This article critically analyses the theoretical and empirical basis of trade liberalisation and finds that the arguments of many mainstream economists concerning the static and dynamic gains from free trade are based on weak theoretical grounds. I will also discuss here the historical experience of trade liberalised regimes. It also discusses the impact of trade liberalisation on the industrial and agricultural sectors and shows how the performance of both sectors has a long-term impact on local industrialisation, food security, employment and the well-being of people in developing countries.
Global policies under the WTO (World Trade Organisation) are based on what are claimed as universal advantages of open economies and trade liberalisation (WTO, 2013). This paper shows this regime is in fact heavily biased towards the demands of rich and powerful countries and against the needs of developing countries (Reinert, 2007, Rodrik, 2004). Furthermore, this regime undermines elected legislatures and their democratic decision-making processes through constraints imposed by neoliberal treaties and associated mechanisms for the settlement of international disputes. The article further examines the theoretical and empirical basis of trade liberalisation and argues that the claimed benefits of free trade are based on weak grounds. An analysis of free trade in historical perspective highlights its negative implications for future development and suggests that the prosperity of the developing countries could be more dependent on their ability to act in concert to challenge the unbalanced rules-based system of the Western neoliberal order than on their willingness to submit to the strictures of the Bretton Woods institutions and the World Trade Organisation (Acemoglu and Robinson, 2012; Sen, 2005).
Free trade theory finds widespread support among the international financial institutions, namely the IMF (International Monetary Fund), World Bank, and WTO (Siddiqui, 2016a). This free trade approach deepens the process of uneven development and unequal exchange as seen, for instance, in the Trump Administration’s attempts to hinder China’s economic development by means of disadvantageous trade agreements. At present, Chinese developmental policies challenge US global corporations such as Boeing and Microsoft because they require some control over the nature of the US investment by granting China a degree of technology transfer. Existing WTO-enforced intellectual property rights, from which US corporations benefit, provide, among many other things, exorbitant patent rights for medicines and grant Microsoft Windows an effective monopoly on operating systems (Siddiqui, 2020a; also see 2018a). With genuine free trade consumers in the US and elsewhere could get cheaper medicines and have more choice in operating systems, but US corporations would not have the levels of profit guaranteed by current arrangements (Siddiqui, 2018a).
II. Late Developers and Free Trade
In the 19th century, Friedrich List in Germany argued for building of the national economy to help the late-developers such as Germany and the US against British imperialism. According to him, due to the historical problems of the late industrialising countries, who were behind in industries and technology compared to Britain and Netherlands and according to him, this could be addressed through strategies of state-led industrialisation and tariff protection (Siddiqui, 2021a).
The List theory was not so much in favour of freedom for colonies and in fact he argued reproducing colonial relations so as a late industrialising country like Germany could become industrially advance and join industrial core of the world economy. The British economy by the second quarter of the 19th century had become imperial economy i.e. industrial-financial centre and its colonies were forced to specialise in the production of agricultural commodities. As Gallagher and Robinson (1953:9) argued that “the British strategy was to transform the colonies into complementary satellite economies, which would provide raw materials and food for Great Britain, and also provide widening markets for its manufacturing.” List advocated that Germany must emulate the British path to industrialisation through protection and government intervention. For example, in the 17th and 18th century England had protected woollen industries by banning exports of raw wool to Netherlands and at the same time concluding treaties to open foreign markets for English products and supported shipping through its Navy.
However, once England secured superiority in industries and technologies, its rulers discovered the free trade doctrine was useful to maintain Britain’s domination. As Reinert (2005: 60) explains: “Britain not only made it politically clear that she saw it as a primary goal to prevent other nations from following the path of industrialization, but also ….possessed an economic theory [in the economics of Smith and Ricardo] that made this goal a legitimate one.” List argued that in order to escape Britain’s domination, Germany should ‘emulate the pragmatism and ruthlessness egoism of the English people’ and by extending support to state-led-industrialisation i.e. protecting infant industries through tariffs and duties on imports. Once competitive edge is acquired by domestic producers then slowly exposes them to foreign competition and resumption of free trade. The list was not in favour of Germany’s isolation but national equalisation and giving later-developers the opportunity to assume a dignified place in the world. However, List did not oppose European colonisation of non-European nations. He advocated that ‘civilised nations’ had to attain ‘balance of the productive powers in industry, commerce and agriculture’ (List, 1983: 51).
The colonizers denying any possibility of independent national development to the rest of the world led to the decolonisation struggles against European imperialism.
List deplored nations like Russia in the 19th century as overwhelmingly agrarian, which according to him consisting of ‘primitive peasants who simply cultivate soil’ and lacked capital and technology and competitive spirit necessary to promote ‘division of labour’ and as a result did not create surplus to be invested in industries (List, 1983: 54). In the 18th – 20th century, the European discourse of so-called ‘civilising mission’ assumed that their colonies as economically stagnated and backward. And in the colonies, they imposed policies of forced specialisation in agricultural and mineral production for exports, especially in India, into de-industrialisation and repeated famines (Siddiqui, 2020b; also 2020c). Britain colonial rule of two hundred years led to the turning India into economic stagnation and mass poverty and a dramatic fall in life expectancy and per capita food consumption. The colonizers denying any possibility of independent national development to the rest of the world led to the decolonisation struggles against European imperialism. As Goswami (2004: 221) notes, “it was precisely the promise of formally replicable, self-engendered, and territorially delimited economic development, which underwrote Listian national developmentalism that helped propel its increasing popularity, while the success of Listian strategies in the USA, Germany and Japan certainly reinforced their appeal to anti-colonial and post-colonial developmental ambitions”.
The economies of the advanced countries were founded on state activitism and protectionism and once they became technologically advanced, rich and prosperous, then their leaders could afford to talk about the so-called benefits of ‘free trade’, but they perfectly ignore their real history of how their nations became rich.
Trade and investment liberalisation was initiated by the IMF and the World Bank during the debt crisis of the 1980s under the loan-conditions ‘Structural Adjustment Programmes’. This strengthened further after the signing of the WTO in 1994. The ideology of free trade began with Adam Smith and David Ricardo; both theorists were from Britain and wrote at a time their country was colonising other countries and grabbing resources of other nations (Siddiqui, 2018b). This was also the period when Britain was launching the world’s first industrial revolution and needed raw materials and resources to support it and thus forcing its colonies to only specialise on the production of agriculture and minerals for its industries. That was also the period when Britain created its own monopoly trade company ‘The East India Company’ to trade with the Indian subcontinent and China. Adam Smith in his book The Wealth of Nations strongly opposed the policy of developing industries in the USA and advised to rely on importing manufacturing from Britain. Adam Smith (1986: 466) notes: “It has been the principal cause of the rapid progress of our American colonies towards wealth and greatness that almost their whole capitals have been employed in agriculture. They have no manufactures…. the greater part both of exportation and the coasting trade of America is carried on by merchants who reside in Great Britain… to stop the importation of European manufactures, and by thus giving a monopoly to such of their own countrymen as could manufacture the like goods, divert any considerable part of their capital into this employment, they would retard instead of accelerating the further increase in the value of their products and would obstruct instead of promoting the progress of their country.”
