How Do Countries Establish Their Economic Policies

April 27, 2015 Musa Freiji Articles

Often citizens wonder how do officials setup an economic policy. Does it reflect the supreme national interest? Is it based on the interest of the various sectors of the citizens or is it effected by pressures from regional or international countries? The industrialized countries tried to set specific measures to facilitate international trade. They started with GATT (General Agreement on Tariffs and Trade) signed on January 1, 1948 in Uruguay by 24 countries, two of which were Arab countries, namely Lebanon and Syria. GATT witnessed several changes until it became a UN organization by January 1995 named World Trade Organization (WTO). Its members have reached 160 nations by mid-2014. The reason for establishing WTO was to facilitate trade amongst its members by reducing or abolishing import permits and duties and by eliminating restrictive measures especially exaggerated standards. The agreements signed so far, and in spite of several Doha negotiation rounds, failed to include free trade of agricultural and food products. This failure is due to the insistence of the industrialized countries especially USA and EU to exclude such products. The industrialized countries went further to impose exaggerated standards to the imported industrial products. They even exercised the imposition of high tariffs on industrial products that compete and threaten the closure of similar companies producing such products in their countries. One can easily conclude that the industrialized countries, which advocated the establishment of WTO, had in effect the intention to invade the developing and under-developed countries and prevent them from setting up their own industries. Lastly, the industrialized countries resorted to subsidize their production as well as their exports in order to maintain their export volumes. EU agricultural policy reached 55 billion euros while the USA exceed 180 billion dollars in agricultural subsidies. These subsidies are in violation with WTO agreements. The problem of the developing countries is that they cannot confront the industrialized countries, especially USA and EU who facilitate obtaining loans from the World Bank and financial assistance in the form of loans or grants. Furthermore, such poor countries may be subject to severe measures like embargoes or even military action based on UN imposed resolutions. This leads us to conclude that the economic policies of the industrialized countries are based on their ability to export the excess of their production over their internal needs in peaceful means or else by force in an attempt to limit the ability of the developing countries from developing their own industrial production. It is quite clear that the industrialized countries, in their attempt to keep their economies healthy watch three essential parameters: 1. Keeping the unemployment rate at a low level and below 5% 2. Keeping inflation rate closest to 1-2% /annum 3. Keeping a positive trade balance What can developing countries do in order to counteract the measures taken by the industrialized countries? It seems to me that such countries need to join forces and employ a protectionist policy. Such a policy requires that these countries pull out of the WTO and any bilateral free trade agreement. It also requires that they resort to applying effective import duties on all industrial or agricultural products that they produce or are able to produce in order to entice investment in such areas. Such a policy helps these countries to develop new industries by introducing new technologies and by creating new jobs. This approach helps these countries to become self-sufficient in many products such as food, clothing and medicinals. It is high time that developing countries combine forces to protect the interest of their own people. The protectionist policy is a peaceful non-aggressive policy that cannot give the industrialized countries enough reason to confront it.

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