|Trade, globalisation and the fight against poverty
“If Africa, East Asia, South Asia, and Latin America were each to increase their share of world exports by one per cent, the resulting gains in income could lift 128 million people out of poverty.”
With this startling pronouncement, Oxfam introduces its new report on trade, globalisation and poverty, entitled Rigged Rules and Double Standards, promising its determination not only to present a powerful case for change but to work to make change a reality
The report, which has a Foreword by the respected global development economist and Nobel Prize winner, Amartya Sen, is written and presented in an accessible manner to share well-researched analysis of what it calls “the paradox at the heart of international trade” that is a source of unprecedented wealth and mass poverty. It makes the case, quite eloquently, that world trade has the potential to be a “powerful motor” for poverty reduction and economic growth but says this potential is being lost because “the rules that govern it are rigged in favour of the rich”.
The idea that globalisation is something new “is a conceit of the late twentieth century”, says the report, when in fact economic globalisation has been going on for more than 500 years. However, the saying that ‘we sink or swim together’ has taken on a new meaning in which the future direction of change will have profound implications for poverty reduction.
The report studies trade liberalisation, transnational companies (investment, employment and marketing), and international trade rules as an obstacle to development.
A substantial section is devoted to the heavy dependence on primary commodities by many of the world’s poorest countries, more than 50 of whom depend on three or fewer commodities for more than half of their export earnings. “National economies of these countries and the household economies of millions of poor people have been devastated by a protracted decline in prices.”
More than half a century after the economist John Maynard Keynes argued for a new international institution to address the problems faced by exporters of primary commodities, the low and unstable prices for commodities are among the most powerful influences that prevent trade from working for the poor, says the report.
Keynes argued in 1944 that, “Proper economic prices should be fixed not at the lowest possible level, but at a level sufficient to provide producers with proper nutritional and other standards.”
“The price of coffee is destroying this community.”
The report cites coffee as one of the commodities worst affected, saying prices have fallen by 70 percent since 1997, “costing developing country exporters some $8bn in lost foreign exchange earnings”, losses which have outweighed the benefits of aid and debt relief.
Research among coffee farmers in Tanzania, southern Mexico, and Haiti found families “reducing their general consumption, taking children out of school, and facing extreme difficulties in meeting health costs. Family and community structures were coming under strain, as women were forced to increase their off-farm labour, and men to migrate in search of work.”
A coffee farmer in the Kilimanjaro region of Tanzania said, “The price of coffee is destroying this community.”
The general problem, says the report, is one of structural over-supply, in which the output across a wide range of products is consistently exceeding demand, leading to excessive stocks and periodic price collapse.
The report recommends a new institution to oversee global commodity markets, a new system of commodity agreements, and the adoption by transnational companies of socially responsible purchasing operations.
Specific recommendations are made with regard to trade liberalisation and to transnational companies, and a key section of the report deals with market access and agriculture, saying that northern governments reserve their most restrictive trade barriers for the world’s poorest people.
The Oxfam Double Standards Index
The double standards are most apparent in agriculture, says the report, where total subsidies to domestic farmers in industrialised countries amount to more than $1bn a day, benefiting the wealthiest farmers, causing environmental damage and generating over-production. The surpluses, financed by taxpayers and consumers, are further subsidized before dumping on world markets.
Describing the European Union and the United States as “agricultural superpowers”, Oxfam says they are exporting agricultural produce at prices more than one-third lower than the cost of production, driving down prices for exports from developing countries.
“Some of the world’s poorest farmers are competing against its richest treasuries.”
The Oxfam Double Standards Index is an analysis of free trade rhetoric versus protectionist policies and gives 10 indicators of trade barriers facing developing countries in the European Union, United States, Canada and Japan.
The report calls for a general reduction in tariff peaks, accelerated phase-out of the Multi-Fibre Arrangement to allow greater market access for textiles, a comprehensive ban on export subsidies, duty-free and quota-free access for low-income countries, and recognition of the right of developing countries to protect their agricultural systems for food security purposes.
Saying that international trade is badly managed at global and national levels, the report advocates for a new world trade order, stressing that “continuing on the current path is not an option”. This new order would be grounded in “new approaches to rights and responsibilities, and in a commitment to make globalisation work for the poor.”
Among the recommendations for reforms to trade governance are:
The Oxfam report provides a thorough, critical analysis of the issues and answers, and says this is the opening shot in a campaign to Make Trade Fair, that it hopes will build the kind of momentum that brought an end to apartheid, banned the use of landmines, and made real progress in reducing Third World debt.
“In their rhetoric, governments of rich countries constantly stress their commitment to poverty reduction. Yet the same governments use their trade policy to conduct what amounts to robbery against the world’s poor. When developing countries export to rich-country markets, they face tariff barriers that are four times higher than those encountered by rich countries. Those barriers cost them $100bn a year – twice as much as they receive in aide.
“Various polite formulations can be found to describe the behaviour of rich-country governments. But the harsh reality is that their policies are inflicting enormous suffering on the world’s poor. When rich countries lock poor people out of their markets, they close the door to an escape route from poverty.” (SARDC -- SADC Today)
Rigged Rules and Double Standards: trade, globalisation, and the fight against poverty. Published by Oxfam in 2002. 272 pages. Oxfam is a confederation of 12 development agencies that work in 120 countries. The report is available from all of them. Contact email@example.com or visit www.maketradefair.com
SARDC has been reporting on SADC from a regional perspective since 1990. SANF can be reproduced in print or broadcast with credit to SARDC and the author.
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