Global Issues: Trade, Hunger and Poverty in 2006

(Last updated December 22, 2006) Trade relations between developed and developing countries are structured in favor of the developed countries: the United States and Canada, countries of Western Europe, and Japan. This is because some of the developed countries have been in charge of making the rules for a very long time--certainly since before the 1700's. The way that the rules are made have certainly changed.  At one time, Spain with colonies and control of the seas, established the unwritten rules. Later, Great Britain took control of the seas, had colonies and did the same thing.  Subject, of course, to negotiation which was fundamentally subject to power relations--the strong dictated to the weaker. Now we have the World Trade Organization, quite a number of regional or specialized trade agreements, and the operation of country legal systems, which can be used to enforce business practices such as contracts and patents.

This article, concerned with trade issues in 2006, deals with the following topics:

• the World Trade Organization (WTO)
• other trade agreements, including  the Central American Free Trade Organization (CAFTA) and the United States' Generalized System of Preferences (GSP)
• realigning representation on global organizations, including the International Monetary Fund, the World Bank and the WTO, that establish and control important parts of the international economic and non-economic framework toward poor countries and (ideally) poor people.
• the possibility of taxing some international transactions such as currency flows or international airline flights for the benefit of poor countries.

WTO  After World War II the General Agreement on Tariffs and Trade (GATT) was established to set rules for international trade.  The successor to the GATT--it even has the same building in Geneva, Switzerland--is the World Trade Organization.  It was established, in Hunger Notes view, in large part so that developed countries could extend their control of international transactions into key new areas, especially including intellectual property rights (e.g. Microsoft didn't want people in developing countries copying computer code) and foreign investment (by developed countries in developing countries. While legal safeguards were presumably in place to protect these property rights in developing countries, this was viewed as not sufficient.  Much better--from the point of view of firms in developed countries and their active supporters, developed country governments--to make the right of trade dependent on compliance with a broad range of controls embodied in the "new and expanded" WTO.  This would mean "one stop shopping" with respect to rules enforcement.  While the developed countries are ostensibly in favor of free trade--free trade is a mantra with the George Bush administration and Republican law makers for example--developed countries are not in favor of free trade when it does not suit their interests.  The key example is agriculture.  The United States, Japan, and European countries have giant agricultural subsides and even quota limitations--the U.S. sugar quota is a major example.   How do they get away with it?  Well of course they wrote the original WTO rules which provide for "differential treatment" for agriculture. The Doha round of trade negotiations is supposed to take major steps to reduce barriers to the export of developing country agricultural products.  Developed country governments do not much want to do this, and so a major theme in 2005 and continuing this year has been a struggle over agricultural trade rules. 

The following articles give an example of how the current trade and legal system can lead to injustice.  Ethiopia is trying to copyright the names of thee of its types of coffees (and coffee regions) in the United States.  Starbucks objects, as it is already trying to copyright the names for its coffees. 

Ethiopia and Starbucks talks fail  BBC News  November 30, 2006 (You will leave this site.)  Ethiopia tries to trademark the names of its most famous coffees/coffee regions but Starbucks resists, as it has already applied for the same names in the United States  Aaron Glantz OneWorld   December 2, 2006    Starbucks in Ethiopian coffee dispute. U.S. coffee chain Starbucks is denying Ethiopia earnings of $88 million a year, according to Oxfam. BBC News  October 26, 2006 (You will leave this site.)

The following articles describe the breakdown (thus far and probably permanantly)  of the Doha round of trade talks, which were supposed to address the issue of developed country subsidies to agriculture.

Failed trade talks usher in uncertainty. WTO system could weaken after breakdown puts globalization on unclear path  Paul Blustein  Washington Post July 26, 2006 (You will leave this site and be required to register [once] with the Post.)  WTO trade talks fail after stalemate over farm issues  Paul Blustein  Washington Post July 23, 2006  World Trade Organization conference collapses--developed countries not willing to make significant concessions on agricultural tariffs and subsidies in spite of earlier promises  Paul Blustein   Washington Post July 2, 2006  A promise not kept: World Trade Organization gathers for last-ditch attempt to give farmers in poor nations better access to markets  Paul Blustein    Washington Post June 29, 2006  The December 2005 World Trade Organization Meeting in Hong Kong: Promises to the poor remain unfulfilled  Kristin Sampson  March 2006

Illustrations of  U.S. subsidies ( and other legal advantages) to agriculture: Farm block digs in on farm subsidies Dan Morgan, Sarah Cohen and Gilbert M. Gaul Gilbert M. Gaul, Sarah Cohen and Dan Morgan   Washington Post  December 22, 2006 (You will leave this site and be required to register [once] with the Post.)  Harvesting cash: the myth of the small farmer.  Federal subsidies turn farms into big business   Gilbert M. Gaul, Sarah Cohen and Dan Morgan Washington Post  December 10, 2006  Harvesting cash: the milk lobby strikes back. Dairy industry crushed innovator who bested price-control system.  Dan Morgan, Sarah Cohen and Gilbert M. Gaul  Washington Post  December 10, 2006  Crop insurers piling up record profits. Why? Subsidies and no competition.  Gilbert M. Gaul, Dan Morgan and Sarah Cohen  Washington Post October 16, 2006    U.S. aid Is a bumper crop for farmers: double-dipping when disaster strikes  Gilbert M. Gaul, Dan Morgan and Sarah Cohen  Washington Post October 15, 2006  Aid to ranchers was diverted for big profits  Gilbert M. Gaul, Sarah Cohen and Dan Morgan  Washington Post July 19, 2006    Farm program pays $1.3 billion to people who don't farm  Dan Morgan, Gilbert M. Gaul and Sarah Cohen Washington Post July 2, 2006  

The World Bank has pushed tariff reduction for developing countries for the last 25 years.  As the Bank coupled this with large loans, often desperately needed by developing country governments, developing country tariff reduction made more headway than many thought was wise, especially since developed countries were dragging their feet in reducing tariffs and other barriers  of major concern to developing countries, such as tariffs and import restrictions on agriculture and textiles.

