The World Trade Organisation - An Australian Guide
- 2006 Edition -
Download the PDF version of this guide here

The Global Economy: Winners & Losers

The Winners: Corporations & The Rich

The global economy’s winners are the rich countries the big multinational corporations - mostly based in the rich countries - which now almost completely control trade within and between nations. The world’s largest 500 corporations control over 70% of world trade (8). For example, in the 1990s, 80% of the entire production of world grain was distributed by just two companies: Cargill and Archer Daniel Midland (9).

Global trade liberalisation allows corporations to relocate to countries with low wages and low labour and environmental standards. It allows them to manufacture products and to cheaply extract natural resources from poor countries without having to pay the costs which wages and environmental regulations demand. The economic cost of the social and environmental damage inflicted by corporations in the US was $2.6 trillion, according to study by US professor of business administration Ralph Estes (10).

Individuals are benefiting from the global economy too. Between 1994 and 1998, the 200 richest people in the world more than doubled their net worth to more than $1 trillion. Meanwhile, disparities continue to grow: In 1960, the income gap between the richest fifth of the world's population and the poorest fifth was 30 to 1; in 1997 it was 74 to 1 (11).

The Losers: Workers

Workers in both rich and poor countries have been badly affected as trade barriers have been "liberalised" and corporations have run a race to the bottom to find the cheapest labor markets and the most lax labour regulations.

Trade liberalisation has resulted in collapses in manufacturing in many developing countries. In Zambia, the government was forced to remove all protections from its manufacturing industry in return for debt cancellation. This led to large increases in imports, especially of cheap, second-hand clothing from industrialised countries. The Zambian textile industry could not compete and the sector has all but vanished, with 140 textile manufacturing firms in 1991, falling to just eight by 2002. Where there had been 34,000 Zambian textile workers in the early 1990s, by 2001, there were just 4,000 (12). Côte d’Ivoire, Kenya, Senegal, Ghana, Ecuador and Peru are just some of the other developing countries which have seen manufacturing jobs slashed by the removal of tariffs and other trade barriers.

The story is similar in Australia. As tariffs have been reduced, Australian industries across all sectors have found themselves unable to compete with cheap imports. A report by the National Institute of Economic and Industry Research found that by 2005, it is likely that the tariff reduction that commenced in 1987 will have resulted in the loss of approximately 100,000 manufacturing jobs alone. In 2005, it is likely that total employment in the Australian economy will be 200,000 less as a result of the tariff phase-down (13).

In the increasingly competitive global economy, cut-throat competition between countries for a share of the export market often results in a ‘race to the bottom’. Countries find themselves lowering their wages and labour standards in a desperate attempt to attract and retain foreign investment. Australia’s new Industrial Relations reforms are part of this, with Prime Minister John Howard arguing that "we live in a globalised world economy, we can’t go back on that . . . what we have to do is out-compete the world. And that means that we must continue with the process of economic reform" (14).

The Losers: Small Farmers

Across the world, farmers have been among the hardest hit of all people affected by economic globalisation. A 2005 UN report found that the main winners from agricultural trade liberalisation were importers, middlemen, and large-scale producers, while the losers tended to be local producers, particularly small-scale farmers who are usually the majority of the population in developing countries (15).

Around the world, trade liberalisation is forcing farmers off their land and destroying traditional small scale agriculture for the benefit of multinational corporate "agribusiness". Reducing tariffs forces small farmers to compete against subsidised food imports, and often destroys their livelihoods. Ruined farmers move to overcrowded cities and take whatever jobs they can find in export-processing zones, producing exports for a few cents an hour. From an economic perspective, this often appears as progress, since farmers make little money by growing their own food, even though they often own their house and land. But leaving their land to earn slave-labour wages in a sweatshop makes GDP figures rise – a success in conventional economic measures. The Australian government has described in glowing terms "the transformation of Asia's . . . predominantly subsistence agriculture, into a rapidly modernising system of agribusiness" (16)

Take Mexico, for example, where since signing the NAFTA trade agreement many US multinationals have moved in. Wealth has massively increased, and Mexico’s $600 billion economy is now the world’s ninth largest. Yet this wealth has flowed only to the richest Mexicans, and has destroyed millions of rural jobs in the process. Nineteen million more Mexicans are living in poverty than 20 years ago, and one in four Mexicans are now classed as "extremely poor" – that is, unable to afford adequate food (17). Mexican economist Alejandro Villamar says "nearly two million jobs out of 8.5 million have disappeared since 1994, [when NAFTA was signed], and 10 million people have fled to the US in search of work" (18). The reality is similar for literally billions of people in Asia, Africa and Latin America.

In Australia, small farmers have also been decimated by reductions in tariffs and subsidies, deregulation, export orientation and the rise of big corporations in the farming sector. Between 1970 and 2000, the number of farms in Australia fell consistently from over 190,000 to about less than 120,000, while over the same period, the contribution of farming to Australian employment almost halved from 7.3% to 4.2% (19). The National Land and Water Resource Audit (NLWRA) notes that between 1986 and 1996 alone, the number of Australian farms fell by 20%, almost all of them smaller then 500Ha (20).

The Losers: The Environment

The environmental impacts of global trade liberalisation are massive, but rarely acknowledged. The move to export-oriented economies has increased the extraction of every type of natural resource, increased logging and land clearing, increased the intensiveness of fisheries and agriculture practices with greater chemical use, and increased industrial production – resulting in a rapid rise in greenhouse gasses. The effects of this growing trade and export orientation have been disastrous. The Amazon is being cleared faster than ever before to grow beef and soy beans, almost exclusively for export (21). Groundwater in many developing countries is being irreversibly depleted and agricultural land is overused and turned saline or into desert to grow cash crops for the West. Fisheries are collapsing as exports rise – over 75% of the world’s fisheries are over-fished or fished at their biological limit (22). Rivers are polluted with chemicals and mangroves are being destroyed across the developing world to farm prawns for export. Species are going extinct at the greatest rate since the time of the dinosaurs 65 million years ago (23).

Impacts of Australian Export-Oriented Agriculture

The UN Environment Program recently reported that "the environmental impacts of increased trade in agricultural products are potentially devastating" (24). A massive 75% of Australia’s agriculture is grown for export (25). This export orientation is the ultimate cause of most of Australia’s environmental problems, including:

• Land Clearing and Biodiversity loss – Land-clearing for agriculture – mostly for export – was identified by the 2001 Australian State of the Environment Report as the single most significant threat to biodiversity in Australia (26).
• Water Over-Use – Even in drought times, up to 80% of Australia’s freshwater use goes to agriculture, mostly for export (27).
• Water Pollution – fertiliser and pesticide from export-agriculture runs-off into our precious waterways. Such run-off is helping to kill the Great Barrier Reef (28).
• Dryland Salinity – Agricultural production for export has been the main cause of 2.5 million hectares and potentially more than 12.5 million hectares of prime agricultural land which is now salinity-affected. At present levels of use, estimates from the National Land and Water Audit put the area of possible land affected by dryland salinity in 2050 at 17 million hectares (29).
• Climate Change – About 37% of Australia’s greenhouse gas emissions result from production for export (30).
• Logging of Native Forests – Up to 80% of native forest logged ends up as woodchips, 90% of which is exported, destroying our natural heritage (31).

Impacts of Increasing Goods Transport

A world based on maximizing imports and exports is also based on maximizing carbon-based transport, which causes a variety of environmental problems. About 95% of the world’s traded goods are moved by maritime transport, which in turn cause about 5% of the globe's sulfur oxides and 14% of the world's nitrogen oxide emissions and – equal to the nitrogen emissions from all the cars, trucks and other vehicles in the United States. Sulfur particles cause acid rain, while nitrogen compounds – as well as being greenhouse gasses – can form ground-level ozone (32). Increasing marine transport also spreads many exotic species which can decimate ecosystems (like the North Pacific Sea Star in Melbourne’s Port Philip Bay) or economies (like the North American Fire Ants in Queensland).

Next Section: The World Trade Organisation

Back to Contents Page