A Policy for International Trade
Independent Green Voice certainly believes in the idea of competition and enterprise, but we hold that an unfettered allegiance to "free trade" and all that it implies, is totally incompatible with a belief in a sovereign nation-state. Nor, of course, do we want a fully regulated economy either, which would suppress initiative and reward complacency. The following strikes a very good balance and is excerpted from the Christian Aid briefing paper, Trade Justice: frequently asked questions (April 05) http://188.8.131.52/campaign/trade/tradeq.htm
Trade Justice strikes a balance between the anti-nation anarchy of total free trade and the stifling restrictions of a completely regulated economy and Independent Green Voice endorses this policy briefing in its entirety.
What is Christian Aid calling for?
Christian Aid is campaigning for trade justice -- not free trade. Rich countries must stop using trade agreements and conditions attached to aid and debt relief, to push poor countries to liberalise their economies and open up to free trade. Poor countries must have the right to protect and support their vulnerable farmers and industries.
What's trade liberalisation, and are we against it?
Trade liberalisation means moving towards a system of 'free trade'.
It involves reducing government intervention in trade, for example removing barriers to trade such as tariffs and quotas, taking away support for producers and traders, privatisation and deregulation.
So, are we against it?
No. Sometimes liberalisation is the right policy for a particular sector or industry, but decisions have to be made on a case-by-case basis.
In the right circumstances liberalising a particular sector is exactly the right policy for a country to adopt in order to reduce poverty. It might create healthy competition, or attract investment.
But if used in the wrong circumstances, liberalisation can and does cause suffering on an enormous scale.
And the problem is that rich countries are forcing poor countries to liberalise when it isn't appropriate -- with devastating results.
Liberalisation should not be prescribed as a one-size-fits-all strategy for all poor countries all the time.
And it should be poor countries themselves, in consultation with poor people, who decide when they are going to use it.
On a cold winter's day it is clear that wearing a really thick warm coat can be a good idea. But we don't think everybody should be forced to always wear one whatever the weather.
Are we against international trade?
No. Rich countries make a fortune through international trade, and poor countries should have -- and need -- their share of this.
However, poor countries should also have the right to prioritise local or regional trade if they believe that is in their best interests.
Current international rules, as well as pressure from international institutions and donor governments, have tended to force them to focus on producing particular export crops. While this may provide foreign currency it doesn't necessarily meet the needs of local people and can threaten the supply of affordable food.
Also, the world as a whole has to deal with the environmental issues around transporting so many goods from one side of the world to the other before they are consumed.
For this reason, it may be that international trade rules -- designed to reduce poverty and protect the environment -- will need to regulate this trade and encourage more local production for local consumption.
But if restrictions are needed they should be implemented in ways that will not compromise the ability of poor countries to fight poverty, and should begin with the richest rather than the poorest.
How can poor countries' governments protect their producers?
Government intervention in the economy is not a new idea.
No country has ever become rich without helping vulnerable industries and traders for long periods, until they were strong enough to compete on the open market.
What poor countries could do, if trade rules allowed:
2. Give help to infant industries and farmers by:
1. Limit the amount of cheap imports coming into the country by:
- taxing imports;
- encouraging companies to use local products before imports.
- giving contracts to local companies to supply governments, offices, hospitals, schools etc;
- helping local producers get their produce to markets;
- offering preferential credit to producers.
3. Make sure investment by business benefits local people by:
- regulating the activities of transnational companies.
What specifically does Christian Aid want to change?
2. End the IMF and World Bank setting poor countries' trade policies
Christian Aid is calling for poor countries to be given the right to protect and support their vulnerable farmers and industries. This means changing trade rules and agreements. In particular we need to:
1. Stop the EU's free-trade agreements with former colonies
The EU is currently negotiating a trade agreement with 77 former colonies. As part of this Agreement, poor countries will have to accept an Economic Partnership Agreement that opens their markets further and limits the help they can give farmers and industry.
The IMF and World Bank have enormous power over poor countries. They use conditions attached to loans and debt cancellation to promote free trade. The UK Treasury and Department for International Development should use their influence on these institutions to argue for an end to these conditions.
3. Bring in special treatment for poor countries at the World Trade Organisation
WTO agreements should be biased in favour of poor countries, so that they have a better chance of using trade as a way out of poverty. This has already been agreed in principle at the WTO, but needs to be made more effective and enforceable.
What does Christian Aid want the UK government to do?
We need to persuade the UK government that, to end poverty and protect the environment, we need trade justice -- not free trade.
We need to change the rules that govern international trade so that poor countries have the freedom to help and support their vulnerable farmers and industries.
