Ian Boyne, Contributor
THE APPRECIABLE levels of media coverage which have been given to the Fifth Ministerial Meeting of the World Trade Organisation (WTO) in Cancun, Mexico, should make a dent in the degree of ignorance displayed by some commentators here who downplay the international economy's effect on Jamaica.
We frequently hear supposedly well-informed commentators and luncheon and dinner speakers saying that developing countries like Jamaica should concentrate on increasing production, removing obstacles to private sector investment, liberalise, maintain a realistic exchange rate and increase exports while pursuing 'sound macroeconomic policies'. Once these occur, they posit growth and development would automatically take place. When others point to the constraints which are imposed by the international economic system and multilateral institutions, this is dismissed as "making excuses for underperformance".
The reason why some Third World countries don't grow, these persons say, is that their Governments are corrupt, inefficient and irresponsible, more intent on blaming external forces than accepting culpability for their misdeeds.
But last week, just ahead of the WTO meeting in Cancun which has representatives from the 146-member institution, no less an institution than the World Bank in its prestigious annual Global Economic Prospectssays it was in favour of a "pro-poor outcome in the Doha Agenda. This step is an important one, but it can only be achieved if everyone understands what is at stake in this historical moment and moves purposefully, and together to seize the opportunity".
In the 223-page report, Global Economics Prospects 2004: Realising the Development promise of the Doha Agenda, the World Bank makes a powerful case for global trade reforms. It showed that without these reforms the development prospects of the developing world and indeed the entire world are slim. This, coming from an organisation which was once the bastion of conservatism and whose policies contributed to underdevelopment in the developing world is powerful.
UNFAIR TRADING PRACTICES
Agriculture has been the major issue of contention at the conference and the Bank in this report shows why this is so. The developed countries subsidise their agricultural sectors to the tune of over US$330 billion a year, and some estimates go as high as US$365 billion a US$1 billion a day. The Developed countries' subsidies to their agricultural sectors are six times the amount of money they give to the developing world in aid. This is while these countries are busily evangelising the world about the benefits of free, uninhibited trade and while Jamaican farmers are reeling from farm imports.
Indeed, in an Oxfam briefing paper, Stop The Dumping: How EU Agricultural Subsidies are Damaging the Livelihoods in the Developing World, issued in October last year, Jamaica is used as a case study of unfair trading practice. The World Bank says that sugar subsidies alone in the developed countries amount to US$6.4 billion annually an amount equal to all developing country sugar exports. "Prices are so high that it has become economic to grow sugar beets in cold climates and to convert corn to high-fructose corn syrup. Sugar imports into the(developed countries) have shrunk to next to nothing."
Says Global Economics Prospects 2004: "Agriculture is central to the development promise of this trade round for two reasons. Most of the world's poor work in agriculture and most of the world's protectionism is directed at agriculture. Some 70 per cent of the world's poor live in rural areas and earn their income from agriculture."
The protection facing developing countries' agricultural exports to the North are up to seven times higher than their exports of manufactures. Besides, there is a tariff escalation which discourages the processing of their agricultural products. "Tariff peaks are particularly high in rich countries against products from poor countries," says the report.
Raw cocoa beans are imported to the United States and Europe without tax but if the poor countries process that and turn it into cocoa butter there is a 10 per cent tariff, and if they process it into cocoa powder the tariff is more than 15 per cent. So this explains why developing countries produce more than 90 per cent of cocoa beans but less than five per cent of chocolate. And then the developed countries preach that they are for increased manufacturing from the developing world!
"Catfish farmers in Mississippi have secured protective tariffs of more than 60 per cent against catfish imports from Vietnam. The average tax rate on Vietnamese goods entering the U.S. is 8 per cent. For Dutch goods it is just 1 per cent, which means Vietnam a country with 81 million people living in poverty pays more in U.S. customs duties than the Netherlands which exports four times as much to America," says the British paper The Independent in an article on the Cancun meeting on Wednesday.
This raises another issue: That while the developing world has made remarkable strides in diversifying its production base and has significantly increased manufactured exports, a discriminatory and unjust trading system has robbed them of the benefits of this enormous growth. Exports of manufactures from the developing world have grown at nearly twice the rate of agriculture and now constitutes nearly 80 per cent of exports from all developing countries.
Says Global Economic Prospects 2004: "Countries that were low income in 1980 managed to raise their exports of manufactures from roughly 20 per cent of their total exports to 80 per cent. As a result, many grew quickly and entered today's middle income countries. The middle income group of 1980 also increased its manufactured share to reach 70 per cent. This dramatic change in trade magnitudes and composition has given developing countries a new interest and a powerful voice-in the ongoing Doha Round."
