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Health Policy and Development
Department of Health Sciences of Uganda Martyrs University
ISSN: 1728-6107 EISSN: 2073-0683
Vol. 1, Num. 1, 2003, pp. 24-28
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Health Policy and Development Journal, Vol.
1, No. 1, Dec, 2003, pp. 24-28
INTERNATIONAL TRADE AND HEALTH: BEFORE AND AFTER CANCUN
Maurizio Murru
Senior Lecturer, Department of Health Sciences, Uganda Martyrs
University
Code Number: hp03008
Introduction
International trade is potentially critical in stimulating increased production,
economic growth and poverty reduction. For this potential to be achieved,
transparent and equitable international rules are necessary together
with national policies clearly oriented towards social objectives and
resource redistribution. Economic globalization, so far, seems to have
produced more inequalities both between and within nations. The World
Trade Organization (WTO), as it is currently structured and ruled, is
a tool in the hands of powerful nations used to perpetuate their dominance
on international trade. It should, rather, be a forum where inequities
and inequalities are corrected to the benefit of millions of people struggling
with abject poverty around the world. The recently collapsed WTO Conference
held in Cancun Mexico, offers an opportunity for some few considerations
on the present state of world trade, its uncertain future and the possible
implications of this for the livelihoods of the world poor.
The World Trade Organization
The WTO was borne in 1995, when it replaced the GATT (General Agreement on Tariffs
and Trade) which lasted since 1947. The Organization, based in Geneva,
is supposed to manage the world trade on the basis of four main principles:
- Expanding trade concessions to all member states
- Establishing freer global trade
- Making trade fairer by establishing clear rules
- Making trade more competitive by removing subsidies
The WTO has 146 members (two more, Cambodia and Nepal, were admitted at the
Cancun Conference). Decisions are supposed to be taken by explicit or
implicit consensus. Explicit consensus is that expressed by members present
at a given meeting and “explicitly”supporting a given decision.
Much more controversial is the concept of “implicit consensus”:
this means that countries not participating at a given meeting are supposed
to have accepted a given decision (accepted by all the participants)
and are bound to respect it. In theory, the WTO functions in a very democratic
way, since each member state has the right to vote and all votes have
equal value. There are no countries with a bigger clout than others like
in the World Bank, the International Monetary Fund or, even, the Security
Council. In practice, behind the scenes negotiations and political pressures
make the whole decision making process much less “democratic”than
it could seem. Consensus is often achieved through “informal”procedures
putting poor countries at a disadvantage. At the WTO Headquarters, poor
countries have permanent delegations formed, on average, by less
than four persons. The average size of rich countries delegations is between
seven and eight.1 This is not an irrelevant detail, given
the high number of meetings taking place at the same time: small delegations
cannot be represented in all of them. By consequence, they are often
excluded from important discussions and decision making processes. About
90 % of the WTO personnel comes from rich countries and only 10 % of
it comes from poor countries.1 So, in spite of its apparent
democratic way of functioning, even within the WTO some countries are “more
equal than others”. Much more equal.
The Cancun Conference
From September 10th to September 14th about 2,000 delegates
of its member states gathered in Cancun, Mexico, for the 5th Ministerial
Conference of the WTO. Many important issues were at stake. Arguably
the most important one was to verify if the WTO can work effectively
to reduce poverty through a fairer world commercial system. At the last
WTO Ministerial Conference, held in Doha, Qatar, in November 2001, several
problems were left unresolved. An optimistic deadline to achieve an overall
agreement was set for January 1st 2005. Cancun was supposed
to be an important step towards that goal. After Doha, however, there
has been very little progress towards solving such problems as agricultural
incentives and dumping, trade barriers, trade-related intellectual property
rights, the postponement of discussions on foreign investment. Not one
single deadline set to solve these issues before Cancun has been met.
To make real progress in Cancun, a high degree of willingness and ability
to compromise was necessary, especially on the side of rich and powerful
nations. In practice, as events have shown, these nations had no intention
of being flexible. After five days of bitter arguments about old and
new issues, the news of the total failure of the talks came on the afternoon
of Sunday September 14th.
Agricultural subsidies
The issues on the table were many and of great importance for the future of
world trade. Prominent among them was the one of the huge subsidies paid
by the United States (US) and the European Union (EU) to their farmers.
Such subsidies amount to more than 360 billion dollars per year, about
one billion dollars per day.2 Costs of production of farmers
in rich countries are much higher than those of the farmers in poor countries.
The huge subsidies of their governments allow them to, literally, “dump”their
products on the international market at artificially low prices. The
agricultural products of poor countries farmers cannot compete with the
artificially low priced products of rich farmers. The end result is that
hundreds of thousand of poor farmers are trapped in a vicious cycle of
persistent poverty.
According to the International Food Policy Research Institute (IFPRI), poor
countries lose about 24 billion dollars per year because of trade barriers
and agricultural subsidies put in place by rich countries.3 Countries
in Sub Saharan Africa are particularly affected given their greater dependence
on agriculture and the greater proportion of their population living
in rural areas.
One exemplary case, powerfully brought to the international attention by Burkina
Faso, Benin, Chad and Mali before the Cancun Conference, is the one of
cotton. The US government spends about four billion dollars per year
to subsidize its 25.000 cotton producers. The European Union, producing
only about 2 % of the world cotton, spends about 700 million dollars
per year to subsidize its cotton producers (especially Greece and Spain).
As a result, the price of cotton on the world market is lowered of about
25 %.4 In 2001, cotton producers in Sub Saharan Africa lost
about $302m as a consequence of US cotton subsidies. Benin, Burkina Faso,
Mali, Cameroon, and Côte d’Ivoire suffered most because of
the small size of their economies and their heavy dependence on cotton
production and export. The subsidies paid by the US government to its 25.000 cotton producers cause economic losses which are higher than the financial
aid given by the same government to the worse affected countries. For
example, in 2001, Mali received 37.7 million dollars from the US but
lost about 43 million dollars because of cotton subsidies. The same year,
Benin received about 15 million dollars from the US and lost 33 million
dollars because of the US cotton subsidies.4 As said, the
American cotton growers, benefiting from government subsidies, are about
25.000. The cotton growers whose livelihood is at risk because of the
same subsidies are little less than 11 million only in Africa.
Another example of agricultural subsidies with disastrous consequences on the
poor is the one of sugar, of which the EU is the biggest world exporter.
Producing sugar in EU countries costs about three times as much as producing
it in countries like, for example, Brazil, Colombia, Guatemala, Malawi
and Zambia. The huge subsidies paid to European sugar producers lead
to a surplus production of about 700 million tons that glut the world
market lowering the price of sugar by about 20 %.5 Sugar growers
represent only about 4 % of the European farmers, but their lobby is
very powerful. Once again, the big losers are millions of poor farmers
in developing countries.
Table 1, below, shows that the European Union and Japan, subsidizing their dairy
industries, spend more money per cow, per year, than they spend in aid,
per person, per year, in Sub Saharan Africa.6
At the UN Conference for Least Developed Countries, in May 2001, the EU launched
its “Everything but Arms”initiative (EBA). In its framework,
all non military products coming from Least Developing Countries (LDC)
should have had immediate duty free access into the EU market. Because
of intense and powerful lobbying, and notwithstanding the declarations
of many EU member states, not much progress has been made in the last
two years.7
Table 1: Annual subsidy per cow and aid per person to Sub Saharan African
Countries by EU and Japan
|
Annual subsidy per cow |
Annual aid per person to Sub Saharan African Countries |
European Union |
913 US $ |
8.00 US $ |
Japan |
2,700 US $ |
1,47 US $ |
Source: UNDP Human Development Report 2003 (modified)
Trade barriers
Another highly publicized issue was the one concerning trade barriers imposed
by both, rich and poor countries, to imported manufactured goods. The
United States, the European Union and Japan ask poor countries to liberalize
imports, that is, to lower their custom duties on imported goods. Many
poor countries, especially those becoming increasingly industrialized,
like Brazil and China, maintain that they cannot do it because they have
to protect their young industrial sector. On the other hand, rich countries
themselves keep in place many trade barriers to cheap manufactured goods
produced by poor countries. Not only that. Higher tariffs are regressively
applied to poor rather than to rich countries. For example, the trade
barriers faced by poor countries like Cambodia and Viet Nam, exporting
to the US are, on average, four times higher than those faced by industrialized
countries, like France and the Netherlands. Again, Bangladesh exports
about $2.4 billion to the United States each year and pays, on average,
14% in tariffs—while France exports more than $30 billion and pays,
on average, 1% in tariffs. 2
This tariff system is iniquitous before even being inequitable. It undermines
poor countries industries and exports in the very areas where they have
a comparative advantage and are able of producing at good quality and
low cost levels, like, for instance, agriculture and textile. Many trade
barriers seem to be purposefully shaped in order to hamper the development
of industries, in poor countries, that would add value to the raw materials
they produce. Let’s take the example of cocoa. Raw cocoa, of which
Ivory Coast, Ghana and other African countries are among the world major
producers, faces no tariffs in the markets of the EU and Japan. Final
products made from the transformation of coca, face tariffs of 30 % in
the EU and 21,7 % in Japan8. Once again, the gap between preaching
and practicing the “free market Gospel”is very wide. The
World Bank itself condemns the system of agricultural subsidies and trade
barriers put in place by rich countries.8,9 It estimates that
a good, equitable and “pro-poor”international trade agreement
could lead to 520 billion dollars gains for poor countries and lift about
144 million of poor people out of poverty by 2015.8 There
is a fundamental difference in the relationship that the World Bank (and
the International Monetary Fund –IMF-) has with rich and poor countries.
Poor countries are often forced to accept the “advises”of
the Bretton Woods institutions lest they loose vital access to loans
and grants. Rich countries can happily ignore “advises”and “condemnations”coming
from the same Institutions. And they do.
The real issues: the Singapore Issues
Reporting on the Cancun Conference, the majority of the media, in rich as well
as in poor countries, devoted their attention almost entirely to agricultural
subsidies and trade barriers. As important as they are, they were not
the only issues discussed in Cancun. Arguably, they were not even the
main ones. As a matter of fact, the conference collapsed because of the
disagreement on other issues: the so called “Singapore issues”.
These are problems first discussed in the WTO Ministerial Conference
that took place in Singapore in 1997. Since then, no agreement has been
worked out. They are:
- Liberalization of investments
- Open competition between national and non national actors
- Opening up of government procurement to foreign companies
- Trade facilitation: significantly simplifying customs procedures
These so called “new issues”(not really new) remain somehow obscure.
Poor countries, internationally weaker, with weaker government and administrative
structures, fear that giving way in these four issues would mean giving
away a significant amount of their sovereignty not only to foreign governments
but also, and mainly, to big and extremely powerful Transnational Corporations
(TNCs). Foreign Direct Investment (FDI) can play an important role in
promoting economic growth and poverty reduction. It all depends on the
type of investment and, even more, on the regulatory capacity of host
countries. In a liberalized and deregulated environment, TNCs would acquire
a disproportionate amount of power in poor countries. If the example
of Firestone in Liberia is something to go by, this fear seems to be
more than justified. In 1926 the government of that country, to pay its
heavy debts with American and British banks, gave to American Firestones
full rights to exploit a rubber plantation of about one million acres.
This American corporation became so powerful and politically influential
in Liberia that the country was known, for many years, as “The
Firestone Republic”.
Open competition and trade facilitation mean that foreign economic actors, in
all fields, should be treated in the same way as national ones. Once
again, in poor countries, this could lead to unbalanced competition and
undue foreign influence building up over time. The same can be said of
opening up government procurement, whereby governments should buy whatever
they need through international tenders. The supporters of it maintain
that this would eliminate corruption from government transactions …as
if big international companies had no potential for or, indeed, no solid
records of, corrupt dealings. According to several analysts, the “Singapore
issues”were the heart of the matter in Cancun, while agriculture,
although very important, was, in the circumstance, more of a diversion.
Major problems such as price fixing, collusive tendering, tax avoidance,
environmental damage, violation of labor rights, must be analyzed and
discussed in detail. Safeguard measures must be worked out together with
effective mechanisms to enforce them. Poor countries are not yet ready
to discuss these issues when other, more important to them, are far from
being solved. The insistence of rich countries, especially the EU, to
discuss the Singapore Issues led to an overloaded agenda in Cancun and
was the most important reason for the collapse of the conference.
The G20 +
To many, the real surprise that came from Cancun was the alliance of poor countries
that stood up against the attempts of breaking it put in place by the
EU, the USA and Japan. The so called G 21 (Group of 21 nations), comprising
of 21 countries led by Brazil, China, India and Kenya, was able of maintaining
a common position not only despite external pressures but, surprisingly,
despite often diverging interests.
The expression “poor countries” is often and superficially taken
as representing a “community”of nations somehow homogeneous
in its characteristics and interests. As a matter of fact, the interests
of Brazil, China and India differ substantially from those of, say, Burkina
Faso, Chad and Mali (it is little publicized, but China is also subsidizing
her cotton growers, although at a lesser extent than the USA and the
EU). Under previous agreements, rich countries are supposed to open up
their markets of textiles and clothing by 2005. China has a huge textile
industry producing at good quality levels and very low costs (mainly
because of low labour costs). Come 2005, it is very likely that many
jobs will be lost in the textile industry of many rich and poor countries
alike because of the strong Chinese competition (the volume of US imports
from China increased 125 % since she joined the WTO in 2001). The export
of agricultural products is much more important for Brazil than for India.
This means that Brazil needs an agricultural trade deal much more than
India. Notwithstanding these and other different interests, the G 21
did not falter in Cancun. The question, now, is how long will this alliance
hold against the attempts to disrupt it that will, certainly, be put
in place. Some countries are already opting out of it (see below) while
others are showing interest in joining in. Some observers already call
this group “G 20 +”rather than “G 21”, since
the number of countries within it is not really clear and seems to be
changing very rapidly.
The danger of bilateral over multilateral agreements
For “poor countries”this was an important victory, concrete and
symbolic at the same time. Concrete because, thanks to the common position,
no unbalanced agreements were imposed. Symbolic because the poor defeated
the rich.
Some analysts are less adamant in calling the outcome in Cancun a “victory”for
poor countries. According to them, an incremental deal would have been
better than the breakdown of talks. Cancun was a missed opportunity to
start transforming world trade so that it can really benefit everybody
and not only the rich and the powerful. The danger, now, is that powerful
countries will opt for a series of bilateral “Free Trade Agreements”(FTAs)
rather than waiting for multilateral ones. The United States already
signed “their”FTAs with Chile, Jordan and Singapore and have
agreements under discussion with several Latin American countries, Morocco
and Barhein. The low volumes of trade between the US, Jordan, Morocco
and Barhein, suggest that the nature of these agreements is more political
than commercial. In fact, bilateral agreements, more than multilateral
ones, are open to political pressures and can be “granted”in
exchange of political support to, for instance, controversial foreign
policies. In addition, bilateral agreements, by definition, don’t
give equal access to all markets and real benefits may be minimized by
different rules in different agreements.
Representatives of several of the G21 countries met on October the 10th in
Buenos Aires, Argentina. They reiterated their willingness to operate
within a multilateral frame to set trade disputes and to work out transparent
and equitable international trade rules. At the last moment, Costa Rica
and Guatemala decided not to participate in the Buenos Aires meeting.
The reasons are not clear but, many observers talked of behind the scenes
pressures by the US. This would not be surprising. If bilateral pressures
or “national interests”are allowed to disrupt the G21, there
is the real danger that the victory of Cancun will translate in a de
facto long term defeat for poor countries.
What next? Globalization trends at stake.
Next ministerial meeting of the WTO members states should take place in 2004
in Hong Kong. Before that, the trade ministers of member states will
reconvene in Geneva in December this year. They will have to assess the
future of multilateral trade talks and of the WTO itself. The two big
questions are: will the US, the EU and Japan adopt a different attitude
and will the G 21 alliance hold? The answers to these two questions hold
the key to the livelihoods of millions of people around the world. Globalization
is a process that cannot be reversed. Per se, is neither good nor bad.
