Envío Digital
Central American University - UCA  
  Number 257 | Diciembre 2002



World Trade Rules: Rabbit and Tiger in the Same Cage

CAFOD has produced a “simple guide” to the ideas behind its Trade Justice Campaign, an initiative to which other European aid agencies are also committed. This guide, edited here by envío, will be handed out widely during the Puerto Alegre Social Forum to be held in Brazil in January 2003.

The Catholic Agency for Overseas Development (CAFOD)

Since the signing of the North American Free Trade Agreement (NAFTA) in 1994, the first between developed nations and a developing one, the price Mexican maize farmers get for their crop has dropped 35%, with a profound effect on the countryside. “I sell some maize, but the price is very low,” says 18-year-old Sebastián Sanchéz. “Life is harder for us now than it was before. Six of the guys from my village have left to find work.” The reason, as CAFOD partner Sarath Fernando from Sri Lanka puts it, is that “world trade rules put the rabbit and the tiger in the same cage.”

More trade; more hunger

International trade rules are unjust and negatively affect the world’s poor. According to the UNCTAD Trade and Development Report for 1999, world trade rules rob developing countries of £500 billion (US$700 billion) a year, which is 14 times what they receive in aid from the developed world. World trade rules also pitch the weak against strong, with poor maize farmers in Mexico, for example, forced to compete against American agribusinesses whose subsidies average £14,000 (US$20,000) a year. Meanwhile, big businesses and their lobby groups help write the unjust rules, playing a big part in helping rich countries in their trade negotiations. Trade liberalization has increased world trade tenfold over the last 30 years, while hunger in Africa has doubled during the same time.

Today, the world produces more food than ever before, enough to provide every living person a healthy diet. Yet ac-cording to the UN’s Food and Agriculture Organization, a quarter of the world’s children—200 million—are so malnourished their growth is stunted, and 6 million under-fives die from hunger every year. Trade could help end this needless suffering, but the institutions that govern world trade are failing as a result of certain fundamental injustices.

Uncovering the truths about world trade

Harmful consequences ignored. One in four of the world’s people are poor farmers and their families. And far from benefiting from liberalized trade, evidence suggests that they are suffering higher costs and increased insecurity.

In Zambia, for example, where more than half of the population are small-scale farmers, agricultural trade has been liberalized since the early 1990s as part of Structural Adjustment Programs imposed by the World Bank and International Monetary Fund. During that time, poverty among these farmers has risen from 81% in 1991 to 90% in 1999 (Seshamani Venkatesh, Globalization and its Impact on Zambia: a country report. Lusaka, 1999).

Mozambique, one of the poorest countries in the world, cannot afford to give its farmers help with transport, subsidized fertilizers or even decent roads. But since trade liberalization in the mid-1990s, small farmers—who make up 80% of the people—have been forced to compete with big, well-supported South African farms.

Also in Mozambique, cashew processing factories went out of business with the loss of 8,500 jobs when the International Monetary Fund and World Bank forced the country to abolish export taxes on unprocessed cashews in 1995-96. Instead of selling them to local processors, farmers sold their crops to Indian traders who at first offered higher prices, but later dropped them. “It has been terrible in this barrio. Everyone has lost their job,” says former processor Adija Antonio from Monapo, Nampula. “There is no money. There is no food. I’m not eating very much now.”
Trade and investment liberalization has been encouraging multinational companies to increase their activities in the Philippines, particularly since 1997. But while the companies might bring jobs, they can also destroy livelihoods. Tenant farmer Barceliso Mariquit and his family had farmed seven hectares of land in Lugait, Mindanao, since 1949. But when the owner sold up to Swiss company Alsons, Barceliso watched in dismay as his maize, coconut palms and banana trees were swallowed up by a giant cement quarry. “We feel we can’t do anything because the company can decide what they’re going to do,” he says.

Double standards. The European Union (EU) lobbies hard for poor countries to open up their markets to European goods, while protecting its own producers with tariffs and subsidies. According to the UNCTAD Trade and Development Report for 1999, for example, there is evidence that dumping in Latin America and Africa of dairy produce that has received EU subsidies ranging from 40% to 100% of the world market price is having a devastating impact on jobs and livelihoods.

Business dominates. Business lobby groups are allowed to have a major influence on world trade rules. The July 1999 edition of the Corporate Europe Observer pointed out that 13 companies, including General Motors and Monsanto, lobbied governments to include intellectual property rights (IPRs) in the Uruguay Round of trade talks. In those talks, 96 out of the 111 members of the US delegation negotiating on IPRs were from the private sector. Meanwhile, half of the poorest countries at the World Trade Organization (WTO) can’t afford to have a single representative at its headquarters in Geneva.

Unfair trade explains foreign debt. These injustices in world trade are underlying causes of third world debt. Without fundamental reform of trade, poor countries will remain unable to earn money through trade to pay their way in the world. By tackling unjust trade, CAFOD believes there is a chance to prevent poor countries from getting into unpayable debt in the future.

