What do you mean by global trade?
Trade is something people and companies do every day - the buying and selling of goods and services. People have traded for centuries in order to overcome local scarcities. It can involve local transactions, such as food from a farmers’ market or purchasing a hair cut. Today trade is far more global, made easier by efficient modes of transport and communications. Fresh fruits and vegetables can be supplied and bought from countries such as South Africa and New Zealand and services, such as call-centres are now supplied from almost anywhere in the world.
Many governments intervene in the trading system to support local firms and farmers and to protect the environment (commonly known as protectionism). Alternatively, many governments have decided to open up their trading markets (commonly known as 'free trade' or trade liberalisation) in the belief that more trade between nations will stimulate growth and ultimately increase prosperity.
What is wrong with global trade?
Although trade has the potential to lift millions of people out of poverty, poor countries are getting a raw deal under the current global trading system. Trade is overseen at a global level by the World Trade Organization (WTO) which believes in free trade, as do global institutions such as the International Monetary Fund (IMF) and the World Bank.
Rich countries, particularly the EU and the US, are trying to force poor countries to open their markets to goods and services from big business, threatening the livelihoods of hundreds of thousands of farmers and forcing local companies out of business.
What’s the evidence?
Because trade has far reaching effects, often outside people’s control - the free trade policies pushed by rich countries, are failing to bring prosperity to those who need it most. The poorest countries have actually become poorer over the past two decades, with 80% of their populations now living on $2 a day or less (and half living on $1 a day). The gap between the rich and the poor is expanding.
In Ghana, two million people living in the Northern and Upper West regions depend on farming as a way of life and a means of survival. Food crops like tomatoes, rice, okra and onions are grown, accounting for 90 per cent of employment and income. However, the relaxing of import tariffs in the 1990s saw cheap rice flood into the country as well as heavily subsidised rice from the EU.
The effect on local communities was disastrous. John Ayariga, a rice farmer from Bolgatanga in the Upper East region, explains: “I have been a farmer for 19 years. I started farming at age 12. Rice farming is no longer lucrative because imported rice is cheaper than locally produced rice. We cannot make ends meet. The field we used to plant rice in is now lying fallow and is being used to play football. Is this fair? There’s no pride in being a farmer now.”
For more on unjust trade go here
What is the difference between free trade and Trade Justice?
Free trade and 'Trade Justice' are opposite sides of the same coin. Perfect free trade means removing all barriers to trade between countries. All too often, this means putting the pursuit of free trade above other objectives such as reducing poverty, protecting the environment and people’s rights. Free trade includes removing all forms of government support to farmers, slashing farm tariffs and removing quotas on goods coming into a country. No country has ever gone to this extreme but ‘free trade policies’ are those which move a country in this direction.
Trade Justice allows developing country governments to freely choose the best policies without being limited by the WTO and other global institutions such as the World Bank and IMF. Governments would be able to intervene in their national economies to protect their farmers and developing industries. Trade Justice means that rich countries would stop harmful practices such as paying massive subsidies to their farmers, dumping farm goods in poor countries and would properly regulate big business.
No country has ever become a 'developed country' by pursuing free trade policies from the outset. Rich countries have used the 'Trade Justice' approach to get where they are today - but are now denying the same chance to poor countries.
Isn't free trade the way out of poverty?
Rich countries say free trade is the best way out of poverty for developing countries. However, free trade forces rich and poor to compete on equal terms. In such an unequal world, this kind of trade would be far from fair. It would be like pitching Manchester United against the village football team – there might be a level playing field, but Manchester United will still win every time.
There is very little evidence to support claims that free trade lifts people out of poverty – in fact, the opposite is true. Countries that have rapidly opened their markets to free trade, such as Haiti, Nepal, Mali, Zambia and Peru, have very poor records on economic growth and poverty reduction. On the other hand, countries such and Taiwan and South Korea opted to protect their domestic industries rather than completely open their economies to global trade. As a result, this not only produced higher economic growth but also resulted in lower inequality in both countries.
In recent years India - where 80% of people live in extreme poverty - has reduced its import taxes on industrial goods such as textiles and leather. This has resulted in a massive increase of imported industrial goods and has left many of the 30 million people, especially women, employed in the textiles sector out of work and destitute. Vishambar, a 35-year-old silk weaver from Varanasi, is one of those who lost their jobs. ‘There is no work’ he says. ‘I am just sitting begging…I want work for myself and for other people in the village.’
Although rich countries push for freer trade, no country has ever developed by following a free-trade model from the outset.
Yet the world’s richest countries continue to force the poorest to open their markets to unfair competition - allowing big business to reap the benefits. This has led to a 'race to the bottom' – damaging workers' rights and contributing to environmental devastation. Almost all rich countries developed by selectively protecting and supporting their own economies. Now they are on top, they are kicking away the ladder for developing countries.
What about Fairtrade products?
