Fair Trade and the WTO  Meeting in Cancun, Mexico

By

Stephen Lampe

stephenlampe@msn.com

 

The World Trade Organization (WTO) launched the so-called Doha Development Round of trade negotiations in November 2001 in Doha, Qatar Emirate. From next Wednesday September 10 through Sunday September 14, trade ministers of the member countries of WTO will be meeting  in Cancun, Mexico to advance the Doha Agenda, which are scheduled for completion by January 2005. Officially, the meetings are an interim stocktaking for the negotiations and will address several areas that are crucial for developing countries, including agricultural subsidies, intellectual property in medicines, labor-intensive manufacturing, trade facilitation, and special and differential treatment. However, the trade talks are stalled over disagreements on several important issues; the underlying reason is the same old one --- a lack of commitment to fair trade. The most developed countries, especially the United States and the European Union, desire to improve even further their advantageous relative positions in the global economy. As in the past, the powerful countries are relentlessly pushing for trade liberalization and would like to ignore or at best pay lip service to issues that are crucial to the economic survival of poor countries.

 

 “Why the relentless pursuit of trade liberalization?”, one might ask. The primary reason is that multinational corporations want rules and commitments that are irreversible and binding on all countries. This is to reduce the hassle of negotiating with individual governments and to eliminate or at least reduce considerably the costs of complying with the different regulations they face in the different countries where they operate. But critics point out that countries are different, they are at different stages of development, and have different needs. Therefore, uniform trade rules are not necessarily in every country’s interest. Moreover, they argue that such global rules reduce the freedom of each country to make its economic policy choices and gives WTO an unwarranted oversight role on governments. Thus, some see these rounds of trade negotiations as processes to undermine the democratic rights of poor and weak countries, which can be easily intimidated. Furthermore, critics assert that the primary beneficiaries of WTO policies are the developed countries and their citizens who are the major shareholders and key employees of the multinational companies.

 

Let us  proceed by examining the issue of free trade from the perspectives of commonsense and natural philosophy. The fact that the world has become a global village argues for a measure of trade liberalization. In the global village, one should not deliberately erect barriers against trade, just as we would not do in our ordinary villages. However, each household in the village must have the right to decide what may be hawked on its doorsteps. Furthermore, one of the Laws that express the Will of God is the Law of Balance between giving and taking. This Law is fundamental in the relationships among individuals, groups, and countries. The Law implies that there must be exchange. Therefore, it is necessary for nations to exchange goods, services, ideas, etc. Since trade is one way of achieving such an exchange (although by no means the only way), it can be said that the Creator expects the world to engage in international trade. The Law of Balance implies that each country must export as well as import, and there should be a measure of balance between export and import in terms of value.

 

In short, international trade must be balanced and, therefore, just and fair. Unfortunately, this is not the case. Among the factors militating against balance are the exceedingly wide gap in economic and other power between the rich and poor countries. Poor countries cannot refuse to export some of their commodities (such as petroleum) and the rich countries may refuse to export some of their own (such as certain technologies). The rich and more developed countries can distort the consumption patterns of the poorer countries and dump products on their markets, thereby undermining local production and reducing job opportunities. Poor countries cannot affect the economies of rich countries in like manner. Obviously, an accountable government cannot accept the destruction of job opportunities and the consequent pauperization of its people just to comply with international agreements. There are also certain unfair practices that put poor countries at a disadvantage in international commercial transactions. The prices of the commodities produced by them are for ever falling, while the costs of the industrial products they need for their development are for ever rising. In short, the poor and weak nations are made to sell cheaply and to buy dearly. Thus, there is a built-in imbalance in the existing trade system. Therefore, the first step in international trade negotiations ought to be the correction of this imbalance. Unfortunately, that cannot be a priority for WTO; this is  because amoral conceptions of self-interest rule the world. But, there should be limits to free trade determined by the extent to which the Law of Balance can be respected.

 

In preparation for the forthcoming meetings in Cancun, President Amadou Toumani Toure of Mali and President Blaise Compaore of Burkina Faso have published a joint statement, which underscores the unfairness of the global trade system. The statement entitled  “Your Farm Subsidies are Strangling Us” explains how the cotton sector in their countries is seriously threatened by agricultural subsidies granted by rich countries to their cotton farmers. Cotton production is crucial to economic development in several countries of West and Central Africa and to the livelihoods of millions of people there. Cotton accounts for up to 40 percent of export revenues and 10 percent of gross domestic product in Mali, Burkina Faso, Benin and Chad. It is the sole agricultural product that Mali and Burkina Faso can trade and, therefore, their ticket into the world market. The International Cotton Advisory Committee reported that cotton subsidies amounted to about $5.8 billion in the production year of 2001 to 2002; the amount is nearly equal the value of cotton trade for this period. Such subsidies lead to worldwide overproduction and distort cotton prices, depriving poor African countries of their only comparative advantage in international trade. Presidents Toure and Compaore point out that from 2001 to 2002, 25,000 American cotton farmers received more in subsidies (about $3 billion) than the entire economic output of Burkina Faso, where two million people depend on cotton. Further, the subsidies granted by the United States government are concentrated on just 10 percent of its cotton farmers. Thus, the payments to about 2,500 relatively well-off farmers has the unintended but nevertheless real effect of impoverishing some 10 million rural poor people in West and Central Africa.

 

Concluding their statement, the Presidents wrote: “Something has to be done. Along with the countries of Benin and Chad, we have submitted a proposal to the World Trade Organization that calls for an end to unfair subsidies granted by developed countries to their cotton producers. As an interim measure, we have also proposed that the least-developed countries be granted financial compensation for lost export revenues that are due to those subsidies. Our demand is simple: apply free trade rules not only to those products that are of interest to the rich and powerful, but also to those products where poor countries have a proven comparative advantage. We know that the world will not ignore our plea for a fair playing field. The World Trade Organization has said it is committed to addressing the problems of developing countries. The United States has convinced us that a free market economy provides the best opportunities for all members of the world community. Let us translate these principles into deeds at Cancun.” Arguments of unfair practices by rich countries can be made for many other crops, including sugar, cocoa, coffee, and tea.

 

In conclusion, it should be noted that only a viable domestic economy can engage successfully in international trade. Just because a foreign market lowers its trade barriers, doesn't mean a country can suddenly export. Investments in ports, roads, training, and improvements in local institutions (such as customs) are needed. And only rational and stable political and social systems can attract such needed investments. Foreigners (and even nationals) will not invest in nations characterized by incessant religious and ethnic bloodletting, high crime rates as well as irresponsible and corrupt leadership. In the final analysis, every country is the architect of its own fortune and misfortune. African governments can do much better for their people, despite the injustices of the international economic system.