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Big News: The Great Trade Robbery

This week Oxfam released a report accusing the rich world of robbing the poor world of $100 billion a year by abusing the rules governing world trade. The campaign is launched as the 144 countries of the World Trade Organisation start to work on a new agenda of trade negotiations that will determine how world trade will be regulated in the future. WTO negotiations risk widening the global divide unless the rich world changes it’s approach on trade.

Ironically enough, that $100 billion figure is the same amount G8 leaders – from the US, UK, France, Germany, Italy, Canada, Japan and Russia - pledged in 1999 to cancel debt in poor countries. Two–thirds of that amount is still to be paid – and probably won’t be. Poor countries don’t get the aid pledged until they are further in debt, while falling victim to unfair trading practices.

The wealth divide between rich and poor countries is at an all-time high due to free trade. The world’s poorest five percent lost a quarter of their real income during the past decade while the richest five percent gained 12 percent. Rich countries have also reduced their aid budgets by $13 billion since 1992, while they continue to set trade rules and close off their markets to the poor. Take the poor countries that rely in a single commodity, like coffee or bananas. Last year, poor countries sold 20 percent more coffee than in 1998, yet they were paid 45 percent less due to falling commodity prices. Had they sold at the original prices, they would have been $8 billion better off. Ghana increased cocoa production by a third but we paid a third less than last year. Sure, rich countries provide aid to poor countries, but they would do better if they traded with these countries fairly.

The Oxfam report, “Rigged Roles and Double Standards:Trade Globalisation and the Fight Against Poverty”, claims that for every dollar given to poor countries in aid, two dollars are lost because of unfair trade, in part due to falling commodity prices. The report is campaigning for fair trade, not free trade as preached by the World Trade Organisation.

Fair trade could well benefit poor countries, many of whom are repaying aid back as debt service, rather than assisting the economy. Just over $35 billion in aid has been given to poor countries by G8 countries since 1999, yet that is the amount Sub-Saharan Africa will spend servicing its debt over the next three years. Poor countries spend more on debt service than health. But if trade was fair instead of free, the benefits to poor countries will mean that debt could be paid off quicker, debt service could be reduced and more money spent on education and health.

The Oxfam report goes on to say that if Africa, Latin America and Asia increased their share of world exports by just 1 percent, 128 million people could be lifted out of poverty. In Africa alone this would generate $70 billion – approximately five times what it receives in aid. It is also the amount that rich countries spend on agricultural subsidies over a six-week period.

But these rich countries, along with the World Bank and the IMF, tell poor countries to open up their markets and get rid of subsidies- and then dump subsidised goods back to them. This lowers commodity prices in these poor countries and forces people into poverty. At the some tine, rich countries fiercely protect their own markets from poor country exports. High these income countries demand that the poorer countries slash support for its farmers, yet they subsidise their own farmers to the tune of $1billion a year. This leads to over production that is then dumped on to the world market, suppressing prices which poor countries cannot compete against. The US has done this with subsidised rice on Haiti, forcing thousands of already poor rice farmers off the land.

Yet this is the sort of thing condoned by Trade Negotiations Minister Jim Sutton, despite welcoming the report. Sutton says he agrees with most of the report, saying he is a supporter of the aspirations of developing countries to use trade as a vehicle for reducing poverty. Trouble is, Sutton has been pursuing free trade agreements for years, but free trade is not fair trade. Sutton wants free trade that is fair, but, under the current World Trade Organisation’s rules, that is as realistic as hell freezing over. Sutton maintains that a rules-based trading system benefits both rich and poor countries. Well, that depends on who is making the rules. One clue, it’s not the poor countries, so guess who benefits from their own rules. That’s right, the rich countries and their multinational corporations with offices in poor countries.

Mr Sutton calls the US an ally, and has been attempting to get free trade agreement with Singapore and the US, while Helen Clark has take a “we’re ready when you are” approach. But making free trade moves with the US and describing it as an ally doesn’t sound very convincing when you realise that the US Congress recently voted a massive 64 percent increase in farm subsidies over a 10 year period. Yet Sutton would like to think that free trade will mean that the US will open its markets to NZ farmers. Well, it didn’t work for the steel industry, did it?

As the Oxfam report says, rich countries should be honouring promises to deliver improved access to their markets. Then globalisation will be producing real benefits for poverty reduction as trade will also be fair. And if developing countries increased their share of world exports by just five percent, they world generate $350 billion – seven times that received in aid. This money could be used to pay off 90 percent of poor country debt. Instead, these poor countries are losing $200 billion through rich countries’ protectionist policies.

And that ‘s not fair.

See also Big News: How Corporate Greed Helps the Poor

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