Trade Practices

TRADE

Resolution

Be it resolved that we eliminate unfair trade practices and increase foreign aid to reduce the foreign debt of the South.

Trade is a powerful engine of economic growth, however, it can also fuel massive inequalities. - Justin Forsyth, Oxfam Policy Director

The World Trade Organization makes the rules that govern international trade, rules that are in effect loaded against poor people and poor nations. In the last two decades world trade flows have trebled, generating massive benefits for rich countries and multinational companies. Developing countries have received precious little of these benefits. In fact, during the same period, the world's 48 poorest countries have seen their share of global exports fall by half, to just 0.4 per cent. The WTO is one of the world's most important international institutions. The rules it makes affects the livelihoods and environments of billions of people. Yet the vast majority of people know very little about the organization or its influence on their lives.

Currently the average tariff on imports from the least-developed countries into industrialized countries will be 30% higher than the average tariff on imports from other industrialized countries. In 1998, total agricultural subsidies for producers in wealthy countries amounted to $353 billion (US) (more than triple the value of official development assistance provided by these same countries). In addition subsidies to agricultural producers of wealthy countries are used to dump surpluses on poor countries which further decreases the value of locally grown products in these poor nations.

Poorer countries are not represented at world trade meetings because their governments lack the financial resources to support their participation. 30 World Trade Organization member countries were not represented at the Seattle Summit Meeting due to lack of resources. Global trade practices continue to advantage wealthy countries and disadvantage the poorest nations in the world. Poor countries have opened up their markets under IMF structural adjustment programs whilst rich countries have jealously guarded access to their markets and continue to dump heavily subsidized agricultural exports. This dumping distorts markets and destroys the livelihoods of poor farmers. The WTO ministerial meeting in Seattle in November highlighted people's concern with this unfairness, and also with the unaccountable nature of WTO processes.

Trade can be a powerful tool in combating poverty, and therefore we should support a rule-based global trading system. Poverty reduction should be put front and center of everything the WTO does. Urgent reforms are required to both WTO process and agreements. Major reforms are required to transform the WTO into a transparent organization which makes decisions with the full participation of poor countries, and which allows poor countries to benefit from integration into the global economy. Global poverty could be radically reduced if the following fair trade practices were adopted:

US and EU eliminated subsidies for agricultural overproduction
redesigned intellectual property rules so that poor countries could benefit from existing scientific knowledge and medicines
improved market access for poor countries, especially for processed goods

At the Earth Summit in 1992, donors committed themselves to making progress towards the UN target of 0.7 per cent of GNP allocated to aid. Since then, overall aid has fallen to its lowest-ever level - falling to 0.22 per cent of donor GNP in 1997. This was a third lower than in 1990. The world's poorest regions, with the biggest deficits in basic education, have not been protected from the fall in aid. Particularly alarming in this context has been a $3.7 billion reduction in aid to sub-Saharan Africa since 1994. At the same time, foreign debt is crippling these countries. More money is flowing back into the north from developing countries than what they are receiving in aid. Since independence, the economic relations between most African countries and their former colonial powers have hardly changed at all. Coming to independence with little or no industry, the only source of foreign income for these former colonies was continued export of raw resources and borrowing. Borrowing at extremely high interest rates for massive "development" projects (largely determined by the north) has led to the serious debt situation that is crippling so many of these struggling nations today.

The "structural adjustment" policies laid down by the International Monetary Fund (IMF) and World Bank as conditions for obtaining help has had a devastating effect on the already suffering economies of virtually all countries forced to borrow money from these organizations.

Whilst no one would argue with the fact that there is/was a real need for some kind of economic and, indeed, political restructuring in many of these struggling nations, the conditions imposed by the IMF and World Bank clearly worsened an already serious condition. Countries receiving Structural Adjustment Loans (SALs) are forced to concentrate on increasing their exports so as to increase their income of ‘hard’ currency, needed for servicing their debts. For the majority of countries, particularly those on the African continent, this means increasing their production and exports of cash crops and raw materials for use in ‘developed’ countries’ industries. This means that growing food for the people in poor nations has been sacrificed to pay foreign debts. In addition the governments of these countries have been forced to cut back and even eliminate funding for social programs such as basic health and education.