global economy is on the risePeople around the globe experienced the mania of the Dow Jones’ historic low in February 2018. Some traders even questioned if this was a sign of a global stock market crash. But as the U.S. stock market recovers from its volatile hijinks, global trade as a whole is rising, and rapidly. This rapid rise has many economists optimistic that the global economy is on the rise as well.

The global economy is driven by trade. As international trade rises, so do technological developments as nations tear down trade barriers. According to a report by the CPB Netherlands Bureau for Economics Policy Analysis, the volume of imports and exports grew by 4.5 percent in 2017. To gain perspective, this is a significant spike from a stagnant 1.5 percent rate of growth the previous year, which was the lowest since the global financial crisis in 2007-2008.

Globalization a Reason Why the Global Economy Is on the Rise

The world is changing. Globalization moves the market, just as we move through our interconnected culture of technology, digital communications and transportation. As markets evolve, global poverty is decreasing, while the global economy is on the rise.

Old business practices are being phased out, technology is replacing hard labor and workers are rising to higher levels of efficiency. Automation is shifting the way goods and services are distributed, easing mass production.

Nations have outsourced businesses to developing nations, partly to reduce wage costs. Yet, business process outsourcing provides an oasis of income for people in developing countries such as India, the Philippines and Malaysia. In many places, this opportunity to earn a living would not be possible without outsourcing.

As technology advances, the market shifts and standards of living rise across the globe. Developing countries who have broken trade barriers have developed competitive advantages in the production of certain products. Ukraine, for example, is known as the breadbasket for its richness in wheat and farmland. Venezuela is known for its vast oil supply and China’s factories are known for producing more than half of the world’s clothing.

Tariff Reduction Has a History of Success in Developing Countries

History reveals that nations who open their economies to trade with the global economy experience faster growth and poverty reduction. During the past 30 years, global poverty has been cut in half. Studies show that developing countries that lowered tariffs in the 1980s experienced quicker economic growth in the 1990s compared to those that did not. Tariffs, or taxes on imports and exports between sovereign states, are often viewed as barriers affecting the global economy.

Developing nations have tariffs that are three to four times higher than industrial countries, and they are even higher on agriculture. Average tariff protection in agriculture is about nine times higher than in manufacturing. This can undermine a developing country’s agricultural sector and exports by depressing world prices.

The outlook for the global economy depends on these countries tearing down trade barriers. Yet, political decisions in developed countries are affected by trade barriers as well. In Venezuela’s case, the U.S. has imposed investor-related sanctions on Venezuelan oil to pressure its government to address its humanitarian crisis of inflation and starvation. According to Reuters, U.S. officials are not ruling out a complete ban on Venezuelan oil in order to send a strong message to its dictator, Nicolás Maduro.

Trade Wars Are Common and May Not Affect Global Trend

China’s trade practices have also affected U.S. trade on a political level. Elon Musk, the CEO of Tesla, recently called on U.S. President Trump for equal and fair rules for cars, citing China’s pressure on foreign businesses to partner with Chinese carmakers before manufacturing in China. Musk noted China’s 25 percent import duty on cars compared to America’s 2.5 percent duty. President Trump proposed a sweeping tariff on steel and aluminum on March 8, 2018, which characterizes the trade wars.

Skeptics believe this political decision could take the global economy down the rabbit hole. Others are bracing for a global crash for different reasons. “I still believe that we’ll face a financial crisis within the next two years if we don’t solve the debt problems,” said Bjorn Ritschewald, a civil engineer with the government Road and Traffic office in Bremen, Germany, a city popular for its maritime trade. “Almost every country spends more than its income. Actually, I don’t know any country that spends less than what it takes in.”

“Waves in trade flow are common, but it depends on the goods,” Ritschewald told The Borgen Project. “You can’t just look at the financial numbers. You also have to look at the real amount of goods and which kind of goods are being sold.” World markets experienced the rippling effects of the Dow Jones’ plunge. The plunge is characterized as market correction, a phenomenon where unusual market success sparks panicked selling, driving market drops across the globe.

On the other hand, many economists believe that the global economy is on the rise. Their confidence stems from positive trade initiatives such as the Trans-Pacific Partnership, a free trade agreement set to be signed by 11 countries in March. The trade wars and other trade barriers are pitfalls that affect the global economy. However, with trade growth booming, there is much optimism in the air about a healthy global economy in the future.

– Alex Galante

Photo: Google

 ChinaThree days after President Trump’s inauguration, he executed one of his major campaign promises: withdrawing the U.S. from the Trans-Pacific Partnership (TPP). Whether or not the TPP will outlast the U.S. withdrawal, China and fifteen other regional partners have forged ahead with a free-trade agreement of their own, the Regional Comprehensive Economic Partnership (RCEP).

