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26 February 2007

’We need trade justice’

Buying Fairtrade is part of the action needed - but not the sum total

By Peter Hardstaff

Fairtrade is both a way for consumers to take individual positive action in solidarity with the poor and a way to introduce people to wider development issues.

But buying Fairtrade products should be seen as part, rather than the sum total, of the action needed to address global poverty. That is why many of the organisations which have been involved in the fair-trade movement over the years have been campaigning to change international trade rules. And, judging by events at the World Trade Organisation (WTO), there is much still to do.

This month, the stalled Doha round of international trade talks officially resumed, but there is little to celebrate in this. In fact, these are dangerous times for poor countries in the WTO. The signs are that the major trade powers are trying to stitch up a deal among themselves and present it as a fait accompli to the poorest countries. The really bad news is that what is on the table will not only not benefit these poor countries, it may do great harm.

Although many developing countries were reticent about the launch of the Doha round back in November 2001, there was huge political pressure to “do something” multilateral in the wake of the 11 September 2001 attacks. The spin merchants at the WTO decided to call the new round of trade talks a “development round”, but they are struggling to maintain this façade. Several detailed studies have come to light showing that the kind of deal on the table will benefit a few rich countries; most, if not all, developing countries will lose out.

Sandra Polaski of the Carnegie Endowment for International Peace, for example, believes her research disproves the commonly held view that agricultural liberalisation benefits developing countries, and that it therefore had to be the key to achieving the development goals of the Doha round. “In fact,” she has written, “agricultural liberalisation benefits only a relatively small subset of developing countries.”

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Her study shows that those benefiting include Brazil, Argentina, most of the rest of Latin America, South Africa and some south-east Asian countries, notably Thailand. However, the losers in agricultural liberalisation include many of the world’s poorest nations, including Bangladesh, the countries of East Africa and the rest of sub-Saharan Africa. The Middle East, North Africa, Vietnam, Mexico, India and China also end up worse off.

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Even the World Bank has revised downwards its estimates of developing-country “gains” from the round – which it now projects to be in the region of just $16bn – and again points towards the bulk of these gains going to the larger developing countries.

The sting in the tail, even for the likes of Brazil and South Africa, is that the benefits could be far outweighed by the costs of opening markets in the manufacturing sector; another recent study estimates these could be up to $63bn.

Poor countries in the WTO understand the situation only too well. As one African delegate commented on the restarting of talks: “Resumption? This is a false resumption. The process is to legitimise the deal that the US and EU may come up with.”

The last round of trade talks – the so-called Uruguay round – was criticised as a stitch-up between the US and EU. The main difference now is that India and Brazil may end up also being party to a deal that is then passed to the rest of the WTO membership in expectation that they would rather sign than be perceived as responsible for the round “failing”.

The world desperately needs a democratic global system that regulates international trade for the benefit of the environment and development, but this is not it.

Multilateralism and multilateral rules are important. We do not want a world of unilateral trade policies based on the “might is right” exercise of political and economic clout, yet something is badly wrong with the rules that are being created and with the way in which they are being created.

The European Union and the US must both reform their agricultural subsidies. But just as important, if not more so, is to give developing countries the right to use policies of the kind that rich countries were once able to develop. This means, for example, the ability to use tariffs to help fledgling industries grow and it means effective regulation of foreign investors.

We also need to see a change in the way trade talks are conducted. Poor countries deserve to have their say rather than being presented with stitched-up deals that it is politically difficult for them to refuse. In short, what we need is trade justice, not free trade.

Peter Hardstaff is head of policy at the World Development Movement