Trade Barriers Still Leave Some Out in the Cold

Return to Protectionism Looms If Doha Summit Falters

DOHA, Qatar, NOV. 10, 2001 ( The World Trade Organization summit got under way Friday in this Persian Gulf state in the Arabian peninsula. The site was chosen to limit the chance for the protests that have marred past summits. But it couldn´t quell the debates in the media.

Wednesday in the Globe and Mail, the prominent anti-globalization writer Naomi Klein compared U.S. trade negotiators to religious fanatics and derided them for being “Kamikaze Capitalists,” given their dogged insistence in promoting free trade.

For Klein, the “god” of the trade ministers is economic growth and the negotiators are “praying for” the sign of successful trade negotiations in order to encourage markets.

Charlotte Denny, economics correspondent of the Guardian newspaper, affirmed Oct. 2 that the developing countries are unhappy with the current system. Richer countries promote free trade while at the same time maintaining high tariffs in agriculture and textiles — key export areas for poorer nations.

A lot is at stake in the Doha summit. Developed nations are in an economic downturn, and trade flows are shrinking for the first time in two decades, the New York Times reported Nov. 1. If the talks fail, as happened in Seattle two years ago, some fear a return to protectionism, which would be a blow to many economies.

Apart from disputes over farm products and textiles, another area of conflict involves intellectual property rights, and in particular drug patents. Brazil, India and a number of African countries want to loosen restrictions on patents for AIDS and malaria drugs. Their position was strengthened when Canada threatened Bayer´s patent rights to produce the anti-anthrax medicine Cipro, and the U.S. government insisted on a price reduction for the antibiotic.

In the Sunday Times on Nov. 4, commentator John Humphrys pointed out the importance of economic growth for poorer countries. Even the aid organization Oxfam, noted Humphrys, admits that trade can act as a powerful means to reduce poverty.

But there is a problem with the way richer nations practice trade. While the Third World has carried out many economic reforms and lowered tariffs, often at the insistence of the World Bank and the International Monetary Fund, the rich countries have not played their part, argued Humphrys.

The developed world has cut barriers to trade, but mostly within the First World, while leaving intact tariffs on imports from the low-wage sources. Humphrys said that at the end of the 1990s, subsidies accounted for almost 40% of the value of the farm output of members of the Organization for Economic Cooperation and Development — the same as 10 years ago.

The problem is that opening up markets is difficult for governments because it is unpopular with some voters and business lobbies.

Nicholas Stern, the World Bank´s chief economist, noted that rich nations spend up to $1 billion a day on agricultural subsidies, which is more than six times the amount they provide in development assistance.

Quoted on Nov. 6 in the Washington Post, Stern said, “The combination of those subsidies and high tariffs in rich countries for agricultural products is in my view something which is untenable. ? It´s a rip-off for consumers and the taxpayers of rich countries, and it´s seriously damaging to the prospects of poor countries.”

Free trade defended

Other commentators defended the WTO and reaffirmed the need for free trade. Writing in the Financial Times on Sept. 4, former WTO director-general Peter Sutherland maintained that success at Doha will encourage improvements in “growth, development, poverty eradication, a better environment, new jobs and, yes, improved labour, social and political conditions.”

Sutherland admitted that not enough action has been taken to redress the claims of poorer countries, a situation he termed as “scandalous.” However, he argued for a reform of the current rules and against those who wish to destroy the current system.

The Financial Times argued Nov. 6 that trade liberalization could bring huge gains. The paper referred to a University of Michigan study that predicts global income would rise by $612 billion if trade barriers were cut by a third. The World Bank estimates the increase could be as much as $2.8 trillion if all barriers were eliminated.

The three main areas where changes can be made, noted the Financial Times, are agriculture, industrial tariffs and services.

A Nov. 8 editorial in the Washington Post conceded that the anti-globalization position has an element of truth, in that many countries remain mired in poverty and that some trade rules inhibit their progress.

The editorial, however, quoted a recent World Bank study that divided developing countries into two groups: a club of 24 globalizers that have doubled their ratio of trade to gross national product over the past two decades, and a residual group that on average trades less than it did 20 years ago.

For the first group — with 3 billion people — income per person grew by 5% a year during the 1990s. In the non-globalizing group — with 2 billion people — average incomes fell by nearly 1% a year over the same period.

The World Bank, in an Oct. 31 press release, affirmed that its latest yearly report on prospects for developing countries shows how expanding trade “could well increase annual GDP growth by an additional 0.5% over the long run — and by 2015 lift 300 million people out of poverty.”

The report proposes four tasks needed to ensure development through trade: launching a Development Round in the WTO; promoting global cooperation to expand trade outside the WTO; encouraging new policies in high income countries to provide assistance that will expand trade; and advocating for trade reforms within developing countries to accelerate development.

Ethical guidelines

On Oct. 30 the Holy See published a note on the Doha summit, outlining a number of points that should be considered in order to ensure poorer countries are fairly treated.

The note agreed with critics of the WTO that sufficient progress has not been made in integrating fairly the developing nations into the global markets.

The Holy See asked the WTO “to enhance the means for achieving development at the disposal of the developing countries in a manner consistent with their respective needs and concerns.” As well, the document calls for wealthier countries to open up their markets to imports from poor countries.

The note in fact recognizes the benefits of free trade and calls on developing countries to “avoid the temptation of taking a crude protectionist path.” The document continues: “In today´s circumstances, generally, protectionism can be of only limited value to developing economies.”

At the same time, the Holy See points out how economies at very different stages of development cannot be subjected to a universal or rigid application of rules. A fair free trade system must “redress, as much as possible, the disadvantages, in terms of economic and negotiating power, of less industrialized economies and of commodity producer economies.”

Greater technical assistance, an adaptation of the rules on intellectual property rights, and transparent and inclusive decision-making structures are some of the areas mentioned by the Holy See where action is needed in favor of developing countries. At stake is the future of billions of the world´s poor.

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