Global trade and poverty

Joseph Stiglitz, the 2001 Nobel laureate for economic science, puts it bluntly: The United States and Europe subsidize their cows at $2 per day, more than what a human being in many parts of the world earn in a day.

I have come across more disturbing figures.  An article by Hamish McRae for a South African financial newspaper reports that “the European Union subsidy for each of its cows — $913 – is greater than the average income per head of a sub-Saharan African — $490.  The Japanese subsidy is $2700 per cow.” To support its 25,000 cotton farmers, the US government, says Stiglitz, spends $4 billion a year in subsidies, which is greater than the value of the cotton itself.

In a capitalist world, these facts do not make sense.  If the farmers of the developed countries spend so much more to produce beef, dairy products, and cotton, they should leave the production of these goods to the less-developed countries, whose economies are still highly dependent on agriculture.  In a truly free market, the farmers of the US, Europe, and Japan should have long been put out of business. Their citizens should have moved to economic activities in which they can be more productive.  This is not happening.

For a variety of reasons, governments in the developed world continue to support the costly operations of their farmers through huge price-distorting subsidies and tariff walls against cheaper imports.  The agricultural lobby in the developed countries is a powerful one, drawing its energy from a reservoir of political clout, cultural appeal, and chauvinism.  In the eyes of the affected communities, what they are defending is an entire way of life, a whole tradition from which the society draws its symbols – and not just jobs.

One wishes that less-developed countries like the Philippines were even half as predisposed to protect their own farmers, instead of allowing them to drown in the floodwaters of globalization.  In permitting the entry of cheap onions, garlic, and chicken meat into the country, we work under the illusion that our farmers would be forced to be more efficient in order to be able to compete.  In fact, few manage to survive.  After they are driven out of business, they are prompted to sell their lands and try their luck abroad as unskilled contractual workers.  All over the country, farming is dying as a way of life; many farms are untilled, awaiting conversion to nonagricultural uses.

Unlike the farming communities of Europe and America, our own small farmers are not sufficiently organized to mount a strong lobby to defend their interests.  There is no agricultural vote in our country. Moreover, our people are conditioned to think that capitalist globalization is inescapable, and that all we can do is accept its terms and find our niche in a fast evolving world economy.  While globalization may be inevitable, the forms it takes are not.  The fight of the anti-globalists is not against globalization as such, but against globalization directed by the multinationals.

The justification for a World Trade Organization rests on the proposition that opening doors to international trade should produce development for everyone provided certain rules were observed and enforced.  Since the WTO founding in 1995, however, the results for poor countries have been the opposite.  They could not effectively gain access to developed country markets because of the persistence of non-tariff barriers.  They lacked the resources to modernize and support their agriculture fast enough to compete in the world market.  Even as Europe and America were increasing their subsidies to their farmers, less-developed countries could not deliver even the promised safety nets to those who were adversely affected by trade liberalization.  They lowered their tariff to permit cheaper imports to come in, but suffered a double squeeze in the process. Local producers went out of business and government revenues went down.

The so-called Doha round of trade talks in November 2001 was meant to redress such imbalances in world trade.  The working agenda on which the negotiations were to be conducted contained a slew of items, with liberalization in agriculture topping the list.  The conference of trade ministers that closes today in Cancun Mexico is meant to facilitate these negotiations.  The basic idea is to arrive at a broad consensus on the framework for the negotiations in accordance with the commitments made at Doha.

A new element in these negotiations is China’s entry as a player. She has joined India and Brazil, and 18 other less-developed countries, including the Philippines, to form a bloc to push for a common set of demands.  Foremost of these are substantial cuts in farm subsidies and removal of export subsidies for agricultural producers in rich countries, and greater access by poor countries into the markets of developed countries.

The rich countries, however, are not going to offer any concessions in any of these areas without exacting their pound of flesh.  They want stricter enforcement of their patents and intellectual property rights, further liberalization of investments, and elimination of barriers to capital flows, including speculative capital.  Stiglitz suspects that the commitment to redress trade imbalances made at Doha was nothing more than an attempt to get the poor countries to sit down and negotiate these items in exchange for a few concessions.

The possibility that the Cancun round may yield an agreement is remote.  But, as Stiglitz says, no agreement might be better than having a bad one.


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