Mzansi Afrika

From Johannesburg South Africa, a window on the world

Thursday, April 29, 2004

New Global Trade Ruling Favours the Poor

There has been an interesting new development in the unfair global system of "Free Trade".

The World Trade Organization on Tuesday ruled in favor of Brazil after the country filed a complaint last year that U.S. cotton subsidies are distorting world prices, violating global trade rules and affecting millions of farmers in developing countries.

The ruling is being considered a landmark because it challenges for the first time the domestic farm policies of developed countries. Reuters reports that the decision could open the door for many developing nations to file complaints against U.S., European and Japanese farm subsidies. It could also give more power to poor nations in the Doha round of global free trade talks, which collapsed in September, in part over farm subsidies.

The subsidies the United States has given to its cotton producers have lowered the price of cotton worldwide, making it almost impossible for producers in developing countries to compete with the Americans. The United States' estimated 25,000 cotton farmers control more than 40 percent of global cotton exports.

The US claims to be committed to a global system of free trade, and yet hypocritically puts in place a distorted system of trade subsidies which protect their own markets, while allowing them to flood developing countries with cheap goods that destroy local agriculture and markets. This system is a major factor thats keeps the status quo of global inequality in place. The unfair global trading subsidy system contributes greatly towards poverty in the developing world. The US can then provide or withhold aid at will as a way of keeping global dominance. This is usually done under the guise of promoting democracy, but doesn't stop the US from doing business with mineral or oil rich dictatorial African countries that have appalling human rights records like Equatorial Guinea.

As Daniel Griswold, associate director of Cato's Center for Trade Policy Studies, writes:

"The U.S. government subsidizes "the production of 25,000 U.S. cotton farmers with an average net worth of $800,000. Those subsidies depress the world price of cotton, driving thousands of already impoverished farmers off the land in Mali and other poor nations. According to the World Bank, U.S. cotton subsidies cost Mali and its desperately poor neighbors $250 million a year. This can only add to the frustration, despair, and anger that are rife in Muslim nations today. And we wonder why the United States has such a difficult time winning friends and influencing people in that part of the world."

While the WTO ruling may open the way for different commodity producers in developing nations to follow suite and challenge US and European Union trade subsidies, it is too soon to get excited as the US plans to appeal the ruling. Likewise it is too soon to tell if this ruling will give more legs to poor countries in the Doha trade negotiations when and if they resume.