The experience of developing countries exposes the gap between free
trade rhetoric of the United States and European Union and the harsh
realities of the rigged rules and double standards that dominate American
and European international trade policies and practices.
The potential of increased international trade to reduce poverty in the
developing world is being lost because the rules that govern that trade
are rigged in favour of richer countries.
Australian steel workers and farmers are well aware of the double
standards of the United States and European Union who, while trumpeting
free trade, are not willing to practice it themselves. Tariffs of up to 30
per cent on imported steel announced earlier this year by the United
States could cost jobs in Australia’s $450 million a year steel export
Australia's agricultural exports have long been undercut in
international markets by heavily subsidised competing products from Europe
and the US, a practice that has little to do with free trade but is
allowed under current WTO rules. The United States Congress’ recent
approval of $170 billion in subsidies for American farmers will make the
playing field even more skewed in their favour.
But it is not only Australians that are hurt by such unfair practices.
In developing countries some two billion people depend on agriculture, and
many of them are also being undercut in their domestic markets by unfairly
subsidised agricultural imports from the US and EU. For example the
dumping of highly subsidised surplus powdered milk from Europe onto the
Jamaican economy has all but ruined the local dairy industry. The US has
done the same by dumping its subsidized rice on Haiti, forcing thousands
of poor rice farmers off the land. In Haiti’s rice-growing area, child
malnutrition is now among the most severe in the country.
To highlight the injustices in the present trade regime and its lost
potential to reduce poverty, Oxfam Community Aid Abroad released a report
earlier this year entitled Rigged
Rules and Double Standards: Trade, Globalisation and the Fight Against
Poverty. At the same time it launched a three-year global trade
campaign, with the theme Make
Trade Fair, to call for changes.
If the full potential of trade to assist economic development and
reduce poverty is to be realised, poor countries must have access to
markets in rich countries. But richer countries reserve their most
restrictive trade barriers for the world’s poorest people, and the
labour intensive agricultural and manufactured goods they produce. Those
barriers cost poorer countries some $100 billion a year – twice as much
as they receive in aid. When rich nations lock poorer countries out of
their markets in this way, they close the door to an escape route from
While European and North American countries keep their markets closed,
poor countries have been pressured by the International Monetary Fund and
World Bank to open their markets at breakneck speed, often with damaging
consequences for poor communities.
East Timor’s Foreign Minister, Jose Ramos Horta, has said that while
aid from countries like Australia was important and appreciated, what the
new nation really needed was access to markets and fairer prices for its
exports. The country’s largest export is coffee beans. But world prices
for coffee have fallen by 70 percent since 1997, costing developing
country exporters some US$8 billion in lost foreign-exchange earnings. In
2000-2001, developing countries sold nearly 20 percent more coffee than in
1997-1998, but received 45 percent less in export earnings due to falling
If countries like East Timor try to process their coffee beans or other
raw commodities, thus obtaining a higher price, they face prohibitively
high import taxes at rich world ports. In the European Union and Japan for
example, fully-processed food products are subject to import duties twice
as high as products in the first stage of processing. In Canada, taxes on
processed food are as much as 13 times higher than those on unprocessed
products. Richer countries, it seems, are determined to keep the more
lucrative processing for themselves.
There is no doubt that increased international trade has the potential
to be a powerful motor for the reduction of poverty. But while the wealth
generated by trade has been enormous, there are still 1.1 billion people
struggling to survive on less than $1 a day – the same number as in the
mid-1980s. The divide between rich and poor is at an all time high and
getting worse. In the last decade the poorest five per cent of the world’s
population lost almost a quarter of their real income while the top five
per cent gained 12 per cent.
If globalised trade is to be effective in significantly reducing
poverty there has to be radical reform of the international trading
- The cycle of subsidised agricultural over-production and export
dumping by the US and EU that undermines the livelihoods of peasant
farmers, has to be ended.
- Market access for poor countries’ exports has to be significantly
improved and escalating tariffs on processed goods abolished.
- IMF-World Bank programs must not have conditions attached that force
poor countries to open their markets regardless of the impact on poor
- A new international institution needs to be created to raise
commodity prices to levels consistent with a reasonable standard of
living for producers.
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