International Trade, Weaker Sections and Power Relations


International trade has generally been examined in the context of impacts on two or more trading countries as well as the world trading system and its rules. Specific studies in terms of impacts on poor and vulnerable people have received lesser attention, even though very large numbers may be adversely affected in some contexts. Certain elites may benefit while the poorer people or weaker people may loss in at least some of the countries in very important and durable ways, even though these elites try to push their gain as entire country or society gain. A different framework of studying trade impacts may look at how certain elites benefit and the much larger number of people from poor and weaker sections lose.

Many societies which face hunger acutely today were once in a position to provide adequate food for their needs, but this self-reliance was shattered by many-sided colonial intervention. In several countries and regions of Africa the village economy was badly disrupted first by the slave trade and then by the diversion of good quality food growing land to obtain minerals, raw materials/plantation crops for colonial powers which had to be exported in huge quantities even at the cost of hunger and deprivation increasing among the people of these countries. A few local elites who were co-opted in this trade and production for this trade managed to benefit, even though the bigger benefits went to the colonial power.

Even after the end of colonial rule, several former colonies continued to remain dependent for their foreign exchange on export of one or two cash crops and a desperate quest for foreign exchange coupled with the decline in international prices of farm commodities led them to go on increasing these cash crops while ignoring staple food needs. While food crops were ignored at home, foreign exchange shortages made it difficult to import food. These trends were made worse by local powerful elites who insisted on importing luxury consumer goods even in times of foreign exchange shortage. Multinational companies based in rich countries insisted on pursuing their own agricultural interests while ignoring or even disrupting the food needs of the host country in the process.

The role of international trade related factors in the African famine of the 1980s, when nearly a million people died and several million suffered immense distress, was highlighted by the World Commission on Environment and Development (WCED), “Among the many causes of the African crisis, the working of the international economy stands out. Sub-Saharan Africa’s economic well-being depends even more than low-income Asia’s on developments in the world economy. Within the last decade, many sub-Saharan countries have been hit by adverse trends in commodity terms of trade and external shocks such as higher oil prices, fluctuating exchange rates and higher interest rates. Over the last ten years, the prices of major commodities such as copper, iron ore, sugar, groundnuts, rubber, timber and cotton have fallen significantly, in 1985, the terms of trade of sub-Saharan countries (except oil-exporting countries) were 10 per cent below 1970 level. In countries eligible for funds from the International Development Association (IDA), the average fall was well over 20 per cent, with even greater drops in some including Ethiopia, Liberia, Sierra Leone, Zaire and Zambia.”

There is a widespread view in some rich countries that their governments are already doing quite a lot to help the people of poor countries. The reality is quite different. A careful look at the international trade and aid scene reveals that poor countries actually suffer grave injustices. According to conventional economic theory, trade is supposed to benefit both sides, but as Paul Ekins points out : “In formulating their innocuous assumptions the economic theorists somehow forget one crucial ingredient: power, the ability to coerce countries to participate in the market against their better interest or more subtly to foster policies that allow open trading today, but bring dependency tomorrow. Differences in relative power can both distort market prices so that the gains from trade only go to one of the trading partners and enforce participation in a contract which is essentially exploitative. Far from being an automatic passport to prosperity trade can just as easily be an instrument of bondage.”

Since the early 1980s, when grain markets began to be deregulated under the supervision of international financial institutions, grain and food surpluses of the USA and some other countries have been used more extensively in ways that have destabilized farm and food systems in several vulnerable societies. Thus at a time when these societies needed more help for adapting to climate change, their resilience has been pushed downwards. Subsidized beef and dairy products imported (more or less duty free) from the European Community had a very adverse impact on Africa’s nomadic pastoral economy. European beef imports to West Africa increased in a very big way around the mid-1980s with the effect of displacing local-level livestock producers. In the Sahel region a devastating drought was preceded by the deregulation of the grain market under the under the pressures of international financial institutions, leading to very adverse consequences for vulnerable people. At the peak of the drought, fresh vegetables were being exported by trading companies from the Sahel region to western countries. The Sahelian drought then claimed over 100,000 human lives.

At the same time when some of these countries have outlived their utility for the richer countries, they are left to cope with the harm inflicted on them as best as they can. As Andre Gunder Frank has written in his paper, ‘Economic Ironies in World Politics’, their national resources having been squeezed dry like a lemon for the industrial development by others, now several regions and their people face the prospects of being discarded.

The total external debt of developing countries increased from $100 billion in 1970 to $650 billion in 1980 to $1500 billion in 1992. The terms of trade for the least developed countries declined a cumulative 50%, in approximate terms, during this period. Real commodity prices in the 1990s were 45% lower than those in the 1980s and 10% lower than the lowest level (during the Great Depression) reached in 1932. For developing countries as a whole the cumulative terms of trade losses amounted to $290 billion between 1980 and 1991. It is important to point this out to understand the wider context in which the new world trade system guided by the WTO took shape.

