WORLD ECONOMY: Empty promises don't feed poor children

Issue 

BY SEAN HEALY

A funny thing happened on the way to the third United Nations Conference on Least Developed Countries in Brussels: the representatives of the rich nations suddenly discovered that their restrictions on market access for poor countries' goods are stifling growth in the Third World and promised to do better next time.

In the two weeks before the conference began on May 14, World Trade Organisation (WTO) director-general Mike Moore, European Union trade commissioner Pascal Lamy and even the pointy-headed US trade representative Robert Zoellick, all decried the miserable access that the 48 poorest countries on Earth have to the developed capitalist markets of the First World.

The World Bank released a specially commissioned report proving the point and a spokesperson said its president, James Wolfensohn, had the view "that debt relief without market access is a sham".

Opening the conference, UN secretary-general Kofi Annan said that the current set-up of trade, finance and investment had caught the 48 least developed countries in a "vicious circle" and criticised First World inaction on lowering tariffs for LDC imports.

In Washington, DC, Australian Treasurer Peter Costello said that restricted market access "continues to limit significantly the ability of developing countries to grow further and reduce poverty".

And in Paris, the annual ministerial meeting of the club of rich countries, the Organisation for Economic Cooperation and Development (OECD), felt so strongly about the issue that it included a call for greater market access for LDCs in its final statement.

But that's not the joke.

The joke is that these people thought that they were fooling someone, that no-one would notice that, tacked on to their statements oozing sympathy for the unfairness of the global trade system, was the oh-so-subtle use of leverage ("And the most effective way to achieve these openings is by launching a new round of WTO trade talks"), that no-one would twig that their promises are as empty as their souls.

When rich country representatives stump for the WTO's next ministerial, to be held in the Persian Gulf emirate of Qatar in November, to formally launch a new round of comprehensive trade talks, they proclaim the necessity for "free trade" for liberating all countries rich and poor from any restrictions on what, how and when to trade and for allowing them to go about their business unimpeded, freely and equally.

That would be bad enough: the equivalent of throwing a goldfish into a tank of sharks and telling it to compete.

But it's worse than that. While enforcing market-opening measures on the weak, WTO agreements allow the strong to do pretty much whatever they like. "Free trade" is only the catchcry when it advances the interests of the rich countries and the giant corporations; when it doesn't, the WTO legalises, even entrenches, First World protectionism.

Rigged

A report by the British charity Oxfam, released immediately before the UN's LDC conference, lifts the lid on the scale of this WTO-sanctioned protectionism. Entitled Rigged Trade and Not Much Aid, the study shows how "rich countries help to keep the least developed countries poor".

Many LDCs have undergone extraordinarily rapid trade liberalisation in the last decade, lowering import tariffs and scrapping non-tariff barriers, both as a result of negotiations in the WTO and as a result of pressure from the World Bank and International Monetary Fund.

Cambodia, for example, is halving its average tariff, from 30% to 15% in the next year, while Haiti now has 800 product lines which have no tariffs on them and has scrapped all import quotas.

In contrast, through various tricks, all of which are perfectly legal under the WTO's Agreement on Agriculture, both the European Union and the United States spend more on agricultural subsidies today than they were spending at the start of the Uruguay Round of world trade talks in 1986.

The OECD countries currently spend US$1 billion each day on agricultural subsidies. Over a year, the spending is about the same as the combined gross domestic products of the LDCs.

Most of this assistance goes to the biggest companies and farms: in the US, 61% of the US$22 billion a year given out in direct payments goes to 10% of farmers, according to the Environmental Working Group.

The result, the report notes, is that "some of the world's most vulnerable rural producers [are] competing against the treasuries of Europe and North America, with heavily subsidised imports driving down local prices and destroying markets".

In 1995, under pressure from the US, Haiti reduced import tariffs on rice from over 50% to less than 3%. This prompted an immediate, and entirely predictable, surge of subsidised US rice imports. Unable to compete, local farmers were driven out of business and, from a position of near self-sufficiency in 1990, Haiti's imports now account for more than half its national consumption.

Some First World policies even deliberately discriminate against imports from the LDCs. The exports of the least developed countries are almost three times as likely as those of the major trading powers to face "tariff peaks" of more than 15%, for instance.

In some product lines, "tariff escalation" discourages countries from exporting goods further up the value chain. Fully processed manufactured food products face tariffs twice as high as products in the first stage of processing in both the EU and Japan, rising to 12 times as high in Canada.

The study makes no estimate of the total dollar figure impact of First World protectionism on Third World economies, although Oxfam has previously put it at US$700 billion a year.

But whatever the monetary cost, the social cost — in lost food security, in even more extreme rural poverty, in worsened child malnutrition, in people forced into the slums of the cities to look for work — is far greater.

Fraudulent

The promise made to LDCs at the UN conference was that First World countries would expand existing Generalised Systems of Preferences and allow LDC exports to enter duty- and quota-free. The promise is fraudulent. As Oxfam's report notes, "Most [such schemes] have been carefully designed to maximise the public relations benefits for industrialised-country governments, and to minimise the real trade benefits for the LDCs".

The Africa Growth and Opportunity Act, passed by the US Congress in 2000, which promises unrestricted access to US markets for all sub-Saharan exports, offers those countries nothing they don't already have.

Under the US-Africa-Caribbean trade bill, African exporters of apparel are required to use yarn and fabrics imported from the US to benefit from duty-free access.

The Japanese offer of open market access focussed on industrial goods not exported by LDCs and explicitly excluded those agricultural products in which poor countries might have a competitive edge.

As for the poster-child of such schemes, the EU's "Everything but Arms" policy, such are the loopholes and exceptions in it that critics have dubbed it "Everything but Farms".

The plan, first put forward by the European Commission in October, would have granted duty- and quota-free access to European markets for all LDC exports except armaments.

Financially, however, the benefits for the LDCs would have been meagre, as they already have such access through various preference arrangements and they have limited capacity to greatly increase production to meet new market openings.

According to one World Bank estimate, the dollar figure impact of "Everything but Arms" would have been in the region of US$185 million a year, a 1% increase in LDC export earnings. Even that benefit, however, has now been done away with, thanks to the European Commission buckling under pressure from powerful, cashed-up farm lobby groups.

Howling that Europe would be flooded by cheap sugar, the British sugar beet industry was able to force back liberalisation of the sugar and rice markets, the two products of most interest to LDC exporters, to 2008 at the earliest.

The EC also put in place a system to prevent "serious disturbances to EU markets", meaning, to stop LDCs actually increasing their market share.

If this is the carrot that is supposed to entice poor country governments into a new round of trade talks, it's a pretty wilted and bedraggled carrot. And the least developed countries might be poor, but they're not bunnies.

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