5 juli 2005

Bad Advice (The Flemish Beerdrinker)

Abolishing the Common Agricultural Policy should be high on the trade agenda. But it’s not about trade justice as people like Blair, Oxfam and the folks over at Make Poverty History contend. In fact just abolishing it would be rather unfair towards the least developed countries who are mostly importers of food and agricultural products and thus will be hurt by rising food prices when subsidies are eliminated. Who stand to gain most when the CAP it ditched are Europeans themselves and middle-income countries like Brazil, Argentina and Colombia, who have a comparative advantage in agricultural products. In this context it is striking that it is precisely those middle-income countries that are by far the most protectionist of all. For example, in the U.S. and in the EU more than a quarter of agricultural products enter duty free. The Cairns group of those same middle-income countries allow duty-free access of just 3 percent. Unfortunately, advocats of trade justice do not plead for free trade. They have nothing against those barriers put up by the Cairns group. They in fact think that least developed countries also should be allowed to take the same protectionist measures. They propose a world where the export subsidies by developed countries are abolished and where developing countries protect their own agricultural sector with subsidies and tarifs. That’s called trade justice. But not only would rising prices hurt the food importing countries - the poorest of the poor - the inability of the least developed countries to export will not be cured:

The inability of the LDCs to export to the developed-country market is largely (though, admittedly, not exclusively) the result of the supply-side constraints that are of their own making. The sooner we recognize this fact the more urgently will the countries and international institutions focus their attention on how best to overcome these constraints. Telling the countries that the developed countries are responsible for their woes may make one popular but it does the countries no good. It only encourages complacency towards domestic policy reform in these countries and without those reforms no amount of opening up by the developed countries will kick off growth.

What the trade justice people have to offer poor countries is neither trade, nor justice. They only offer them continued poverty.

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