MAKE POVERTY HISTORY - 2005

Why trade matters

Along with aid and debt relief, changing the way international trade works is one of the most important things that we can do to work towards making poverty history.

International trade has the potential to reduce poverty substantially. It has been estimated that if Africa, South and East Asia and Latin America were able to increase their share of world exports by 1% each, the resulting gains could lift between 43 million and 128 million people out of poverty (4 to 12% of all those currently in poverty). This could generate an increase in income of US$30 per head per year (7%) in the poor countries, modest indeed by our standards, but much more than current aid provides and crucial to poverty alleviation.

However, international trade will only significantly reduce poverty if it is fair. What is required is an international trading system that is equitable, provides space for development, protects workers’ rights and protects the environment.

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Global trade at present - hypocrisy

International trade is governed by a series of international agreements. Some are the product of multilateral negotiations, which have taken place within the World Trade Organisation; others are agreements between individual countries (such as the recent New Zealand/Thailand agreement), and others are the result of negotiations between several countries (like the NAFTA agreement between Canada, the USA and Mexico). Trade negotiations reflect and reinforce the power imbalances between countries. The agreements have been shaped by the self-interest of the world’s wealthiest countries, while the needs of developing countries have been undermined at every turn.

The result of these unfairly negotiated agreements is an international trading system that is fundamentally hypocritical: a system in which the world’s poorest countries have been forced to open their markets to international trade while, at the same time, most wealthy countries have continued to protect their farmers from similar competition. Many of the world’s wealthy countries also subsidise their own producers, who then dump artificially cheap produce on to world markets, undermining the ability of farmers in developing countries to compete. When it comes to industry, rich countries block imports of goods that poor countries tend to produce more cheaply (like textiles) while at the same time demanding that poor countries do nothing “protectionist” to prevent de-industrialisation, or to promote the growth of new industries, in sectors where poor countries are not yet globally competitive.

The economic cost of this hypocrisy is huge: trade barriers erected by wealthy countries are estimated to cost poor countries US$100 billion a year – twice as much as they receive in aid. The human cost of the same trade hypocrisy is tragic: millions of farmers and workers in the developing world consigned to poverty either because their produce is unable to be exported to the developed world due to trade barriers or because produce which they might sell domestically has to compete with subsidised produce from the world’s wealthy countries.

The rich world’s agenda to make the poor countries open their markets as much as (in practice more than) they do themselves is based on the economic interests of the rich world and its transnational corporations, as well as discredited over-simplistic economic models, rather than historical evidence. The models’ advocates profess to believe that governments should play a minimal role in managing economies, and should not take steps to protect local industries. Such beliefs ignore the history of development. In all countries that are currently prosperous (including the East Asian nations) economic development has resulted from active government intervention in the economy. Governments in developing countries must retain the same flexibility to support and protect domestic industries that today’s developed nations had. They must also retain the ability to supply essential goods and services to their people without restriction by international trade rules.

The reference to services is important. Skewed trade rules cover far more than goods. For example, clauses covering services, intellectual property and opening up investment in poor countries to rich world competition can mean reduced access to core needs like water and medicines, while they pose threats to indigenous people’s control over their lands and knowledge.

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What are they doing?

Between them, they're forcing poor countries to open up their markets to foreign imports and businesses, and sell off public services like electricity - even when this isn't in their interest. They're also banning poor countries from supporting vulnerable farmers and industries, while wealthy nations continue to support their own.

All this is being done in the name of 'liberalisation' - and 'free trade' or leaving things to market forces.

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Protecting the poor and the environment

The current system of international trade also pays scant regard to the needs of the environment and the rights of workers. Too often international trade negotiations and rules have undermined environmental and labour standards, which are mislabelled as barriers to trade. This ignores the fact that economies fail to function when the environments that they are based upon have been destroyed. It also ignores the fact that unless workers’ rights are protected, there is little chance that the benefits of trade will ‘trickle down’ to workers and their families. Women and children are always over-represented in poverty statistics.

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