In which the WTO Beats a Dead Horse with another Dead Horse

The World Trade Organization (WTO) has two dead horses on its hands: Doha – the deceased WTO round that has long awaited a proper burial – and the paternalist development model.  The latter is epitomized by WTO and International Monetary Fund (IMF) policy impositions on developing countries that crescendoed in the 1990’s, but have taken a global battering ever since.  The WTO seems to think that using one dead horse, the we-know-what’s-best-for-you development approach, to beat the other, Doha, will reanimate both. Call me crazy, but beating one dead horse with another doesn’t seem like a winning strategy.

The WTO disagrees, WTO Director-General Pascal Lamy particularly disagrees, and some developed countries of the WTO aggressively disagree.  They have picked a new name for the dead horse embodying the paternalist development model: “trade facilitation.”  This euphemistic WTO proposal would have developing countries spend their own limited funds to improve their import infrastructure, i.e. customs and port facilities. WTO adherents are pegging their hopes of Doha resuscitation to this new scheme.  In Friday’s issue of The Guardian, Pascal Lamy singles out the trade facilitation agenda as the best hope this year for reviving the much-chagrined Doha round. EU Ambassador to the WTO Angelos Pangratis argues that “most delegations” realize the “vast benefits” that trade facilitation brings “both in terms of intrinsic economic value, as well as systematically.”

Really?  If there’s such widespread agreement on the benefits of trade facilitation, why does the Doha trade facilitation negotiating text have about 650 square brackets, each one indicating disagreed-upon text (according to Washington Trade Daily)?

The significance of that number of edits is being downplayed by the trade facilitation negotiations chair Eduardo Ernesto.  Meanwhile Pascal Lamy is hard at work selling trade facilitation as “essentially about making trade, both imports and exports, easier and less costly.”

Less costly for who, Mr. Lamy? For developing countries whose strained budgets must now make room for outsider-requested line items of bigger ports and more customs personnel?  Less costly for farmers in those same developing countries who would be outcompeted in their local markets by increasing flows of subsidized imports?  

Let’s look at that again: the World Trade Organization would have developing countries paying the cost of importing more goods, including agricultural products that would, and have, put their own small farmers out of business, bringing increases in unemployment, immigration, and food insecurity.  Even more, the added budgetary cost of refurbishing imports infrastructure would place greater pressure on developing country governments to cut education/training programs that might help those displaced farmers.  So “trade facilitation” could cost the livelihood of farmers, and the ability of the government to support that sizeable population.

Mr. Lamy, your belief that “trade facilitation” makes trade “less costly” is measuring “costs” in the wrong way.  

“Free trade” deals modeled after the North American Free Trade Agreement (NAFTA), similarly sold on promises of facilitating trade, have “facilitated” huge surges of subsidized food imports in developing countries, displacing small farmers and pushing many who produce food for a living to a point where they can no longer feed their families.  These deals have forced low-resource, small-scale farmers to compete with heavily-subsidized, highly mechanized, large-scale agribusiness in developed countries.  

In many cases, after this asymmetrical competition forced developing country farmers to abandon farming, the population became dependent on the new flood of imported food staples.  That is how we have developing countries now primarily importing the same food they have produced for centuries.  As countries have grown increasingly dependent on food imports, international food prices have become increasingly volatile, hitting record highs in recent years. Import-dependent countries that must now swallow those price spikes have experienced food crises.  A few examples:

• In Mexico, NAFTA provoked the loss of livelihood for 2.5 million farmers, displaced by a flood of subsidized U.S. grains.  After the loss of food security provided by those farmers, the 1996 U.S. corn shortage resulted in the malnourishment of one out of five Mexican children.
• In Haiti, IMF structural adjustment programs led to a surge in U.S. rice imports that overwhelmed farmers in a country that used to feed itself –- rice-growing areas in Haiti now have some of the highest concentrations of malnutrition and poverty.  When international rice prices tripled during the 2007-2008 food crisis, import-dependent Haiti was wracked by food riots.
• In El Salvador, the Central America Free Trade Agreement (CAFTA) prompted a doubling of the income gap between men and women in the agricultural sector as investors prioritized exportable goods, such as cash crops, which employ men, while sectors that employ women shrank.

Mr. Lamy, a malnourished and poorly-paid workforce is not a workforce that can grow trade, a market overrun by subsidized imports is not a healthy market, and budget priorities of a nation dictated by outside forces will not serve the needs of internal markets or the nation’s population.  Promises to the contrary are just as tired as the WTO’s dead horses.

As the WTO continues to make such promises in selling “trade facilitation,” representatives of many developing nations whose trade is slated to be “facilitated” aren’t buying it.  Ambassador Jayant Dasgupta of India indicates that trade facilitation will not bring the Doha-resuscitating consensus at the WTO that Mr. Lamy hopes for.  He states, “Trade facilitation is being pushed very aggressively and relentlessly by the developed countries.  The arguments which have been put forward are that they are good for the developing countries; perhaps, the implicit message is that ‘you don't know what is good for you.  We are telling you this is good for you, so please go ahead and accept it.’”  By contrast, he argues, “we need to look at trade not only from the mercantilist angle of more profits, more zeros, etc. We need to look at it through the prism of social justice.” 

Now that would be a novel practice, if only the WTO would leave its poor horses alone.