Coercive Trade Relations

In our consideration of lumber exports we assume that the lumber cannot be used to increase local health because all associated final outputs are at their target quantities. In the real world, this is not necessarily the case.

For example, we could have been compelled to export the lumber prematurely because of political, commercial, or other pressures. Many poor countries are forced by coercive trade relations to export food crops well before their citizens have consumed the target quantities of these final outputs. Exporting under such conditions can significantly decrease the local region's well-being.

A particularly striking example of this situation is depicted in Hubert Sauper's documentary, "Darwin's Nightmare." The film shows how Nile perch are harvested by Tanzanians from Lake Victoria, cut into fillets, and then flown to Europe for consumption by the rich.1

The Tanzanians themselves get little in return except meager wages and fish bones. It is clear that the commercial relations driving this export are deeply exploitative, and therefore ignore the health benefits that the Tanzanians could gain from consuming some of the fish themselves.

Another poignant example of unequal "trade" relations is provided by Adam Hochschild in King Leopold's Ghost, a disturbing examination of Belgian colonial history in Africa. Part of the story revolves around Edmund Morel, an employee of a Liverpool-based shipping company who ended up spearheading an effective anti-slavery campaign. Hochschild writes:

Although the officials he works with have been handling this shipping traffic for years without a second thought, Morel begins to notice things that unsettle him. At the docks of the big port of Antwerp he sees his company's ships arriving filled to the hatch covers with valuable cargoes of rubber and ivory. But when they cast off their hawsers to steam back to the Congo, while military bands play on the pier and eager young men in uniform line the ships' rails, what they carry is mostly army officers, firearms, and ammunition. There is no trade going on here. Little or nothing is being exchanged for the rubber and ivory. As Morel watches these riches streaming to Europe with almost no goods being sent to Africa to pay for them, he realizes that there can be only one explanation for their source: slave labor.2

In cases such as this, the sacrifices associated with the export must be reconsidered. These no longer include just the input cost incurred in local production, but also the gains that have been forgone by not consuming the output locally. Both of these components are shown in the following figure.

Sacrifices in coercive trade
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If the local region exports an output that is being consumed at less than its target quantity, it sacrifices not only the input cost from production, but also the gains from forgone consumption. "EV" and "IC" indicate effectual value and input cost respectively.

The input cost incurred in producing the export, including the cost associated with its transportation to the remote region, is represented by the line marked ICX.

At any quantity, such as Q, the local loss from this production is the area under the ICX line. Input cost always accompanies the production of an export. The additional loss now being considered is depicted by the triangle at the top.

The gain that could have been achieved from local consumption is the difference between local effectual value (EVL) and local input cost.

(To avoid cluttering the diagram this line is not shown; it would be below ICX because local production involves lower transportation costs than exports. As an approximation, therefore, this second loss is the shaded triangle.)

The net gains from such trade are the effectual value of the import minus this total export loss. If this math were done for the Nile perch and a rational decision made, it is likely that much of the fish would remain in Tanzania for local consumption rather than the entire harvest being flown to Paris and Berlin for the dining pleasures of the affluent.

This consideration also applies to intermediate outputs like lumber. ENL's treatment of this subject assumes that all outputs using lumber are at their target quantities. If this is not true — if lumber is being exported when it could be used to increase local health — then this sacrificed health gain must be included in the net gains calculation and factored into allocation decisions.

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