Global Policy Forum

By Brian Kenety

Trade restrictions imposed by rich countries are costing the world's poorest "a staggering US$2.5 billion a year in lost foreign exchange earnings", Oxfam says in a report released on Monday. The 27-page report, "Rigged Trade and Not Much Aid: How Rich Countries Help to Keep the Least Developed Countries Poor", to be presented at the NGO Forum in advance of the UN Conference on Least Developed Countries, warns that Northern governments are guilty of offering "empty promises" to the poor when it comes to trade, aid, and debt relief.

While Least Developed Countries (LDCs) face a complex array of problems, the report finds that their efforts to combat poverty have been "systematically undermined" by Northern governments. Oxfam Senior Policy Advisor Kevin Watkins, who will present the report, says: "On trade, the industrialized countries have operated a policy of highway robbery masquerading as market access preferences."

The United States and Canada are identified as the "worst offenders", with Bangladesh losing $7 from trade restrictions for every $1 it receives in US aid and five times that for every dollar it receives from Canada. "Indeed, losses associated with US trade barriers are roughly equivalent to total US aid to the LDCs," it says. Trade restrictions in Canada cost LDCs an estimated $1.6 billion, or approximately five times aid flows to the poorest countries. Similarly, Japanese trade restrictions cost Bangladesh more than double the amount Tokyo provides in aid.

At a time when aid to the developing world has fallen to its lowest level since the early 1970s, around 11 percent of exports from LDCs face tariff peaks in excess of 15 percent, which is three times the share of imports affected from other countries. "In areas where they have a capacity to export, LDCs face higher tariffs than other countries, including developed market economies," the report says.

Average tariffs in the European Union, the United States, Canada and Japan - the so-called Quad countries that account for over half the world's trade - are relatively low, at approximately 5 percent. "However, the average obscures very high tariffs in sectors of most relevance to poor countries. Tariffs on some agricultural products are more than 300 percent in the EU and, in the case of groundnuts, over 100 percent in the US," it says.

While the European Union's "Everything but Arms" proposal for providing duty- and quota-free access to LDCs by 2009 represents a bold step in the right direction, intensive lobbying resulted in key agricultural items - rice, sugar and bananas - being removed from the proposal.

In Europe, total duty-free access would increase exports from LDCs by $185 million, with sugar accounting for over 60 percent of the gain, according to Oxfam's research. But the "Everything but Arms" initiative was watered down into "Everything but Farms", says Watkins. "The clear message from Brussels to the LDCs was that powerful industrial lobbies come first, and poverty second."

While the doors to Northern markets remain shut, many LDCs have been liberalizing, often under International Monetary Fund and World Bank auspices, at breakneck speed, notes the pressure group. "The results have often been disastrous. In Haiti, the liberalization of the rice market and subsequent surge in subsidized US imports has destroyed thousands of livelihoods and undermined national food security," says the report.

In such labor-intensive areas as textiles, footwear, and agriculture, production for export growth has the potential to generate more equitable patterns of economic growth, "creating employment and livelihood opportunities for highly vulnerable populations", the report notes. "There are potentially powerful inter-linkages between exports and poverty reduction in many LDCs, through a commitment to redistribution and to environmental sustainability that would strengthen the benefits of trade," it says. "The problem is that trade policies in industrialized countries are carefully designed to prevent LDCs from taking advantage of export opportunities." The Oxfam report also examines the rich world's record on aid and debt relief. It concludes that the rich countries' performance on aid has been "derisory".

In 1990, the countries of the Organization for Economic Cooperation and Development (OECD) pledged to increase aid and reach a target of 0.20 percent of their GNP to the LDCs in development assistance. Since then, they have cut around $3.5 billion from their aid flows, which are now at their lowest level in per capita terms since the early 1970s. At the same time, annual spending in OECD countries on farm subsidies - $1 billion per day - is roughly equivalent to the GDP of all the LDCs combined.

While many LDCs are eligible for debt relief under the Heavily Indebted Poor Countries (HIPC) Initiative, the report says that many will emerge in an unsustainable debt position. "Preliminary analysis by Oxfam suggests that at least 13 LDCs - including Zambia, Niger and Senegal - will emerge from the HIPC Initiative spending more than 10 percent of government revenue on debt," it says.

The Oxfam report calls for immediate duty-free and quota-free access for LDCs in industrialized country markets; reform of the EU's "Everything but Arms" proposal to include immediate liberalization of LDC access for sugar and rice markets; an end to agricultural import liberalization under IMF and World Bank programs; a timetable for OECD donors to reach the 0.20 percent of GNP aid target; and deeper levels of debt relief.

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