It all depends on how it is managed and, even more, to whose advantage.
As the Nobel laureate in economics Amartya Sen put it, even those who
actively protest against globalization at each important international
gathering, are not, in essence, against “globalization”.
Their manifestations are, themselves, among the most “globalised”events
of the last few years. What they are really against, is the persistent
abject poverty of hundreds of millions of people around the world and
the increasing levels of inequality between and within nations.10 The
poorer and weaker strata of population need to be protected through public
policies within countries. To the same token, in an increasingly globalised
and globalising world, the poorer and weaker nations need to be protected
from oppression and exploitation by richer and more powerful nations
through international rules and laws. This is not happening yet.
The victory of poor countries in Cancun can lead to a more open minded and less
selfish approach to international trade by rich countries. It could also
lead to global economic disintegration with the total demise of the WTO
and the impossibility of reforming it to the advantage of the poor. International
trade is not separated by international politics. It is an integral part
of it. The current trends of polarization and discrimination in international
politics do not leave much room to optimistic expectations. These are
tough times for those who still hope in the globalization of solidarity
and tolerance against selfishness and bigotry. Paraphrasing the words
of the Secretary General of UNCTAD (United Nations Conference on Trade
and Development), we can certainly say that the “after Cancun”will
be “... the first real test of economic policy in a post Bretton
Woods globalized world”.11
Does it all matter for health?
The answer to the above question is an unequivocal and resounding “yes”.
All those who are interested in and working for better health of entire
populations, know that the key for it lies, mainly, outside the health
sector. Education, housing, food security, safe water, adequate sanitation,
adequate communications, are all very powerful determinants of the health
status of populations. Government expenditure, individual and household
income are, all, of great importance in facilitating social participation
and access to social services.12 A more equitable international
trade can promote economic growth.2 In the presence of economic
growth, national policies ensuring resource redistribution, universal
access to social services, and social participation are essential in
improving population health.13 Since the use and distribution
of resources, between and within countries, is the essence of politics,
health is much more a political than a medical issue. International and
national politics matter a lot to health. Health workers must be fully
aware of this.
References
- Action Aid, CIEL, Friends of the Earth, Oxfam International, World Wildlife
Fund International, Open letter on Institutional Reform in the WTO, October
2001
- OXFAM, Running into the Sand, Oxfam Briefing Paper N° 53, 2003
- International Food Policy Research Institute, How much does it hurt? Measuring
the impact of agricultural trade policies on developing nations,
IFPRI,
2003
- OXFAM, Cultivating Poverty. The Impact of US Cotton Subsidies on Africa, Oxfam
Briefing Paper N° 30, 2002
- OXFAM, The Great EU Sugar Scam. How Europe’s sugar regime is devastating
livelihoods in the developing world, Oxfam Briefing Paper N° 27,
2002
- UNDP, Human Development Report 2003, Millennium Development Goals: A compact
among nations to end human poverty, Oxford University Press, New York,
Oxford, 2003
- OXFAM, EU Hypocrisy Unmasked: Why EU Trade Policy Hurts Development, Oxfam Briefing
Note, 2003
- World Bank, Global Economic Prospects 2004: Realising the Development Promise
of the Doha Agenda, World Bank, 2003
- World Bank, World Development Report 2000/2001, Attacking Poverty, Oxford University
Press, New York, Oxford, 2000
- Sen Amartya, “Globalization, Inequality and Global Protest,”Development,
45(2): 11-16, 2001
- UNCTAD, Trade and Development Report 2003, UNCTAD, Geneva, 2003
- Marmot Michael, The Influence of Income on Health: Views of an Epidemiologist:
does money really matters? Or is it a marker for something else?
Health Affairs, Volume 21 (2), 31-46, 2002
- Ravallion Martin, The Debate on Globalization, Poverty and Inequality: Why Measurement
Matters, World Bank Research Policy Working Paper 3038, April 2003
Copyright 2003 - Department of Health Sciences of Uganda Martyrs University
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