INTERNATIONAL TRADE AND/OR GLOBALIZATION

International Trade and Sustainable Development



How International Trade is good or bad for Sustainable Development

Introduction

The pursuit of sustainable development and the requirement to make our societies, economies, and systems of consumption and production more environmentally, socially, and economically sustainable will be the dominant challenge for management throughout the 21st century. Concern about the social and environmental impacts of business activity can be traced back throughout history. The use of regulation to limit the social and environmental impacts of business and to punish transgressors can be traced back more than 3,000 years to ancient Mesopotamia. More recently, a key business theme during the 20th century was the growing expectation that businesses should go beyond regulatory compliance in conducting their affairs to demonstrate corporate social responsibility. This paper discusses how international trade is good or bad for sustainable development in a concise and comprehensive way.

Discussion

The World Commission on Environment and Development (WECD) in the now famous Brundtland Commission Report defined sustainable development (SD) in 1987 as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs” (WCED, 1987, p. 43). The concept of intergenerational equity embodied in this definition of SD is not new. Aristotle spoke about this when he stated that justice of exchange has to be oriented towards equality. That is, one may not give less than what one has received. In that sense, an economy can be described as “sustainable” if it allows future generations to have no less than what current generations receive.

At the core of SD is the need to improve the living standards of the people, with particular attention to the poor. However, in order to improve the lot of the poor, the economy must grow in order to generate the funds needed to reduce poverty. The alternative is to rely almost exclusively on foreign aid. However, past evidence indicates that foreign aid has done little to improve economies in the region.

It has been estimated that the rate of economic growth necessary to keep the numbers of the poor from increasing is between 3 per cent to 5 per cent per annum. That is, in order to arrest the increase in poverty, the economy must grow at rates in excess of population growth rates. Unfortunately, the economic statistics coming out of Sub-Saharan Africa (SSA) are not encouraging:

* Average per capita income (excluding South Africa), inflation-adjusted, is US$315, lower than what it was in 1960.

* Africa's population is more than twice that of the USA, but its total income is not much lower than Belgium's.

* Africa's share of world trade has declined to less than 2 per cent.

* Africa has become aid dependent. Net transfers from foreign assistance has averaged 9 per cent of gross domestic product (GDP).

* Poverty in SSA increased from 38.5 per cent to 39.1 per cent between 1987 and 1993 based on the head-count ratio (Ravallion and Chen, 1997).

The main objective of this paper is to discuss the role of international ...