WTO delivers

December 8, 2013

The World Trade Organisation has delivered:

The World Trade Organisation (WTO) has agreed on its first-ever global deal aimed at boosting commerce. Analysts say it could add $1 trillion to the global economy.

The agreement – reached in Bali after marathon negotiations between trade ministers from 159 nations – simplifies trade procedures and also makes it easier for the poorest countries to sell their goods by reducing export barriers and allowing such nations more scope to use subsidies to safeguard food supplies.

It is seen as an important step for the WTO, which has struggled to make new trade agreements since being founded in 1995, the BBC’s economics correspondent reports.

“For the first time in our history, the WTO has truly delivered,” says WTO chief Roberto Azevedo. “This time the entire membership came together. We have put the ‘world’ back in World Trade Organisation.”. . .

The core of the deal is trade facilitation:

. . . This is about reducing the costs and delays involved in international trade. It is often described as “cutting red tape”.

Some analysts suggest the benefits could be large. An influential Washington think tank has put the potential gains to the world economy at close to $1tn and 20m million jobs.

It also estimates the cost of administrative barrier as double the cost of tariffs.

The rich countries have agreed to help the poorer WTO members with implementing this agreement.

Another important aspect of the Bali package is about enabling poor countries to sell their goods more easily. This part is about tariffs, and also quota limits on imports.

Rich countries and the more advanced developing countries have agreed to cut tariffs on products from the poorest nations.

The head of New Zealand’s International Business Forum says a new global trade deal agreed by the World Trade Organisation (WTO) will mean cheaper and faster exports.

International Business Forum executive director Stephen Jacobi says exporters’ goods will be fast-tracked through international customs as the facilitation part of the deal cuts down on red tape for traders.

“The main benefit of this agreement is that it will become easier and faster and cheaper to move goods around supply chains, to export our goods around the world, and indeed to import our goods from other countries.”

Business New Zealand chief executive Phil O’Reilly says the WTO deal will boost the confidence of trade ministers meeting in Singapore to try to reach agreement on the proposed Trans-Pacific Partnership trade deal.

The deal marks the WTO’s first global trade agreement since it was created in 1995 and follows years of failed attempts to secure the required unanimous approval from all its members. . . .

British Prime Minister David Cameron says the deal could be worth more than £1 billion a year to British businesses and £70 billion globally.

“. . . By slashing barriers to trade, this deal will also provide a lifeline to the world’s poorest people. Helping developing countries to grow is not only the right thing to do, but it also increases potential markets for us all. So this really is win-win and the World Trade Organisation is to be commended for this historic deal.”

Trade restrictions mean people get less for what they produce and pay more for what they consume and this hurts poorer people and poorer countries hardest.

Freer trade is fairer trade and poorer people and countries have the most to gain from it.


Free trade is only real fair trade

July 31, 2013

Fair Trade – that’s got to be good, hasn’t it?

No.

Over at Anti Dismal, Paul Walker discusses an article in The Economist by Amrita Narlikar and Dan Kim which argues that like a lot of other ideas that sound good in theory,  it does more harm than good in practice:

Despite the claims of its champions, the fair-trade movement doesn’t help alleviate poverty in developing countries. Even worse, it is just another direct farm subsidy of the kind most conscientious consumers despise. In the long term, the world needs free trade, not fair trade. . .

The stated purpose of the fair-trade movement is to give economic security to producers in developing countries — often of unprocessed commodities such as fruits, live animals, and minerals — by requiring companies and consumers to pay a premium on the market price.

Until now, any questioning of the fair-trade movement has been limited to the micro level. The movement has faced repeated criticisms, for example, for the relatively expensive fees that producers must pay to get a fair-trade label, which make it ineffective for many poor farmers. Another area of concern is just how lucrative the process is for middlemen and retailers. Finally, several studies show that very little of the premium that consumers pay actually reaches needy producers. Consumers might be surprised to learn that only one or two percent of the retail price of an expensive cup of “ethical” coffee goes directly to poor farmers.

The adverse effects of fair trade are even more worrying at the macro level. First, fair trade deflects attention from real, long-term solutions to rural poverty in developing countries; and second, it has the potential to fragment the world agricultural market and depress wages for non-fair-trade farm workers. . .

Walker points out in spite of the marketing which tries to convince consumers that Fair Trade is good for producers, they get only a tiny percentage of the money made:

An interesting statistic is that in 2010, retail sales of fair-trade-labelled products totalled about $5.5 billion, with about $66 million premium — or about 1.2 percent of total retail sales — reaching the participating producers. There has to be a better way of helping poor farmers. Having only 1.2 cents out of every dollar spent on fair-trade products reach the target farmers is a hugely inefficient way of helping these people. If people wish to help these farmers there has to be charities out there that can transfer more than 1.2 cents per dollar to them.

Also a more efficient and straightforward way to help poor farmers is to remove the massive OECD subsidies and tariffs we see on agricultural products. In other words, a move towards free trade is needed.

Fair Trade has a powerful brand but it’s not one which really helps producers.

They, and consumers, would have much more to gain from free trade, which is the only real fair trade.


Democracies don’t have famines

July 31, 2011

Quote of the week from Roger Kerr:

Less edifying was a session titled ‘An Uncertain Harvest: Investigating Global Food Security’. Malthus seemed to have a couple of seats at the table in a round of agonizing about food security and whether the world can feed its population in the 21st century.

I made the point that food security is often the code word for agricultural protectionism. It has been the excuse for the common agricultural policy and protection of Japan’s rice farmers, for example. If markets are allowed to work, trading is free, and property rights and contracts are secure, it is hard to see why global supply and demand will not balance over the longer term.  As one delegate said, there’s never been a famine in a democracy.  

Consumers never win from protectionism and in the long-term producers don’t either. New Zealand is proof of that.

We might have been dragged kicking and screaming into the real susbisdy-free world in the 1980s but New Zealand farmers are much the stronger for it now.

Protectionism increases the power of politicians and bureaucrats which adds costs and uncertainties.

It also upsets the law of supply and demand, creating unwanted surpluses or unnecessary shortages.

Aid might be needed in the short-term but the best way to tackle famine is to open borders and ditch subsidies.

Fair Trade is a compelling slogan but the only really fair trade is free trade.


Poor pay price of protection

July 25, 2008

 If nothing is salvaged from this sorry round, it is the world’s poor who will pay the highest price.

The Herald is correct when it says this in its editorial. It is the poor who are most disadvantaged by trade restriction.

The only fair trade is free trade.


%d bloggers like this: