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Globalisation & Pesky Non-Tariff Trade Barriers

Globalisation of trade has been around for many centuries. However, in its current phase from the 1970s onward, globalisation has become exponentially more efficient and effective – fueled by corporations crossing international boundaries and the golden chalice of trade-enabling technological progress.

Globalisation is enabled by Technology

The enabling technologies of this latest phase of globalisation include rapid development in computer and related technologies (including the Internet), logistical technologies like the humble shipping container, a shift toward internationalised legal/political structures and the almost costless communication that sees more business transactions occuring in 1 day of 2011 than occurred in a year (or years) of the 1960s. Never before have individuals (of elite economies) and business transactions been able to travel so far and fast or purchase goods so broadly at such low cost.

GATT, the WTO & Trade Barriers

Unfortunately all of that internationalisation comes at a price. If you look at the new globalised world – driven by corporations expanding across borders – the ideals of a new world order have aligned squarely on the maximisation of shareholder wealth at the expense of those less fortunate. The World Trade Organisation (WTO – 1995 onwards), which replaced and furthered the aims of General Agreement on Tariffs and Trade (GATT – ran from 1947 to 1993), has progressed past the lowering of tariff trade barriers and is focused squarely on the issue of non-tariff trade barriers.

The effect of globalisation on affluent societies can’t be denied – those GATT agreements for tariff reductions led to a huge rise in international trade and profits since the end of World War 2. Particularly important, underpinning those Free Trade objectives are those enabling technologies that have resulted in an exponential increase in business transactions and the ability to send goods to their global destinations. Obviously, there are winners and losers in the globalisation paradigm… that cheap shirt you’re wearing is made on the back of the four-fifths of this planet who underpin the one-fifth of us who are better off.

Non-tariff Trade Barriers

Which brings me to those pesky non-tariff trade barriers – that is, any number of trade barriers other than a tariff that stand in the way of free trade on a level international business playing field. As tariff trade barriers receded around the world there has been a tendency to impose non-tariff barriers in their place. These include quotas, import licensing, requirements for documentation, red tape, the use of national standards (often with the excuse of health and safety), buy national policies, an over-valued currency, government policies and subsidies (consider Tony Abbott’s proposed $50 billion subsidy for big polluters), domestic assistance programs, border taxes, administration fees and that pesky old excuse of quarantine.

All of these (and more) are practices that the WTO, holding us to the objectives of international free trade, consider to be protectionist measures to lock foreign players out of a fair and equal playing field.

The New Era of FTAs and Trading Blocs

The 1980s ideal that Australian Standards are an immovable line in the sand, for example, fails to realise that as we move into an era of Free Trade Agreement (FTA) and trading blocs there are producers overseas lobbying (as producers in Australia lobby for export purposes) to have exemptions created that allow them to enter markets. It is also worth noting that most standards are about process, rather than product; and, most people have no idea how many standards exist in the world and how expensive and time consuming it is to develop and maintain them on a country-by-country basis.

Examples & Questions to Reconcile your Understanding

Let me put it another way. If Australia has a standard for car headlights and every other country has their own standard… then all of those standards not only have to be maintained at each country’s origin but their manufacturers and import / export relationships also have to negotiate those trade barriers. How arrogant, in this globalisation paradigm (the WTO perspective of the new world economic order), to consider Australian Standards to be the only standards? It’s not unrealistic to suggest, as with other industries, that there could be a national standard set for car headlights manufactured in Australian factories, while imported car headlights may be held to a less rigid standard.

Here are some questions to reconcile in your own mind:

  1. If a standard is a process, how do you ensure that standard produced in a Chinese manufacturing facility is the same process as in the American or Australian facility? Sheer common sense should tell you that goal is expensive and frought with daily challenges – for all standards out there.
  2. Or, if Australia (a Continent) was 20 countries, rather than six states and two territories, how would that political reality need to alter free trade? If goods can move from Adelaide to Darwin freely in this Australia, why would barriers be any more necessary in a 20 country Australian continent?
  3. Again, when you are driving in the United States, Iran or Lichtenstein are you less safe in a Toyota compared to driving an identical model Toyota that meets an Australian safety standard? Why is the Australian Standard superior or justifiable in a world market?
  4. Think of every product made of every component and consider the number of standards and standards committees involved worldwide to maintain that ever-increasing store of human effort. How can standards be used to make it difficult for you to export your product into a foreign market (ie. China, USA, EU – manufacture, process, labeling and logistics to market)?

They are tricky questions. The globalisationist would ask: is Australian steel safer than Chinese steel and if so, why? Building cars has always been a compromise between a safety objective and the economics of a healthy car industry – a safe car has never existed. If we demanded safe cars there would be no car industry – many thousands die in car accidents every week. We currently make cars out of plastic and an ever-decreasing thickness of tin.

Special exemptions to overcome a non-tariff trade barrier might be exactly the sort of thing you’ll find at the bottom of page 40323 of a Free Trade Agreement.

Conclusion: We Need to Constantly Question Govt & Industry

The motivations behind all of this are purely the drivers of the last thirty years of globalisation – corporations crossing international borders. It’s not driven by a primary ideal for a better life for all humanity. Nor is it driven by a desire to lift all human beings from poverty or facilitate multiculturalism. Modern globalisation is fundamentally underpinned by multinational corporations’ desire to expand markets and maximise shareholder wealth.

As those multinational corporations (influencing governments) chip away at our pesky non-tariff trade barriers it’s worth plugging these ideas into the other things you should be aware of on the planet. Corporate greed… the Global Financial System… the rich getting richer with the poor growing poorer… the rationale that ‘economics is a God’… depleting world resources… corporate irresponsibility and crimes in under-developed countries… the list goes on.

It’s our responsibility to ask questions about that new world order and call those powerful parties to account. If we fail to question there is every opportunity for them not to inform us by default. In which case, we may remain happily ignorant that Australian safety standards are considered a non-tariff trade barrier to international trade with extreme pressure to buckle, or even remove, them.

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About the Author

Steven Clark Steven Clark - the stand up guy on this site

My name is Steven Clark (aka nortypig) and I live in Southern Tasmania. I have an MBA (Specialisation) and a Bachelor of Computing from the University of Tasmania. I'm a photographer making pictures with film. A web developer for money. A business consultant for fun. A journalist on paper. Dreams of owning the World. Idea champion. Paradox. Life partner to Megan.

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