WTO: When, what, how and why?

The WTO is the institution responsible for deciding the trade rules that are having a great impact on poor communities. As its influence grows, its rules could lift millions of families out of poverty—or plunge them into deeper suffering.

The WTO was created on January 1, 1995, as the successor to the General Agreement on Tariffs and Trade (GATT), a post-war agreement to reduce barriers to trade. The GATT developed through eight “rounds” of international talks, mostly on trade in manufactured goods. It culminated in the Uruguay Round (1986-94), which included for the first time agreements on agriculture, services and intellectual property rights, with all three sparking serious concerns about their impact on development.
Some 142 countries had joined the WTO by April 2001, with around 30 more interested in joining. The organization’s main functions are to implement Uruguay Round agreements, run a court where one country can challenge another if it suspects it of breaking WTO rules, review how countries are performing on trade liberalization and act as a forum for more trade negotiations.

The WTO’s chief policy-making body of government trade ministers meets every two years. In 1999, talks in Seattle broke down amid riots and tear gas. They agreed to meet again in Qatar in November 2001. Some 500 staff in Geneva support the WTO’s councils, committees and ministerial conferences. They also analyze world trade and provide technical assistance for developing countries. Britain contributes nearly £3.5 million to its annual budget of around £50 million.

The most senior permanent body is the General Council, which meets several times a year. It is made up of representatives of all member countries that have ambassadors in Geneva. There are also a number of specialist councils and committees, such as the WTO’s ‘court,’ the Dispute Settlement Body. The Director General from 2002 to 2005 is Supachai Panitchapakdi from Thailand.

The WTO describes its purpose as “to help trade flow smoothly, freely, fairly and predictably.” In practice, the WTO is pursuing policies of trade liberalization that may benefit big business, but are doing little to help the poor. For example, the WTO’s agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), gives businesses the right to patent plant varieties, a move it is feared could endanger the livelihoods of poor farmers. Farmers like Belene Apale, who grows organic rice in the Salug valley in the Philippines, fear that if indigenous plant varieties are patented by multinational companies, they will have to pay fees to use seeds they have sown for generations. For while much of the richness of the world’s biodiversity is found the Third World, the legal and scientific resources needed to describe genetic codes and to register patents are in the industrialized world.

Is the WTO democratic?

In the words of Sir Walter Raleigh (1552-1618), “Whosoever commands the trade of the world, commands the riches of the world and hence the world itself.” In theory, the WTO should be a highly democratic organization. Unlike the World Bank and the International Monetary Fund, where votes are weighted according to countries’ financial contributions, all countries at the WTO have an equal vote. In practice, however, decisions happen behind the scenes as countries trade concessions with one another.

This horse-trading favors those countries that are big markets. Countries with large populations of people with money to spend, such as the US, have a great advantage in negotiations with a small, poor country, such as Bangladesh, which desperately wants to sell its goods in America and is willing to make considerable concessions to do so. What is called the “Quad”—Japan, the United States, Canada and the European Union—ends up dominating much of WTO decision-making.

At WTO headquarters in Geneva there are an average of 12 meetings on any one working day. While rich countries maintain permanent negotiators in Geneva (the US has a team of 250 according to Multinationals and the World Trade Organization. WDM, September 1999), and fly in experts on particular issues when necessary, half of the poorest countries can’t afford a single representative at WTO headquarters. It costs US$900,000 a year to keep a mission at WTO in Geneva, according to the UK Department of Trade and Industry. As a result, the poor countries simply can’t keep up. The more issues are discussed simultaneously, the less able they are to identify and defend their national interests.

The negotiators for powerful countries at the WTO often enjoy very close relationships with big business. The US negotiator on agriculture at the outset of the Uruguay Round was a former vice-president of Cargill, a US firm that controls 60% of the world’s trade in cereals (Lang T. and Hines C., The New Protectionism: Protecting the Future Against Free Trade, Earthscan, 1993). Meanwhile, according to the August 22 1999 edition of the London weekly, The Independent on Sunday, key negotiators in Seattle in 1999 met with business lobbyists in return for donations to cover the costs of the summit.

Our campaign demands

Tackling hunger. “Is globalization only to benefit the powerful and the financiers, speculators, investors and traders?” asked Nelson Mandela at the Davos World Economic Forum in February 1999. “Does it offer nothing to the men, women and children ravaged by the violence of poverty?” CAFOD believes that if poverty reduction were the goal of the WTO it would be forced to make fundamental changes to its current policies, as these are failing to tackle poverty.

