Human development and international trade

According to the report: "In the midst of lan increasingly prosperous global economy, 10.7 million children every year do not live to see their fifth birthday and more than 1 billion people survive in abject poverty on less than $1 a day. In human development terms, the space between countries is marked by deep and in some cases widening inequalities in income and life chances. One fifth of humanity live in countries where many people think nothing of spending $2 a day on a cappuccino. Another fifth of humanity survive on less than $1 a day and live in countries where children die for want of simple anti-mosquito bed net."

Today, 18 of the poorest countries, with 416 million people, most of them in sub-Saharan Africa, have worse living standards than in 1990. "Life expectancy gaps are among the most fundamental of all inequalities. Today, someone living in Zambia has less chance of reaching age 30 than someone born in England in 1840 -- and the gap is widening."

"No indicator captures the divergence in human development more powerfully than child mortality. Sub-Saharan Africa represents for 20 per cent of births worldwide yet it accounts for 44 per cent of child deaths. The world's richest 500 individuals have a combined income greater that of the poorest 416 million."

As far as unequal distribution of income is concerned, the report highlights the fact that the 2.5 billion people living on less than $2 a day -- 40 per cent of the world's population -- account for only 5 per cent of global income. The richest 10 per cent, almost all of whom live in high-income countries, account for 54 per cent. The UNDP warns that if this trend continues, the MDGs -- to reduce extreme poverty by half; to reduce child mortality by two-thirds, and achieve universal primary schooling by 2015 -- will be missed by a wide margin and "the Millennium Declaration will go down as just one more empty promise."

So, the question is: how can we reverse this trend? In an attempt to answer this question, the UNDP report points out: "Under right conditions, trade can be a powerful catalyst for human development." Then it adds something which, in my opinion, is the crux of the issue. It says: "Rich country trade policies continue to deny poor countries and poor people a fair share of global prosperity -- and they fly in the face of the Millennium Declaration."

The movement to dismantle the complex structure of trade barriers and to promote free international trade owes its origin to the International Trade Conference held in 1947. There, in Geneva, a multilateral treaty called the General Agreement for Tariffs and Trade the (GATT) was signed by 23 countries. The World Trade Organisation was established in 1993. It replaced GATT forum and incorporated all existing GATT treaties. But there was an important difference between the GATT and the WTO -- the WTO was given legal powers to enforce the treaty obligations. At present, there are 148 members in the WTO.

There is no doubt that since 1947, the nine rounds (including Doha) of lengthy trade negotiations under the GATT and WTO have expanded trade and generated enormous wealth, but as confirmed by the Human Development Report of 2005, it has been distributed in a blatantly unfair manner between the rich and poor nations. Most of the benefits of trade rounds have gone to the industrialised North. In the words of Amartya Sen, this trend has, so far, created "massive levels of inequality and poverty."

Under the Uruguay Round, the poor countries took significant steps to lower barriers and opened their markets to manufactured products from the industrial North, which made solemn promises to open its market to agricultural products, textiles, clothing, footwear, and other basic products in which the poor countries have a comparative cost advantage. The same promises, which were made again under the Doha Round (which was supposed to be the Development Round) remain largely unfulfilled. This was the principal reason why the ministerial meeting of the WTO at Cancun in 2003 failed so miserably.

Agriculture is most certainly the area where the rich nations, in general, and the US, Japan, and the EU, in particular, have played and are still playing a shameful and hypocritical role. On the one hand, they "impose tariffs on imported farm products that are eight or ten times higher than those levied on industrial products," which effectively rigs the trade game. On the other hand, they spend huge sums of money -- nearly one billion dollar a day -- on farm subsidies. Just to give a couple of examples, the EU imposes a tariff of more than three hundred percent to protect its totally inefficient sugar production and gives a subsidy of $2.20 a day or more for each French cow.

Actually this protectionist policy punishes the farmers in poor countries in more than one way. They generate vast surpluses because of overproduction which, in turn, inundate the international markets at prices below the real production cost. Farmers in poor nations cannot compete with these subsidised products -- cotton, wheat, rice, corn etc -- even within their own countries. This policy, which cannot be described by any other name but dumping, literally ruins the possibility of farmers from poor countries of ever getting out of poverty. The situation becomes even more acute in countries where their economic survival is closely linked to one single export crop. This year alone, United States will dole out 4 billion dollars in subsidies to its cotton farmers, ruining the lives of many West Africans, who according to many experts are the most efficient cotton farmers in the world.

After the recent tragic incidents at the Spanish enclaves of Ceuta and Melilla, which guard the southern frontier of the European Union against illegal immigrants from the South, there has been much hypocritical talk of sympathy in Europe for the hundreds of thousands of sub-Saharan Africans who want to migrate to Europe because of poverty at home. They are not allowed to enter Europe to work. Yet at the same time, through high tariffs and generous farm subsidies to the EU farmers, they are not allowed to market their products in Europe. Instead of uttering empty words of sympathy, what is required is for the EU to open its own market to agricultural products from these poor African countries. This, I am sure, would gradually extricate them out of their current desperate situation.

After four years of bitter wrangling, the mood in the industrialised North seems to have changed somewhat. Both Peter Mandelson, the EU trade commissioner, and Robert Portman, the United States trade representative have called for "a more equitable pattern of globalisation." But do they really mean what they say or is it merely a cosmetic exercise to delay the reforms?

At the much-publicised G-8 meting in July where rhetorical expressions like "make poverty history" were uttered with apparent enthusiasm, the emphasis was on aid, not on trade. Promises were also made to phase out export subsidies, but no specific dates were mentioned. More recently statements have been made promising cuts "in trade distorting subsidies." What does this mean? What about other subsidies which are euphemistically described as "non-distorting subsidies"? Will all the "non-distorting subsidies" obtain the seal of approval from the WTO? Who is going to define what is a "distorting" and what is a "non-distorting subsidy"? Is this not an attempt to hoodwink the poorer nations of the South into accepting a deal which will make little practical difference to their current situation? The US government is also trying to use another trick to maintain the status quo. The Senate Agriculture Committee has just voted to extend the subsidies until 2011 by sneaking them into the main body of the budget bill and not the farm bill. These subsidies were supposed to expire in the 2007 farm bill.

The next meeting of the WTO is scheduled to be held in Hong Kong from December 13-18. There is a danger that this meeting may suffer a similar fate as the one at Cancun in 2003, if the industrialised North does not come up with a serious proposal which addresses the crucial issue of agriculture. On September 14, 2005, President Bush declared: "The United States is ready to eliminate all tariffs, subsidies, and other barriers to free flow of goods and services as other nations do the same. This is key to overcoming poverty in the world's poorest nations." The Hong Kong meeting of the WTO will give him an opportunity to prove that he means what he says.