By Vince Caruana
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| A woman holds a candle as she participates in a celebration of the collapse of talks at the Cancun World Trade Organisation ministerial meeting on Sunday. |
European non-governmental development organisations (NGDOs) working closely with non-governmental organisations (NGOs) from the south know that the conventional wisdom that liberalisation will lead to growth, which will in turn lead to poverty reduction, does not go unchallenged by poor nations. In fact these NGDOs often report that for consumers in developing countries, price stability is as important as the cost of goods, and consumers expect their governments to set up storage systems so that prices remain more stable throughout the year.
These NGDOs also report that poor producers complain about the uncertain process they face daily and want an opportunity to sell their goods before markets are flooded with cheap imports. NGDOs also maintain that local companies in the developing world want long-term relationships with local suppliers, and thus a market where local products can compete with imports.
Free trade almost certainly leads to less stability and in simple words poor producers, consumers and local companies all want some form of protection from the uncertainty and volatility of the market.
These demands might sound unreasonable because they are unfashionable. However, consider these two facts:
Protecting local producers and building up local capacity to supply domestic enterprises was a key part of the successful development of a number of countries in the 1980s and 1990s, leading to an improvement according to important indicators such as life expectancy.
The UK, the US, Germany and Japan all grew first and then liberalised their markets later.
Two questions emanate from the above:
Should trade liberalisation be at the top of the list of priorities for developing countries?
Should developing countries be free to apply a flexible and less dogmatic application of free trade principles?
Whatever the answer, developing countries ought to be allowed to answer these questions without a lot of behind-the-scenes arm-twisting.
Ultimately only fairer arrangements will ever allow trade to become an effective means for poverty alleviation. Current unfair practices include keeping out farm products from developing countries reaching the rich world through high tariffs or heavy subsidies.
For example it is a known fact that northern governments spend $1 billion a day on agricultural subsidies alone - six times as much as they spend on aid. Of course, restructuring the economy towards more social justice, such as rich nations opening up their markets, will produce some upheaval. But then only the rich nations have the welfare system and infrastructure required to cope with this!