“I’ve been attending meetings for four years and it’s hard to write two lines about how my country has benefited,” a WTO delegate of an African country told CAFOD. “On agriculture, the promise was—liberalize and things will get better. The opposite has happened. Now we have food insecurity.”
According to the UN Food and Agriculture Organization’s April 2001 publication Mobilizing Resources to Fight Hunger, current policies are on course to cut the number of hungry people from 800 million to 580 million by 2015, way short of the target to halve the number of malnourished people in the world agreed to by leaders of 186 countries at the World Food Summit in 1996. And the World Bank predicts that “over the next 10 years, if growth rates and levels of inequality continue unchanged, the headcount index of $1-a-day poverty will fall from 24 percent to 22 percent—far short of halving world poverty by 2015.”
CAFOD believes evidence should become much more central to the way the WTO works, through a poverty impact assessment of agreements made in the Uruguay Round and by making poverty impact assessments an integral part of any future trade negotiations.

Protecting small farmers. The trade agreement with perhaps the most potential to help—or harm—millions of poor people is the 1995 Agreement on Agriculture (AoA). Its objective is to aid free trade of agricultural goods through cuts to tariffs and other trade barriers and to farmers’ subsidies. Further negotiations on the AoA began in Geneva in 2000.

The agreement has many flaws. For example, it comes down hard on measures such as tariffs that are simple, cheap and used by poor countries. But it goes easy on measures such as subsidies to farmers, which rich countries use and poor countries cannot afford. It also fails to cut rich countries’ protection of their markets in any significant way. The WTO recognized the potential of the AoA to harm developing countries and agreed to give them extra help in the so-called Marrakesh Decision. That decision has never been implemented.

Things are going from bad to worse. In many sub-Saharan African countries, up to 85% of food is produced by farmers with small plots of poor quality land, no money for farm machinery, fertilizers or pesticides and no transport to get their harvests to markets. Many of them are women. These most vulnerable people are harmed by the AoA because it prevents governments giving cheaper loans to poor farmers, cuts help for farmers’ transport and reduces tariffs that protect poor farmers from imports.

Small-scale farmers are hit particularly hard by increased imports. A study of the impact of the Uruguay Round on poor countries’ agricultural trade released in January 1999 by the FAO’s Committee on Commodity Problems found the food import bill for 48 poor countries rose on average by 83% in two years. Meanwhile, surges of imports led agricultural production to fall in 29 poor countries. The study concluded that such sudden changes could have “considerable implications” for malnutrition in these countries, where 40% of people already go hungry.

CAFOD believes the Agreement on Agriculture doesn’t take into consideration the crucial role of farming in the livelihoods of poor communities. One in four of the world’s people—and 70% of those living in the least developed countries—live off the land. Countries are particularly vulnerable where a large proportion of national income comes from agriculture, there are high levels of subsistence farming, a large proportion of the population is living from the land, roads and other infrastructure are poor and there is little alternative employment for rural people. In such countries it is important that agriculture remain a source of livelihood for most of the population.

We are calling for special treatment for poor countries and for the goods produced by small farmers in those countries. The Agreement on Agriculture includes the idea of “boxes” to describe clauses that allow certain goods exemption from WTO rules. CAFOD is calling for the WTO to introduce a special “Development Box” for those crops that are either staple foods in poor countries, or that are grown mainly by very poor farmers. These rules would allow the use of subsidies and trade barriers to protect the livelihoods of small farmers. The aim would be to tackle hunger and cut poverty by increasing poor countries’ production of their staple crops; increasing food security, especially for the poorest; providing livelihoods for rural poor; and protecting very poor farmers from cheap, subsidized imports.


2015 Targets
The resolutions of various UN summits brought together as a set of targets for human development, now endorsed by many governments and international institutions.

Agreement on Agriculture, drawn up by the Uruguay Round of the GATT and implemented by the WTO. It is the main agreement dealing with food.

Development Box
A proposed means by which poor countries could gain exemption from some rulings of the AoA that threaten their development.

Food security
All people, at all times, having physical and economic access to sufficient safe and nutritious food for an active and healthy life.

General Agreement on Tariffs and Trade set up in 1950 to reduce tariffs and other barriers to trade. Replaced by WTO in 1995.

Intellectual property
A category of public law that includes copyrights, patents and trademarks.

A political philosophy that says market forces should, as far as possible, be unregulated and with minimal interference by governments.

Marrakesh Decision
The Ministerial Decision on Measures Concerning the Possible Negative Effects of the Reform Program on Least Developed and Net Food Importing Countries—recognition by the WTO that the AoA’s effect on global food market prices could harm poor countries and require them to be compensated.

A border tax on imported and exported goods that raises their price.

Trade Related Aspects of the Intellectual Property Rights Agreement drawn up by the Uruguay Round of the GATT and implemented by the WTO. Covers a wide range of intellectual property issues, including patents on plants and seeds.

UN Conference on Trade and Development, established in 1964. Defines its overall aim as the development-friendly integration of developing countries into the world economy.

Uruguay Round
The final round of talks of the GATT (1986 to 1994), which brought into international trade law a wide range of issues that had previously been under the control of individual countries.

World Trade Organization, which replaced the GATT in 1995 as the legal foundation of a world trading system.

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