Double Standards in International Trade

Oxfam Says Rich Nations Rig the Rules, But Others Fault the Poor Too

OXFORD, England, MAY 11, 2002 ( World leaders gathered in Monterrey, Mexico, in March to examine aid for the Third World. Just a month later, Oxfam International issued a report criticizing aspects of the international commerce system.

The report, entitled “Rigged Rules and Double Standards,” does not condemn international trade in itself, but contends rather “that the rules that govern it are rigged in favor of the rich.”

Oxfam International, a non-governmental organization, is a federation made up of the national Oxfam groups in a number of countries. The NGO notes that while developed countries express their commitment to fighting poverty, in practice they obstruct the exports that are essential if the Third World is to develop economically. For example, the study notes that rich countries spend $1 billion a day on agricultural subsidies. This leads to overproduction of produce, which is then dumped on world markets, undermining the livelihoods of millions of small-scale farmers in poor countries.

When poor nations try to export to rich-country markets, “they face tariff barriers that are four times higher than those encountered by rich countries,” Oxfam contends. Those barriers cost them $100 billion a year — twice as much as they receive in aid, notes the report.

Oxfam tries to measure which countries are most active in setting up these barriers. It has created a “Double Standards Index” that measures 10 dimensions of rich-country trade policies. In this list, the European Union emerges as the worst offender, narrowly beating the United States.

But Oxfam also tries to break out of the polarized debate over globalization and commerce. It notes how “Globaphiles” take an uncritical view of world commerce and that their prescription for the future is “more of the same.” On the other side are the “Globaphobes,” who argue that trade is inherently bad for the poor, leading to more poverty and inequality.

Oxfam considers this a “false debate,” affirming that “well-managed trade has the potential to lift millions of people out of poverty.” But, it warns, “increased trade is not an automatic guarantee of poverty reduction,” since much depends on the rules that govern international commerce.

How this trade is organized is of crucial importance for Third World economic development. The report points out that exports now account for more than one-quarter of the combined gross domestic product of developing countries, a proportion which is higher than for rich countries.

If developing countries increased their share of world exports by just 5%, notes Oxfam, this would generate $350 billion — seven times as much as they receive in aid.

Exports can help poorer countries in a number of ways. Not only do they provide a direct source of income for the poor, but they also create opportunities for employment and investment. The report mentions the success of many East Asian nations as an example of what can be achieved when export growth succeeds.

Yet the promise of increased wealth through exports has not been fulfilled in many regions. Oxfam observes that rich countries in the 1990s increased the per capita value of their exports by $1,938, compared with $51 for low-income countries and $98 for middle-income countries. And export success in developing countries has been limited mainly to East Asia, with South Asia and sub-Saharan Africa together accounting for less than 2% of the exports in manufactured goods from developing nations.

Reforms needed

Oxfam suggests a number of points for reform. In order to help poor countries increase their exports, it calls for duty-free and quota-free access for all low-income countries. It also wants a general reduction in tariff peaks, so that no tariffs applied against developing country exports exceed 5%.

The report also asks for a comprehensive ban on export subsidies, and a restructuring of farm subsidies to achieve social and environmental objectives, rather than increased output.

When it comes to imports by developing nations Oxfam recognizes that “carefully designed and properly sequenced import liberalization in developing countries can also benefit the poor.” However, this needs to take place as a part of a coherent poverty-reduction strategy in order to avoid the ill effects of an uncontrolled liberalization.

On the question of the behavior of transnational companies, the report comments that there is good- and bad-quality foreign investment. Oxfam asks that governments enact and enforce national employment laws consistent with the standards of the International Labor Organization. It also recommends that home countries hold the investing companies accountable for their actions in developing countries.

Another problem arises from the fact that many of the poorest countries remain heavily dependent on primary commodities. More than 50 developing countries depend on three or fewer such commodities for more than half their export earnings. Uncontrolled price changes have led to many problems for these countries.

To counter that, the report recommends that a body be set up to oversee global commodity markets, that would have as one of its goals the reduction of price volatility. This new institution should “include financing mechanisms designed to bring supply back into balance with demand, at reasonable price levels.” It should also work to support diversification, and to increase the value of exports through strategies for adding value to the products of low-income countries, recommends Oxfam.

Reaction to the report

World Trade Organization director general Mike Moore welcomed the Oxfam report. “Oxfam has built some sound arguments,” he commented in a press release dated April 11. “Oxfam´s criticism of rich country barriers to imports from poor nations, for instance, is entirely correct.”

But Moore criticized the report for not taking sufficiently into account the actions being undertaken by the WTO to liberalize world trade and the gains already made in this area.

“It´s important to recall that since 1900, average life expectancy has risen from 30 years to 67 years, that since 1970 the percentage of people in the developing world who are starving has fallen from 35% to 18%, and that today about 80% of the people in the developing world have access to clean drinking water, compared with only 30% in 1970,” Moore wrote.

An analysis of the report, published by a Financial Times opinion columnist Martin Wolf on May 8, was more critical. Wolf acknowledged that the report makes some valid points, such as the problem of low commodity prices and the bias of the trade system in favor of the interests of rich countries. He argued, however, that often the failure of poor countries to break into world markets is due to their own deficiencies, and not just protectionism. Wolf also points out that most poor countries maintain “significantly higher trade barriers than rich ones.”

While trade and foreign investment have significantly helped many poor countries, too many people have been left out of this process. And severe poverty remains a pressing problem in many countries.

For this reason John Paul II has called for a globalization of solidarity to fight against poverty. In remarks April 11 to the members of the Pontifical Academy for Social Sciences, the Pope invited political and economic leaders “to create systems of solidarity” so as to avoid negative consequences of globalization. The increasing interdependence of countries has both positive and negative results, noted John Paul II. What is needed, he said, is a “stewardship of the earth” that will “be at the service of persons and peoples and not just of profit.”

Support ZENIT

If you liked this article, support ZENIT now with a micro-donation

Support ZENIT

If you liked this article, support ZENIT now with a micro-donation