Fairtrade refers to a system which allows farmers in developing countries to get a fair price for the goods they sell abroad. Fairtrade consists of a very specific range of products available to western consumers. Fairtrade goods have been certified by the Fairtrade Foundation (a charity). Farmers are paid a higher price than the current global price for their goods and have certain rights, such as being able to join a trade union.
Western consumers pay more for fairtrade tea, coffee, chocolate etc. to ensure that producers in developing countries get a better deal.
If everyone brought Fairtrade products, wouldn’t that solve the problem?
No. The number of Fairtrade products is still relatively small. Unless you're going to drink coffee and eat chocolate all day it’s likely you’ll have to consume goods that aren’t Fairtrade! Fairtrade primarily helps those who sell their goods abroad. The very poorest farmers produce for local consumers, not foreign ones. They are being pushed out of those markets by goods sold cheaply below the cost of production by big corporations based in rich countries and then dumped into developing countries’ markets. Although this system benefits some farmers in developing countries, Fairtrade products represent less than 1% of global trade. So while Fairtrade helps, it’s only 'trade justice' that will begin to solve the wider problem of unfair trade.
What is the WTO and why is it important?
The WTO is an international institution with 150 member countries which decides the rules that govern world trade. It works on the detail of trade agreements all year round, but every two years trade ministers from member countries meet for a ministerial meeting to set the WTO's priorities for the coming years. The last meeting took place in Hong Kong in December 2005 – but very little progress was made.
Virtually any economic policy that a government can make is dependent upon what is agreed at the WTO. This means that governments do not have a full range of options open to them – their space to set their own economic policies is narrowed by the WTO. WTO rules, agreed by member countries, limit the role that governments can play in their economies.
ActionAid is not against a rules-based system of international trade – in fact, that’s what we want. But the WTO is being used by rich countries and big business to push 'free trade' policies which bring misery to millions in poor countries.
What about bilateral and regional trade deals?
Trade deals can take place multilaterally (through the WTO), bilaterally (involving just two countries), regionally (involving more than 2 countries) or unilaterally (special terms of trade given by one country or bloc, such as the EU, to one or more other countries).
Bilateral trade agreements usually involve both opening their markets to the goods and services of the other rich country. The US have bilateral trade agreements with Australia and Singapore among others. Regional trade agreements involve two sets of countries, such as the EU and the African, Caribbean and Pacific (ACP) countries who are currently negotiating Economic Partnership Agreements (EPAs).
ActionAid is currently campaigning to ensure that the EU does not press ahead with Economic Partnership Agreements which could leave 750 million people living in the African, Caribbean and Pacific countries worse off. Click here to take action now
What happened to the current round of WTO trade talks?
Rich countries promised a special 'Development Round' of global trade talks in 2001 that would put the concerns of poor countries at the heart of the WTO agenda. But since then, the talks have moved slowly and are currently suspended. This is because powerful countries - including the US and EU - believe that poor countries should follow free trade rules by slashing barriers to trade and abandoning government intervention.
ActionAid believes that the 'Development Round' of global trade talks should not resume as the current deal on offer would be disastrous for developing countries. African countries would stand to lose $190m if they agreed to the proposed trade deal and poor countries in total could lose up to $63bn. The WTO must be radically reformed so that people’s rights and sustainable development are put at the heart of its agenda.
What is ActionAid doing to make global trade rules fairer?
ActionAid's Trade Justice Campaign works to tackle the unfair rules that govern world trade and keep people poor. We campaign globally for Trade Justice in over 20 countries from Ghana to Pakistan, Beijing to Rio, Washington to London and locally with grassroots groups based in developing countries.
Campaigning with ActionAid means that you are directly helping to tackle the unfair rules that govern world trade and keep people poor.
In the UK, we campaign as part of the Trade Justice Movement, a coalition of over 80 UK organisations campaigning for trade justice. The TJM represents over nine million people in the UK who continue to campaign for trade justice.
- Over 250,000 people gathered in Edinburgh in 2005 ahead of the G8 summit to call on world leaders to make poverty history
- Over 25,000 people took part in the ‘Wake Up to Trade Justice’ overnight vigil in London in April 2005 to challenge the UK government to deliver trade justice – not free trade
- More than 8,000 trade justice activists met with their MPs in 2005 to put pressure on the UK Government for a fairer deal on trade for the world’s poorest countries.
At a local level, we work on the ground with communities that have been affected by unfair trade to secure, for example, the right to food and water, fairer wages, better prices, and more favourable working conditions. This will often involve campaigns and lobbying targeted at national governments against free trade, but also to push alternative trade policies that will have a positive impact on development and poverty reduction.
But local issues and national regulations are being undermined by free trade policies at an international level. ActionAid also campaigns and lobbies against those institutions and northern governments that are having a negative impact on poor people through their trade policies. This includes the UK Government, the EU Government, WTO, World Bank and the IMF.
