Trade Justice and the Least-Developed Countries*

Abstract

In this article, we argue that least-developed countries (LDCs) should be treated as a distinct group from developing countries within theories of international justice generally, and theories of trade justice more specifically. While authors within the trade justice literature occasionally make passing reference to LDCs’ entitlement to special favourable treatment from other states, they say little about what form this treatment should take, and how such entitlements relate to the obligations and entitlements of their trade partners, both developed and developing. This oversight is untenable because it overlooks the significantly different needs that LDCs have compared to developing countries with respect to the economic opportunities afforded by international markets. Moreover, by grouping states into the binary categories of developed and developing (or rich and poor), trade justice theorists have ended up obscuring and passing over a fundamental conflict between least-developed and developing countries’ interests, the weighing of which should be central to any complete normative evaluation of the trade regime.

The article proceeds as follows. In Section II, we introduce the category of least-developed countries, a category which is recognized as a basis for differential treatment of states within the global trade regime and the international order more broadly, but which is typically subsumed by political philosophers into the larger category of ‘developing countries’. We relate this neglect of the distinctive features and needs of LDCs to two broader shortcomings which characterize much of the philosophical literature on trade justice, shortcomings which we seek to overcome in our subsequent discussion of LDCs’ trade-based entitlements. In Section III, we argue that developed countries, as well as some of the wealthier and larger developing countries, have a duty to help remedy the extreme immiseration characteristic of life within LDCs by actively diverting trade flows towards LDCs. We suggest that they ought to do so by committing to ensuring that a certain minimum percentage of their imports come from LDCs. We label this proposal the ‘LDC quota’. In Section IV we note that wide adoption of an LDC quota would foreseeably harm some developing countries, some of which are themselves very badly off. Nevertheless, we argue that in the absence of better alternatives this does not undermine the basic case for diverting trade towards LDCs. We then raise and refute several objections that affected developing countries may have to the LDC quota. All told, this article presents both a novel conceptualization of the problems of trade justice, and a promising proposal for how states ought to act upon their duties to LDCs.

In the last decade or so, philosophers writing on international justice have increasingly shifted their focus away from big-picture debates about the international order as a whole towards normative analysis of specific subsystems within the international order. Few subsystems have received as much attention as the international trade regime.1 While some of this work has focused on the duties of agents at what we might call the ‘transactional’ level of trade, where producers and consumers exchange on the market, in this article we will restrict our focus to normative questions concerning the ‘governmental’ level, where states author and enforce the rules that shape the international terms of trade.2

Reflecting broader trends in the international justice literature, this recent work on trade justice has generally been informed by some understanding not only of the relevant economic literature, but also of the workings of the political institutions of the trade regime. Given the empirically informed character of such work, it is surprising to note the relative dearth of normative analysis by philosophers of the special challenges facing the LDCs in relation to trade and international justice more broadly. The UN defines LDCs as ‘low-income countries suffering from the most severe structural impediments to sustainable development’,3 and recognizes 46 countries as such, based on their low gross national income per capita (below US$1,018), low ‘human assets’ (nutrition, education, and health stages), and high economic vulnerability.4

Currently over 13 per cent of the world’s population live in an LDC, most of which are in Sub-Saharan Africa, yet LDCs account for barely 1 per cent of world GDP, around 1 per cent of world trade—and close to 40 per cent of the world’s population living on less than US$1.90 per day. (The reason LDCs do not represent an even higher percentage is that tens of millions of people in extreme poverty live in large developing countries such as Nigeria and India. Countries with a population greater than 75 million are not categorized as LDCs even if they meet the criteria listed, on the grounds that larger countries’ abilities to generate domestic economies of scale allow them to better overcome the development constraints faced by their smaller counterparts; see Section III.)5

All of the countries which score lowest on the Multidimensional Poverty Index (MPI), and on the Human Development Index (HDI), are LDCs; put simply, poverty is more widespread, more intense, and more multidimensional in these countries than in developing or developed countries.6 Because of this, LDCs are already given special assistance and entitlements within the trade regime, as well as within global governance institutions more broadly.7 They also have a history of acting in concert with one another in order to pursue their shared interests; the LDC group, for example, is among the most durable and active coalitions within the World Trade Organisation (WTO).8 While LDCs are all, by definition, characterized by a similar mix of poverty, low human development, and economic and political vulnerability, which leads them to share a similar set of interests and structural handicaps, it is worth noting that there is an inequality of prospects even within this group: by and large, Pacific Island and Asian LDCs are much closer to graduating from LDC status than African LDCs, meaning that in the near future LDC status is set to become an overwhelmingly African phenomenon.

