TRADE: WTO Prescribes More Liberalisation to Reduce Poverty

By Gustavo Capdevila Reprint | | Print |

Gustavo Capdevila

GENEVA, Jun 19 2000 (IPS) - The World Trade Organisation (WTO) affirms in a study released Monday that, in the long term, trade liberalisation contributes to alleviating poverty, though people may suffer temporary economic shocks because most of the benefits come from adjustments made in the production apparatus.

WTO director-general Mike Moore said the report confirms that “although trade alone may not be enough to eradicate poverty, it is essential if poor people are to have any hope of a brighter future.”

Moore, a New Zealander who took over the WTO reins in September 1999, based his observation on the example of South Korea, which 30 years ago was as poor as Ghana, but today is as wealthy as Portugal – because liberalised trade favoured growth, he stated.

The WTO study describes the magnitude of worldwide poverty and affirms that its eradication is a moral imperative and the shared responsibility of the international community.

The portion of the world population that lives on less than a dollar a day fell from 28.3 percent in 1987 to 24 percent in 1998, but demographic growth for that period (815 million people) maintained the real number of individuals in this situation at 1.2 billion.

The number of people living on less than two dollars a day, however, grew by 250 million in the same period, reaching 2.8 billion people – or about half the world population.

The report points out that the World Bank does not project that the number of people living on less than a dollar a day would change by the year 2008 if current conditions were to remain the same, and even considers that the total could be reduced by 500 million people if the Bank’s recommended policies are implemented.

But the WTO warns that even under the more optimistic scenario, Latin America and the Caribbean, and especially sub-Saharan Africa, would see little if any progress in the next eight years.

The report says, “in light of these dire statistics and projections it is easy to appreciate the growing public concern that not enough is being done to address poverty and poverty- related social ills, such as poor work conditions, lack of respect for human rights, and natural resource degradation.”

“Such concerns have been vented with increasing frustration, including at the third Ministerial Conference of the WTO in Seattle last year, and more recently at the joint spring meeting of the IMF (International Monetary Fund) and the World Bank.”

The WTO study was released one week before a special session of the United Nations General Assembly opens to evaluate progress made in applying the resolutions of the Social Summit held in Copenhagen five years ago, when delegates made poverty eradication the top priority.

The WTO document attributes poverty to a variety of causes, among them the lack of access to education – especially for girls and women – and lack of medical attention, as well as the unequal distribution of production elements, including land, livestock and credits.

One of the factors perpetuating poverty is that “the poor often lack political leverage to influence the policies and priorities of governments,” acknowledges the text.

The study follows the traditional policy lines of the WTO, an institution created to oversee the liberalisation process of economic relations among the world’s nations.

One of the report’s conclusions is that, though there is “no simple one-to-one relationship between trade and poverty, evidence seems to indicate that trade liberalization is ‘generally’ a positive contributor to poverty alleviation.”

Free trade “allows people to exploit their productive potential, assists economic growth, curtails arbitrary policy interventions and helps to insulate against shocks.”

But most trade reforms will create some losers – even in the long run -, and poverty may be exacerbated temporarily, warns the organisation.

The WTO report states that the “appropriate policy response in those cases is to alleviate the hardships and facilitate adjustments rather than abandon the reform process.”