However, in 1776 after becoming independent the US leaders did quite opposite and ignored Adam Smith’s advice and erected protective barriers and increased tariffs to protect domestic manufacturing. As a result, the US in the early 20th century emerged as a leading industrial nation. If the US leaders would have followed Adam Smith’s model of ‘free trade’ it would have been at most like Egypt (Siddiqui, 2020c).
The mainstream (also known as neoclassical) economists argue that free trade is a good thing for everyone participating in trade (Siddiqui, 1989a). Modern international trade theory is associated with David Ricardo model of ‘Comparative Advantage’. His theory focuses on specialisation in trade necessarily leads to mutual benefit to both trading nations as long as relative cost differences in producing goods exist, even if a country may produce all goods at lower costs than the other (Siddiqui, 2018b). David Ricardo in his book, Principles of Political Economy and Taxation (1817) wrote about his theory of ‘Comparative Advantage’. He presented the trade in wine and cloth between England and Portugal. He argued that even though Portugal to be more efficient than England in the production of both goods i.e. wine and cloth. However, he argued that it could still be mutually beneficial for both countries to specialise and trade if Portugal and England specialised where it was relatively most efficient compared to the other country. The problem with the Ricardian model is that it does not allow the possibility that after specialisation one country’s production may get caught in the spiral of diminishing returns and increasing production costs (e.g. in wine production) while another country might find the production costs falling as production increased due to increasing returns (e.g. cloth production) (Ricardo, 2004).
On the issue of ‘free trade’, Karl Marx argued that with increased competition, free trade will drive down workers’ wages. However, he questioned that the supporters who according to him failed to understand how “one country can grow rich at the expense of another.” Marx, emphasised that the related the differences in factor endowment to unequal economic development of the trading nations as his ideas of international trade was firmly based on the trade between unequal partners. He further elaborated, trade, whether home trade or foreign trade, produced exchange-value which was inseparable from the creation of surplus through exploitation of surplus labour. According to him, it was inherently unequal exchange. His theory explains the phenomena of colonial trade i.e. trade between Europe and their colonies. In the Communist Manifesto, he notes: “by the exploitation of the world market, the bourgeoisie has given a cosmopolitan character to production and consumption in every land. To the despair of the reactionaries, it has deprived industry of its national foundation. The old local and national self-sufficiency and isolation are replaced by a system of universal intercourse, of all-round interdependence of the nations…” Engels at Brussels Free Trade Congress said: “It was a strategic move in the Free Trade Campaign then carried on by the English manufacturers. Victorious at home, by the repeal of Corn Laws in 1846, they now invaded the continent in order to demand, in return for the free admission of continental corn into England; the free admission of English manufactured goods to the continental markets”. Engels further explained, “it was under the fostering wing of protection that the system of modern industry developed in England during the last third of the 18th century. England supplemented the protection she practised at home by the free trade she forced upon her possible customers abroad.”
The theory of ‘comparative advantage’ on which the classical theory of international trade is based on, it does not depend for its validity and on the inequality of status or economic strength of the trading partners or the degree of their economic development. The essence of this theory was the fact of reciprocal exchange of natural or acquired advantage in particular branches of production on the principle of international division of labour. Marx’s saw it as trade between unequal partners. Trade, whether home trade or foreign trade, was inseparable from the creation of surplus profit through exploitation of surplus labour. It was thus inherently unequal exchange. Marx noted on the colonial trade, i.e. trade between Europe and their colonies, as, “Commercial profit not only appears as out bargaining and cheating, but also largely originates from them.” Apart from the fact that the merchant abstracted the difference in prices over space, he appropriated the major part of the surplus-product emerging in a pre-capitalist society by mediating between societies and regions in which the marketed surpluses of commodities were of secondary importance and in which the trader could take advantage of the extravagant luxury consumption of landed proprietors and despotic rulers. Thus “merchant’s capital when it holds a position of dominance, stands everywhere for a system of robbery”. He referred to India’s vast home market that was “sufficient to support a great variety of manufactures”, and particularly to Bengal, “which commonly exports the greatest quantity of rice, but has always been more remarkable for the exportation of a great variety of manufactures than for that of grain”.
Marx indentified capitalism’s two inherent problems i.e. demand problem and tendency of the rate of profit to fall. He identified the source of surplus value by differentiating labour and labour power and presented how competition brings values down to their ‘socially necessary level’. Marx emphasised that capitalism was not eternal but a historically specific mode of production and due to its inner contradictions, it is inherently volatile and unstable David Ricardo claimed that free trade benefitted all countries; by this he justified colonisation and colonial pattern of trade, when the European powers sought to externalise their market crisis by exporting their excess production to colonies or unprotected markets, which destroyed any prospects of industrialisation there. Rosa Luxemburg in her book The Accumulation of Capital argued that ‘purely capitalist’ society consist of only workers and capitalists could not be self-contained and for its own survival requires non-capitalist societies to sell its excessive production and try to resolve demand deficits problems, which is a major contradiction of capitalism. She paid serious attention to the impact of occupation on the colonies. Later on Marxist economists analysed how surpluses drained from formally or informally from colonies or semi-colonies have critically aided industrialisation in Europe and how expanding markets for imperial products de-industrialised colonies. Moreover, how core countries monopolies on higher value production are secured and maintained in a wider system of unequal exchange and by various means formally or informally discouraging peripheries from improving their productive capacities (Chang, 2002).