INCREASED PRODUCTION NOT ENOUGH
But while they have done that well, says the World Bank, "Overall rich countries collect from developing countries about twice the tariff revenue per dollar of imports that they collect from other rich countries." So when our commentators talk nonsense about simply "increasing production" and "getting the economic fundamentals right" so that exports can increase and development can trickle down, they should be exposed for their ignorance.
Developing countries like Jamaica have to do far more than just increase production and get the macroeconomic policies right. They have to wage a relentless battle on the international front, and this is why the issues of globalisation and the conduct of international organisations like the WTO and the International Monetart Fund (IMF) are vitally important to us and are not just as diversion, as the ignoramuses said when Michael Manley was rightly devoting much attention to global affairs.
International economic and political developments have a far greater impact on Jamaica than national economic and political developments. Our next Prime Minister has to be a person who is acutely aware of and adept on global issues. And foreign affairs has to be put on par with national affairs as a focus. Indeed, foreign affairs is national affairs! The price of ignorance in this matter is far too high.
What difference would reforms to the international trading system make to the developing world and indeed to global economic prospects? The reduction in trade barriers would result in additional income of US$291 billion globally and US$159 billion by the developing world by 2015. Reductions in trade barriers in agriculture and food alone would result in additional income by the developing world of us $101 billion by 2015. Manufacturing liberalisation by rich countries would lead to gains of US$25 billion to developing countries right away.
REFORM GLOBAL TRADE RULES
Reforms to the world's unjust and inequitable trading system would see the number of people living on less than $1 a day declining in the developing world by 61 million and the number of people living on less than US$2 a day declining by 144 million. Something can be done about the poverty in the world. It is not ordained by God nor is it merely evidence of the "time of the end". It is evidence of greed, exploitation and injustice.
Reforms to the global trading system would considerably assist development and would boost developing country exports by some 20 per cent or US$540 billion. Brazil estimates that it could earn US$10 billion more this year from agricultural exports were it not for trade barriers in the North.
"Lifting restrictions on Mozambique's imports into the European Union (EU) would boost the country's earnings by almost $100 million nearly as much as it receives in European aid," Britain's The Independent says in its September 10 edition. This is why the battle cry from the 1970s when Michael Manley was striking the conscience of the North and P.J. Patterson was adroitly negotiating for the Third World was "trade, not aid". It has been a lie that the developing world has been more interested in hand-outs and charity from the North. It has been more interested in getting a fair day's pay for a fair day's work.
The Independent adds in its enlightening piece: "Europe produces sugar at three times the price that more efficient countries such as Malawi and Zambia do. At the same time the rich countries spend more on farm subsidies than Africa has for its entire GDP."
Poor countries hold 40 per cent of the world's population but receive only three per cent of the world's income from trade. Rich countries constitute 14 per cent of the population of the world and yet get 75 per cent of the profit from trade. Britain makes more from trade than South Asia and Sub-Saharan Africa combined, and a shirt made by a worker in Bangladesh attracts 20 times more import duties in America than goods imported from Britain. So not all the wealth earned by he developed countries is simply from hard work, productivity technological superiority, and certainly not from "superior intellect". It's a matter of raw power and strategic control of key global institutions and the international economic system.
ANTI-DEVELOPMENT
In a well-argued scholarly paper, Elements For a New Parading on Special and Differ-ential Treatment, Cambridge Economics Professor Ajit Singh blisteringly critiques the developed country apologists and gives a clinical analysis of the anti-development aspects of the WTO regime. The Trade-Related Intellectual Property System (TRIPS) is designed to restrict trade, not liberalise it and the latter is supposedly what the WTO is about. How ironic. The Trade-related Investment Measures (TRIMS) are also biased toward the developed countries.
Professor Singh calls the WTO back to its original development agenda which was clearly outlined at its founding in 1995. The original charter makes reference to "raising standards of living, ensuring full employment and expanding the production of and trade in goods and services," while promoting sustainable environmental development. If the WTO is to be true to its mandate, says Professor Singh, it has to be concerned about the effects its policies and rules have on real economies.
The same interventions which were made by US after World War Two to enhance development of Europe and Japan and the same latitude given to them over their currency arrangements and fiscal affairs should be given to developing countries today, the Cam-bridge Professor says. He calls on the developed countries to "overcome the narrow mercantilist outlook which demands reciprocity. The ball is squarely in the court of the advanced countries as only they have the economic power to determine the world economic priorities and agenda." As we are witnessing in Cancun, Mexico. right now.
Ian Boyne is a veteran journalist. You can e-mail your comments to ianboyne1@yahoo.com
