How good is free trade?

8 August 2008

How good is free trade?

"Free trade is good, but not just yet" was the headline above the editorial in De Volkskrant on 31st July. The editorial concerned the failure of the World Trade Organisation (WTO) successfully to conclude the Doha round. According to De Volkskrant a consensus exists around the principle that everyone benefits from free world trade. But is free trade fair trade?

by Eric Smaling

It seems so simple: where there is free trade, the producer has a bigger market in a world without tariffs, and the consumer can shop around for the lowest price, even if the product comes from the other side of the world. In fact, this matters little. Bulk transport is for the time being relatively cheap and the environmental costs are not calculated into the price of the product. This is the best way, according to protagonists of free trade such as European Commissioner Peter Mandelson and Secretary of State Frank Heemskerk, to keep the world turning and prosperity increasing. But what constitutes an increase in prosperity? How much prosperity should we be striving for? That people in Burkina Faso could use more prosperity is obvious, but how much more do we still need here in the Netherlands? Can anyone say where the upper limit lies? And what is the relationship between prosperity and wellbeing, or feeling good? On the world scale there may well be more prosperity, but the free trade model is supposed also to ensure a better division of this prosperity. Moreover, how culpable are some of these negotiators? How can Commissioner Mandelson argue for free trade with a straight face when the European Commission at the end of last year actually introduced new subsidies on the export of pig meat?

What was striking during the Doha meeting were the attempts to arrive at deals across sectors. You lower your farm subsidies, and we'll open the door to your industrial products. It turned out to be problematic to put agriculture on the same level as the other sectors. You can do without television, without toys, without hairdressers, even without electricity. But you can't do anything without food. The current food crisis and the reactions from producing countries – export bans, removal of import tariffs – show clearly that free trade does not work for agriculture. As Kamal Nath, Indian trade minister bluntly stated, "Every country must first ensure its own food security". And this is a minister who represents 200 million farmers, not one million as is the case for the United States. China's view is just the same, but Dutch Agriculture Minister Gerda Verburg, for example, finds the idea of providing for oneself old-fashioned. Now I don't want to pretend that the Netherlands should ever again be wholly self-sufficient, but the aim should be to produce as much as possible locally or regionally.

De Volkskrant considers protectionist measures understandable in the short term, "but in the longer term they hinder both trade and the development of agriculture." That no further explanation was given of this assertion says a great deal. The opposite is in fact true: look at the history of the EU's Common Agricultural Policy (CAP). Market protection is exactly what is needed in order to achieve development. Only when development has gone a certain way can you consider loosening such protection.

Another observation was that it was the farmer in small developing countries who was the loser. "They have seen a broader access to the western markets snatched from under their noses." Once again, this monomaniacal focus on access to markets for small farmers in the tropics. What is it that they will be cultivating for our markets? And in any case they already have such access via the Everything but Arms initiative and a comparable programme in the United States. Africa contributes scarcely a few percentage points to Europe's imports. There is no response from producers to access because nothing is being invested in African agriculture. Free trade also means the loss of important sources of income for the state in developing countries, and the dropping of import duties will make itself felt in the public sector: lower wages, more unemployment, poor service delivery, poor education. The editorial closed with the observation that "global problems – the climate problem above all – demands a collective solution" – but this completely obligatory remark has of course nothing at all to do with free trade.

The failure of the Doha meeting came at the same time as the publication of an interim evaluation of the CAP. High food prices mean that European farmers are receiving less in subsidies. The further phasing out of support for agriculture must, however, be carefully looked at. Rural areas, crops, grass lands, cattle, but also farms, birds of the meadows, ditches, panoramic views, all form part of the national cultural heritage. The guardians of this area must be able to earn a crust, and this must be a priority. And if income support is needed for this, then it must simply be paid. In this light the attribution of a monetary value to "ecological services" is an important step which must yet be taken. But who refuses to interest themselves in this? The WTO indeed, because it would distort the market.

Eric Smaling is Professor of Sustainable Agriculture at the Technical University of Enschede and a Senator for the SP. This article first appeared in the daily newspaper De Volkskrant on 6th August, 2008

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