The UK government is a member of the European Union -- the largest trading bloc in the world. It negotiates its own trade agreements with poor countries and is a major player at the World Trade Organisation. The UK is also a major 'shareholder' at the IMF and World Bank.
In recent months the UK government has changed its language on 'free trade' so that it sounds more like trade justice, but it still has not given a clear statement that poor countries should be able to protect and support vulnerable producers and new industries.
And while the words have changed, little if anything, has changed 'on the ground.'
The Africa Commission report, Our Common Interest, [March 2005] acknowledges publicly that enforced liberalisation is not the right way to reduce poverty. This is a fantastic achievement and wouldn't have happened without the trade justice campaign.
The report is not official government policy but the commission was chaired by Tony Blair. Gordon Brown was also a member. And Tony Blair has stated clearly and publicly that the recommendations would become government policy. The report throws down a strong challenge to the government to amend their trade policies.
Now we need to make sure they do so.
How the South East Asian tiger economies did so well
South Korea, Taiwan, Hong Kong, Singapore -- these are developing countries that have become comparative giants in trade terms.
Their success has been phenomenal. Fifty years ago, South Korea was one of the poorest countries in the world. It exported little except wigs made with human hair. Its industries now export all over the world.
The financial crisis in 1998 only slowed it down -- it now has one of the fastest growing economies in the world again. Not only did these countries achieve economic success, but they did so while maintaining relatively fair distributions of income between rich and poor.
So what lessons can be learned? As you might expect, economists debate it! Each side tends to quote these countries as proof of their own case.
One side claims the success was due to the free market, and the other says it was due to government intervention.
The point is: the reason they are both able to do this is that these countries made use of a range of policy-measures for particular purposes.
It is far too simplistic to say that because these countries increased their 'trade' it was because of 'free trade'. They did indeed use market forces to encourage competition and efficiency.
But they also intervened substantially to protect and assist home-grown industries, favouring them over foreign competitors. This mix of policies is precisely the kind of approach the Trade Justice campaign says poor countries must have the right to adopt.
It has been shown to deliver unprecedented success, and it is also the approach that all rich countries have used on the path to their own present-day dominance.
TRADE JUSTICE JARGON
IMF -- International Monetary Fund -- and World Bank
They were set up with different aims. IMF lent to rich and poor countries to help with Balance of Payments problems. But both now work primarily in developing countries. They greatly influence the way poor countries trade, by only giving loans -- and renegotiating old debts -- after the countries have agreed to run their economies in a certain way.
Trade without any government intervention: who produces what and how much they are paid for it, is decided entirely by market forces. a product finds its own price level, influenced by the product's availability and how much demand there is for it (market forces).
Fairtrade labelling began in the Netherlands in the late 80s. In the UK the Fairtrade Mark and Fairtrade Foundation were developed and set up in the early 90s. Recently an international label was developed. 18 countries now sell Fairtrade-marked products. Fair trade itself began in the 1970s. A number of organisations were involved, one of which was Traidcraft, set up by Christian Aid and others. Traidcraft is one of the founder organisations of the Fairtrade Mark and the Fairtrade Foundation in the UK, buying direct from small-scale farms and farmers (instead of through profiteering middlemen) at guaranteed above-market prices. Fair Trade was devised in the early 1990s by Third World development agencies: wanting to help poor farmers and farm workers hard-hit by falling world market prices for commodities like coffee and cocoa.
Reducing what a government is allowed to do to manage an economy, leaving things to market forces. Liberalisation is a step towards 'free trade', and as a process is being forced on many poor countries by the organisations like the IMF, World Bank, and WTO.
Opportunities to trade and sell, or the demand there is for a particular product.
Protecting your own farms and industries from foreign competition, for example by putting taxes (tariffs) on imported products as they come into your country. Protectionism makes the products of other countries more expensive and therefore helps local producers.
Support that governments give to producers in order to promote employment or support economic growth. Subsidies might be in the form of financial aid or exempting certain sectors from tax. Subsidies enable producers to sell their products more cheaply than they would otherwise.
A tax imposed on imported goods. Tariffs can be an important source of revenue for governments, but can also be used to make imports more expensive and reduce competition for local producers.
TNC -- Transnational Corporation
Massive international businesses controlling operations in more than one country.
Helping poor countries to develop and strengthen their economies by weighting world trade rules in their favour. Weighted rules would apply until they are strong enough to compete without them.
Regulations and policies controlling the way countries trade with each other (ie. access to each other's markets).
WTO -- World Trade Organisation
The main rule-making body for global trade. Many believe it serves the interests of the richest trading countries and should be reformed.