David Ricardo’s theory has been claimed to be beneficial not only the trade between nations of equal economic strength e.g. intra-industry trade between rich countries, but also between economically unequal countries e.g. colonisers and their colonies, inter-industry trade. On this assumption, the Europeans imposed ‘free-trade’ on colonies to specialise in agriculture and minerals, while the European powers specialised in manufactures. Consequently, India being the world’s largest exporter of cotton textiles in the pre-colonial period, India turned into an importer of cotton textiles from Britain and an exporter of agricultural commodities such as raw cotton, opium, indigo, jute, tea etc. (Siddiqui, 2020d; also 2020e)
The mainstream economists ignore in their discussions that in the 19th century if ‘free trade’ was beneficial then why European powers had to use military force to induce countries like India, China and Indonesia to accept it (Siddiqui, 2019a; also 2018b). Ricardo’s theory is based on incorrect premises. As Professor Utsa Patnaik (1999: 6) argues: “In the case of the comparative theory applied to the Northern trade with warmer lands, the premise itself is incorrect. The premise is that in the pre-trade situation (assuming the standard two-country two commodity model) both countries can produce both goods. Given this, then it can be shown that both the countries gain by specializing in that good which it can produce at a relatively lower cost compared to the other country, and trading that good for the other good: for compared to the pre-trade situation, for a given level of consumption of one good a higher level of consumption of the other good results in each country… The reality was that the tropical or sub-tropical regions with which Britain, Netherlands, France etc. initiated forced to trade using military power, where bio-diverse could, and did, produce a much larger range of goods than the Northern European countries could…”
Since 19th century the ideology of free trade has been propagated via textbooks, print, and electronic media that any criticism or alternative opinions which examine the costs of ‘free trade’ is hardly ever heard. The free trade model is now modified and presented as – the labour-abundant country e.g. poor countries produce labour intensive goods (agricultural commodities) while capital abundant country e.g. rich countries produce capital intensive high value products (Siddiqui, 1989b). In fact, the crops such as raw cotton, jute, indigo, rubber, tea, coffee, cocoa, banana, sugarcane and rice cannot be produced in cold European climate hence the premise that both countries could produce both goods does not hold. Historically we could see that specialisation and enforced free trade led to very negative social and economic development in the colonies. For example, the nutrition levels and life expectancy fell sharply during the colonial period in India, Indonesia, the Philippines, and Kenya (Siddiqui, 2018c; also 2018d).
In the past, the cost of ‘free trade’ in the colonies had been de-industrialisation and the forcible trade liberalisation led to the destruction of traditional manufactures and increased dependence of the production of primary commodities (Siddiqui, 2015a). As Patnaik (1999: 12) further notes: “This resulted in one-way free trade, viz, a situation where the North protected its own industry by various means and opened up the subjugated markets of the Third World countries, …. Keynes had once used, describing a situation where a country insists on exporting another the good that second country also produces, thereby the North ‘exported its unemployment’ to other counties. That agenda too remains unchanged: market access is a price objective of the earlier and ongoing loan conditional liberalization and of the present WTO regime….” Moreover, the demands for tropical crops in rich countries have increased further in recent years and the WTO regime insists that tropical countries to increase the production and export of the primary commodities (Siddiqui, 2015b, also 2015c).
Free trade theory emphasises that if protections are removed resources should flow from high-cost to low-cost products resulting in an increase in productivity. David Ricardo’s theory of comparative advantage provides a foundation for understanding the nature of so-called mutually advantageous international free trade and forms the basis of arguments generally used to defend a laissez-faire approach (Siddiqui, 2018b). Protection is seen as interference in the free play of beneficent market forces (Kruger, 1996). Ricardo’s model assumes that all resources are fully employed, but in reality we find that in developing countries mass unemployment and mass poverty have often existed alongside vast but under-exploited resources. During the British colonial period, for example, the imposition of free trade policy on India made it possible for the Lancashire cotton industries to prosper while hand loom production in India was systematically destroyed by the active intervention of the British authorities (Bagchi, 2000). Another notable example could be cited here: in 1699 with the Wool Act, Britain banned the export of woollen cloth from the colonies to other countries. This proved to be a severe blow to the Irish wool industry.
Free trade theory emphasises that if protections are removed resources should flow from high-cost to low-cost products resulting in an increase in productivity.
Britain adopted “free trade” policies in the 19th century when it possessed relatively more advanced technologies and industries compared with those of other European countries. These policies were extended to the colonies to further Britain’s business and trade interests. From the mid-19th century, Africa and Latin American countries were also integrated into the world economy as suppliers of primary commodities, as envisaged by the “comparative advantage” model. (Siddiqui, 2019b and also 2019c)
At the same time that colonies were encouraged to specialize in the production and export of primary products rather than manufactured goods, Britain abolished import duties on raw materials produced in the North American colonies. Thus, Britain slowed, or completely prevented, modern industrial development in the colonies and in other territories in which it enjoyed pre-eminent influence. As Bagchi (2000: 403-4) observes: “In the victory of private enterprise, the construction of a state fostering its growth played a critical role, and free trade as a policy did not gain ascendancy until Britain had already emerged as the most powerful nation in the world economically, militarily and politically … it had begun preaching the doctrine of free trade to others, even enforcing it with gunboats and soldiers, as in the case of opium war”.
It is claimed that if all countries adopt free trade policies then it is claimed by the proponents that the world economy can achieve a more efficient allocation of resources and a higher level of material well-being than it can without trade. In contrast, Bieler and Morton (2014: 40) found: “Trade liberalisation has often implied deindustrialisation and import dependence. An analysis of the consequences of trade liberalisation in Africa and Latin America during the 1980s and1990s, for example, reveals widespread job losses, increasing unemployment and declining wages in both continents”.
In the late 1980s and 1990s, at the behest of the World Bank and the IMF and as a condition for their loans, most of the Latin American countries adopted Structural Adjustment Programmes or SAPs (Siddiqui, 1998; also 1994) (i.e. neoliberal reforms), while China, which was then not a member of the WTO, was able to maintain greater control over both trade and foreign capital investments (Girdner and Siddiqui, 2008). The Chinese government was able to encourage foreign investors to establish joint ventures with local companies that included agreements on technology transfer. In China rapid urbanisation and higher growth also resulted in a sharp increase in the scale of the domestic market. By 2010, China became a net importer of food, the largest importer of soya, and accounted for half of the world’s total food imports.
III. WTO and Trade Liberalisation
The WTO aims to liberalise trade in goods, capital and services, and more recently also in world’s agricultural markets. In the agriculture sector, the WTO wants to liberalise trade in agricultural commodities by eliminating subsidies to inefficient producers, tariffs, and the practice of holding food stocks by governments (WTO, 2013). This policy is supposed to increase agricultural commodity prices through a de-regulated market and benefit farmers. At the same time, increased competition is supposed to generate greater efficiency and thus bring down prices to the benefit of consumers. However, such assumptions ignore the fact that agricultural trade is in fact characterized by large economic, social, and political inequalities. Since 1991, with the collapse of the Soviet Union and East European regimes, many more countries have adopted trade liberalisation policy and thus global economy more integrated than ever in the past and global trade as a percentage of global GDP has risen sharply, as Figure 1 indicates. And the major trading countries in goods are largely developed economies apart from China (see Figures 2 and 3).
In agricultural commodities, due to climate limitations developed countries cannot produce coffee, rubber, sugarcane, cocoa, bananas or tea but want these commodities for their food processing industries and they want to acquire these from deregulated markets. In the cotton and sugar markets, however, distortions exist because of subsidies given to producers in both the United States and the European Union and therefore these products are protected from liberalisation. With the signing of the WTO’s international treaty Agreement on Agriculture (AoA) in 1995 developing countries were granted little access to new markets in the developed countries but were required to accept significantly more imports. This depressed local investment and production ultimately exacerbated food deficits and undermined food security in developing countries (Siddiqui, 2021b).