One of the differences between the Trans-Pacific Partnership and the Regional Comprehensive Economic Partnership is that the former was slated to account for almost 40 percent of the world’s GDP and 10 percent of its population, while the latter comprises nearly 40 percent of GDP and almost half of the global population.

Many analysts have framed the differences between the TPP and the RCEP in terms of the balance of power between the U.S. and China, but for many of the countries involved, free trade is first and foremost an economic issue. Like most free-trade agreements, TPP and the RCEP center on tariff reductions. By liberalizing the international exchange of goods, many economists believe increased competition will stimulate growth in each country’s comparative advantage.

While the TPP aimed to remove tariffs completely on over 90 percent of traded goods, the Regional Comprehensive Economic Partnership attempts to merely reduce tariffs on only 80 percent of goods. The TPP also went further in attempting to curtail government-subsidized industrialization and implement environmental and labor regulations.

Despite the projected benefits for all countries involved, free trade agreements have been criticized for their potential harm to workers. Not only President Trump, but presidential candidate Bernie Sanders advocated for leaving the TPP. Senator Sanders held valid concerns about the continued widening of the international labor pool for American companies.

Indeed, despite the TPP’s projected contribution of 0.6 percent to U.S. GDP, this growth would have occurred in only the country’s comparatively advantageous sectors such as agriculture and advanced technologies, at the expense of every other sector. In the process, workers in less efficient sectors would experience displacement and, without a safety net, suffer in the near-term. On the flipside, the TPP would have contributed more than 10 percent GDP growth to countries like Vietnam and Malaysia, each willing to capitalize on their low labor costs.

In India, though, one of the potential signatories of RCEP, concerns about the displacement of its agriculture industry have slowed negotiations. The Indian parliament is hesitant to liberalize trade and capital flows for fear of allowing large agribusinesses to displace millions of small farmers. Though the end result of structural change may very well be improved efficiency and cheaper food, the transition will inevitably feature dispossession.

Despite minor setbacks, one of the final differences between the TPP and the RCEP is that the latter has a greater chance of coming to fruition. If it does, and only time will tell, economic integration will certainly bring growth, and disruption, to its signatories.

Nathaniel Sher

Photo: Flickr

After months of negotiation, the public has spoken. Public health outcry surrounding the Trans-Pacific Partnership (TPP) resounds online, in print and on television.

“We have raised our voice as loudly as we can,” said Manica Balasegaram, executive director of Doctors Without Borders’ (DWB) access campaign. “This is a terrible deal for access to affordable medicines.”

The idea behind campaigns like the one headed by DWB is to remove the intellectual property laws (many pertaining to pharmaceuticals that treat life-threatening conditions) from the Trans-Pacific Trade Partnership (TPP).

As it stands, according to a November 13 Wikileak, the TPP would seek to extend the patent on brand-name pharmaceuticals an additional five years (delaying the onset of cheaper generic drugs that compete with brand-names), as well as 12 years of “data exclusivity” for biologic drugs, of which include many cancer and multiple sclerosis therapies.

While these intellectual property rights are sure-fire ways to keep pharmaceutical prices high—even unreachable for many in developing countries—defenders of the TPP laud them as ways to improve health, not hamper it.

The first line of the secret TPP document that was leaked by Julian Assange in 2013 decries that the thought process behind these intellectual property laws is to “enhance the role of intellectual property in promoting economic and social development in relation to the new digital economy, technological innovation, and transfer the dissemination of technology and trade.”

As increases in antibiotic resistance demands more innovation in pharmaceuticals, they remove incentives for Big Pharma to pursue antibiotic options (data shows that the more times you use these antibiotics, the less effective they are, so profits are capped).

Beneath this intellectual property clause that is a roadblock to doctors and patients everywhere, lies a real problem–how can we incentivize further development of life-saving antibiotic therapies?

The best way our society knows how to incentivize something is to monetize it. The idea of writing hours of code at a computer was abhorrent, for many, until Bill Gates and Steve Jobs turned personal computers into million-dollar industries.

The intellectual property laws surrounding pharmaceuticals (especially, antibiotics) exist to serve this purpose—to create an industry that is robust, profitable and differentiated.

It is even present in the existing TRIPS free trade agreement which guarantees some intellectual property laws in free trade agreements, even providing special waivers to certain developing countries that exempt them having to abide by pharmaceutical patents until at least January 2016.

“The LDC waivers [exemption from TRIPS-sponsored patent law for drugs] are among the important flexibilities available in the TRIPs agreement,” wrote a UNAID 2012 report.

“Retaining the flexibility to adapt intellectual property law and policy to meet national development objected has facilitated the development of robust generic industries such as India and Brazil. Generic competition, primarily from Indian pharmaceutical manufacturers, has been one of the key factors in the dramatic decrease in prices of…medicines for HIV treatment.”

