr/facts/mdri.htm

• How can countries develop with a hole in their bucket…..Drop the Debt video• https://www.youtube.com/watch?v=KlKJlElSKqo

Some advantages and Disadvantages of Debt Relief:

Advantages Disadvantages

If a sovereign nation with a massive debt load is finding it difficult to service its borrowings, its creditors may be amenable to restructuring the debt and providing relief, rather than risk the nation defaulting on its obligations and increasing global systemic risk.

It may encourage imprudent and reckless behavior by fiscally irresponsible parties, who may embark on borrowing sprees in the expectation that their creditors will eventually bail them out

Relieving the burden of debt may allow the borrowing countries to invest in infrastructure and programs to improve Q of L

Creditors have to incur needless losses on debt relief measures through no fault of their own.

Relieving the burden of debt may allow the borrowing countries to invest in infrastructure and programs to attract capital investment from abroad

In order to receive debt relief, countries may have to agree to structural changes to their economy and society, possibly sacrificing sovereignty

It could be argued that debt in LEDC’s is a legacy of an imbalanced global economy. Is MEDC wealth already at the xpense of ‘LEDC’s. Who really owes who?

Stigma (HIPC) may be attached to countries receiving debt relief. Disincentive for investors.

What are remittances?•A remittance is a transfer of money by a foreign worker to an individual in his or her home country. Money sent home by migrants competes with international aid as one of the largest financial inflows to developing countries.•Good video explanation…•https://www.youtube.com/watch?v=-6sumAF9I5U