Tuesday, September 16, 2003

The sensational collapse of World Trade Organization talks in Cancun, Mexico was a historic first step in trying to implement a fairer global trading system.

For the first time, developing countries formed a united bloc against the against the bullying of developed nations and allied with a few middle income countries like India and Brazil. By walking out, developing countries prevented the imposition of an agreement which would've done nothing to help alleviate poverty at home. Better no agreement, they contend, than a terrible agreement. By showing the power of their unity, they sent a message to the developed countries that their needs have to be taken into account too. In an organization run by consensus, such polarization was fatal to this round of talks.

The three main blocs of developed countries are the United States, Japan and the European Union. They all offer large subsidies to their farmers, which is at the crux of the issue. Developing countries can't afford these subsidies and thus can't compete. Negotiations "reaffirmed their commitment to moving towards the objective of reducing the farm subsidies of industrialized nations, without setting timetables or targets for doing so," noted The Inter Press Service. And that's the problem: developing countries don't trust such vague promises.

And can you really blame them? Europe and the United States lecture them piously on the importance of free trade, on the economic problems caused by government intervention in the economy (like subsidies) and on how they must slavishly adhere to every letter of International Monetary Fund fiats; these fiats in the name of economic liberalization (supposedly the cure for all ills) can even ruin domestic industries and put thousands of people out of work, as was the case for cashew nut workers in the southern African state of Mozambique. So developing nations are calling the bluff of the Americans and Europeans by asking, "If fundamentalist free trade is so great, why don't you try it to?" Developed countries aren't used to being told to practice what they preach.

It's been reported, for example, that the average European Union COW is subsidized to the tune of over $2 a day, the average American cow nearly $3 per day and the typical Japanese bovine receives fully $7 a day in subsidies. The BBC notes, "Economists estimate that the world's poor countries lose a total of $24 billion a year because of subsidies paid to farmers by rich nations."

Not surprisingly, everyone tried to pass the buck. But the real problem is that Europe, Japan and the US want free trade in theory, but don't want the sacrifices required for that to occur. They want exceptions for themselves, but not for anyone else. Not surprisingly, this fuels broad resentment of the whole concepts of economic liberalization, freer trade and globalization as a whole. When globalization becomes synonymous with "free trade" that's not really free (or fair), people in poorer countries begin to question the whole concept of globalization.

I think more freer trade and more transparency will help developing countries far more than increased aid. The West has been giving out development aid for decades and things haven't fundamentally changed in a lot of countries, especially African ones. Things haven't changed largely because what the West has been giving with one hand (aid), it's been taking away with the other (unfair trade rules). While we shouldn't slash development aid for now, fairer trade rules will benefit everyone. The economic rise of western countries was fueled by an exploding middle class. Increasing the size of the middle class in places like Ghana or Sri Lanka will fuel their economies too.

But one key thing is worth noting. Western countries became developed in the 19th and early 20th centuries using methods that would be TOTALLY unacceptable in 2003. Child labor, deplorable working conditions, no overtime or vacation time, no workers' compensation, no minimum wage, anti-trade union repression, high tariffs. The West industrialized by taking actions that would be roundly condemned today. Today's poorer countries don't have the same shortcuts available that western countries did. That's why they're finding development harder and slower.

The main developed countries aren't as committed to free trade as their rhetoric suggests. Japanese farmers love their huge subsidies. European farmers have an influence that is probably disproportional to their numbers. Washington would rather negotiate bilateral trade agreements on smaller scales so they can more easily bully individual countries into accepting American conditions.

The collapse of the talks was not good for anyone, least of all the developing countries. The status quo is clearly doing them no favors. Hopefully, the unity of developing countries will send a message to developed countries. "This is the first time we have experienced a situation where, by combining our technical expertise, we can sit as equals at the table," observed South Africa's trade minister. Hopefully from this collapse, a better deal will emerge the next time around.

One fear, however, was underlined in an essay in The Guardian (UK) by Adriano Campolina of Action Aid's international food rights' campaign.

He wrote, However, there is now a real danger that having failed to impose their wishes on developing countries at the WTO, rich countries will try to get their way by brokering deals on an individual or regional basis. As we have seen with NAFTA (the North American Free Trade Agreement, involving Mexico, US and Canada), developing countries rarely fare well in these kinds of agreements. The elite usually manage to take the lion's share of any profits, while the poorest communities are left with nothing.

American and European rhetoric is right: freer trade will benefit developing countries, create wealth and help alleviate poverty. The question is: are the American and European leaderships willing to do what it takes to truly impelement freer trade rules? So far, the answer has been no.


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