Despite their coordinated activity within the WTO, as well as the urgency of their needs and interests, there are, as far as we are aware, no philosophical articles on what is owed specifically to LDCs in trade (as opposed to, say, badly-off countries more generally).9 Nor is this matter given any substantive treatment in any of the major works on trade justice. When LDCs are acknowledged as a distinctive subset of states, their claims are relegated to the periphery of the analysis of states’ duties and claims. To give some indication of this relative neglect of LDCs, take the two most comprehensive works on trade justice produced in recent years, Aaron James’s Fairness in Practice, and Mathias Risse and Gabriel Wollner’s On Trade Justice. In each of these works, ‘least-developed countries’ are mentioned less than ten times; even fewer of these involve substantive points pertaining to LDCs’ justice claims. By contrast, ‘developing countries’ are mentioned well over one hundred times in each work (in James’s case, almost two hundred times).10

There is, of course, a perfectly sensible explanation for any imputed neglect of LDCs, which we’ve noted above: namely that, when authors discuss ‘developing countries’, they mean this to include LDCs as a subset therein.11 We might therefore think it is disingenuous to contrast the frequency with which ‘LDCs’ and ‘developing countries’ are discussed, insofar as whether to categorize LDCs as developing countries or as a separate class of states is merely a semantic issue. Yet the subsumption of LDCs into the broader category of developing countries is precisely the problem we want to highlight: by failing to take account of the specific needs and structural constraints of LDCs, and treating them as a worse-off subset of developing countries, theorists have overlooked important considerations which ought to factor into our thinking about trade justice. Moreover, we suggest that the failure to adequately consider the distinctive plight of LDCs is a symptom of more general shortcomings in how trade justice itself is typically framed. Below, we highlight two problematic framings which are commonly adopted in the literature, each of which contribute to the neglect of, among other things, LDC-specific considerations of trade justice.

In this section, we argue that developed states ought to actively divert a certain minimal portion of their trade towards LDCs. More specifically, we suggest that they ought to adopt what we will call an ‘LDC quota’, whereby they commit to acquiring (at least) a certain percentage of their imports, measured by value, from LDCs.19 Given their deleterious effects on LDCs’ development prospects, imports of natural resources such as oil and minerals should not count towards these quotas. Such quotas should give an artificial competitive advantage to industries such as labour-intensive manufacturing that are characterized by increasing returns to scale.20

The model we envisage for implementing this quota would be akin to the Paris Climate Agreement, where states commit to achieving a certain target, but it is left to each state to determine how best to pursue their target.21 Some developed-country governments may choose to work with LDC partner governments to improve their infrastructure, in areas ranging from electricity supply to customs procedures. Alternatively (or additionally), they might provide technical, legal, and administrative assistance for complying with the developed country’s own quality and safety standards. Others may decide that the best way to meet the quota is just to attach negative tariffs on goods imported from any LDC, making them artificially cheaper. Ideally, countries would adopt the LDC quota within the WTO, which could provide a ready-made forum for coordinating commitments, sharing best (and worst) policy practice, and holding each other accountable for their progress. However, if global coordination is not forthcoming, each developed state should still seek to coordinate with as many others as possible; the larger the market, the greater the impact.

In order to explain why a policy of this sort is required by justice, it is worth explaining in more detail one of the structural impediments facing LDCs’ development. On a simple analysis of trade, after all, we might think that a policy of this kind is not needed for LDCs to export more labour-intensive products. Insofar as inhabitants of LDCs in Africa have very low wages (considerably lower at this point than in, say, China and most of South-East Asia), they should already be economically attractive places for export manufacturers to set up in. Yet this has not happened, nor is it likely to happen in the near future.

This is because, as New Trade theorists such as Paul Krugman have analysed, international trade allows for the development of ‘spatial economies of scale’, far greater than those permitted by a domestic market.22 Economies of scale allow businesses to reduce costs not only through hiring cheap labour, but also through easy access to supply chains, nearby workers with relevant specialized skills, good infrastructure, and so on. Spatial economies of scale can generate significant efficiency gains for businesses operating within an industrial cluster, which can compensate for having higher wage costs than those found elsewhere. For example, although wages in Asia were many multiples lower than in Western Europe and North America for several decades, it was only in the 1970s and especially in the early 1980s that the wage gap was large enough (around a forty-fold difference) to make it worthwhile for individual manufacturers to leave the industrial agglomerations that had already developed and found new ones. Once they did so, however, the new clusters they formed created new efficiencies and rapidly became much more attractive to the manufacturers who remained in Europe and America.23

Today, recently established manufacturing clusters in developing countries benefit both from significantly lower wages than in developed countries and from economies of agglomeration that LDCs cannot match. Without some sort of policy intervention, it will take many decades before the wage gap is large enough to make it profitable for manufacturing firms to start abandoning those agglomerations in favour of the remaining LDCs.24 LDC quotas can reopen the closed door of development, by artificially raising demand for LDC products, thereby encouraging export industries to locate in LDCs and seed new efficient agglomerations.

