Poverty and Trade

Considering the (partially) successful conclusion of the Sixth World Trade Organization Minsterial Conference (MC6) in Hong Kong on December 18th (developed countries made some trade concessions, especially regarding subsidies, to developing nations), I think it is important to look at the possible effect of these WTO talks on poverty.

The MC6 was actually part of a broader series of trade talks - the so-called 'Doha Round' - , which began in0 Doha, Qatar in 2001. The Doha meeting resulted in an agreement of WTO members on the 'Doha Development Agenda,' which was aimed at creating a more equal playing field for developing countries starting to compete in the global economy.

The major controversy throughout the WTO talks, from Doha to Hong Kong, has been agricultural subsidies. In essence, developed countries, especially within the European Union, have used subsidies toward their domestic farmers to allow them to compete globally. Because farmers in these developed countries receive government subsidies, the global price of many agriculture commodities is driven very low. Then, in developing countries, where farmers DO NOT receive subsidies, many farmers are unable to sell their good competetively, and are forced into poverty. This can be very well illustrated through sugar production. In the European Union, five million tonnes of 'high-cost,' excess sugar are exported. The EU subsidies the sugar - it is estimated that it spends Euro 3.30 to export Euro 1.00 of sugar. Because of this, the EU sugar can be sold in foreign markets for less than any other sugar, even if that sugar is actually cheaper to produce.

Also, tariffs (taxes on imported goods) and quotas are used in many developed countries to limit the sale of foreign goods in domestic markets. These restrictions, along with agricultural subsidies, make it very difficult for Third-World farmers to sell their goods and make a living.

The WTO talks are aimed at cutting agricultural subsidies, reducing tariffs, and eliminating quotas - creating a free trade environment where developing nations can compete and grow. Even by simply cutting EU subsidies on sugar, and opening up the EU sugar market, the WTO can have a huge impact on developing nations. Oxfam estimates, for example, that due to EU market restrictions, 'Ethiopia’s [monetary] losses are equivalent to total national spending on programmes to combat HIV/AIDS.' Anti-open-market policies that are employed by developed countries to give them an unfair advantage should be completely removed by the WTO, and with the MC6, it looks as if the WTO is finally moving in the right direction.