Globaleyes

The WTO and the ‘Development Round’

By Bruce Guenther

This is the sixth in a series of articles on economic globalization sponsored by the Peace Ministries Program of Mennonite Central Committee Canada. The writers are young adult Canadians who are studying and thinking about globalization and who are seeking to make a difference.

 

 

From Seattle to Cancun to Hong Kong, World Trade Organization (WTO) meetings have been portrayed as occasions for violent protests, sit-ins, tear-gas, and clashes with police. In Canada, farmers jam roads and circle Parliament Hill with their tractors. From diverse settings and economic strata, the protestors have one thing in common: anger at how the current world trading regime is harming their rural livelihoods.

The Doha Round

The most recent WTO round of trade negotiations, called the “Doha Round”, was proclaimed to be "the Development Round". It was intended to negotiate a trade deal that would benefit the developing countries which make up over three quarters of WTO members. The Doha declaration pledged to enable developing countries to "secure a share in the growth of world trade commensurate with the needs of their economic development." If only it was that easy.

A major sticking point for the negotiations is related to agriculture, particularly protectionism in the North, including the European Union (EU), the United States, and Japan. While much of the developing world has been forced to reduce trade barriers through the liberalization of their economies, rich countries have taken great lengths to protect and prop up their agricultural industries.

This protectionism includes subsidies, as well as tariffs, which prevent more competitive agricultural economies from penetrating these large markets. A Catholic development organization calculated that the EU agricultural program gives a subsidy of $2.50 to every EU cow per day – enough to send each of the 21 million cows on a round-the-world flight every year. With half of the world’s population living under $2.00 per day, this is not only inefficient but grossly unjust.

Import tariffs and subsidies distort competitiveness and the ‘comparative advantage’ of other more efficient producers in the South (and also Canada). Subsidies enable the over-production and dumping of these goods at very low prices, undercutting local markets. Whether it is milk producers in Jamaica, rice growers in Indonesia, cotton farmers in Burkino Faso, or sugar producers in Mozambique, the world’s poorest farmers suffer as subsidized goods are dumped on their local markets.

And if that weren’t enough, the massive food surplus that is generated by the US subsidy program is bought from up from US farmers and sent overseas as food aid, further undermining already crippled local markets. It is only very recently that Canada changed this harmful practice.

Canada is also hurt by these subsidies as global prices are unfairly driven down. Canadian farmers are squeezed by US farmers on the one side and by food processors and retailers on the other. For a loaf of bread, the miller, baker, and the grocer receive $1.35, while the Canadian farmer takes home a nickel.

A major aim of the Doha development round is to reduce these agriculture subsidies and import tariffs in the North. But in exchange for modest gains in this area, developing countries are being pressured to reduce barriers in the manufacturing and service sector. The developing world may be forced to trade away their future in hopes for small gains in agriculture.

Whether one looks at the first industrialized nation, the United Kingdom, or the more recent "East Asian Tigers", they have all used forms of protectionism to develop their industrial sector. The British protected their textile industry from higher quality Indian cloth and used their naval strength to pry open markets around the world. Similarly, the Korea and Taiwan’s rapid development was a product of strategic government intervention in the economy in order to develop high-tech industries as well as equitable growth. China and India, the two countries which have successfully brought millions out of poverty in the last decade, have also strategically intervened in their economies and only started to liberalize when they had reached a certain stage in their development processes.  

In many ways the developed nations of the North do not practice the free trade orthodoxy that they are forcing upon the developing South. Developing countries need the democratic space to strategically develop policies that will enhance their economic development and ensure their food security. It is not a question of being pro or anti-free trade but rather giving space for the differing development needs of various developing countries and letting their citizens participate in the development process.

 

What can we do?

Global trade is not new. The Phoenician city of Tyre, on the eastern shore of the Mediterranean was a major trading centre in Old Testament times, with trade routes extending into the Arabian Peninsula and as far as China, North Africa, Spain and the Mediterranean islands. The prophets in the Old Testament, Jesus, and New Testament writers all condemned trade for the purposes of individual economic profit and political power (see passage from Amos above). The purpose of exchanging goods is to enhance the livelihoods of all God’s people.

From a Christian perspective we must not think of trade as an end in itself but rather a means to reduce poverty and to enhance human dignity. Trade must be conducted in a way that enhances local livelihoods and environmental sustainability.

So, as Christians dependent on the world trading system, how should we respond in faith?

• First, we must recognize and confess how we are implicated in this system that so often exploits the poor.
• We must stop talking about “free trade” because it does not exist. Trade regimes are always a product of political negotiations, where those with the power make the rules. If this is the case, then we must use our power as citizens and consumers to encourage our governments to ensure that trade deals are not only fair but are negotiated on the premise of enhancing the lives of the poor.
• We can take steps toward this by purchasing fair trade certified goods where possible, and by urging companies to have fair and equitable labour practices in the developing world. We can also support one of MCC’s numerous agricultural projects in order to enhance the livelihoods of the rural poor.

The Doha Round appears to be in crisis. The developed North seems unwilling to budge on agriculture subsidies but blames the developing South for its unwillingness to embrace "free trade". It is time for leadership from North. The poor should not be forced to live with a bad deal.

 

Bruce Guenther is currently a MPhil student in Development Studies at the Institute of Development Studies, University of Sussex in Brighton, UK. He has served as a human rights advocate with MCC Jamaica, as a program analyst for MCC Canada, and as a MCC Manitoba board member. Bruce is a member of Hope Mennonite Church, Winnipeg, MB and is originally from Saskatoon.

 

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