Make Trade Fair
The Paradox of International Trade
There is a paradox at the heart of international trade. In the globalised
world of the early twenty-first century, trade is one of the most powerful
forces linking our lives. It is also a source of unprecedented wealth.
Yet millions of the world's poorest people are being left behind. Increased
prosperity has gone hand in hand with mass poverty and the widening of
already obscene inequalities between rich and poor. World trade has the
potential to act as a powerful motor for the reduction of poverty, as
well as for economic growth, but that potential is being lost.
The problem is not that international trade is inherently opposed to the needs and interests of the poor, but that the rules that govern it are rigged in favour of the rich. The human costs of unfair trade are immense. 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. Reduced poverty would contribute to improvements in other areas, such as child health and education.
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 aid.
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.
Fundamental Reforms Needed
Lack of market access is not an isolated example of unfair trade rules,
or of the double standards of Northern governments. While rich countries
keep their markets closed, poor countries have been pressurised by the
International Monetary Fund and World Bank to open their markets at breakneck
speed, often with damaging consequences for poor communities.
The problem of low and unstable commodity prices, which consigns millions of people to poverty, has not been seriously addressed by the international community. Meanwhile, powerful transnational companies (TNCs) have been left free to engage in investment and employment practices which contribute to poverty and insecurity, unencumbered by anything other than weak voluntary guidelines.
The World Trade Organisation (WTO) is another part of the problem. Many of its rules on intellectual property, investment, and services protect the interests of rich countries and powerful TNCs, while imposing huge costs on developing countries. The WTO's bias in favour of the self-interest of rich countries and big corporations raises fundamental questions about its legitimacy.
Reform of world trade is only one of the requirements for ending the deep social injustices that pervade globalisation. Action is also needed to extend opportunity, and reduce inequalities in health, education, and income distribution. However, world trade rules are a key part of the poverty problem. Fundamental reforms are needed to make them part of the solution.
The Oxfam Trade Campaign
A new report from from Oxfam analyses the rules that govern
world trade. The campaign aims to change those rules in order to unleash
the potential of trade to reduce poverty. It is motivated by a conviction
that it is time to end double standards and to make trade fair. The following
are among Oxfam's main policy goals:
- Improving market access for poor countries and ending the cycle of subsidised agricultural over-production and export dumping by rich countries.
- Ending the use of conditions attached to IMF-World Bank programmes which force poor countries to open their markets regardless of the impact on poor people.
- Creating a new international commodities institution to promote diversification and end over-supply, in order to raise prices to levels consistent with a reasonable standard of living for producers, and changing corporate practices so that companies pay fair prices.
- Establishing new intellectual-property rules to ensure that poor countries are able to afford new technologies and basic medicines, and that farmers are able to save, exchange, and sell seeds.
- Prohibition rules that force goverments to liberalise or privatise basic services that are vital for poverty reduction.
- Enhancing the quality of private-sector investment and employment standards.
- Democratising the WTO to give poor countries a stronger voice.
- Changing national policies on health, education, and governance so that poor people can develop their capabilities, realise their potential, and participate in markets on more equitable terms.
Why campaign on trade, and why now?
There are three answers to this question. The first is that the existing
trade system is indefensible. No civilised community should be willing
to tolerate the extremes of prosperity and poverty that are generated
by current trade practices. And none of us should be willing to accept
the abuse of power, injustice, and indifference to suffering that sustains
those practices.
The second reason for action can be summarised in a simple phrase: 'enlightened
self-interest'. What is happening today is not just indefensible, it is
also unsustainable. Large parts of the developing world are becoming enclaves
of despair, increasingly marginalised and cut off from the rising wealth
generated through trade.
Ultimately, shared prosperity cannot be built on such foundations. Like
the economic forces that drive globalisation, the anger, despair, and
social tensions that accompany vast inequalities in wealth and opportunity
will not respect national borders. The instability that they will generate
threatens us all. In today's globalised world, our lives are more inextricably
linked than ever before, and so is our prosperity. As a global community,
we sink or swim together. No country, however strong or wealthy, is an
island.
The third motivation for Oxfam's trade campaign is the conviction that
change is possible. The international trading system is not a force of
nature. It is a system of exchange, managed by rules and institutions
that reflect political choices. Those choices can prioritise the interests
of the weak and vulnerable, or they can prioritise the interests of the
wealthy and powerful.
Reform and Action Needed
Trade is reinforcing global poverty and inequality because the international
trading system is managed to produce these outcomes. The rules of the
game reflect the power of vested interests. Concerted public campaigning
can change this. As demonstrated by the international campaign to cancel
the debts of poor countries, public action can force the interests of
the poor on to the international agenda. And it can achieve real gains
for human development.
Ultimately, there is a clear choice to be made. We can choose to allow
unfair trade rules to continue causing poverty and distress, and face
the consequences. Or we can change the rules. We can allow globalisation
to continue working for the few, rather than the many. Or we can forge
a new model of inclusive globalisation, based on shared values and principles
of social justice. The choice is ours. And the time to choose is now.
* If Africa, East Asia, South Asia and Latin America each increased their share of world exports by just one per cent, they could lift 128 million people out of poverty.
* In Africa alone, this one per cent increase in the share of world trade would generate $70 billion - five times what the continent gets in aid.
* More than 40 per cent of the world's population live in low-income countries - yet these countries account for just three per cent of world trade.
* For every dollar given to poor countries in aid, they lose two dollars to rich countries because of unfair trade barriers against their exports.
* When exporting to rich countries, producers in poor countries pay tariffs that are four times higher than those paid by producers in other rich countries.
* Africa has lost the equivalent of 50 pence for every pound received in aid because of the falling prices it gets for its commodities.
* Coffee prices have fallen by 70 per cent since 1997, costing exporters
in poor countries $8 billion.
Rich countries spend $1 billion a day on agricultural subsidies, putting
farmers in poor countries out of business and driving down their income.
* A Ghanaian cocoa farmer only gets 1.2 per cent of the price we pay for a bar of chocolate. Between 1996 and 2000 Ghana increased cocoa production by almost a third but was paid a third less.
* About one-third of manufacturing workers in developing countries are women. They earn about 25 per cent less than their male colleagues.
* Increased patent protection will cost developing countries $40 billion each year. The new rules were designed by the transnationals that stand to reap the benefits.
For more information on this campaign go to Make Trade Fair website