NO disappointment has been more bitter than the collapse this June of the Doha development trade round – how different from the heady days a year ago, when the headlines were filled with the rally to Make Poverty History and the G8 summit at Gleneagles. And no contrast more clearly illustrates the hypocrisy of the wealthy nations: the G8 countries loudly declared their commitment to ending poverty in the developing world, but in trade negotiations the USA and the EU gave in to short-term domestic political pressures and succumbed to the demands of their various protectionist lobbies.
The failure of the Doha trade round signifies a serious failure for developing countries. Although their leverage was limited even at Doha, the middle-income and least developed countries will have even less of a voice as WTO negotiations are replaced by regional and bilateral trade deals. This comes at a time when developing countries are increasingly looking at trade as a route out of poverty. Aid and debt cancellation remain significant elements in tackling the problems of the poor, but as one representative from Zambia said to me: “With aid, you control our future. But if we can have open markets to trade in, we can control our own destiny”.
This new emphasis reflects a changing view of development. Frankly, aid has been a disappointment, with no real correlation between the level of aid and success in development. Of course, aid and debt cancellation are essential to provide the funding of health clinics, schools, infrastructure and micro-finance. But the countries that have recently achieved substantial economic progress, such as China, Brazil and India, have used both exports and foreign investment as key levers. These countries are the role models that others wish to emulate. Trade is no longer perceived as the vehicle for the rich to dominate the poor, but as the means for a poor country to take back control of its own economy.
Development is urgent. Half the population of developing countries is under 15 years old. This rising tide of young people will very soon be of working age, looking to subsist for themselves and start their own families. I recently visited India, which offered a real opportunity to see ‘development’ in action. India has altered dramatically in the last decade; using the tools of trade and foreign investment, it has turned from a largely closed, inward-looking economy to a major player in the global economic system: like China and Brazil, it will soon be a major economic force. These countries, like the rest of the developing world, quite rightly demand that wealthy nations provide much better market access for their agricultural and industrial products, and the issue under debate is how much the markets of the developing world should be opened in return and, more importantly, when that opening should occur.
In my various discussions with representatives of developing countries, both the less developed and the success stories, I have found few who argue against increasing trade liberalisation. Most accept that, even if they do no more than open their own markets, this will bring the benefits of new and cheaper products to their citizens. Only a few argue for long-term protection, and then only in very limited areas that have special cultural or social importance, such as permanent protection for the tribal forest culture of north India. It has struck me that resistance to globalisation is a luxury espoused with far greater enthusiasm by those living in rich countries than in poor ones: anti-globalisation, anti-free trade arguments were made to me far more zealously by UK representatives of NGOs than by local politicians or members of the public in developing countries.
One of the weaknesses of the recent WTO and the trade negotiations of the failed Doha round was the ‘one size fits all’ approach towards how rapidly, and with what products, developing countries should open up access to their markets. If all the tariff reductions demanded by the USA were implemented by developing countries, Lesotho’s economy, for example, would have been completely untouched while some African countries would have faced severe disruption to local agriculture. At Doha, developing countries generally sought to achieve broad, flexible but temporary protections for products of special importance in order to gain time to adjust their economies. Those whom I spoke with did not argue against liberalisation but for a fairer, less disruptive path to achieve that goal.
If ‘Fair Trade’ means the kind of temporary protection outlined above, structured as a path to a more open economy, then call me a ‘Fair Trade’ supporter. But I say this with some caution. I am well aware that some define ‘Fair Trade’ as going much farther to provide for the long-term exclusion of foreign imports and foreign investors, a developing country equivalent of the protectionism argued for by some in the West to “save local jobs”. In both developed and developing countries, opening markets creates losers as well as winners; developed countries simply have many more resources to mitigate the impact.
In India, I saw and heard from many who had been losers or only marginal winners from this new approach to development through trade. The benefits of new opportunity have flowed very unevenly: for some 15% of the people, life today is very much ‘first world’. For around 35%, life is better than in the past, and the future is optimistic. But for 50%, change has shattered a traditional way of living and brought, at best, marginal improvements; at worst, it has created dislocation, hardship and dire poverty. Casual labourers and their families, dislodged from the land, live in grim, makeshift tents by every major roadside. They lack clean water and sanitation, let alone schools or healthcare.
In the fabric and garment export industries of Tirapur in Tamil Nadu province, most export factories I saw were sweatshops of unremitting awfulness where workers earn less than £1 for a typical 12-hour working day. Competition from China, corruption and a lack of will are said to be the reasons why the Indian Government fails to enforce the rules on labour and working conditions. In the heart of rural Andra Pradesh province, a few hours from Hyderabad, we met communities where farmer suicides can number in the double digits in the worst weeks, as families sink under debts incurred by trying to grow rice and wheat on a commercial scale on land that is unsuitable.
The answer to these problems, I would argue, is not to close the door to liberalisation and try to protect the old hand loom-weaving industries, nor to preserve traditional farming across India. Instead, the international community should use aid to empower countries to take advantage of market access – ‘Aid for Trade’ – and also to cope with the negative effects of change. Let us use aid to focus on those left behind – a key reason why the goal of donating 0.7% of Gross National Income to international aid remains a crucial target for which trade is not a substitute.
We have additional tools, too. Strict rules on Corporate Social Responsibility in the UK and other western countries, for example, would have a dramatic effect on working conditions in the Indian fabric and garment export industries. Just such a public outcry has already radically reduced child labour, cutting the numbers from 40,000 to 10,000 in the Tirapur factories alone. A number of Dutch and Swiss retail companies under pressure from ethical customers have already worked with suppliers to set up and maintain decent quality factories with decent working conditions: I doubt whether any western retailer could survive the PR disaster if sweatshop conditions were openly detailed in their annual reports.
Pro-poor development is a strategy that focuses on empowering the most disadvantaged to take charge of their circumstances and seek local solutions. For example, a group of Dalit women have formed a self-help group in Andhra Pradesh to use their skills in subsistence farming on semi-arid land to earn a decent and reliable livelihood. Unlike commercial farming, they mix crops, so that – regardless of the rainfall – there is always sufficient food. Now they are sharing their know-how among local villages, and want the Government to offer the same subsidised loans for their primary crop, millet, as it does for commercial crops like rice and wheat, so that it can compete in local markets on a level playing field. As well as aid, the international community can play a role simply by showing respect for projects like this, which take a different strategy from Western farming.
Earlier this summer, Ben Bernanke, chairman of the US Federal Reserve, called for a “consensus for welfare-enhancing change” and stressed the need “to ensure that the benefits of global economic integration are sufficiently widely shared”. He was speaking on behalf of firms and workers in the developed countries who are adversely affected by trade liberalisation and globalisation. The concern must be greater yet for those who are losing out in developing countries.
Trade liberalisation has long been a central tenet of liberalism, and economic history over the last century has, I believe, proved us correct. But it is far from sufficient as a theory for international development, and if too many individuals, companies and communities lose out, even in the short-term, few countries will be willing to pay the price. A form of ‘Fair Trade’ that provides for temporary and flexible protection, recognising the economic differences between countries, offers a far more equitable and realistic path. Combined with a pro-poor development strategy, it offers the way to build a global economy that will share its benefits as widely as possible.