Sham of World Trade Talks

cotton_body.jpgDespite claims to the contrary by Britain ’s Tony Blair and others, the best possible outcome of current world trade negotiations for the poorest countries would be for them to fail and for the latter to regroup and present a more focused, united front. Simple common sense – and their common self-interest – demands it.

A successful Doha round of the World Trade Organisation (WTO) would only serve to reinforce the neo-mercantilist status quo, whereby the poor countries function as little more than sources of cheap commodities and markets for the more expensive manufactures of the developed nations. This so-called development model, based on the questionable theory of comparative advantage, has only served to devastate the fragile economies of the mainly African South.

The issues surrounding the talks are not as complicated as some make out. On the surface of things, their “free” trade agenda aims to remove tariffs and other trade barriers and open up international markets for the supposedly free flow of commodities, goods and services. However, the major flaw at the heart of the talks is the assumption by the free marketers that this will result in bountiful rewards for all of the WTO’s 148 member countries.

Decimation of fledgling industries
This is palpably not the case: a free-for-all in international trade will result in the decimation of the fledgling industries in the mandelson.jpgdeveloping countries, whose products would be unable to compete on a level playing field with the developed countries. This is especially the case with agricultural products, the producers of which are heavily subsidised by the rich countries of the North.

One would be forgiven for thinking that since the rich countries were demanding access to developing countries' markets for their manufactures, they were prepared in return to open up theirs for the products from the latter. They are not. But listening to Blair and his Euro-plenipotentiary Peter Mandelson (pictured), one would think that was exactly what was on the table.

The assumptions on which they and others in their camp base projections of “billions of dollars” worth of benefits for developing countries are World Bank figures for trends in the global economy up to 2015. However, independent analysts are agreed that those projections are at best overly optimistic and, at worst, misleading.

According to Professor Robert Hunter Wade of the London School of Economics, “The case for further radical liberalisation … makes some implausible assumptions which inflate the benefits and omit important losses. Most of the gains would go to less than a dozen developing countries. A majority of developing countries would lose from full agricultural textile liberalisation.”

Hold out against unfair market competition
Very craftily, Mandelson and co are using this as an excuse to not liberalise further, in effect playing the more well-off developing countries against the poor, mainly sub-Saharan African ones. While across-the-board liberalisation in agriculture will not result in substantial benefits for the poorest countries, deft manoeuvring by the latter should see them supporting it and at the same time insisting that the preferential access they enjoy in, for example, the European market, should be further entrenched in the Doha round. This in the long term will ensure entry into those markets in the next couple of years when their capacity to take advantage of it would have improved. Secondly, they should hold out against opening up their markets to competition that could damage local fledgling industries.

In this they should be careful not to fall into the trap of thinking that developing countries’ are homogeneous and so have the same interests, or that they should be singing from the same hymn sheet. While they should endeavour to maximise their position by using the clout of the more successful developing countries, it is important not to lose sight of the fact that what may be good for a China may not be as good for a Malawi .

Of paramount importance to the South is to not allow the Europeans and Americans to get away once again – as they did in the Uruguay round of the WTO – with the massive subsidies they give to their agricultural producers – a practice which serves to depress commodity prices and leaves a large proportion of Third World agricultural production uneconomic.

Unfairness and sheer hypocrisy
The scale of this problem can be gleaned from the fact that the developed countries of the OECD spend over $350 bn a year on agricultural subsidies of one form or another. Although there are indications that they are willing to be “flexible” on this issue, educated opinion predicts any changes will be only token in nature. The unfairness and sheer hypocrisy represented by this is brought into bolder relief when viewed against the backdrop of developing countries being literally and systematically forced to remove farm subsidies under so-called Structural Adjustment Programmes of the World Bank and IMF.

On this particular issue the example of my own country, Sierra Leone , is not only persuasive but, I would venture, also very conclusive. Up until the early 1980s that country was self-sufficient in rice, its staple food, and even exported surpluses. Then came the economic overlords of the Bretton Woods institutions. One of their “conditionalities” for providing development “aid” was that the country should phase out subsidies to rice farmers.

This economic assault was based on their theory of comparative advantage, which held that Sierra Leone was more suited to cocoa and coffee than to rice production, so should divert resources away from rice farming and towards the former. According to this theory, foreign exchange earned from selling cocoa and coffee on the world market would be enough to satisfy national requirements, including the food import bill.

And what has been the result after over two decades? Sierra Leone is one of the poorest countries – if not the poorest – on earth; it is a net importer of food aid, export revenues have plummeted as commodity prices have fluctuated, and the country has lost its economic, hence political sovereignty.

rice.jpgThe rabid free marketeer may carp at this, with accompanying quips that the country’s problems stem from the recent civil war. In reply, we say to her/him: Why are the economic realities of Sierra Leone , save a few inherent particularities, replicated in the whole of sub-Saharan Africa ? Take Malawi . That country is now in the throes of a massive food crisis after Western dictates forced it to remove subsidies to farmers. Or Zimbabwe . Here anti-Mugabe fanatics will say the fault lies with the Zimbabwe president, but objective observers know that the real problem there is a complex matrix at the heart of which are restrictive and defective Western economic prescriptions (of which more another day).

Reverse Robin Hoodism of the West
The irony in all of this is that most people who should know better, including latter day Saint of Africa Bob Geldof, seemingly believe all the fine words being mouthed by Western leaders like Blair, Bush and others about “making poverty history” in Africa. They are just that: words.

Need more proof? Then look at reports this week that the Group of Seven leading industralised countries (G7) will be receiving upwards of $12.4 bn as a part of a debt rescheduling package from Nigeria . To put things into perspective, they will receive from Nigeria in six months more than the recent Gleneagles Make Poverty History nonsense will “give” to the whole of Black Africa in the next ten years. The name of the game is giving, or promising to give with one hand while taking a lot more with the other. Have a drink on me, Sir Geldof!

The sooner African leaders realise there is nothing on the WTO table for them, the sooner they will abandon these talks and band together to hold out for a better deal – one in which the IMF and World Bank’s discredited policy prescriptions and the reverse Robin Hoodism of the West are roundly challenged and defeated. To paraphrase one of my oldest friends: You have nothing to lose but your poverty, and the World of a Better Life to win.