A full defence of our proposal has both empirical and normative components. Here, we focus on the normative component; the reader who is sceptical of the economic merits of our proposal can treat what follows as an ‘if, then’ argument; if LDC quotas would have the effects we suggest above, then some states have a duty to adopt them. In any case, the proposal gives us a lens through which to view the distinctive character and relative weight of LDCs’ justice claims in trade where they come into conflict with those of developing states, which is the key issue we seek to insert into the philosophical conversation about trade justice.

As Judith Lichtenberg has stated, ‘you don’t need industrial strength ethical theory to know that it would be better if billions of people didn’t live in dire poverty’.25 This basic moral commitment is reflected in the numerous international treaties, programmes, and institutions directed at ending such extreme poverty, from Article 25 of the Universal Declaration of Human Rights to the Sustainable Development Goals to the World Bank. Without significant reform of the international economic system, by 2030 extreme poverty will largely be an LDC phenomenon.26 And, in a world whose purchasing-power-adjusted GDP is now around US$130 trillion,27 the persistence of such poverty is not only morally unacceptable, but also starkly anachronistic, and its removal eminently affordable.

Trade enters this picture because economic development is necessary for the eradication of extreme poverty, and integration into the global economy is a key ingredient in such development, especially for small countries such as LDCs.28 Insofar as this is the case, we can say that LDCs are strongly dependent upon trade. In other work, one of us has defended the claim that trade generates duties of justice between states because, and to the extent that, states are dependent upon trade in order to realize their duties of domestic justice.29 An agent, A, depends upon another agent, B, to the extent that B plays a role in how A will, or has the best chance to, meet their needs. Dependence is weak if B is easily substitutable, if the needs that B is implicated in are peripheral ones, or both. Conversely, A is strongly dependent upon B to the extent that there is no viable substitute for B (that is, B is integral to A’s plans), and the needs that B is implicated in are among A’s core needs. Strong dependence generates more stringent duties towards the dependent agent than weak dependence, insofar as the needs at stake are more central, and the depended-upon agent’s role is more central to the realization (or deprivation) of such needs.

In trade, we take it as given that states are only of instrumental importance; we are ultimately concerned with how states are treated insofar as this has effects on individuals, and states only have justice-claims against one another because they each have demanding, conceptually prior domestic duties to their respective citizenries. Therefore we propose to consider a state dependent upon trading partners to the extent that those trading partners play a role in the state being able to meet the needs of its citizens, more specifically those needs which citizens have a claim-right to. So state A will be dependent upon state B to the extent that B’s policies form an (integral) part of how A realizes, or has the best chance to realize, some or all of its duties of domestic justice.

Among other things, grounding states’ duties in trade in their respective levels of dependence entails that the degree of immiseration of a trading partner, and the severity of the structural constraints it faces in pursuing its own self-advancement, will often be decisive considerations when determining whom the terms of trade should favour.30 Of course, they will not be the only considerations; governments have demanding duties towards their own citizens, and reasonable partiality may well tell against state representatives requiring all their trade policies to conduce to the benefit of worse-off states. It would appear unreasonably demanding, for instance, to ask states that are themselves incapable of reliably realizing a decent standard of living for their citizens to nevertheless commit to policies which would raise the cost of living considerably for their citizens, even if this was for the benefit of the citizens of a worse-off state. But for states that are well off on any reasonable reckoning, if they have the ability to improve the terms of trade for a trading partner in a way which would enhance the trading partner’s ability to realize a minimally adequate standard of domestic justice at a non-prohibitive cost, then it would be wrong not to do so.

We have already noted that LDCs are strongly dependent upon their trade partners. There are many states who would be easily capable of shouldering the costs entailed by a reasonably ambitious LDC quota. In particular, developed countries are the wealthiest countries the world has ever seen and are, by any reasonable standard, robustly capable of ensuring a satisfactory standard of living for their inhabitants, so long as there is the political will to do so. Moreover, their wealth, and in some cases sheer market size, give them the ability to decisively tilt the economic playing field away from some countries and towards those most dependent upon new economic opportunities. Given their ability both to decisively change the international economic outlook for trading partners and to absorb the costs involved in doing so, combined with the urgency of LDCs’ own needs, developed states are the obvious candidates to bear the burdens involved in providing LDCs with a more favourable profile of economic opportunities.

