While lavish agricultural subsidies illustrate wealthy countries’ hypocritical stance on “free trade,” ending them would be no panacea for human development.
Published on TomPaine.com.
Although much is at stake at the World Trade Organization Ministerial in Hong Kong this week, the success of the talks will largely hinge on one issue: the willingness of the U.S., Japan, and the European Union to live up to their own “free trade” rhetoric and to substantially cut their agricultural subsidies. By providing nearly $1 billion dollars a day in subsidies for their own farmers, the world’s wealthiest countries, which regularly preach the virtues of open markets for poorer nations, are guilty of the rankest hypocrisy.
Be that as it may, a key question remains for critics of corporate globalization based both in the first world and in the global South: Is market access really the answer to poverty?
Governments of developing nations, coming off of their victory in resisting a one-sided trade deal in Cancun in 2003, will be pushing hard in Hong Kong for countries like the U.S. to scale back their agricultural supports, something the Bush administration has thus far proved unwilling to do. Such institutions as the World Bank and The New York Times editorial board will lend their support to the poorer countries by arguing that first world market access is a cornerstone for development and poverty reduction.
This leaves the increasing number of “free market” skeptics around the world in an uncomfortable position. Certainly, the agricultural subsidies are two-faced. But is removing those subsidies the best path to economic justice for developing countries? And do critics have reason to be wary about making common cause with World Bank chief Paul Wolfowitz?
In the past, the question of market access has divided progressives. In 2002 Oxfam, a prominent anti-poverty organization, released a report entitled “Rigged Rules and Double Standards” and launched a campaign to “Make Trade Fair.” The report presented a range of recommendations for improving the terms of international trade and development, but market access became the clear focus as the document was promoted in the media. Oxfam echoed World Bank rhetoric by arguing, “For [the] engine [of trade] to function, poor countries need access to rich country markets. Expanding market access can help countries to accelerate economic growth, at the same time expanding opportunities for the poor.”
Oxfam drew special fire by painting other advocates as “globophobes.” Social movement representatives from developing countries, who have often criticized the trade positions of their own government elites, were among the first to respond. Walden Bello, Executive Director of Focus on the Global South, charged Oxfam with “caricaturing [free trade critics] in the crudest Economist fashion.” Thankfully, Oxfam has since backed away from such gratuitous criticism of allies in the globalization movement. And, of late, the organization has tempered its demands for market access with greater emphasis on resisting the forced intrusion of corporate globalization into poorer countries.
There are good reasons not to uncritically jump on the bandwagon promoting “free trade” and ending subsidies. First, it’s not at all clear that basing economic development on agricultural exports will allow countries to “trade their way out of poverty,” as proponents claim. Historically, many nations that have relied on export-led development have been foiled by declining agricultural prices on the world market, a problem spurred by over-supply. As a 1992 Oxfam report entitled The Trade Trap notes, “Countries that depend on the export of primary commodities like coffee, sugar, or cotton are caught in a trap: the more they produce, the lower the price falls.”
Ending lavish subsidies would help this situation somewhat by reducing the “dumping” of artificially under-priced first-world goods on the international market. It won’t help a lot, however, even if the U.S., Europe, and Japan were to eliminate their supports entirely—something that is politically out of the question. The typically pro-trade advocate Nancy Birdsall, along with economists Dani Rodrik and Arvind Subramanian, writes in a recent Foreign Affairs article that International Monetary Fund (IMF) estimates predict, “world prices would only rise by 2 to 8 percent for rice, sugar, and wheat; 4 percent for cotton; and 7 percent for beef. The typical annual variation in the world prices of these commodities is at least one order of magnitude larger.”
In other words, the famous instability of agricultural export markets would remain a bane of poor farmers struggling to survive. Likewise, the World Bank’s most optimistic predictions suggest that a country with a per capita income of $100 would boost this figure by only 60 cents over the next ten years as a result of trade liberalization. That’s hardly a panacea for development.
Small farmers are in the worst position to actually reap any such gains, which are far more likely to be siphoned off by middlemen. Put in competition against giant agribusiness corporations that dominate markets and enjoy great political influence (not to mention access to deep lines of credit and facilities in which to store their foodstuffs when prices are low), those small producers will still find themselves playing a rigged game.
Moreover, as economists from the liberal Dean Baker to Morgan Stanley’s Stephen Roach point out, with the United States running unsustainable trade and current account deficits, the overvalued dollar will almost certainly fall in coming years. This means that U.S. import markets will contract. Countries that have based their development strategies on gaining a piece of that pie will be left to fight with one another over ever-smaller slices.
Politically speaking, following the World Bank and The New York Times in their focus on market access draws attention away from alternative policies that would support small producers in a much more direct way—solutions promoted by social movements in the global South. These include using anti-trust law to curb the power of agribusiness, pressuring for land reform, promoting regional trade, and upholding international provisions for “special and differential treatment” that allow poor countries with vulnerable populations to ensure food security for their people.
Even if developing governments win concessions on agricultural subsidies, the access will come at a cost. In return, wealthy countries will demand that their trade partners open in other ways—making poor nations privatize services like water and electricity distribution, and curtailing their ability to protect infant industries. A WTO compromise would also mean cutting government safety nets that have helped protect farmers from the unforgiving fluctuations of international markets. Furthering corporate globalization is not a price that developing countries should be forced to pay for ending U.S. and European hypocrisy.
In the end, the poor will continue to lose as long as the dominant system of “free trade” economics marches forward. Given that reality, a collapse of talks in Hong Kong would be better than an unfair deal adopted in the name of development.
Research assistance for this article provided by Kate Griffiths. Photo credit: fuzheado / Wikimedia Commons.