A One-Way Route to Helping the Poor
IPN Opinion article
The poorest countries of the world will get richer only through trade. Now is the right time for rich countries to throw open our markets unilaterally to the poorest to help them do just that.
Launching such a campaign at the onset of a world-wide recession might seem quixotic. But the recession makes it all the more essential to allow the poorest countries to export more. Our Trade Out of Poverty campaign, launched to coincide with the G-20 meeting in London tomorrow, reflects our belief, across the political spectrum in the U.K. Parliament, that we can do more for the world's poor by unilateral action than through the stalled Doha round of the World Trade Organization.
While the credit crunch hits the poor hardest everywhere, in the poorest countries it is a matter of life and death. Yet we can give them the opportunity to help themselves at little or no cost to ourselves. Although the Low Income Countries -- defined by the World Bank as those with average incomes below $2.56 a day -- account for 20% of the world's population, they account for less than 2% of world trade. They are no threat to our industries.
Trade is the single best route out of poverty. Billions of exchanges every day encourage efficient and mutually beneficial production by letting willing buyers meet willing sellers. Without trade, people cannot provide or buy the best and cheapest goods and services.
But there are five obstacles -- from the deliberate to the self-inflicted -- preventing the poorest countries from trading out of poverty. We want to tackle them all.
First, the rich countries must open their markets unconditionally to all 49 Low Income Countries. The key words are "unconditionally" and "all." If rich countries refuse to open their markets unless poor countries reciprocate, we will get nowhere. Poor nations are understandably, if wrongly, afraid of the full blast of competition from the developed countries.
Until recently, the European Union and other rich countries would not open their markets to all Low Income Countries because that category included India. But now that India has joined China as a Middle Income Country and both are G-20 members, that protectionist objection has vanished. WTO rules require that any unilateral trade measure apply to all members of an accepted category such as Low Income Countries, not a select choice.
Second, we must simplify the complex rules which mean that countries which are in theory entitled to tariff-free access end up paying tariffs or being excluded by bureaucracy. Consider the so-called "rules of origin" provisions, which mean that a product from a tariff-exempt country can still be subject to tariffs if it includes components from nonexempt countries. These rules must be made simple and generous so that poor countries can participate in the complex supply chains of modern trade.
Third, we must end rich countries' export and domestic subsidies, which skew the market against poor countries' goods.
Fourth, the highest tariffs which poor countries face are those imposed by their poor neighbors. These tariffs repress trade and boost corruption -- one reason why less than a tenth of African exports go to other African countries, whereas nearly three-quarters of European trade is within Europe. We must help them replace customs duties by supporting governance reforms that boost other sources of revenue.
Fifth, we need a fresh emphasis on funding infrastructure -- roads, ports and administration. It costs more to transport goods to a port from a landlocked country such as Uganda or Zambia than it does to cross the oceans.
Although the members of the G-20 have condemned protectionism, 17 of them have enacted a total of 47 restrictions of trade since mid-2008, a World Bank study shows. They must now match words with deeds.
There is no need to wait for the tottering Doha round, whose disputes are mainly about trade between the rich and Middle Income Countries. Any G-20 member could open up unilaterally and shame the others into action. The G-20 can act now to help the poorest help themselves.
Messrs. Battle, Campbell, Hastings and Lilley and Ms. Short, members of the British Parliament, launched the U.K. cross-party Trade Out of Poverty campaign this month.