This is where most discussions on distributive justice would leave things, with developed states owing reasonably demanding duties to the worst-off states. But if we are assigning remedial duties to states on the basis of LDCs’ dependence, combined with other states’ ability to absorb costs and to tilt economic conditions towards LDCs, this does not pick out developed countries exclusively. Certainly, developed states will have the most demanding duties, but better-off developing countries, as well as the very largest ones, are not off the moral hook. It is not unreasonable that better-off developing countries be required to absorb some limited costs for the sake of LDCs, on precisely the same basis (though proportionately attenuated) that developed countries must (see Section II.A). They may, then, have a duty to apply a lower LDC quota to themselves. At the very least, they owe LDCs a sizeable reduction of the tariff barriers they currently have in place.31

Relatedly, if we are assigning duties to states partly on the basis of their centrality to trading partners’ development opportunities, larger developing countries—most notably China, but to lesser extents countries like India and Brazil—will bear more demanding duties than is ordinarily thought, even if they themselves are not very wealthy. (Again, this follows from what was said in Section II.A.) To see this, first note that, while LDCs can be said to be dependent upon trading opportunities simpliciter, this dependence can be further broken down into differential degrees of dependence upon particular states. Many LDCs are more significantly affected by the trade policies adopted by large developing countries like China, India, Brazil, and Indonesia than by those of a small rich state like Switzerland. LDCs’ export prospects are brighter, and so their citizens’ broader development opportunities are greater, when these large developing states adopt LDC-friendly policies. A state’s ability to influence international economic outcomes through its policy decisions, in other words, entails that it bears an additional suite of responsibilities with respect to how it exercises this ability. Given that their per capita wealth is not particularly high, citizens of such states, especially the worse off among them, could reasonably protest if their government made the cost of living markedly higher through any sort of costly special treatment of LDCs. But even a very modest commitment by larger developing countries to increase the proportion of imports coming from LDCs would make a significant difference to LDCs’ economic outlook.

It might be asked why developing countries must bear any of the burden of facilitating LDCs’ development; developed countries, the objection might go, could simply adopt, say, a 10 or 15 per cent LDC quota instead of a 5 per cent one, absolving developing countries of their responsibility. Two points are worth making here. Note, first, that there is a limit to the amount of goods that developed countries could reasonably expect to import as part of an LDC quota: outside natural resources, a great deal of our trade by value is in goods, like cars and high-end electronics, requiring technologies it is not plausible to expect LDCs to master in the short to medium term. Second, and more pertinently, whatever commitments developed countries make to LDCs, this leaves untouched the question of how developing countries are to treat the LDCs with which they trade. It is certainly not obvious that, just because developed countries give generous terms to LDCs, the developing countries upon which LDCs also depend would be thereby absolved from bearing moral responsibilities themselves for trade justice. Thinking along such lines repeats the moral mistake of treating developing states merely as moral patients, rather than as full moral agents. The relevant moral considerations which speak in favour of adopting an LDC quota ought to carry weight within each state’s own domestic deliberations over what trade policies they should enact. Developing countries are not absolved from responding to such moral considerations simply because there are other states that are better off than themselves.

The argument in the previous section concluded that developed states, as well as the wealthiest and the largest developing states, should effectively give a leg-up to LDCs. This leg-up would come at the expense of developing countries; given this, our proposal is hardly a clean moral solution. If we were capable of making and remaking the international order at will, we should want to create a world where an LDC quota would not be necessary. But, the world we live in and must make the best of is characterized not only by certain economic laws (such as external economies of scale), but also by inherited contingent facts about the state system, and the global distribution of economic power. In this world, we believe implementing an LDC quota is unambiguously justified to the extent that the cost of not implementing it is far worse: the continued marginalization and immiseration of LDCs. So, even if it is not a policy which should form a permanent feature of any fully just international trade regime, in a non-ideal world such as ours, the LDC quota helps us escape from a morally suboptimal equilibrium.32

Yet there are further issues to resolve. First, that LDCs are entitled to this sort of favourable treatment is not as clear-cut as the above discussion suggests; we need to explain why being concerned with global poverty speaks in favour of helping LDC states and their constituent citizens, rather than helping the more numerous global poor who live in developing countries. Call this the numbers problem.33 Second, we need to defend not just the priority of aiding LDCs, but the very permissibility of it; a world where LDCs have a leg-up which helps them outcompete developing countries may in some sense be morally preferable to one where they don’t, but that doesn’t necessarily entail that trading states are entitled to give them this leg-up. Call this the permissibility problem.

In this article, we have made the case for clearly distinguishing LDCs from developing countries in the international justice literature in general, and the trade justice literature more specifically. Taking proper account of the condition of LDCs within our theories of trade justice requires us to depart from the common framings of the problem of trade justice, in order to better capture the heterogeneity of trading states’ needs, capabilities, and policy options. To illustrate the value of paying more attention to such matters, we put forward a proposal, the ‘LDC quota’, which would allow states to discharge their demanding duties to LDCs in a way which promises to generate real opportunities for LDCs’ economic development, albeit at the relative expense of developing countries. While there is something morally tragic about having to adjudicate in this fashion between the conflicting interests of the worst off and the still very badly off, countries are justified in setting back the interests of developing states if this is necessary for facilitating the development of LDCs.