The agricultural sector plays an important role not only in maintaining a healthy rural environment and ecology but also in the economic development of a country. It makes a significant contribution to per capita income and employment, especially in developing countries. Neoliberal policy reforms in agriculture alter the situation in this sector and restructure the economic fabric of the society. Food security and self-sufficiency are important contributing factors to the stability and economic growth of regional and international economies (Siddiqui, 1990). Accordingly, we should examine the impact of trade liberalisation (i.e., free trade) on the agricultural sector and food security issues in developing countries.
The WTO wants to introduce the idea that agriculture and food production should be treated as any other form of production and be subjected to the rules of competition in deregulated and open markets similar to those in the industrial sector. The supporters of this approach claim that if such policies are followed in the developing countries they will increase output under competitive conditions and achieve levels of surplus and prosperity similar to those enjoyed by Europe and North America even though those regions do not, in fact, apply such policies in their domestic markets. The developing countries as a group would be wise therefore to defend their interests and seek reform of the WTO in order to protect their agriculture, manufacturing and service sectors and their interests in general.
IV. Conclusion
The proponents of ‘free trade’, which is based on David Ricardo’s ‘Comparative Advantage’ model, choose to forget that in the 18th and 19th centuries the transition of European and North American agriculture towards greater use of technology and capitalist large-scale production took place at the same time their industrial sectors were expanding and their surplus populations were migrating to the Americas, Australia, New Zealand, and South Africa. These developments resulted in the largest land-grabbing and resource-extraction exercises in human history, during which indigenous populations were eliminated or enslaved and their land and natural resources expropriated. Because developing countries have no such possibilities and hence, the adoption of the WTO’s agriculture neo-liberal reform policy inevitably leads to greater poverty and to ecological destruction exacerbated by climate change.
In fact the rich countries have advanced through a combination of tariff protection, government intervention, strategic investment and use of military force, however, when it comes to today’s poor countries, the benefits of so-called ‘comparative advantage’ is being insisted by the international financial institutions and the rich countries.
The WTO has become as an important international multilateral institution, not only by bringing liberalisation of trade in agriculture, manufacturing and services but also through its dispute settlement mechanism. In particular, the WTO’s negotiations at Doha in 2001 resulted in policies made largely to protect the interests of agro-business corporations based in the West, while offering few benefits to farmers in the developing countries (Stiglitz and Charlton, 2006).
In the developing countries, farmers are often forced to sell their products soon after harvest due to difficulty with storage and the need for money to repay debts, which is known as stressed sales.
This study has found that the free trade approach (i.e. trade liberalisation) will deepen the process of uneven development and unequal exchange between poor and rich countries. And free trade in agriculture undermines food sovereignty and adversely affects the possibilities for autonomous development and food self-sufficiency in developing countries. For example, the WTO’s 1994 Agreement on Trade-Related Investment Measures (TRIMs) do not allow the use of local content specification to increase linkages between foreign investors and local manufacturers or restrictions on the outflows of capital by investors. Other WTO policies such as the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) further allow privatisation and concentration of knowledge in the hands of global corporations (Siddiqui, 2016a).
Unlike manufacturing, agricultural production cannot take place throughout the whole year, and therefore prices cannot be lower during the harvest season than during the rest of the year (Siddiqui, 2021b). In the developing countries, subsidies were aimed at reducing production costs by providing inputs lower than market prices, but in the developing countries farmers are often forced to sell their products soon after harvest due to difficulty with storage and the need for money to repay debts, which is known as stressed sales (Siddiqui, 2019d). To ensure prices governments buy agricultural commodities at prices higher than markets to protect farmers from market fluctuations. Additionally, during shortages, governments release agricultural products from storage to stabilise prices in the market. Under WTO rules, such food stock holdings are prohibited and farmers in the developing countries are left entirely at the mercy of the market (Siddiqui, 2015a).
The farmers in North America and the European Union operate highly mechanised capital-intensive agriculture and productivity range between 10,000 and 20,000 quintals of cereals per farmer per year. In developing countries, especially in Africa and Asia, farming is far less mechanised and capital intensive and productivity ranges from just 100 to 500 quintals per farmer per annum (Siddiqui, 2018b).
In 1991with the adoption of neoliberal reforms in India the government reduced its investment in irrigation and extension services in agriculture and for the last two decades the crisis in rural communities has deepened (Siddiqui, 2016a). In addition to cuts in government spending and greater emphasis on market forces farmers have had to suffer the demonetisation and cash crisis of 2016. This was done soon after monsoon harvest and due to lack of banknotes farmers were unable to sell their products or buy inputs to sow winter crops. The agrarian crisis has been reflected in the increasing number of farmers’ suicides and forced migration to the cities. Over the same period the availability of institutional finance to farmers has been reduced, meaning that the cost of borrowing has risen and also global agricultural commodity prices have declined, particularly since 2017. As a result profitability in the agriculture sector has decreased. India is the largest producer of wheat and second largest producer of rice. In 2017, the production of wheat in India was nearly 96.6 million tonnes and consumption was about the same. However, India still exported nearly 3 million tonnes from government stocks. In the same year, rice production was 105 million tonnes and consumption was 103 tonnes, but India exported 11 million tonnes of rice from government stocks. The balance between global food prices, food security, and the living standards of the poor is thus extremely precarious under neoliberal policies, even in an economy as large as that of India.
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Mr. Rows Namoura Coffee 
Trade Liberalisation, Comparative Advantage, and Economic Development: A Historical Perspective
I. Introduction
This article critically analyses the theoretical and empirical basis of trade liberalisation and finds that the arguments of many mainstream economists concerning the static and dynamic gains from free trade are based on weak theoretical grounds. I will also discuss here the historical experience of trade liberalised regimes. It also discusses the impact of trade liberalisation on the industrial and agricultural sectors and shows how the performance of both sectors has a long-term impact on local industrialisation, food security, employment and the well-being of people in developing countries.
Global policies under the WTO (World Trade Organisation) are based on what are claimed as universal advantages of open economies and trade liberalisation (WTO, 2013). This paper shows this regime is in fact heavily biased towards the demands of rich and powerful countries and against the needs of developing countries (Reinert, 2007, Rodrik, 2004). Furthermore, this regime undermines elected legislatures and their democratic decision-making processes through constraints imposed by neoliberal treaties and associated mechanisms for the settlement of international disputes. The article further examines the theoretical and empirical basis of trade liberalisation and argues that the claimed benefits of free trade are based on weak grounds. An analysis of free trade in historical perspective highlights its negative implications for future development and suggests that the prosperity of the developing countries could be more dependent on their ability to act in concert to challenge the unbalanced rules-based system of the Western neoliberal order than on their willingness to submit to the strictures of the Bretton Woods institutions and the World Trade Organisation (Acemoglu and Robinson, 2012; Sen, 2005).
