International trade is one of the most important economic activities taking place on a global level with the hope of not only restoring economic growth and development to several countries, but it is also seen as the indirect mechanism through which major reductions in poverty can be achieved worldwide.
That basic notion remains as the most persuasive arguments in favour of more free trade among countries of the world as promoted from time to time by many regional and international organizations.
In short, trade is supposed to be good for economic growth and development and therefore all countries ought to engage in as much trade as possible to remain viable economies and restore hope and aspirations among their respective citizens.
That argument aside, it is an inescapable fact that trade also hurts. You see, international trade is based on several principles incorporated in various articles and provisions under the watchful eyes of the World Trade Organization (WTO).
Trade can only be facilitated or discouraged using various tools at the disposal of local authorities. For example, a country can seek to influence trade by simply imposing a tariff on an imported commodity.
Some sectors lose
What that tariff does is raise the price of the commodity to local consumers. Hence, while domestic producers are being effectively protected by the tariff, local consumers are losing welfare – some of which is transmitted to domestic producers, part goes to the government and the remainder is lost entirely.
Hence, with the imposition of a tariff, some sectors of society benefit (domestic producers and government) while others (local consumers generally) lose. This basic fact that with international trade there will always be “winners” and “losers” represents a strong moral and perhaps technical argument for the idea of aid for trade.
The reasoning is that if a country is encouraged to participate in free trade it would encounter gains and losses. In several cases it is quite possible that the losses could exceed the gains. Under such circumstances, the country can be compensated for its involvement in global free trade through financial and other forms of donations grouped together under the caption “Aid for Trade”.
I firmly believe, therefore, that the recently announced CARICOM aid for trade initiative should be seen as a positive development for regional economies. That strategy “aims to create consensus within CARICOM on priorities for ensuring growth and a more diversified regional economy.
Participation
“Aid for Trade refers to the flow of development finance from developed countries and multilateral funding agencies to developing countries to enhance their participation in the multilateral trading system.”
Indeed, there can be no better initiative for encouraging regional countries, irrespective of their specific financial and economic positions, to become more engaged in trade not only among themselves, but also with the wider global community.
Once the necessary safeguards are erected, then there really isn’t much to fear as far as participation in more trade is concerned.
Since “the strategy presents a coherent approach to resource mobilization that outlines to donors, investors, and international development partners how the region intends to utilize existing and future resources”, every country in CARICOM should fully embrace this initiative and work tirelessly to ensure that all of the objectives are realized. The region will be a much better place to live and work as a result.
