by Mike Gidney, Chief Executive, The Fairtrade Foundation
One of the fault lines in the debate about trade and development has been whether trickle-down works well enough.
For some it’s long been an article of faith that trade liberalisation has lifted more people out of poverty than anything else, where the benefits of globalisation eventually trickle down to the many. For others, including in the fair trade movement, rushed liberalisation has created too many losers and too few winners, and the immediate social and environmental costs are simply too high.
Recently there are signs that the theology is changing. Even the big beasts of the free market are starting to realise that trickle-down too often increases inequality and does not have all the answers. A recent report from the IMF called inequality “one of the defining challenges of our time” and proposed that “boosting the incomes of the poor and the middle class can help raise growth prospects for all.” The World Economic Forum meeting in Davos this year chose inequality as one of its themes. And the OECD has begun expressing concern that richer countries have allowed unions to be undermined with serious consequences for labour rights and inequality.
This capacity for reflection still seems to be missing from the World Trade Organisation. For twenty years the WTO has promoted a deep liberalisation agenda, but the current round of talks – the Doha Development Agenda – has been stalling since 2001. Ministers are meeting this week in Nairobi to try yet again to make progress. Fundamental questions like the right of the poorest countries to ensure food security and protect their most important sectors, and the insistence of rich country groupings like the EU on faster and deeper market opening, have created deep divisions, no agreement and turned the WTO into a dialogue of the deaf.
Successive attempts at a breakthrough have failed, principally because of the refusal of those driving the agenda to listen to developing country concerns and act on them. Double standards persist, nowhere more so that in the scandal of cotton, where the four West African cotton producing countries have argued for more than a decade that the subsidies provided by richer countries have suppressed global prices, hitting their cotton farmers hard. West African cotton smallholders are amongst the poorest farming communities, where conditions are harsh, child labour is endemic and there are few options to make a living. They are highly vulnerable to global price fluctuations, and many cotton farmers do not make enough from their harvest to feed their families across the year. The problem is widespread: as many as 100 million rural households depend on cotton for their living globally. In India, over the last twenty years, 285,000 Indian farmers – many of them cotton smallholders – have committed suicide.
Meanwhile richer countries – notably the US, EU and now China ¬– continue to support domestic cotton production, the US moving from direct to indirect subsidy to comply with the letter of WTO law, but not the spirit. This is trade policy at its worst, driving inequality and failing many millions of vulnerable producers.
If the newly approved Global Goals are going to be achieved, another way of setting trade rules is needed. One that puts farmers and workers first, that fights hunger and poverty and creates equality. For too long the reality of the WTO has undermined its development rhetoric.
We need good regulation to make trade fair, and we need good global rules, otherwise regional trade agreements (some, like TTIP, more aggressive that the WTO talks) will flourish. But the regulators need to listen to the concerns of marginalised producers in developing countries and put them first. If the WTO Ministerial does not make progress this week then surely the time is right for a root and branch reform of the WTO, to give it a new mandate to fight poverty through trade, so that globalised trade works for the many not the few.
What if the world’s trade ministers, their lawyers and negotiators, broke out of their secure compound and actually went and spoke – and really listened – to Kenyan smallholders? There are producers within easy reach of Nairobi who could tell them how far the WTO talks fall short of the reality on the ground. Then perhaps they would be inspired to create trade rules that work for the many and give us the global trading system we deserve.