Free trade theory finds widespread support among the international financial institutions, namely the IMF (International Monetary Fund), World Bank, and WTO (Siddiqui, 2016a). This free trade approach deepens the process of uneven development and unequal exchange as seen, for instance, in the Trump Administration’s attempts to hinder China’s economic development by means of disadvantageous trade agreements. At present, Chinese developmental policies challenge US global corporations such as Boeing and Microsoft because they require some control over the nature of the US investment by granting China a degree of technology transfer. Existing WTO-enforced intellectual property rights, from which US corporations benefit, provide, among many other things, exorbitant patent rights for medicines and grant Microsoft Windows an effective monopoly on operating systems (Siddiqui, 2020a; also see 2018a). With genuine free trade consumers in the US and elsewhere could get cheaper medicines and have more choice in operating systems, but US corporations would not have the levels of profit guaranteed by current arrangements (Siddiqui, 2018a).
II. Late Developers and Free Trade
In the 19th century, Friedrich List in Germany argued for building of the national economy to help the late-developers such as Germany and the US against British imperialism. According to him, due to the historical problems of the late industrialising countries, who were behind in industries and technology compared to Britain and Netherlands and according to him, this could be addressed through strategies of state-led industrialisation and tariff protection (Siddiqui, 2021a).
The List theory was not so much in favour of freedom for colonies and in fact he argued reproducing colonial relations so as a late industrialising country like Germany could become industrially advance and join industrial core of the world economy. The British economy by the second quarter of the 19th century had become imperial economy i.e. industrial-financial centre and its colonies were forced to specialise in the production of agricultural commodities. As Gallagher and Robinson (1953:9) argued that “the British strategy was to transform the colonies into complementary satellite economies, which would provide raw materials and food for Great Britain, and also provide widening markets for its manufacturing.” List advocated that Germany must emulate the British path to industrialisation through protection and government intervention. For example, in the 17th and 18th century England had protected woollen industries by banning exports of raw wool to Netherlands and at the same time concluding treaties to open foreign markets for English products and supported shipping through its Navy.
However, once England secured superiority in industries and technologies, its rulers discovered the free trade doctrine was useful to maintain Britain’s domination. As Reinert (2005: 60) explains: “Britain not only made it politically clear that she saw it as a primary goal to prevent other nations from following the path of industrialization, but also ….possessed an economic theory [in the economics of Smith and Ricardo] that made this goal a legitimate one.” List argued that in order to escape Britain’s domination, Germany should ‘emulate the pragmatism and ruthlessness egoism of the English people’ and by extending support to state-led-industrialisation i.e. protecting infant industries through tariffs and duties on imports. Once competitive edge is acquired by domestic producers then slowly exposes them to foreign competition and resumption of free trade. The list was not in favour of Germany’s isolation but national equalisation and giving later-developers the opportunity to assume a dignified place in the world. However, List did not oppose European colonisation of non-European nations. He advocated that ‘civilised nations’ had to attain ‘balance of the productive powers in industry, commerce and agriculture’ (List, 1983: 51).
The colonizers denying any possibility of independent national development to the rest of the world led to the decolonisation struggles against European imperialism.
List deplored nations like Russia in the 19th century as overwhelmingly agrarian, which according to him consisting of ‘primitive peasants who simply cultivate soil’ and lacked capital and technology and competitive spirit necessary to promote ‘division of labour’ and as a result did not create surplus to be invested in industries (List, 1983: 54). In the 18th – 20th century, the European discourse of so-called ‘civilising mission’ assumed that their colonies as economically stagnated and backward. And in the colonies, they imposed policies of forced specialisation in agricultural and mineral production for exports, especially in India, into de-industrialisation and repeated famines (Siddiqui, 2020b; also 2020c). Britain colonial rule of two hundred years led to the turning India into economic stagnation and mass poverty and a dramatic fall in life expectancy and per capita food consumption. The colonizers denying any possibility of independent national development to the rest of the world led to the decolonisation struggles against European imperialism. As Goswami (2004: 221) notes, “it was precisely the promise of formally replicable, self-engendered, and territorially delimited economic development, which underwrote Listian national developmentalism that helped propel its increasing popularity, while the success of Listian strategies in the USA, Germany and Japan certainly reinforced their appeal to anti-colonial and post-colonial developmental ambitions”.
The economies of the advanced countries were founded on state activitism and protectionism and once they became technologically advanced, rich and prosperous, then their leaders could afford to talk about the so-called benefits of ‘free trade’, but they perfectly ignore their real history of how their nations became rich.
Trade and investment liberalisation was initiated by the IMF and the World Bank during the debt crisis of the 1980s under the loan-conditions ‘Structural Adjustment Programmes’. This strengthened further after the signing of the WTO in 1994. The ideology of free trade began with Adam Smith and David Ricardo; both theorists were from Britain and wrote at a time their country was colonising other countries and grabbing resources of other nations (Siddiqui, 2018b). This was also the period when Britain was launching the world’s first industrial revolution and needed raw materials and resources to support it and thus forcing its colonies to only specialise on the production of agriculture and minerals for its industries. That was also the period when Britain created its own monopoly trade company ‘The East India Company’ to trade with the Indian subcontinent and China. Adam Smith in his book The Wealth of Nations strongly opposed the policy of developing industries in the USA and advised to rely on importing manufacturing from Britain. Adam Smith (1986: 466) notes: “It has been the principal cause of the rapid progress of our American colonies towards wealth and greatness that almost their whole capitals have been employed in agriculture. They have no manufactures…. the greater part both of exportation and the coasting trade of America is carried on by merchants who reside in Great Britain… to stop the importation of European manufactures, and by thus giving a monopoly to such of their own countrymen as could manufacture the like goods, divert any considerable part of their capital into this employment, they would retard instead of accelerating the further increase in the value of their products and would obstruct instead of promoting the progress of their country.”
However, in 1776 after becoming independent the US leaders did quite opposite and ignored Adam Smith’s advice and erected protective barriers and increased tariffs to protect domestic manufacturing. As a result, the US in the early 20th century emerged as a leading industrial nation. If the US leaders would have followed Adam Smith’s model of ‘free trade’ it would have been at most like Egypt (Siddiqui, 2020c).
