Today free trade grown intensively in the world. This means that protectionism is slowly diminishing. Free trade is a system of trade policy that allows traders to trade without barriers and with less government interference. Protectionism is attempts to safeguard ones economy that involve the implementation of economic tools such as tariffs, import quotas, subsidies, and non tariff barriers.
Free trade and protectionism are based on system called LIEO. LIEO stands for Liberal International Economic Order. LIEO is an economic order embodying traditional liberal preference for free and open trade as a means of promoting economic efficiency and prosperity. LIEO emerge after world war two by the US. Interpreting the great depression occurred in 1930 caused by the economic nationalism, US, the militarily and economically powerful country, suggests that liberal international trade is the way to prevent another crisis. Thus, LIEO aim international trade less government intervention. There are several organizations and institutions made to support the free trade dispersion: World Bank, International Monetary Fund (IMF), General Agreements on Tariffs and Trade (GATT), and World Trade Organization (WTO). All of these organizations, including GATT and WTO, are enforcing international rules, promoting free and open trade, and reducing obstacles of international trade. That is why GATT and WTO serve the goal of LIEO to promote free trade.
Another organization is International Monetary Fund. International Monetary Fund is an international organization that helps countries deal with balance of payment issues. IMF works on developing countries on supporting their development. It offers short term assistance for countries to pay their due loans. In order to get assistance from IMF, a country has to follow some ways that obliged by the IMF. These requirements are called structural adjustment programs. Structural adjustment programs (SAP)’s main point is for developing countries to open their economy and take part in free trade. This SAP had been criticized by people because IMF seems to generalize all countries by simply saying SAP works for every country, while apathetically admit that every country has its own characteristic and differences. But, when it turns out that this SAP is not working for all countries, IMF blamed the government for making poor decisions. Another point that is criticized is the short-term assistance. People question country’s ability to pay that much of money in such a short time while they remain in crisis. Therefore, people seen IMF as controversial and does not help developing countries out of their problem but in fact making them suffer even more.
Another bad effect from country’s eco-social point of view is that structural adjustment program put less emphasis on education, health care, and social welfare program. The structure abandons some critical needs of society. Actually education, health and welfare can help a country to develop in order to guarantee continuity of its people quality. Not only for social reasons that country needed those things, but also for the improvement of their future economics. Today, there are more unemployment which is caused by pressure brought by SAP to producers. The Structural Adjustment Program’s free trade had pushed developing nations to sell their labor as cheap as possible to generate cheaper products. A lot of employers are fired because of the costs race, race to the bottom. These countries are being pushed by the developed countries to provide them delightful price for their products. In the end, those countries society becomes the victim and the state’s economy become scrambled.
In the movie Life and Debt, people concerns about IMF action toward Jamaica have been criticizing the effect of structural adjustment problem that is so detrimental and disadvantageous for Jamaica. IMF came to Jamaica and forced Jamaican government to restrict its spending so tightly and to open its economy for global market. The cooperation of Jamaica and IMF does not result in any betterment; on contrary it creates greater hardship. IMF forces devaluate the value of Jamaican dollar. The restriction on Jamaican government spending and imports are killing Jamaican because they keep on exporting their production and the government no longer capable of even feeding the people. IMF keep on forcing them to exports all commodities without caring the people’s wealth. Second, the IMF required Jamaica to adopt free trade and the result is an unimaginable severity. Not only that the Jamaican product lost in market competition, but the industries are closing down and societies are losing their occupations. A country like the US put 137% subsidies upon their milk product. How can a country compete towards that condition? Government is not even allowed to help farmers but government have to push farmers. They are struggling because the prices of foreign products are cheap because the government subsidized them and they cannot even survive without government subsidy. Another countries like the US which constitute most of IMF role do not buy Jamaican products and even claimed to WTO while European Union grant the Jamaican duty free banana exports. While, the Jamaican debt keeps on swelling. As a result, Jamaican has no more capital to continue their business. Life had changed for them, even worse. This country started with poverty and ended with even more tremendous poverty. This country, Jamaica, had proven that IMF’s Structural Adjustment Program might work to countries such as the US and European countries, but it does not work for most developing countries.