How Insane is Global Trade?

Sean Keller

The way trade works in the global economy can be insane – it wastes resources, worsens climate change, and undermines the livelihoods of millions of small-scale producers worldwide. Yet it is an almost unavoidable consequence of de-regulatory ‘free trade’ agreements and the billions of dollars in supports and subsidies – many of them hidden – that prop up the global economy.

Food routinely gets shipped halfway across the world to be processed, then shipped back to be sold right where it started. Mexican calves — fed imported American corn — are exported to the United States to be butchered, and then the meat is exported back to Mexico for sale. More than half of the seafood caught in Alaska gets processed in China, and much of it is sent right back to American grocery store shelves.

Compounding the insanity of this ‘re-importation’ is the equally head-scratching phenomenon of ‘redundant trade’. This is a common practice whereby countries both import and export identical quantities of identical products in a given year.

For instance, in 2007, Britain imported 15,000 tons of chocolate-covered waffles, while exporting 14,000 tons. In 2017, the US both imported and exported nearly 1.5 million tons of beef, and nearly half a million tons of potatoes.

On the face of it, this kind of trade makes no economic sense. Why would it be worth the immense cost – in money as well as fuel – of sending perfectly good food abroad only to bring it right back again?

The answer lies in the way the global economy is structured. Direct and indirect subsidies for fossil fuels, on the order of $5 trillion per year worldwide, allow the costs of shipping to be largely borne by taxpayers and the environment instead of the businesses that actually engage in it. This allows transnational corporations to take advantage of differences in labor and environmental laws between countries, not to mention tax loopholes, in service of making a bigger profit.

The consequences of this bad behavior are already severe, and set to become worse in the coming decades. Small farmers, particularly in the Global South, have seen their livelihoods undermined by influxes of cheap food from abroad. Trade agreements have made it impossible for companies to compete in the global economy unless they base their operations in places with the weakest protections for workers and the environment.

And all the while, the share of global carbon emissions produced by commercial shipping is set to rise to 17 percent by 2050, if action isn’t taken to curb our addiction to trade. 

But policymakers currently have little incentive to reduce unnecessary trade: bizarrely, emissions from global trade do not appear in any nation’s carbon accounting.

The action will therefore have to begin with peoples’ movements around the world. We must call for an end to subsidies that only benefit giant corporations, as well as an end to tax policies that encourage things like re-importation and redundant trade. Perhaps the most critical step towards sanity would be the removal of subsidies for fossil fuels. Without governments covering the cost of their emissions, transnational corporations would have to radically reconsider the way they operate.

Making these changes will not be easy. Generating momentum for trade policies that promote community health, small farmers, and ecological stability will not happen overnight. But the first step is raising awareness of trade as an issue, and overcoming the unwillingness of most major media outlets, politicians and think-tanks to discuss it critically.

To that end, Local Futures has released a tongue-in-cheek short film and an accompanying factsheet, highlighting the absurdity of the current global trade system and pointing to some ways out. The film and factsheet have been launched as part of #InsaneTrade Week, a social media campaign Local Futures is running from March 25 to April 1.

The factsheet can be downloaded here