The mainstream (also known as neoclassical) economists argue that free trade is a good thing for everyone participating in trade (Siddiqui, 1989a). Modern international trade theory is associated with David Ricardo model of ‘Comparative Advantage’. His theory focuses on specialisation in trade necessarily leads to mutual benefit to both trading nations as long as relative cost differences in producing goods exist, even if a country may produce all goods at lower costs than the other (Siddiqui, 2018b). David Ricardo in his book, Principles of Political Economy and Taxation (1817) wrote about his theory of ‘Comparative Advantage’. He presented the trade in wine and cloth between England and Portugal. He argued that even though Portugal to be more efficient than England in the production of both goods i.e. wine and cloth. However, he argued that it could still be mutually beneficial for both countries to specialise and trade if Portugal and England specialised where it was relatively most efficient compared to the other country. The problem with the Ricardian model is that it does not allow the possibility that after specialisation one country’s production may get caught in the spiral of diminishing returns and increasing production costs (e.g. in wine production) while another country might find the production costs falling as production increased due to increasing returns (e.g. cloth production) (Ricardo, 2004).
On the issue of ‘free trade’, Karl Marx argued that with increased competition, free trade will drive down workers’ wages. However, he questioned that the supporters who according to him failed to understand how “one country can grow rich at the expense of another.” Marx, emphasised that the related the differences in factor endowment to unequal economic development of the trading nations as his ideas of international trade was firmly based on the trade between unequal partners. He further elaborated, trade, whether home trade or foreign trade, produced exchange-value which was inseparable from the creation of surplus through exploitation of surplus labour. According to him, it was inherently unequal exchange. His theory explains the phenomena of colonial trade i.e. trade between Europe and their colonies. In the Communist Manifesto, he notes: “by the exploitation of the world market, the bourgeoisie has given a cosmopolitan character to production and consumption in every land. To the despair of the reactionaries, it has deprived industry of its national foundation. The old local and national self-sufficiency and isolation are replaced by a system of universal intercourse, of all-round interdependence of the nations…” Engels at Brussels Free Trade Congress said: “It was a strategic move in the Free Trade Campaign then carried on by the English manufacturers. Victorious at home, by the repeal of Corn Laws in 1846, they now invaded the continent in order to demand, in return for the free admission of continental corn into England; the free admission of English manufactured goods to the continental markets”. Engels further explained, “it was under the fostering wing of protection that the system of modern industry developed in England during the last third of the 18th century. England supplemented the protection she practised at home by the free trade she forced upon her possible customers abroad.”
The theory of ‘comparative advantage’ on which the classical theory of international trade is based on, it does not depend for its validity and on the inequality of status or economic strength of the trading partners or the degree of their economic development. The essence of this theory was the fact of reciprocal exchange of natural or acquired advantage in particular branches of production on the principle of international division of labour. Marx’s saw it as trade between unequal partners. Trade, whether home trade or foreign trade, was inseparable from the creation of surplus profit through exploitation of surplus labour. It was thus inherently unequal exchange. Marx noted on the colonial trade, i.e. trade between Europe and their colonies, as, “Commercial profit not only appears as out bargaining and cheating, but also largely originates from them.” Apart from the fact that the merchant abstracted the difference in prices over space, he appropriated the major part of the surplus-product emerging in a pre-capitalist society by mediating between societies and regions in which the marketed surpluses of commodities were of secondary importance and in which the trader could take advantage of the extravagant luxury consumption of landed proprietors and despotic rulers. Thus “merchant’s capital when it holds a position of dominance, stands everywhere for a system of robbery”. He referred to India’s vast home market that was “sufficient to support a great variety of manufactures”, and particularly to Bengal, “which commonly exports the greatest quantity of rice, but has always been more remarkable for the exportation of a great variety of manufactures than for that of grain”.
Marx indentified capitalism’s two inherent problems i.e. demand problem and tendency of the rate of profit to fall. He identified the source of surplus value by differentiating labour and labour power and presented how competition brings values down to their ‘socially necessary level’. Marx emphasised that capitalism was not eternal but a historically specific mode of production and due to its inner contradictions, it is inherently volatile and unstable David Ricardo claimed that free trade benefitted all countries; by this he justified colonisation and colonial pattern of trade, when the European powers sought to externalise their market crisis by exporting their excess production to colonies or unprotected markets, which destroyed any prospects of industrialisation there. Rosa Luxemburg in her book The Accumulation of Capital argued that ‘purely capitalist’ society consist of only workers and capitalists could not be self-contained and for its own survival requires non-capitalist societies to sell its excessive production and try to resolve demand deficits problems, which is a major contradiction of capitalism. She paid serious attention to the impact of occupation on the colonies. Later on Marxist economists analysed how surpluses drained from formally or informally from colonies or semi-colonies have critically aided industrialisation in Europe and how expanding markets for imperial products de-industrialised colonies. Moreover, how core countries monopolies on higher value production are secured and maintained in a wider system of unequal exchange and by various means formally or informally discouraging peripheries from improving their productive capacities (Chang, 2002).
David Ricardo’s theory has been claimed to be beneficial not only the trade between nations of equal economic strength e.g. intra-industry trade between rich countries, but also between economically unequal countries e.g. colonisers and their colonies, inter-industry trade. On this assumption, the Europeans imposed ‘free-trade’ on colonies to specialise in agriculture and minerals, while the European powers specialised in manufactures. Consequently, India being the world’s largest exporter of cotton textiles in the pre-colonial period, India turned into an importer of cotton textiles from Britain and an exporter of agricultural commodities such as raw cotton, opium, indigo, jute, tea etc. (Siddiqui, 2020d; also 2020e)
The mainstream economists ignore in their discussions that in the 19th century if ‘free trade’ was beneficial then why European powers had to use military force to induce countries like India, China and Indonesia to accept it (Siddiqui, 2019a; also 2018b). Ricardo’s theory is based on incorrect premises. As Professor Utsa Patnaik (1999: 6) argues: “In the case of the comparative theory applied to the Northern trade with warmer lands, the premise itself is incorrect. The premise is that in the pre-trade situation (assuming the standard two-country two commodity model) both countries can produce both goods. Given this, then it can be shown that both the countries gain by specializing in that good which it can produce at a relatively lower cost compared to the other country, and trading that good for the other good: for compared to the pre-trade situation, for a given level of consumption of one good a higher level of consumption of the other good results in each country… The reality was that the tropical or sub-tropical regions with which Britain, Netherlands, France etc. initiated forced to trade using military power, where bio-diverse could, and did, produce a much larger range of goods than the Northern European countries could…”
Since 19th century the ideology of free trade has been propagated via textbooks, print, and electronic media that any criticism or alternative opinions which examine the costs of ‘free trade’ is hardly ever heard. The free trade model is now modified and presented as – the labour-abundant country e.g. poor countries produce labour intensive goods (agricultural commodities) while capital abundant country e.g. rich countries produce capital intensive high value products (Siddiqui, 1989b). In fact, the crops such as raw cotton, jute, indigo, rubber, tea, coffee, cocoa, banana, sugarcane and rice cannot be produced in cold European climate hence the premise that both countries could produce both goods does not hold. Historically we could see that specialisation and enforced free trade led to very negative social and economic development in the colonies. For example, the nutrition levels and life expectancy fell sharply during the colonial period in India, Indonesia, the Philippines, and Kenya (Siddiqui, 2018c; also 2018d).
