Are you a Priority Change Denier?

At the present moment 925 million are hungry and more than a billion live on less than $1.25 per day. Poor nutrition causes 45% of all deaths of children under five, or 3.1 million each year.

In terms of deaths this is equivalent to a Holocaust every two years, and that only factors in fatalities of under-fives. Countless millions more perish each year due to their impoverished states.

Despite this hideous stain on humanity, the menace of poverty and aid dependency has been successfully overcome to a large extent in countries such as China, where 600 million have cast off the shackles of poverty through trade, not aid.

No nation has ever become sustainable and wealthy through aid, while many have prospered from free trade where international resources can be allocated most efficiently to effectively utilise each region’s comparative advantages. While global trade barriers have come down since the Second World War, agricultural trade remains the most protected through tariffs, quotas, subsidies and regulations.

This is especially significant for developing nations as the majority of their workforce is employed in agriculture, while this industry constitutes a much higher proportion of developing countries’ GDP when compared to the advanced economies.

In 2011 OECD countries spent US$252 billion on support for their agricultural sectors. European cows are subsidised at the rate of $2 per day, meaning they in effect receive more than over a billion humans.

Health and safety regulations are also prone to abuse, for example Dutch tulips are effectively prohibited from entering Japan due to requirements that imports be sliced down the middle for inspection. American consumers pay double the world price for sugar, while Australian and EU residents pay significantly more for bananas due to various trade bans and restrictions.

Regulations without valid scientific foundation are common and can have devastating consequences. For example, a World Bank report found that further European Union regulations on aflatoxin (a carcinogenic fungus) would see food exports by some African nations plummet by 64%, but only reduce the number of deaths by 1.4 per billion annually.

Australiahas some of the world’s lowest agricultural subsidies and formal barriers to trade, but has much ‘hidden’ protectionism through regulations which have been found on many occasions to be scientifically invalid, such as for restrictions on Canadian salmon and New Zealand apples. When there is no genuine health risk, these regulations simply result in higher prices for consumers.

Pleasingly, Australia, the EU, US, Japan and others have instituted schemes that provide tariff and quota concessions for trade with the world’s Least Developed Countries (LDCs). This is particularly important for further alleviation of poverty as LDCs typically have a higher proportion of their population in absolute poverty, meaning that further gains must be made in these nations to achieve poverty targets.

 In an ideal world, trade barriers would be removed by all nations on all trade. A 2003 World Trade Organisation report estimated that a ‘good’ outcome to the agriculture focussed Doha round of negotiations that have since stalled would have provided between $290 - $520 billion in benefits by 2015 for both developed and developing countries while bringing 144 million more out of poverty.

However, in the real world powerful political pressure groups mean that significant, sudden cessation of agricultural protectionism looks unlikely in the short term. Farmers and agricultural companies opposed to a removal of their protections hold significant political influence in a variety of nations. That said, there should be consistent pressure on protected economies to embrace the benefits of free trade.

While a cynic might argue that these concessions have been provided only because LDCs make up only 0.5% of world trade and therefore impact very little on domestic industry, these programs have delivered tangible benefits to their beneficiaries. An international agreement on removing all trade restrictions on LDCs would be particularly helpful in providing sustainable export markets for LDCs.

The World Bank’s central goal is to alleviate poverty, and its research finds that funding of agricultural development typically delivers 2-4 times the poverty alleviation of other projects. LDCs typically lack capital, and where this can be provided have the ability to create viable international agricultural industries that can comply with even strict health regulations. In the late 1990s new EU regulations effectively shut down the lucrative Bangladeshi shrimp industry, but following capital injections to upgrade facilities exports eventually returned to prior levels.

A redirection of World Bank funding towards viable agricultural projects would provide the best value for money in terms of alleviating poverty

This brings us to the question of priorities. No serious economist would suggest that the current levels of protectionism advance the interests of anyone but the direct beneficiaries (usually large scale farmers in developed countries). Despite this, nations impose tariffs that raise the price of food for consumers and increase poverty. Loud demands from lobbyists are prioritised over the interests of consumers, with subsidies raising taxes, poverty and inefficient allocation of resources.

Countless UN and pressure group conferences have been held on an enormous variety of other topics, such as global warming, but few on the far more immediate and larger burden of extreme poverty.

 The damage caused by agricultural protectionism is as clear as the solutions that actually make the average person better off. We should start with the politically plausible step of an international agreement guaranteeing quota and duty free trade for LDCs while continuing to campaign for freer trade more broadly.

There is no reason why the radical anti-development left should hold a virtual monopoly on protests and public pressure campaigns. It’s high time the silent majority sound their voices and demand trade liberalisation as an economic and moral necessity.

The facts are clear: we just need a change in priorities. Will you advance the cause of poverty alleviation through support for trade liberalisation or are you a priority change denier?