International trade carries enormous potential for reducing poverty worldwide and driving economic growth. A 1% increase in the developing countries’ share of world exports would lift 128 million people out of poverty. But the current global trading system discriminates against developing countries and hinders poor country participation in the global economy.
The biggest problem is agricultural policies in rich countries. Both domestic agricultural production and export of agricultural goods in many rich countries are subsidized, thereby keeping world prices artificially low. This damages earning opportunities for farmers and for rural communities in poor countries, as well as denying them access to rich country markets.
Second, poor countries can face limited market access in rich countries due to quantitative restrictions and tariff duties. Market access for developing countries is restricted most for labor-intensive goods and services in which poor countries should have a comparative advantage. In addition – in the case of some types of products – poor countries face higher tariffs than industrialized countries upon entry to rich markets. Even where market access is theoretically ensured, complicated implementation rules can make it very difficult for poor countries to exploit these opportunities. >>NEW Download Millennium Campaign Brochure: Trade – The Role of the Doha Round in Achieving the Millennium Development Goals.
The most trade-distorting policies are in the agriculture sector. Many developing countries still depend on the agriculture sector.
Three-quarters of the world’s poor-900 million people-live in rural areas and depend on agriculture or related activities. Rich countries-the EU is among the worst offenders-grant large support to their domestic agricultural producers, totalling $300 billion annually.
These subsidies lead to worldwide overproduction that effectively depresses world prices, floods poor country markets and undermines incentives and earning opportunities for farmers in developing communities. In the meantime, agriculture policies in OECD countries cost consumers and taxpayers $300 billion every year-six times annual OECD spending on ODA.
Reform of agriculture policies reducing overall levels of support, would free up hundreds of billions of dollars and, in effect, reduce the domestic burden on consumers and taxpayers; at the same time, this would help to eliminate harmful import barriers and export subsidies. As two-thirds of the world’s poor live in rural areas and depend on agriculture, putting an end to the distortion of international and local agriculture markets is a crucial ingredient to achieve the first Millennium Development Goal.
Developing countries continue to face restrictions to market access. Despite significant liberalization in recent decades, trade barriers are still high-especially on labor-intensive goods and services in which developing countries have a comparative advantage.
Poor country exports are locked out by high tariffs (concentrated on agricultural products, textiles and clothing), by tariff escalation (whereby the tariff increases the moment a commodity is processed) and by non-trade barriers. Barriers on products from developing countries are twice as high as those on developed country products. Reducing tariff peaks on products that are of export interest to poor countries will be essential for them to trade their way out of poverty.
Preferential Market Access
One additional point on market access is that even when ‘preferential’ market access privileges are available, rules of origin make it extremely difficult for poor country exports to profit from them. Giving least developed countries (LDCs) free market access under Everything But Arms, for example, has delivered very little and this and other agreements need to be evaluated to ensure they are made more effective by simplifying and relaxing the rules of origin.
On multilateralism, it is important for poor and small developing countries to engage in the multilateral trade system (the WTO), where they can exercise a collective negotiating powerto facilitate reforms in policies that are critical for their development.
They should first and foremost focus on making the Doha Round deliver the promised benefits for development.
Secondly, the priority for Sub-Saharan Africa would be to develop their own markets by regional integration (the African Union). Given their limited negotiating capacity, it is impossible for countries in Sub-Saharan Africa to play chess on 3 boards at the same time.
As the WTO and AU internal market is much more important for these countries, the EU should consider not pushing EPAs for Sub-Saharan Africa until the Doha Development Round is concluded. Moreover, EPAs seem inconsistent with promises that G90 countries would not be forced into new disciplines. Developing countries perceive EPAs as a vehicle for the EU to require reciprocity and reintroduce disciplines on investment and competition that have been explicitly excluded from the Doha Round in 2004.
Rich countries must deliver on these Goal 8 commitments–well in advance of 2015–if poor countries are to have any chance of meeting the Goals.
So what will it take to ensure that developed and developing countries both hold up their ends of the global deal? You.
We must hold governments in both the North and the South to their Millennium pledges. We must make it clear to them that we refuse to miss this historic opportunity to put an end to poverty!