In the past, the cost of ‘free trade’ in the colonies had been de-industrialisation and the forcible trade liberalisation led to the destruction of traditional manufactures and increased dependence of the production of primary commodities (Siddiqui, 2015a). As Patnaik (1999: 12) further notes: “This resulted in one-way free trade, viz, a situation where the North protected its own industry by various means and opened up the subjugated markets of the Third World countries, …. Keynes had once used, describing a situation where a country insists on exporting another the good that second country also produces, thereby the North ‘exported its unemployment’ to other counties. That agenda too remains unchanged: market access is a price objective of the earlier and ongoing loan conditional liberalization and of the present WTO regime….” Moreover, the demands for tropical crops in rich countries have increased further in recent years and the WTO regime insists that tropical countries to increase the production and export of the primary commodities (Siddiqui, 2015b, also 2015c).
Free trade theory emphasises that if protections are removed resources should flow from high-cost to low-cost products resulting in an increase in productivity. David Ricardo’s theory of comparative advantage provides a foundation for understanding the nature of so-called mutually advantageous international free trade and forms the basis of arguments generally used to defend a laissez-faire approach (Siddiqui, 2018b). Protection is seen as interference in the free play of beneficent market forces (Kruger, 1996). Ricardo’s model assumes that all resources are fully employed, but in reality we find that in developing countries mass unemployment and mass poverty have often existed alongside vast but under-exploited resources. During the British colonial period, for example, the imposition of free trade policy on India made it possible for the Lancashire cotton industries to prosper while hand loom production in India was systematically destroyed by the active intervention of the British authorities (Bagchi, 2000). Another notable example could be cited here: in 1699 with the Wool Act, Britain banned the export of woollen cloth from the colonies to other countries. This proved to be a severe blow to the Irish wool industry.
Free trade theory emphasises that if protections are removed resources should flow from high-cost to low-cost products resulting in an increase in productivity.
Britain adopted “free trade” policies in the 19th century when it possessed relatively more advanced technologies and industries compared with those of other European countries. These policies were extended to the colonies to further Britain’s business and trade interests. From the mid-19th century, Africa and Latin American countries were also integrated into the world economy as suppliers of primary commodities, as envisaged by the “comparative advantage” model. (Siddiqui, 2019b and also 2019c)
At the same time that colonies were encouraged to specialize in the production and export of primary products rather than manufactured goods, Britain abolished import duties on raw materials produced in the North American colonies. Thus, Britain slowed, or completely prevented, modern industrial development in the colonies and in other territories in which it enjoyed pre-eminent influence. As Bagchi (2000: 403-4) observes: “In the victory of private enterprise, the construction of a state fostering its growth played a critical role, and free trade as a policy did not gain ascendancy until Britain had already emerged as the most powerful nation in the world economically, militarily and politically … it had begun preaching the doctrine of free trade to others, even enforcing it with gunboats and soldiers, as in the case of opium war”.
It is claimed that if all countries adopt free trade policies then it is claimed by the proponents that the world economy can achieve a more efficient allocation of resources and a higher level of material well-being than it can without trade. In contrast, Bieler and Morton (2014: 40) found: “Trade liberalisation has often implied deindustrialisation and import dependence. An analysis of the consequences of trade liberalisation in Africa and Latin America during the 1980s and1990s, for example, reveals widespread job losses, increasing unemployment and declining wages in both continents”.
In the late 1980s and 1990s, at the behest of the World Bank and the IMF and as a condition for their loans, most of the Latin American countries adopted Structural Adjustment Programmes or SAPs (Siddiqui, 1998; also 1994) (i.e. neoliberal reforms), while China, which was then not a member of the WTO, was able to maintain greater control over both trade and foreign capital investments (Girdner and Siddiqui, 2008). The Chinese government was able to encourage foreign investors to establish joint ventures with local companies that included agreements on technology transfer. In China rapid urbanisation and higher growth also resulted in a sharp increase in the scale of the domestic market. By 2010, China became a net importer of food, the largest importer of soya, and accounted for half of the world’s total food imports.
III. WTO and Trade Liberalisation
The WTO aims to liberalise trade in goods, capital and services, and more recently also in world’s agricultural markets. In the agriculture sector, the WTO wants to liberalise trade in agricultural commodities by eliminating subsidies to inefficient producers, tariffs, and the practice of holding food stocks by governments (WTO, 2013). This policy is supposed to increase agricultural commodity prices through a de-regulated market and benefit farmers. At the same time, increased competition is supposed to generate greater efficiency and thus bring down prices to the benefit of consumers. However, such assumptions ignore the fact that agricultural trade is in fact characterized by large economic, social, and political inequalities. Since 1991, with the collapse of the Soviet Union and East European regimes, many more countries have adopted trade liberalisation policy and thus global economy more integrated than ever in the past and global trade as a percentage of global GDP has risen sharply, as Figure 1 indicates. And the major trading countries in goods are largely developed economies apart from China (see Figures 2 and 3).
In agricultural commodities, due to climate limitations developed countries cannot produce coffee, rubber, sugarcane, cocoa, bananas or tea but want these commodities for their food processing industries and they want to acquire these from deregulated markets. In the cotton and sugar markets, however, distortions exist because of subsidies given to producers in both the United States and the European Union and therefore these products are protected from liberalisation. With the signing of the WTO’s international treaty Agreement on Agriculture (AoA) in 1995 developing countries were granted little access to new markets in the developed countries but were required to accept significantly more imports. This depressed local investment and production ultimately exacerbated food deficits and undermined food security in developing countries (Siddiqui, 2021b).
The agricultural sector plays an important role not only in maintaining a healthy rural environment and ecology but also in the economic development of a country. It makes a significant contribution to per capita income and employment, especially in developing countries. Neoliberal policy reforms in agriculture alter the situation in this sector and restructure the economic fabric of the society. Food security and self-sufficiency are important contributing factors to the stability and economic growth of regional and international economies (Siddiqui, 1990). Accordingly, we should examine the impact of trade liberalisation (i.e., free trade) on the agricultural sector and food security issues in developing countries.
The WTO wants to introduce the idea that agriculture and food production should be treated as any other form of production and be subjected to the rules of competition in deregulated and open markets similar to those in the industrial sector. The supporters of this approach claim that if such policies are followed in the developing countries they will increase output under competitive conditions and achieve levels of surplus and prosperity similar to those enjoyed by Europe and North America even though those regions do not, in fact, apply such policies in their domestic markets. The developing countries as a group would be wise therefore to defend their interests and seek reform of the WTO in order to protect their agriculture, manufacturing and service sectors and their interests in general.
