Trade -- the real issue

Posted in Other | 14-Dec-05 | Author: Martin Walker| Source: UPI

U.S. Trade Representative Rob Portman answers a questions during a news conference at Hong Kong's Convention and Exhibition Centre during the sixth World Trade Organisation (WTO) Ministerial Conference December 15, 2005.

WASHINGTON, Dec. 13 (UPI) -- The essential dispute at this week's world trade summit in Hong Kong has been portrayed as the rich Americans, Europeans and Japanese against the world's poor. And while there is a case for saying this ought to be true, it just isn't. The real battle is between the poor and the less poor, and the rich countries are astutely exploiting this division.

The essential culprit is the term 'developing nations,' which includes China, India and Brazil, three countries that are already in or close to the Top Ten of world economies as measured by GDP.

But the term also includes the wretchedly poor, like Burundi and Tajikistan and Nepal, whose economic prospects are light years away from those of China (which has put men into space) or India (which is a nuclear power) or Brazil (which has a thriving aerospace sector).

There are advantages (and a degree of justice) for CIB, (the acronym devised by global banks for China, India and Brazil) in labeling themselves "developing." But they are no longer poor, and the kind of trade deal that they want in order to sell things like China's DVDs, India's financial services and Brazil's Embraer passenger jets, is not at all the kind of deal that would really benefit the very poorest nations.

In fact, the best deal on offer for the poorest is that provided by the much-maligned European Union, a system called EBA, which stands for 'Everything But Arms' and which commits the EU's 25 nations to open their markets without tariffs, quotas or other barriers to anything -- except weapons -- that the world's 48 poorest nations want to sell.

This offer, which the EU has vainly asked the Americans and Japanese to emulate, is on paper the best the poorest countries could hope for. In reality, it does not mean very much because there is no point in having access to EU markets if the roads are too bad for farmers to get fresh produce to the nearest airport in order to export it.

The EBA deal looked wonderful, for example, to Zambian entrepreneurs who began growing mange-tout peas and other up-market vegetables for the EU market. But then British Airways decided that its own corporate planning meant it had to cancel its airfreight flights from Zambia -- and the fledgling industry just about collapsed.

For EBA to work as hoped by the altruistic EU bureaucrats who devised it, the 48 poorest countries need the infrastructure of roads and ports and cold storage depots and reliable logistic links and honest customs and public health officials, and if they had those, they would not be among the world's 48 poorest nations anyway.

"In recent years the EU and the United States have slashed tariffs to the poorest countries under special schemes granting them free market access," notes Nobel economics laureate and World Bank chief economist Joseph Stiglitz. "Yet despite the good intentions behind these schemes, we have witnessed almost no increase in the volume of exports from beneficiary countries. Market access is not enough. Without assistance to overcome gaps in infrastructure, boost product quality and connect to international supply chains, tariff cuts have little effect on trade from the poorest nations."

In short, those glib politicians and free marketers and non-government organizations who parrot the slogan "Trade Not Aid" as the panacea for global development are at best only half-right, and at worst they are talking through their hats. Trade not Aid works fine if a country is already developing, but not if it has yet to pick itself up off the floor.

Still, for the rich NAJEU nations (North America, Japan, Europe) it makes excellent political sense to focus on the poorest nations at Hong Kong this week because by doing so they can divide and conquer the attempts by Brazil and India to rally a developing world consensus against NAJEU.

Accordingly, the Japanese have announced a $10 billion plan to help train and build export capacity for the LDCs (Least Developed Countries), and the EU is promising them an extra $1.2 billion a year in capacity-building aid. One problem, as the non-governmental organization Action Aid noted, is that Japan's generous-sounding scheme is for loans rather than grants. Another problem is that the rich nations have become rather clever at tossing the odd bone to the poorest nations so that they can sedate them or peel them away from the 'developing' consensus that the Brazilians and Indians want to build. Yet another problem is that the richer countries are pushing these trade-promotion plans with a discreet price tag -- they want easier access for their industrial goods and services into the poorest countries, which is likely to keep the poor countries as essentially agrarian and low-tech economies for the foreseeable future.

"Trade-related development assistance is certainly desirable, but it must not become a pretext for arm-twisting by industrialized countries that obliges developing countries to mortgage their future industrial development and public services in exchange," argues Guy Ryder, general secretary of the International Confederation of Free Trade Unions (ICFTU), a coalition of labor unions.

The NAJEU nations are entitled to whisper quietly to the very poorest nations (with their 48 votes in the World Trade Organization) that they have no real common interest with those cunning Brazilians and Argentines are just waiting to undercut their impoverished farmers with low-priced foodstuffs. The Brazilians and Indians are also entitled to whisper to the very poorest nations that the old colonial powers and the bullying Americans are conspiring to keep them poor. This is how politics works at every level, including the global one of the WTO summit.

But even more discreetly, the NAJEU nations and the fast-growing CIB countries agree on one big fact, that poverty has a lot to do with the pitiful governance record of the world's poorest nations and their bad habits like war, military coups, corruption and under-funding public health and education. Perhaps the most widely quoted fact of this entire debate is that back in 1957, South Korea and Ghana had exactly the same level of GDP per head -- and now South Korea is a rich country while Ghana (although improving) remains desperately poor.

Governments and their internal policies are probably the most important factor in development. And the CIB countries, increasingly proud of their recent economic growth and confident that they will one day count among the rich and powerful of the world, know it from recent and direct experience. Deep down, they do not really believe they have an absolute identity of interest with the ill-governed poorest of the poor, which is why the rich white world of Europe, Japan and North America can continue to divide and rule, and to ensure that the global economy operates in their interest.