Analysis: Unfair trade

With the current trading regime, poor countries have limited opportunity to use trade to achieve development. Most have liberalised rapidly and broadly according to recommendations and demands by the World Trade Organisation (WTO) and the international finance institutions. This gives very few opportunities to protect domestic markets, and poor countries usually have no chance of subsidising production in the same way as rich countries do.

Local and national producers in poor countries are often out-competed by producers in rich countries, even in their own countries, and they still experience limited access to markets for several of the products they wish to export, for example textiles.

Current trade rules make it very difficult for a country to build up production to a point where it is competitive in a global market. This results in inequitable exchange conditions in global trade, and trade not leading to development, but rather reinforceing existing differences.

International trade can contribute to development, provided the developing country is given the political space to chose for itself if, how much and when it wishes to open its markets.  Studies reveal that it is those countries that already have reasonably extensive and fairly advanced production that have the most to gain from liberalisation of trade, while the poorest countries will often lose out. This is indicated amongst other places in Making Global Trade Work for People (UNDP: 2003), a report that confirms that economic growth has to come first, before liberalisation will be of any use. Poor countries that have rapidly reduced tariffs have often experienced their companies collapsing and jobs being lost. It is the most marginal production that is out-competed first and women are over represented in this sector. UNCTAD’s report on the least developed countries in 2004 shows that the increase in number of people living in poverty in a ten-year period was much higher in open, liberalised economies that in countries which had a higher degree of protectionism. Even if liberalisation often reduced prices to the consumer, it is a bigger problem if it destroys the foundation for production and employment.

Current trade regimes have been shaped without considering what would have been best for the Earth’s environment. The WTO agreement is not in harmony with the UN’s environmental conventions, for example the Convention on Biological Diversity (CBD). In addition there are various trade agreements that prevent the transfer of environmental technology, by including strict patent-rights regimes that make technology transfer both expensive and delayed.

Negotiations on liberalisation of environmental services can work against their best intentions if it prevents poor countries building up their own systems, for example for purification of water or treatment of waste. 

In the WTO negotiations the liberalisation of trade of food has been dealt with in the same way as other goods. This has resulted in a strain on food production in many countries, and not least led to producers in developing countries being out-competed by cheap imports from the global market. At the same time the WTO has not been able to stop the EU’s and the US’s use of direct or indirect export subsidies, something that leads to overproduction and dumping on the global market at prices far below the real production costs.

Trade policies are controlled today above all by the multi-lateral agreements reached by the WTO and bilateral trade deals. These agreements are the result of negotiations that are neither transparent nor democratic, and that reflect an uneven balance of power between the negotiating parties. The WTO has universal liberalisation as its goal, and when negotiations are dominated by the rich member states they do not take account of the developing countries’ interests and viewpoints. Since 2001 negotiations on a new multi-lateral trade agreement have been ongoing, under the direction of the WTO – the so-called Doha round. The ruling powers want this to be finished as soon as possible during the course of the next four years. The finance crisis has created a certain momentum because many countries fear loss of market share as a result of protective measures and subsidies given to individual country’s producers. But the finance crisis has also proven that liberalisation of the finance sector had gone too far, such that countries had lost many of the control mechanisms for their economies. This realisation will possibly give more room for a more nuanced approach to the liberalisation of the financial services in WTO’s General Agreement on Trade in Services (GATS).

If trade is to contribute to development a global regime is required that is fair, and in which all countries have equal power to influence the forming of the regulations. This implies that the WTO must change the way it negotiates and that new bi- and multilateral trade agreements must allow for a more differentiated system where poorer countries are allowed better conditions than rich ones, and where developing countries are allowed to decide for themselves how they shall regulate trade.

Rich countries such as Norway must therefore avoid demanding that poor countries should open their markets to our export products, but rather argue for and accept that developing countries need political negotiating space to be able to control how trade will contribute to their development. These would be the same conditions as Norway and other rich countries once had, and implemented. Rich countries must simultaneously increase access to their own markets for developing countries’ products and through aid help them to improve production capacity such that trade becomes possible. ForUM will work to make Norwegian authorities understand the need for developing countries to be treated differently, the requirement to make space for this, and the necessity for negotiations on new trade agreements to be more transparent, including for civil society.

Trade

Thematic Advisor:
Ane Schjolden
Cell 478 34 540

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We are a contact point for the coordination of policy initiatives and recommendations. Many of the following documents are in Norwegian adressed to the Norwegian government. But we also influence international processes so quite a few of them are in English.

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