IV. Conclusion
The proponents of ‘free trade’, which is based on David Ricardo’s ‘Comparative Advantage’ model, choose to forget that in the 18th and 19th centuries the transition of European and North American agriculture towards greater use of technology and capitalist large-scale production took place at the same time their industrial sectors were expanding and their surplus populations were migrating to the Americas, Australia, New Zealand, and South Africa. These developments resulted in the largest land-grabbing and resource-extraction exercises in human history, during which indigenous populations were eliminated or enslaved and their land and natural resources expropriated. Because developing countries have no such possibilities and hence, the adoption of the WTO’s agriculture neo-liberal reform policy inevitably leads to greater poverty and to ecological destruction exacerbated by climate change.
In fact the rich countries have advanced through a combination of tariff protection, government intervention, strategic investment and use of military force, however, when it comes to today’s poor countries, the benefits of so-called ‘comparative advantage’ is being insisted by the international financial institutions and the rich countries.
The WTO has become as an important international multilateral institution, not only by bringing liberalisation of trade in agriculture, manufacturing and services but also through its dispute settlement mechanism. In particular, the WTO’s negotiations at Doha in 2001 resulted in policies made largely to protect the interests of agro-business corporations based in the West, while offering few benefits to farmers in the developing countries (Stiglitz and Charlton, 2006).
In the developing countries, farmers are often forced to sell their products soon after harvest due to difficulty with storage and the need for money to repay debts, which is known as stressed sales.
This study has found that the free trade approach (i.e. trade liberalisation) will deepen the process of uneven development and unequal exchange between poor and rich countries. And free trade in agriculture undermines food sovereignty and adversely affects the possibilities for autonomous development and food self-sufficiency in developing countries. For example, the WTO’s 1994 Agreement on Trade-Related Investment Measures (TRIMs) do not allow the use of local content specification to increase linkages between foreign investors and local manufacturers or restrictions on the outflows of capital by investors. Other WTO policies such as the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) further allow privatisation and concentration of knowledge in the hands of global corporations (Siddiqui, 2016a).
Unlike manufacturing, agricultural production cannot take place throughout the whole year, and therefore prices cannot be lower during the harvest season than during the rest of the year (Siddiqui, 2021b). In the developing countries, subsidies were aimed at reducing production costs by providing inputs lower than market prices, but in the developing countries farmers are often forced to sell their products soon after harvest due to difficulty with storage and the need for money to repay debts, which is known as stressed sales (Siddiqui, 2019d). To ensure prices governments buy agricultural commodities at prices higher than markets to protect farmers from market fluctuations. Additionally, during shortages, governments release agricultural products from storage to stabilise prices in the market. Under WTO rules, such food stock holdings are prohibited and farmers in the developing countries are left entirely at the mercy of the market (Siddiqui, 2015a).
The farmers in North America and the European Union operate highly mechanised capital-intensive agriculture and productivity range between 10,000 and 20,000 quintals of cereals per farmer per year. In developing countries, especially in Africa and Asia, farming is far less mechanised and capital intensive and productivity ranges from just 100 to 500 quintals per farmer per annum (Siddiqui, 2018b).
In 1991with the adoption of neoliberal reforms in India the government reduced its investment in irrigation and extension services in agriculture and for the last two decades the crisis in rural communities has deepened (Siddiqui, 2016a). In addition to cuts in government spending and greater emphasis on market forces farmers have had to suffer the demonetisation and cash crisis of 2016. This was done soon after monsoon harvest and due to lack of banknotes farmers were unable to sell their products or buy inputs to sow winter crops. The agrarian crisis has been reflected in the increasing number of farmers’ suicides and forced migration to the cities. Over the same period the availability of institutional finance to farmers has been reduced, meaning that the cost of borrowing has risen and also global agricultural commodity prices have declined, particularly since 2017. As a result profitability in the agriculture sector has decreased. India is the largest producer of wheat and second largest producer of rice. In 2017, the production of wheat in India was nearly 96.6 million tonnes and consumption was about the same. However, India still exported nearly 3 million tonnes from government stocks. In the same year, rice production was 105 million tonnes and consumption was 103 tonnes, but India exported 11 million tonnes of rice from government stocks. The balance between global food prices, food security, and the living standards of the poor is thus extremely precarious under neoliberal policies, even in an economy as large as that of India.
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Siddiqui, K. (2020d). “Britain’s Trade with China in the Eighteenth and Nineteenth Century: A Review of the Opium Wars”, Asian Profile, 48(3): 207-221.
Siddiqui, K. (2020e). “The Study of Economic History and the Importance of Understanding the Past”, World Financial Review, November/December, pp. 46-59.
Siddiqui, K. (2019a). “Economic Transformation of China and India: A Comparative Political Economy Perspective”, Asian Profile, 47(3): 243-259.
Siddiqui, K. (2019b). “The Political Economy of Inequality and the issue of ‘Catching-up’” World Financial Review, July/August, pp. 83-94.
Siddiqui, K. (2019c). “The Economic Performance of Modi’s Government in India: The politics of Hindu right”, World Financial Review, July/August, pp.12-26.
Siddiqui, K. (2019d). “Agriculture, WTO, Trade Liberalisation, & Food Security Challenges in the Developing Countries” World Financial Review, March/April, pp.3-40.
Siddiqui, K. (2018a). “U.S. – China Trade War: The Reasons Behind and its Impact on the Global Economy”, The World Financial Review, November/December, pp.62-68.
Siddiqui, K. (2018b). “David Ricardo’s Comparative Advantage and Developing Countries: Myth and Reality”, International Critical Thought, 8(3): 1-28, September.
Siddiqui, K. (2018c). “The Political Economy of India’s Economic Changes since the last Century” Argumenta Oeconomica Cracoviensia, 19: 103-132.
Siddiqui, K. (2018d). “Imperialism and Global Inequality: A Critical Analysis”, Journal of Economics and Political Economy, 5(2): 266-291.
Siddiqui, K. (2017a). “Financialization and Economic Policy: The Issues of Capital Control in the Developing Countries”, World Review of Political Economy 8 (4): 564-589, winter.
Siddiqui, K. (2017b). “Capital Liberalization and Economic Instability”, Journal of Economics and Political Economy 4(1): 659-677, March.
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Siddiqui, K. (2016b). “Will the Growth of the BRICs Cause a Shift in the Global Balance of Economic Power in the 21st Century?” International Journal of Political Economy 45(4):315-338.
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Siddiqui, K. (2015c). “Foreign Capital Investment into Developing Countries: Some Economic Policy Issues”, Research in World Economy, 6(2):14-29.
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