The impact of unfair trade practices at the level of poor people was described by Human Development Report (HDR), 1994 “when industrial countries dump surpluses of products such as sugar, cereal and beef in developing countries, the local price plummets. In some African countries, where it cost $74 to produce 100 kgs of maize, the local market price has fallen to $21. A similar effect is evident in meat exports. In 1991, the European Community dumped 54 million tons of frozen and chilled beef in Africa further impoverishing four million Sahelians who depend on cattle farming.” HDR 1992 estimated that the loss to developing countries from unequal access to trade, labour and finance amounted to around $500 billion dollars a year, 10 times what they receive annually in foreign assistance.

After the conclusion of the Uruguay round of GATT and the establishment of the WTO regime, several problems and hurdles of developing countries increased further. According to HDR, 1997, “The Uruguay round (of GATT) left intact most of the protection for industry and agriculture in industrial countries, while ignoring issues of vital concerns to poor countries notably the problems of debt and the management of primary commodities markets.”

More specifically this report stated- Goods from the industrial countries enjoyed much greater tariff reduction in the Uruguay Round than those from developing countries – 45% compared with 20-25%. While developing countries as a group now face tariffs 10% higher than the global average the least developed countries face tariffs 30% higher. An OECD study found that in more than 90% of US and EU anti-dumping actions, the goods being imported posed little or no threat to national industries. These anti-dumping actions more than doubled in number between 1989 and 1994, affecting a large share of exports to industrial countries.

One estimate suggests that if industrial countries were to reduce agricultural subsidies and protection by just 30% developing countries would gain an extra $45 billion a year. The USA and the European Union give heavy subsides to their farmers – equal to roughly half the value of agricultural output of these economies. Each US farmer receives in subsides roughly 100 times the income of a maize farmer in the Philippines.

The Uruguay Round extended the life and enforced the protection of patents and other intellectual property rights – increasing the cost of technology transfers to developing countries.

As poor countries open their economies, they expose many poor agricultural producers to overwhelming and unfair competition from subsidized imports. According to a study by Oxfam, in the Mindanao island, which is the main maize producing area of the Philippines, the liberalization of maize imports means the loss of up to half a million livelihoods.

Yet another cause of concern is the increasing power of multinational corporations to incredible levels. The annual sales of five top corporations amounted to $871 billions in 1994, more than 11 times the GDP of all the least developed countries, and almost twice the GDP of South Asia. HDR concluded, “Lacking power, poor countries and poor people often find their interests neglected and undermined.”

Commenting on the neglect of the concerns of developing countries seen at Uruguay round of GATT, a Brazilian expert Amb. Rubens Ricupero cited the example of how 20 Third World delegations had submitted joint proposals at the investment negotiating committee, only to have their submission totally overlooked by the group chairman when he prepared his own draft version of an agreement on investments. Ricupero commented, “The situation is akin to one where the cook asks the chicken with which sauce would you like to be eaten? When the chicken answers it does not want to be eaten, the cook says, “I rule you out of order.”

When the ‘chicken’ tried later to protect its interests under the Doha Development Round so that the injustices could be remedied, the new negotiations simply dragged on for a frustratingly long time without any effective decisions being made. Several countries like India faced the frustration of their admirable and much needed efforts to help their farmers and consumers by a food procurement and subsidy based effort being threatened by WTO rules.

This further worsened when the WTO rules were also misused by the USA ( in addition other pressure tactics were also used) to pressurize developing countries to end or loosen existing, highly justified restrictions on import of highly hazardous GM food from the USA. Once this happens, the spread of highly hazardous GM crops would be much more difficult to stop in these countries, as can already be seen in India. In fact it is widely believed that very unfair and unjust trade rules are being used by the USA to spread GM foods and crops in many countries and this would be a disaster for farming, environment (with irreversible losses of genetic contamination), and health. The grip of multinational companies on farming and food system will increase, and the small farmer base and self-reliance of farming and food system will be affected very adversely. In this context we also see the working of power relations and its important role very clearly as the USA in particular uses its status as the world’s most powerful country to enhance the misuse of international trade and its distorted rules.

It is in this wider context that we should be cautious and should give adequate attention to the less obvious but important impacts of various free trade agreements, particularly those in which a big power on the one hand and a weaker country with substantial number of poor and vulnerable people on the other hand, are involved.

Bharat Dogra is Honorary Convener, Campaign to Save Earth Now. His recent books include Planet in Peril, Protecting Earth for Children and A Day in 2071.


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