If the TPP must go through, which according to some reports will happen before the dawn of the 2016 election year, the TRIP waiver program has already given us the skeleton of a tool to combat it.

If intellectual property rights for biologic therapies and drugs in the US are to be tightened, the extension of the waivers for generic development elsewhere may be necessary.

Diversify the market–let the developing nations step in with their own budding pharmaceutical industries and mollify the situation that the TPP has the power to create.

Emma Betuel

Sources: UNITAID, UNAIDS, About News, Doctors Without Borders (MSF), WikiLeaks, Health Affairs, Center for American Progress
Photo: Pixabay

The Trans-Pacific Partnership (TPP) continues to face strong popular opposition, particularly among those who claim that the provisions aimed at establishing new standards for intellectual property are beneficial only to multinational corporations and associated industries. One of those is the pharmaceutical industry, which faces the prospects of increased drug prices and extended patent rights if the agreement becomes law. These revelations come from a WikiLeak’s leak of the Healthcare Annex, the TPP provision concerning access to healthcare and pharmaceutical products.

Among the provisions under scrutiny are proposals to extend patent terms on new pharmaceutical products, increased ability to enforce patent rights, increased risks and costs associated with registering generic drugs and further limits on exceptions to patent rights. The result is increased authority for multinational pharmaceutical companies, higher prices on basic goods and decreased access to basic medicine and healthcare for patients.

Dr. Deborah Gleeson, a professor of Public Health at Australia’s La Trobe University, says the Healthcare Annex does nothing to expand, or even guarantee, access to medicine for the world’s people.

“The purported aim of the [Healthcare] Annex is to facilitate ‘high-quality healthcare’ but the Annex does nothing to achieve this,” she said. “Nor does this do anything to promote ‘free trade’: rather, it tightly specifies the operation of countries’ schemes for subsidizing pharmaceuticals and medical devices with the aim of providing greater disclosure, more avenues for the pharmaceutical industry influence and greater opportunities for industry contestation of pharmaceutical decision making.”

The provision would also affect signatory countries’ control over their own healthcare programs, the result of a “consultation mechanism” that could be used to pressure countries into adopting health policies beneficial to U.S.-based pharmaceutical and medical device companies. According to Jane Kelsey, a professor of law at the University of Auckland and the second specialist consulted by WikiLeaks, this suggests that the ability of member states to subsidize medicine for their citizens will be diminished.

“That will mean fewer medicines are subsidized, or people will pay more as co-payments, or more of the health budget will go to pay for medicines instead of other activities, or the health budget will have to expand beyond the cap,” she said of New Zealand’s healthcare subsidy program.

Proponents of the Healthcare Annex argue that extended patent rights and high drug prices are necessary in order to fund pharmaceutical research and development. According to Kelsey, however, other options are available to governments worried about stimulating R&D. She notes that Pharmac, New Zealand’s medicine subsidy administrator, has been able to dramatically lower the price of drugs by subsidizing pharmaceutical companies that offer the cheapest shelf prices. Under New Zealand’s system, companies compete to provide customers the cheapest prices, and as a result of the subsidies realize increased sales for their efforts.

According to WikiLeaks, the TPP’s healthcare provision would restrict the ability of countries like New Zealand to implement such policies, and would “inhibit the adoption of similar policies in developing countries.”

The most immediate threat to medical care for the world’s poor comes in the form of decreased access to generic drugs, which often cost a fraction of the price of patented drugs. For example, generic drugs, which account for a large portion of the Mexican medicine market, have saved the poorest Mexicans $1.3 billion over the last four years. Farmacias Similares, a bargain pharmacy in downtown Mexico City, charges only $17 for a two-week supply of the generic drug bicalutamide. A patented version of the same medication under the brand name Casodex sells for $83, more than Guillermo Ocampo, a security guard with no health insurance, earns in a week.

“This medicine stops [my] cancer from growing and that keeps me alive,” said Ocampo in an interview with Global Post. “I simply couldn’t afford to pay for the patented version. I don’t know what I would do.”

The Trade Promotion Authority (TPA) passed in the House Thursday, and, if it proceeds to pass in the Senate, will strip Congress of the ability to debate or amend the version of the TPP proposed by President Obama, limiting it to an up or down vote. While the trade agreement has largely been negotiated behind closed doors, the leaked provisions indicate that access to affordable medicine among the world’s poor could be seriously threatened. “The TPP agreement is on track to become the most harmful trade pact ever for access in developing countries,” warned Doctors Without Borders in a statement in 2013. “[We urge] the U.S. government to withdraw – and all other TPP negotiating governments to reject – provisions that will harm access to medicines.”

– Zach VeShancey

Sources: The Hill, Doctors Without Borders, Telesur, Global Post, Wikileaks
Photo: Business and Human Rights Resource Center