Fair Trade
Careful readers will have noted that Shruti asked me for my thoughts on fair trade in a comment to the last post. In case anyone else is interested, here is a clipped version of my response:
'Fair trade' is a somewhat indistinct term. The people who sell 'fair trade' tee/coffee/chocolate etc. usually imply that 'fair' means that suppliers of goods are guaranteed a price that will give them a decent standard of living. But this is quite a subjective judgment, and although it might be very beneficial to a few producers, it is unlikely to draw any country out of poverty, because programmes like these in themselves have little impact on things like health and education, industrial infrastructure and so on that are needed to stimulate real and sustained growth in a whole economy.
When 'fair trade' campaigners (Oxfam etc.) are lobbying governments, they're talking about something a bit different - motly, they are calling for trade liberalization, which means ending the system by which more powerful countries protect their own industries while insisting that less powerful countries abolish any kind of protection for theirs. Now here is where I believe the Oxfam etc. campaigns stumble: they really misunderstand why the system of global trade that has emerged in the last 30-40 years is so destructive. The usual implication is that poor countries are stuck in poverty because they have surplus rice/cotton/steel/whatever 'dumped' on them (ie sold to them at below the amount it costs producers in those countries to produce the stuff) while they are prevented from exporting to richer countries by various trade barriers like tarrifs. There is no doubt that this process can cause serious and grave problems for some producers in poor countries, especially if they have been intensively producing one thing (eg coffee) that they find they cannot shift, and so are stuck with no means of income until next year's harvest. But I don't think that this is where the really serious problems lie.
In the last 30-40 years, speculative trade in foreign currency has created a high degree of destabilisation in the global economy. This has made possible the 'currency attacks' that can throw an economy into turmoil in a matter of hours should investors 'lose confidence' in government policy. There was an article from the Financial Times in April 1992 by the BBC World Service's economics correspondant on the nature of the 'de facto world government' administering the 'new imperial age.'
Dean Baker and Mark Weisbrot at the Centre for Economic Policy Research in a paper called The Relative Impact of Trade Liberalization on Developing Countries ( http://www.cepr.net/publications/trade_2002_06_12.htm ) have argued that the large amounts of foreign currency holdings which poor countries maintain to safeguard against speculative 'attacks' on their currencies are a greater inhibitor of investment than rich countries' protection of their commodities. They argue that the major obstacle to development, however, is the system of patent rights being implemented, which stifle innovation in the fastest growing industries - as well as having an atrocious effect on mortality by making essential medicines unaffordable for all but a tiny minority.
In a paper about a year ago with David Rosnick ("Poor Numbers: The impact of Trade Liberalization on World Poverty" http://www.cepr.net/publications/trade_2004_11.htm ) they suggested that the projections about the benefits to poor countries of liberalization have been considerably overestimated.
In short, the issues seem more complex than campaigners like Oxfam seem to suggest, and the emerging structures of the global financial system, which is certainly not 'free' and actually has very little to do with 'trade,' need to be properly addressed before serious suggestions on how to solve these crises can be made.
In my opinion, the most urgent matter is the question of pharmaceutical patent rights, which stop producers in poor countries from coming up with cheap ways to make essential drugs, making these drugs unaffordable to most people in the developing world. The human toll is probably incalculable, but a UN Human Development Report a few years ago estimated that 30000 children worldwide were dying from preventible causes (ie hunger and disease that could be cured with the right medicine) every single day.
The following might also be of interest: Vandana Shiva, "Trade Liberalisation is Not Development"
'Fair trade' is a somewhat indistinct term. The people who sell 'fair trade' tee/coffee/chocolate etc. usually imply that 'fair' means that suppliers of goods are guaranteed a price that will give them a decent standard of living. But this is quite a subjective judgment, and although it might be very beneficial to a few producers, it is unlikely to draw any country out of poverty, because programmes like these in themselves have little impact on things like health and education, industrial infrastructure and so on that are needed to stimulate real and sustained growth in a whole economy.
When 'fair trade' campaigners (Oxfam etc.) are lobbying governments, they're talking about something a bit different - motly, they are calling for trade liberalization, which means ending the system by which more powerful countries protect their own industries while insisting that less powerful countries abolish any kind of protection for theirs. Now here is where I believe the Oxfam etc. campaigns stumble: they really misunderstand why the system of global trade that has emerged in the last 30-40 years is so destructive. The usual implication is that poor countries are stuck in poverty because they have surplus rice/cotton/steel/whatever 'dumped' on them (ie sold to them at below the amount it costs producers in those countries to produce the stuff) while they are prevented from exporting to richer countries by various trade barriers like tarrifs. There is no doubt that this process can cause serious and grave problems for some producers in poor countries, especially if they have been intensively producing one thing (eg coffee) that they find they cannot shift, and so are stuck with no means of income until next year's harvest. But I don't think that this is where the really serious problems lie.
In the last 30-40 years, speculative trade in foreign currency has created a high degree of destabilisation in the global economy. This has made possible the 'currency attacks' that can throw an economy into turmoil in a matter of hours should investors 'lose confidence' in government policy. There was an article from the Financial Times in April 1992 by the BBC World Service's economics correspondant on the nature of the 'de facto world government' administering the 'new imperial age.'
Dean Baker and Mark Weisbrot at the Centre for Economic Policy Research in a paper called The Relative Impact of Trade Liberalization on Developing Countries ( http://www.cepr.net/publications/trade_2002_06_12.htm ) have argued that the large amounts of foreign currency holdings which poor countries maintain to safeguard against speculative 'attacks' on their currencies are a greater inhibitor of investment than rich countries' protection of their commodities. They argue that the major obstacle to development, however, is the system of patent rights being implemented, which stifle innovation in the fastest growing industries - as well as having an atrocious effect on mortality by making essential medicines unaffordable for all but a tiny minority.
In a paper about a year ago with David Rosnick ("Poor Numbers: The impact of Trade Liberalization on World Poverty" http://www.cepr.net/publications/trade_2004_11.htm ) they suggested that the projections about the benefits to poor countries of liberalization have been considerably overestimated.
In short, the issues seem more complex than campaigners like Oxfam seem to suggest, and the emerging structures of the global financial system, which is certainly not 'free' and actually has very little to do with 'trade,' need to be properly addressed before serious suggestions on how to solve these crises can be made.
In my opinion, the most urgent matter is the question of pharmaceutical patent rights, which stop producers in poor countries from coming up with cheap ways to make essential drugs, making these drugs unaffordable to most people in the developing world. The human toll is probably incalculable, but a UN Human Development Report a few years ago estimated that 30000 children worldwide were dying from preventible causes (ie hunger and disease that could be cured with the right medicine) every single day.
The following might also be of interest: Vandana Shiva, "Trade Liberalisation is Not Development"
posted by UK plc at 10:40 AM
1 Comments:
Hope your Christmas was awesome!!! TTYL, hopefully. :)
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