What’s wrong with trade?

We live in a world of outrageous inequality, with millions of people trapped in poverty. More than anything else it is the institutions, conditions, rules and practices of international trade that keep poor people poor.

It is now more important than ever that this situation be transformed.

The facts and arguments below will show you the ill effects of trade to those in the developing countries.
Increasing poverty

Free trade has rarely reduced poverty. However, rich countries still insist on forcing free trade policies on poor countries, at the same time as refusing to implement free trade themselves.

As the world gets richer, so should the poor. But they aren’t. Instead millions of people are stuck in poverty, barely earning enough to survive. The institutions, conditions and rules of international trade are forcing free trade and privatisation on poor countries (but not on rich ones). It is this, more than anything else, that keeps poor people poor.

Free trade is not always wrong. It may sometimes be right to open a particular sector of the economy to competition. However, there is little evidence that forcing free trade on the poor helps them out of poverty. When countries such as Haiti, Nepal, Mali, Zambia and Peru have been `encouraged’ to open their markets to foreign companies and imports, and reduce government involvement in the economy, this has not reduced poverty.

Threats and bullying

For years, rich countries and the international institutions they control, such as the World Trade Organisation, the International Monetary Fund and the World Bank, have been quietly forcing poor countries to follow their economic `advice’.

Through a mixture of persuasion, threats, bullying and conditions attached to loans and aid poor countries are being forced to open their markets to foreign competition, to stop helping their vulnerable producers and to privatise essential services.

Double standards

Rich countries often claim to support free trade. They say free trade is the way to poverty reduction. However, despite this rhetoric, rich countries tend only to follow their own advice when they are certain to benefit. So whilst demanding that poor countries remove every possible trade barrier and privatise their basic services, rich countries continue to subsidise and protect their own industries and farmers.

This hypocrisy is greatest in agriculture. Rich Northern farmers receive hundreds of billions of US dollars in state subsidies each year which are used to reduce the price of agricultural exports. These subsidised exports flood poor country markets destroying the livelihoods of millions of poor farmers in these countries.

Real lives destroyed

At its heart, trade is not an economic issue; its a human one. It affects the lives and livelihoods of poor people across the world every day. Here are four of their stories:

`I could no longer support my family.’

Rice in Haiti – Muracin Claircin is one of thousands of rice farmers who have lost their livelihoods in the flood of cheap American imports. In return for World Bank and IMF money the Haitian government had to eliminate almost all import restrictions. In 1995 the import tariff on rice was slashed to just 3%, leaving small Haitian farmers with no chance of competing with subsidised US farmers.

`Sometimes I will go without food so that my grandchildren can have water.’

Water in Ghana – Hawa lives in the capital but has little access to water. And the price she has to pay is rising. This is because the World Bank and the IMF made water privatisation a condition of giving aid to Ghana and the price has risen to attract private investment. However, these private companies have no obligation to invest in poorer areas.

`What sort of efficiency is it that leaves thousands of farmers unproductive, families hungry and parents unable to send their children to school?’

Cotton in Kenya – Susie Ibutu works with poor farmers in Kenya. The economic reforms imposed by the IMF led to the spectacular collapse of the Kenyan cotton industry. Tariffs on imported clothing were removed and government support was drastically cut. By 2000, cotton production was worth less than 5% of its value in the 1980s.

`When we come back from the market it is heartbreaking. The money we get is not worth our hard labour’

Onions in Senegal – Bolo Sy has seen her livelihood destroyed. As a Senegalese onion farmer, she can no longer compete on the local market with subsidised imported onions from Holland. International trade rules do not allow the Senegalese government to protect the market and provide subsidies to local farmers.

What is true for rice in Haiti, cotton in Kenya, water in Ghana and onions in Senegal is also true for corn and coffee and milk and vegetables and countless other products in village after village, community after community, across the poorest regions of the world.