The advocates of capitalism and free trade see globalisation as a positive progressive force generating employment and ultimately raising living standards throughout the world. Critics see it as a means of expropriating the resources of poor countries by drawing them into debt, encouraging the use of sweated labour, and accelerating job losses and environmental degradation.

In the second half of the last century, transnational corporations were knitting the world together. For business purposes, the boundaries that separate one nation from another are no more real than the imaginary line of equator around the earth. They are merely convenient demarcations of geographical and political territory. They do not seem to define business requirements or consumer trends. The world is seen as a single market.

It appears that economic globalisation has four distinct and inexorable ways:

* Global capital primarily coalesced around the US, Europe and Japan, followed by Taiwan, Singapore and Hong Kong.

* It is markets that matter now because of trade liberalisation in the name of "free trade".

* Financial regulation makes inflows and outflows of foreign investment easier.

* The global merger of banks, airlines and corporations leads to the day of mega-corporations.

Transnational corporations engage in foreign direct investment and own or control activities in more than a few countries. They have become the main global economic force and have diminished the notion of national economy. They act in their own ways to maximise profits.

For example, if a government tries to protect its own industry, either the rules of the World Trade Organisation (WTO) will prohibit it doing so or transnational corporations will try to buy local companies in that country.

Globalisation and its impact

Globalisation is associated with rapid economic growth resulting from de-regulation, free trade and strong anti-inflationary measures but it has not led a settled and prosperous world order but with inequality between rich and poor nations. James Galbraith was quoted in the Australian Financial Review of 28th July 2001 that : " We have studied 150 countries and with the exception of some Scandinavian countries, income inequality has been rising sharply with globalisation." This increased inequality seems to have occurred in the past twenty years which also ironically registered a strong global economic growth.

The poverty- trap gives rise to instability bordering on anarchy. Many failed states are also the consequences of this instability. Economic globalisation is not matched by globalisation of political structures, of a system of governance that can shape,mould, and control the powerful new forces and ensure they deliver for the many rather than the few.

The impact of globalisation is that national governments no longer have much control over their economies. With transnational corporations moving industries or transferring call centres to places with the cheapest efficient labour and with the advent of so-called "free trade" and an end to "protectionism", mass job cuts are common in both developed and developing countries. For example, Motorola, IBM, Microsoft and Hewlett Packard, have set up software programming offices in Bangalore (India) and the place is commonly known as "silicon plateau".

In addition to job losses from corporations seeking cheap labour, advances in technology have seen many jobs replaced by machines and many of the jobs lost will never return. Unemployment wastes valuable human resource and ruins lives. One of its most insidious effects is on the children of the unemployed who disproportionately become addicted to drugs and various forms of anti-social behaviour and crimes.

Globalisation lacks a moral dimension, a sense that there is something wrong about a system that apportions risk to those able to bear it least and which tolerates grotesque disparities in wealth and well-being. For example an average Bangladeshi earns less than US$ 400.00 a year while it is about US$30,000 in the US, according to the World Bank. President Clinton in the November 2000 APEC meeting said globalisation needed a "human face" and warned more was needed than a free trade deal. He said that it required strong safety nets, more anti-poverty efforts and more quality education so people would believe that globalisation was not leading "to a race to the bottom but to higher standards of all".

Some experts say that officially the Cancun WTO talks collapsed because of disagreements between the north and the south over subsidised agriculture in Europe, Japan and the US. In reality, the seed of the collapse was sown in the widespread concern about losses of domestic jobs that could occur with opening of markets under trade liberalisation and the increasing cheap imports they bring in the wake.

Objectives of national governments

The hard political reality is that national governments want to protect the job losses in their countries and the goal of reducing all barriers in trade does not match with the reality. Farmers in both developed and developing countries are struggling to make a living. Most developing countries face even more serious rural problems. First they cannot sell their agricultural products to developed countries. Second, under WTO rules, developing countries are forced to reduce import barriers on key food commodities. For example, India was forced to reduce import barriers on coconut products with devastating results. Prices of coconuts have fallen 80 per cent per cent and pepper prices 45 per cent. This is also happening in Bangladesh because farmers in Bangladesh cannot compete with the cheaper import of commodities from other countries because of reduction of trade barriers.

A major objective of economic growth is to maximise employment opportunities in the country. Economic growth may not lead to such phenomenon because growth in modern times has been based on capital-intensive technology as opposed to labour-intensive industries and as a result growth in employment appears to be limited. Furthermore rate of growth does not indicate about the content of growth. A country may enjoy high growth because of a rapid increase in production of luxury goods while leading masses of people remain steeped in insulting poverty. For example in Brazil, during 1967-74 the GNP registered a rise of 10 per cent but income of the poorest section of community in fact declined from 10 per cent to 8 per cent.

The Geneva-based United Nations Conference of Trade and Development (UNCTAD) in the 1999 Report sounded a timely warning against the current policies of financial and trade liberalisation being pursued by developing countries as a result of pressure and advice by rich countries, multilateral agencies and institutions under their control. In calling for a reappraisal of such policies of closer integration into the global trading and financial system, the 179-page UNCTAD Report urged developing countries to retain their policy options and economic instruments, including the regulatory tools to control financial inflows and outflows. The Report said that developing countries had been striving hard often at a considerable cost to integrate more closely into the global economy but protectionism in the rich countries prevented them from fully exploiting their existing or potential competitive advantage.

Protectionism not too distant

It seems that the wheel of some kind of protectionism is turning again. In response to ill-effects of free trade and globalisation, national governments are likely to return to protective barriers. Some experts believe that international competitiveness and reduction in trade barriers have to be replaced by a combination of internationalism and new rules to allow national governments in developing countries including Bangladesh to protect their domestic agriculture, industry and services. They consider that the gradual re-introduction of import controls, allied to domestic policies and redirected aid and trade rules that make the diversification of local economies worldwide a priority, is the only way to protect livelihoods and reduce poverty.

Trade is one of the most important mechanisms to achieving job and food security. To ensure that this does not result in a return to "beggar-your-neighbour" policies but instead "better-your-neighbour" trade rules. Consequently the WTO will need a new direction and agenda. Critics point out that the WTO is also without rational justification. The conventional theory used to justify free trade and globalisation is the theory of comparative advantage and central to this theory is the assumption that capital is not internationally mobile.

Obviously this assumption is blatantly violated in the real world. The internationally mobile capital decides what to produce where and what to grow where and how. And through their aid and soft loans to developing countries, development agencies like the IMF, the World Bank and the WTO often hold the poorer nations "hostage".

Some kind of protectionism for domestic goods in the days of so-called "free trade" may be seen as fanciful and backward step. But with free trade, everywhere human beings are again becoming less equal. Furthermore, China's GDP is rapidly growing at a rate never seen before. The US-China trade is about US$ 800 billion this year. When quotas are abolished in textiles and ready-made garments, many countries including Bangladesh will not be able to compete with the Chinese products. Similar unease is growing in developed countries (US and Europe) about cheap imports from China. The US is pressing hard China to revalue upward its currency (Yuan).

Bangladesh and free trade deals

Critics say that free trade does not yield mutual benefit to trading nations but a hemorrhaging of wealth into the hands of tiny financial elites in rich and poor countries. It is correct that free trade is making many people wealthy but they have dramatically increased inequality within nations and between rich and poor nations. They do not automatically bring prosperity for poor people around the world and the claim appears to be misconceived.

The fundamental question is whether we want prosperity for the few, neglecting alleviation of poverty among vast majority of our people. The traditional thinking has to be modified if we are to remove absolute poverty in the country. This is a sad fact that free trade may not be the panacea for reducing the incidence of absolute poverty; on the other hand it may increase inequality of wealth and income within the country. Life will be tougher for those at the bottom of the economic pyramid and this may bring instability in the country.

The stark choice for Bangladesh is whether we continue as we have done in the past to place prosperity of a few above the interests of the vast majority of poor people in the country. Alternatively we have to choose in removing income inequality within the country and this of necessity will involve re-consideration of our present thinking of possible benefits of "free trade".

Time has come for our political leaders to involve wider section of community as to pros and cons in opening Bangladesh market to foreign goods without barriers. It is not too late to ask why so many countries are interested in doing a free trade agreement with Bangladesh whose export base is narrow and 90 per cent of its exports consists of garments, frozen sea food, leather, tea and jute products. We need a robust debate on this vital question within the community at all levels. There seems to be considerable debate among trade experts about whether a free trade deal with other countries will, in fact, boost Bangladeshi exports or it would merely divert these exports from other markets.

Conclusion

The existing key global institutions IMF, World Bank and WTO are seen as vehicles for ensuring interests of rich nations. Critics say all these institutions are anti-democratic and none of the heads are elected to their positions by a popular vote. Some experts believe that there is a need for a beefed-up and restructured UN, a Global Central Bank, a WTO with global anti-monopolies power and a code of conduct for multinationals and a World Investment Trust with redistributive functions. The bottom line is that we have to put morality into the globalisation and free trade equation.

The 19th century French political writer De Tocqueville said : " A state of equality is perhaps less elevated, but is more just; and its justice constitutes its greatness and its beauty." How do we get from where we are to where we ought to be when those states that have the power lack the will and those that have the will lack the power? The answer is to some extent lies in the setting up of new global institutions and in promoting self-reliance over market-reliance.

Barrister Harun ur Rashid is a former Bangladesh Ambassador to the UN, Geneva.