Africa, Development & Aid, Economy & Trade, Food and Agriculture, Headlines, Poverty & SDGs

Q&A: Trade Liberalisation No Silver Bullet Against Poverty

Kristin Palitza interviews PETER DRAPER, South African Institute of International Affairs

JOHANNESBURG, Nov 7 2008 (IPS) - Countries around the world aim to eradicate poverty and hunger by 2015 as one of the Millennium Development Goals (MDGs).

Peter Draper Credit:

Peter Draper Credit:

With only seven years left to the deadline, Peter Draper, head of the Development Through Trade Programme of the South African Institute of International Affairs (SAIIA), highlights the importance of linking domestic and regional trade policies to developmental strategies as a step towards poverty alleviation.

IPS: What are South Africa’s core regional trade policies aimed at creating growth?

Peter Draper: South Africa subscribes to the Southern African Development Community (SADC) free trade agreement, which has been in place since 2000. Its core aim is an asymmetrical phasing down of tariffs to liberalise trade.

Another growth-creating strategy is the building of regional infrastructure, through spatial development, to build productive capacity with the region. This means that money is invested to improve transport corridors, building roads and railways and putting in electricity and telecommunications infrastructure, because there is a realisation that the absence of transport links between cities and countries is a key blockage [to economic growth] within the region.

IPS: Does the South African government link trade liberalisation to sustainable development and poverty alleviation?

PD: Those are undoubtedly underlying objectives. Trade liberalisation can be linked to poverty alleviation from two perspectives: a) the prices consumers have to pay for goods and b) potential benefits of high tariffs for producers protection.

In South African trade policies, I don’t see the consumer perspective coming through. Policies are purely concerned with producers. South Africa generally follows an industrial policy approach without a sustainable development perspective. That is a problem, because the average South African loses out.

IPS: Will efforts to achieve regional economic integration within SADC help to achieve MDG 1, eradication of poverty and hunger, by 2015?

PD: Yes. SADC trade policies focus on market-led and production-led interventions, and both are needed. However, such interventions need to be carefully managed and implemented. Failure of economic interventions can result in the loss of industries and the destruction of livelihoods.

IPS: What has been the impact of the global financial crisis on achieving the first MDG?

PD: What we have yet to see – but will see soon – is the impact of the recession in Europe and the United States on commodity prices. This will have a huge impact within SADC, because by and large the region exports commodities.

Over the next few months, we will see commodity prices decrease, sales go down and revenues diminish. Growth will slow down and this will potentially have severe effects on economic growth and the level of poverty in the region.

IPS: What has been the impact of the recent food crisis on agricultural production in South Africa?

PD: The impact on farmers will be positive in the medium-term, because they will produce more food and make more money due to higher food prices. This is key to regional development.

However, an increase in food prices has a negative impact in the short-term for consumers, particularly the urban poor. In addition, constant, serious fluctuation in food prices will create uncertainties that could destabilise the markets.

IPS: What kind of trade policies could incentivise food production, entrepreneurship and poverty eradication?

PD: That’s a difficult question. It largely depends on developed countries, especially European agricultural policies and subsidies, and how this distorts global food prices. This makes it difficult for African farmers and this needs to be addressed.

In terms of South African domestic policies, to give just one example, the land tenure issue needs to be resolved. If commercial agriculture is the way to go, land tenure needs to be addressed, because farmers will need larger plots and more security of tenure to get finance to boost food production.

IPS: What have been South Africa’s successes in creating agricultural growth and reducing poverty?

PD: Deregulation has been by and large successful and led to a substantial increase of exports in horticultural products.

IPS: What are the challenges?

PD: The biggest challenge is employment creation, in South Africa as well as in the region. There are also geographical challenges, because we are far from major markets and production sites. It’s difficult to find the right way to overcome this, through more regulation or freer trade. My bias is towards the latter.

In addition, the region is still hugely dependent on commodity trade, so the challenge is to find ways to diversify production.

IPS: How can development aid be more appropriately allocated?

PD: There’s no simple answer to the debate around aid effectiveness. Although development assistance might help in the short-term, it is likely to create long-term dependence. Perhaps aid should be used to build alternative revenue generation systems so that countries can eventually become independent.

IPS: What are South Africa’s regulatory approaches towards farming of genetically modified organisms (GMOs)? Are they likely to help reduce poverty and hunger?

PD: South Africa does allow GMO farming, especially maize and cotton, but within tight regulatory frameworks.

GMO farming has a large potential in terms of poverty alleviation, especially for small-scale farmers, because it offers best possible yields and could thereby help economic growth and eradication of hunger. But high prices of GMO seeds and fertilisers might become a problem and may need subsidisation.

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