Thursday, December 15, 2005

Vulnerability and sustainability, the missed challenge of the WTO development round

The current international trade system plays a major role in the injustice of the global economy. The potential positive role of international trade to contribute to development has to be acknowledged in the international economy, but trade liberalisation is not always a solution for poverty eradication. The decisions taken at the World Trade Organisation (WTO) affect the life of millions of people in poverty throughout the world. In the current global trade system, poor countries lose out twice.

Firstly, subsidised commodities from rich countries are dumped on their markets. This often leads to substantial price cuts, which are very harmful for small producers. For example, the cotton price has fallen by 25% (from $0.40 a kilo to $0.31) in the last two years only, partly because of massive US cotton subsidies. This price decrease threatens dramatically the livelihoods of 6 million people relying on small-scale cotton production in Africa.

Secondly, developing countries are asked to liberalise in a number of situations where their small producers do not have the capacity to stand up to the world market. In these cases, market opening puts local producers in danger. Frozen chicken from the EU, Brazil, Thailand and some other countries, mostly produced by multinational corporations, is exported at very low prices to African and Asian countries where it is sold at 1/3 to 1/5 of the price of local poultry. In Senegal, 70% of chicken producers have ceased their activities since the market liberalisation in 2000.

Eliminating trade-distortion resulting from Northern export and domestic subsidies and reducing tariff barriers, if it were to be achieved, would mean the removal of anti-development measures and contribute to fairer rules but this alone would not ensure a positive contribution to development enabling trade to lift millions of people out of poverty.

Trade justice to sustain development

The Doha Development Round has so far failed to reach its development goal. Today, people in poverty and subsidised farmers in rich countries are required to compete on an equal footing. They do not have the same capacities however and do not face the same economic conditions. Furthermore, rich countries do not even respect these common rules. Therefore, this so-called “non-discrimination” rule of the WTO does not create anything but new injustices. The negotiations at the WTO must take into account the different capacities in production and export and thus recognise the right to different treatment of the poorest.

Trade justice requires the freedom of all countries to choose and design their own trade policies that will promote human sustainable development. In certain cases, the positive role of an open market has to be acknowledged. However in many other situations, a pro-poor development perspective requires the right to protect vulnerable producers, small-scale farmers and particularly women, who are the main family food providers. Developing countries should have the right to promote livelihoods, rural development and food security through special and differential provisions (special products, special safeguard mechanism…) allowing them not only flexibility in the implementation of the rules but also, when appropriate, the right to use tariffs, quotas, domestic supports…

The current multilateral trade negotiations taking place at the World Trade Organisation are often described by governments – but also by many civil society organisations which have a completely different approach – as a process which aims at identifying a balance between offensive interests (looking for new economic opportunities) and defensive interests (looking to protect the existing economic interests). This view of the multilateral trade negotiations is based on the assumption that all countries would be able to and interested in maximising their potential benefit from international trade. This way of thinking however denies the fact that many developing countries have relatively low economic potential to develop or to protect. It does not cost anything to developed countries to provide quota free and duty free access to least developed countries because their trading interests are so low. But it needs to be underlined that it does not deliver anything for these least developed countries to obtain such quota and duty free access because it does not address the causes of their difficulties and their needs.

Trade justice to lift vulnerable people out of poverty

A development perspective that makes a preferential option for the poor means that economic decisions must start with a full consideration of their effects on people in poverty. For poor countries the challenge is not how to increase production, productivity or competitiveness and therefore it is not about opening or protecting a market. The challenge is how to avoid vulnerability and sustain a minimum of food security and livelihoods. Many developing countries are not aiming at maximising their trade benefits, but rather at guaranteeing the sustainability of an existing economic minimum.

If trade ministers want to achieve a development deal, they need to change their approach to the negotiations. The issues at stake should not be offensive and defensive trade interests, or about liberalisation versus market protection. It is about economic vulnerability versus sustainability. Many developing countries will gain very little from new market opportunities. The issue at stake for developing countries is not so much about how to develop production or trade. It’s about how to stabilise commodity prices, how to guarantee family incomes, how to ensure policy space to build an adequate development policy, how to sustain their supply capacity and their trading capacity.

It is not clear if all countries or regions will gain from radical agricultural trade liberalisation, as is commonly portrayed. However there is a real danger that model-based estimates can be misleadingly used to suggest this. In Thailand for instance, trade liberalisation pushing for an export-oriented rice production had devastating effects on the rural population and small-scale rice farmers although the country increased its global rice exports in the last few years. The revenues of family based farmers selling on the local market are 3 times higher than those of export-oriented farmers. Because of the constant decline of price, the farmers’ incomes are reduced and they run into debts. This has damaged small-scale family producers whose food insecurity has increased.

Millions of people in poverty expect a change in the international trade policies which allows them to move from a vulnerable situation to a more sustainable livelihood.

Contributed by Guillaume L├ęgaut, advocacy and policy officer, CIDSE.

More information on the Euforic's trade dossier.