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TRADE: ‘Incoherent’ Rules Put Poor Nations at Disadvantage

Mario Osava

RIO DE JANEIRO, Jun 8 2004 (IPS) - Benin, Burkina Faso, Chad and Mali have achieved high quality cotton production at lowest cost, but what was supposed to be a success turned into a catastrophe because of the “incoherence” of international trade.

This complaint, voiced by Benin’s ambassador in Geneva, Samuel Amehou, on opening day of the Rio de Janeiro Foreign Trade Week, targeted the heavy subsidies the United States and European Union grant their cotton farmers.

In this “contaminated market”, farmers may be competitive, like the African cotton growers, “but they can’t sell” or they have to sell at prices so low that they give up farming altogether and end up in misery, ruined by trade without consumers, according to Amehou.

It is “incoherent” that the international community makes the fight against poverty a priority while allowing rules that impede fair trade of cotton, which otherwise could contribute to reducing poverty in Africa, he said.

Other incomprehensible rules are the structural adjustments imposed on poor countries by international finance institutions, which ban subsidies, while rich countries are permitted to subsidise, Amehou stressed.

The need for “balanced” rules that are more appropriate for developing countries was also touted by Mauricio Botelho, president of the Brazilian aeronautics firm Embraer, an example of a highly successful advanced technology company in a non-industrialised country.

To achieve such rules, “multilateralism is the best path,” said Botelho, recalling six years of an intense battle at the World Trade Organisation (WTO) against Embraer’s rival from Canada, Bombardier.

Both companies, which compete on the global market to sell small aircraft, accused each other of exporting their product with the benefit of state subsidies. The trade dispute ended with a condemnation of both sides, though it was found that Canada had granted more subsidies than had Brazil.

That experience revealed for the WTO that financing for exports followed the rules established by the Organisation for Economic Cooperation and Development (OECD), a bloc that includes all industrialised countries.

The upshot is: “structural disadvantages for companies established in developing nations,” outside the scope of the OECD, according to Botelho.

Embraer was the “successful case” presented in the opening session of Rio de Janeiro’s Foreign Trade Week, a series of 10 seminars and forums in the lead-up to the 11th United Nations Conference on Trade and Development (UNCTAD), to take place in the other Brazilian metropolis, Sao Paulo, Jun. 13-18.

Born as a state enterprise in the 1970s and privatised in the 1990s, Embraer was Brazil’s leading exporter from 1999 to 2001, though lost that edge in the wake of the Sep. 11, 2001 terror attacks in the United States, due to the decline in the market for new aircraft.

The aeronautics industry, concentrated in the hands of four corporations, is a global business that involves multiple advanced technologies and complex realities, as each aircraft contains 150,000 to 200,000 components, which must be delivered timely for assembly, said Botelho.

And it is an exception in developing countries, which are unlikely to be able to compete with the industrialised world due to lack of capital and technology.

But the dynamic products for export are not only those related to advanced technology, says Rubens Ricupero, UNCTAD secretary-general. They can also be from the agricultural sector, he said.

Some fruits – the pineapple, for example – are seeing rapid expansion in international trade; up to 25 percent a year, Ricupero said as he launched the Rio meeting.

Developing countries should identify the dynamic products amongst their own exports, to expand their participation in world trade, improve competition and, in many cases, reduce their vulnerability to the financial crises associated with deep debts, said the U.N. official, himself a Brazilian.

He cited the example of Kenya, a country that a short time ago relied heavily on its coffee exports, and today has become the leading seller of cut flowers to Europe. The African country also exports many prepared and packed vegetables, which means added value, said Ricupero.

Greater attention is needed to the supply of products, he added. In his opinion, the Chinese economy has been the world leader in growth during the past 23 years because it has the most to offer in quantity, quality and competitive prices.

Mexico was able to triple its exports in seven years, after joining the North American Free Trade Agreement (NAFTA) with Canada and the United States, but that expansion fell to 2.3 percent last year because it was not able to compete with China, he said.

Ricupero has made it clear that he wants to capitalise on UNCTAD XI and the parallel meetings to identify the areas and mechanisms through which trade can be made a bigger a factor in contributing to development.

This is essential particularly for the highly indebted countries, like Brazil, for which boosting exports “is the only viable route for reducing vulnerability – a strategy of life or death,” he said.