We're Tricking The Poorer Nations


By John Humphrys

Sunday Times
November 4, 2001
Tony Blair tells us this is a moral war. So it is. He and President Bush may or may not be proved wrong about the strategy, and we may argue about it until the last B-52 has dropped its last bomb. So we should. It should not be necessary for a prime minister to tell us that we are not appeasers if we disagree with him.

But none of us can argue with the stated aims. We all want to defeat terrorism. Even if we believe in our hearts that the ambition is simply too great, there is a powerful moral force behind it. To argue otherwise is perverse.

So perhaps it is time to start thinking about what a moral peace might look like. A good place to start is in Doha, the capital of Qatar. Next week ministers from 142 countries will meet there for the latest outing of the World Trade Organisation (WTO). What they decide will have profound implications for the wellbeing of the poorest people on earth. They could make a powerful contribution to a moral peace -or they could revert to type. The protesters who disturbed the calm of Seattle a couple of years ago see the WTO as the problem and not the solution. Some think it is trade that keeps the developing world poor. How wonderful it would be to turn back the clock to the days when contented peasants lived happily off their small plots of land - before the wicked westerners and their own corrupt governments conned them into growing food for export and cheated them out of the profits.

It is a seductive notion and entirely unrealistic. History and economic theory are against them.

Trade is the engine of economic growth. Even Oxfam -no wide-eyed supporter of the WTO -argues that trade has the "potential to act as a powerful motor for poverty reduction". On its calculation, every 0.7% increase in exports from a developing country generates as much income as it receives each year in aid.

The problem does not lie in the freeing up of trade. It lies in the way free trade is practised by the rich, developed countries. They are mighty strong on rhetorical enthusiasm for it. They just don't want to practise it when it comes to the developing countries. The effect on the poorest has been disastrous. The detail of trade arrangements is mind-numbingly tedious, but the central problem is simple enough.

Over the past 20 years most of the developing world has halved its import tariffs. Many countries had no choice. In the best Godfather tradition, they were made an offer they could not refuse by the International Monetary Fund and the World Bank. When you cut your tariff it makes it easier for countries to export to you. That's fine if they do the same in return. But they do not.

What the rich countries have done is to cut tariffs between each other, mostly through trade agreements such as we have in the European Union. It is estimated that 60% of all world trade is now conducted under such deals. The poorest countries can only peep between the curtains that cover the windows of these rich gentlemen's clubs.

Oxfam calculates that for manufactured goods, tariffs facing the exports from developing countries to wealthy countries are, on average, four times higher than goods travelling in the opposite direction. The World Bank estimates that overall the trade barriers maintained by the developed world cost developing countries about $ 100 billion a year. That's twice the amount they receive in aid.

What makes it even worse is that it is goods such as textiles and clothes that are hit hardest -the very industries that employ the poorest people in the poorest countries.

All this was meant to change. As far back as the Uruguay trade round of 1995, it was agreed that the restrictions would be phased out within 10 years. But the rich countries have been dragging their well-shod feet. The latest estimate is that developing countries will still face quota restrictions on 80% of their exports by 2004.

Agriculture matters even more. Three-quarters of the very poorest people in the world live in rural areas. Once again, Uruguay was supposed to offer a better future. Once again, it has not happened.

The promise was not only that tariff barriers would be reduced, but also that the huge subsidies paid to farmers in rich countries would be slashed. The barriers are still there -insurmountable in many cases. And you and I are still forking out a fortune in taxes to keep some of the world's wealthiest farmers in the style to which they have become accustomed.

At the end of the 1990s, subsidies accounted for almost 40% of the value of OECD farm output. That is precisely the same as it was 10 years earlier. The total value of subsidies to farmers in the rich northern countries is a colossal $ 252 billion a year. Remember how we were going to reform the EU's common agricultural policy? Dream on.

The poorest lose twice in this particular game. They struggle to export because of the tariffs and the unfair competition. And they cannot compete with subsidised food dumped on their own doorsteps. So much for free trade.

If the poor countries try to fight fire with fire they usually end up getting burnt. Some countries have managed to get a bigger slice of the export cake by imposing an obligation on foreign investors to buy what they need from local industry. It helped countries such as South Korea and Taiwan to prosper. Now it has been outlawed by the WTO. Can't have those little squirts playing us at our own game, can we?

Patent restrictions are another way of keeping the poor in their place. They are tougher now than they have ever been. That's fine if you own plenty of patents. The United States earns a vast fortune from royalties. But it's not so fine if you're a minnow trying to learn to swim in this shark-infested sea. Relax the rules? You've gotta be kidding.

The rules affect the health of the poorest, too. When the South African government tried to import cheap generic copies of patented drugs to help people dying from Aids, no fewer than 39 drug companies went to court to stop them. They were forced to give in eventually.

A senior man at one of the biggest companies admitted privately to me the other day that, yes, perhaps it had been a "bit of a PR error". But the rules stand. It is argued that without them, drug companies would not invest the money needed to develop new drugs. The American government supports them and has threatened rule-breaking countries with severe sanctions.

Funny, isn't it, that when America needed millions of doses of Cipro to protect its own people against anthrax, the government leant on the manufacturers to relax its patent. How much more is an American life worth than an African life?

One way out of poverty for a poor country is to find oil. A more reliable way is to educate its children. Once again the rich nations have attended conferences and made speeches. "Good quality universal primary education" should be available by 2015. That was promised at the last big one. Fat chance. A vast number of African children will not be going to school at all in 2015, just as they don't today. Typically, those who do are lucky to get three or four years' education at best. More aid would help. We are giving less. For years the United Nations target for aid from rich countries to poor has stood at 0.7% of their GDP. Today it stands at 0.22% In a moral peace the rich would do more for the poor and help them to help themselves. It does not happen for a combination of reasons: indifference, neglect, short-sightedness, political cowardice. It is always tempting for governments to cave in to powerful business lobbies and to avoid upsetting the voters.

We can't go on like this. Pascal Lamy, the EU's own trade commissioner, has made the connection between what happens in Doha next week and what happened in the United States on September 11: "The greater the military and security pressures -and the greater the risk that resentment will be strong -the more we have to push for the generous opening of our economies to developing countries."

Maybe this time we will get more than words. Maybe.

More Information on Inequality of Wealth and Income Distribution
More General Analysis on Poverty and Development

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