World Bank trade programs less effective in reducing poverty and increasing exports from developing countries than advertised  World Bank  March 22, 2006

Other trade agreements  There are other trade agreements, often regional, such as the Central American Free Trade Agreement (CAFTA). European countries are also negotiating regional trade agreements. To Hunger Notes, the regional trade agreements seem to be a case of "divide and conquer"--get better terms by negotiating with a subset of developing countries rather than, as in the WTO, the larger group.  Certainly in CAFTA, the United States got Central American countries (and the Dominican Republic) to sign off on a modest increase in their U.S. sugar quotas rather than quota abolition. 

United States and Colombia sign trade deal  BBC News November 24, 2006 (You will leave this site.)  Latin Americans Wonder If Democrats Are Traders. Anxiety High Over Stance of Incoming Congress. Sibylla Brodzinsky and Peter S. Goodman Washington Post November 23, 2006 (You will leave this site and be required to register [once] with the Post.)

Ecuador reaps costs of anti-trade fervor. Pullout of Dole food company called 'alarm bell.'  Juan Forero  Washington Post October 24, 2006 (You will leave this site and be required to register [once] with the Post.)

Workers suffer under NAFTA: three-country study details effects on economies and labor markets  Economic Policy Institute  September 28, 2006

Landless Workers Movement: the difficult construction of a new world  Raśl Zibechi  IRC Americas Program  September 26, 2006

United States to reassess GSP program which gives trade preferences to developing countries.  Advanced developing countries may lose benefits. BBC News August 7, 2006 (You will leave this site.)  The Generalized System of Preferences gives certain trade preferences to developing countries. The United States is reassessing whether the following developing countries should continue to benefit from the GSP: Brazil, India, Indonesia, Philippines, South Africa, Thailand, and Venezuela. (See the United States Trade Representative's GSP page and  notice of review.)

Textile imports. For many years, developed countries restricted textile imports from developing countries, by quotas, tariffs, or other arrangements, such as "voluntary" limitations. This was done because, although the United States and other developed countries were ostensibly in favor of free trade, this was to a real degree propaganda, to be set aside when free trade led to harm to developed country industries, such as textiles, in which the developing countries had a cost advantage in production.  Though the United States and other developed countries did permit a substantial reduction in the size of the textile industry, they also imposed strict limitations on imports. For the United States, a key agreement was the 'multifiber agreement,' which limited the size of imports from major importers such as China.  There were also additional agreements, such as, for the United States,  the Generalized System of Preferences, and more recently,  the African Growth and Development Agreement (AGOA) that permitted exporting countries that were not key exporters to increase their exports. However with the advent of the WTO, the free trade rules are stronger, permitting China and other low cost producers to increase exports, threatening other developed country textile producers.  (China has also not increased its exchange rate in spite of an immense trade surplus, which also makes its exports cheaper.  This has been considered as unfair competition by other countries.  See, for example,  China's export engine: international competitors crying foul over cheap currency  Peter S. Goodman and Paul Blustein  Washington Post September 13, 2006 (You will leave this site and be required to register [once] with the Post.) )

Realigning representation on global organizations

The  principal international institutions, including the International Monetary Fund (IMF), the World Bank and the WTO, allocate power within these institutions on the basis of economic and political power. This marginalizes/disenfranchises poor countries and poor people.  In the IMF, for example, voting power is based on economic strength (calculated many years ago).  Even though economic strength (size of economies) has changed greatly in the intervening years, voting power in these international institutions has not changed to reflect these changes.  Much less has it changed towards a very possibly more democratic ideal--one country, one vote, or proportional voting by population.  The control of these institutions greatly helps the developed countries impose their will on other countries--for example through sanctions or through the granting or withholding of loan approvals.

The following articles describe and evaluate the voting reform efforts in the IMF

Still the rich world's viceroy.  If the IMF wants to reform itself, why not try democracy? George Monbriot (Op ed. You will leave this site.)  Four developing countries to have International Monetary Fund voting rights increased; major voting inequities remain  Paul Blustein  Washington Post September 1, 2006 (You will leave this site and be required to register [once] with the Post.) Reform on the cards for the IMF  Malcolm Borthwick  BBC News August 11, 2006 (You will leave this site.)  .

Taxing International Transactions. An important issue is taxing international trade for the benefit of developing countries. A key idea was the "Tobin tax," named for an economist, James Tobin, who proposed it. This involved a tax on international financial transactions and was universally opposed by the international financial community and developed country governments such as the United States and Great Britain that benefit from private international financial institutions.  A tax on international airline flights, a more modest but still useful proposal, has been adopted by some, as the first article indicates.

Thirteen countries will adopt air ticket tax for poor  Asian Tribune March 3, 2006

France plans tax on international airline tickets to benefit developing countries  Hunger Notes September 2, 2005

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