Tipping the scales of injustice

Date: 10/05/01

Next week's UN conference on least-developed countries should be an opportunity for rich nations to seriously discuss the trade and debts of the poor. Kevin Watkins, senior policy advisor for Oxfam, fears it may turn into little more than a talking shop

GROUCHO Marx once quipped that he would never want membership of a club willing to accept him. Governments of the world's 49 least-developed countries (LDCs) will probably share the sentiment as they prepare for another international conference charged with halting the rising poverty and growing marginalisation of their citizens within an increasingly prosperous global economy.

The UN conference on LDCs in Brussels next week (14-17 May), provides a real opportunity to tackle the trade, aid and debt problems that are reinforcing poverty and driving the increasingly obscene income gap separating rich from poor countries.

Sadly, it is likely to degenerate into yet another high-cost, low-output talking shop, with industrialised countries offering pious declarations of intent in place of the substantive policy reforms that are needed.

While sub-Saharan Africa accounts for three-quarters of the LDCs, membership extends across the developing world from countries such as Haiti, Bangladesh, Nepal and Cambodia. Low income and mass poverty are endemic. Almost half of the LDC population - around 300 million people - are surviving on less than €1 a day, and life expectancy is 25 years shorter.

The income gap between the LDCs and other countries has widened to alarming proportions. Twenty years ago the ratio of average income in an LDC to income in industrialised countries was 1:87. Today it is 1:98 and growing.

Meanwhile, the LDC group's share of global wealth is shrinking. Its members account for 11% of world population, but less than 0.5% of world income and trade flows.

If current trends continue there is no chance of the vast majority of LDCs achieving the international development goal of halving income poverty by 2015. Ten years ago, at the last UN conference on LDCs, rich countries promised to help by improving access to their markets, increasing aid, and providing debt relief. That promise has been comprehensively broken on all fronts.

No speech from a developed country trade minister today is complete without reference to the benefits of open markets and the special advantages granted to the world's poorest countries. In reality, the trade policies of industrialised countries towards the LDCs amount to highway robbery masquerading as market preference.

It is true that average industrial country tariffs are low; but they are exceptionally high, and reinforced by quotas, in sectors such as agriculture, textiles and leather where LDCs have a capacity to increase exports. Schemes have been crafted to retain restrictions, while improving market access in areas where LDCs have no export capacity.

According to the World Bank, trade restrictions in rich countries cost the LDCs €2.75 billion each year. Lost export opportunities translate into lower wages and less employment and into less household income for smallholder farmers to spend on health, education and nutrition.

One of the worst offenders is that paragon of free-market virtue, the United States. The country accounts for almost half of the total foreign exchange losses suffered by LDCs as a result of trade restrictions. For every $1 provided in the form of US aid to Bangladesh, trade barriers against exports of textiles and clothing deprive that country of $7.

The EU imposes fewer restrictions on LDC exports than either the US or Japan, but it has little else to be proud of. Last October, Trade Commissioner Pascal Lamy proposed granting immediate duty and quota-free access to all LDC exports. Everything but Arms, as the plan was dubbed, would have created new export opportunities, leaving the EU well-placed to provide leadership in advancing LDC interests.

Predictably enough, the Lamy proposal was attacked by the familiar coalition of agribusiness interests - such as the British Sugar Corporation - and assorted big farm lobbies. Equally predictable was the Council of Ministers' supine response in allowing some governments - notably the French - to put the liberalisation of agricultural products on a back-burner by postponing market openings until 2006.

In place of Everything but Arms, the EU is offering the LDCs Everything but Farms.

The collective failure of European governments to put the interests of some of the world's poorest countries before those of powerful commercial lobbies underlines the gulf separating the rhetoric of EU development policies from the realities of trade policies.

One area in where rich countries have been generous is in dispensing bad advice. Conditions attached to loans from the World Bank and the International Monetary Fund (IMF) have resulted in LDCs liberalising their markets at breakneck speed, often with disastrous consequences.

Consider the case of Haiti, now one of the world's most open economies. Successive structural adjustment programmes have virtually eliminated restrictions on imports of rice, opening the door to a flood of heavily subsidised imports from the US. From a position of self-sufficiency ten years ago, the country now relies on imports for over half of consumption. Thousands of rural livelihoods have been lost as prices slump, driving desperately poor households into poverty and migration.

While industrialised countries continue to subsidise agricultural systems to the tune of €1 billion a day, and the EU prevaricates over replacing the Common Agricultural Policy with an alternative, farmers in the poorest countries of the world are forced to compete in grossly unfair markets without protection. Trade policy illustrates the hypocrisy and double-standards applied by rich countries to the LDCs.

Ten years ago the last UN Conference on LDCs ended with ringing pledges of more aid to finance basic services such as health and education. The result: development assistance budgets have been cut by €3.85 billion, or by almost one third in real terms.

Shortfalls in aid have inevitably compounded the debt problems facing LDCs, especially in sub-Saharan Africa. The Heavily Indebted Poor Countries (HIPC) initiative has started to provide some long-overdue debt relief, but falls far short of what is needed. At least 11 LDCs - including Zambia, Senegal and Niger - are still spending more than 10% of government revenue on debt-servicing after HIPC debt relief.

What needs to be done to prevent the UN Conference on LDCs going the same way as its predecessors? Bluntly stated, rich countries need to reaffirm the promises they made ten years ago - and keep them.

They could start with a tariff and quota bonfire, providing LDCs with unrestricted market access for their exports. The adjustment costs in rich countries would be minimal, while the potential benefits to LDCs would be enormous. Well-targeted aid could play a vital role in enhancing growth prospects and in expanding access to health and education.

Industrialised countries should set a clear timetable for reaching the 0.5% of GNP target and increased aid should be supported by far deeper levels of debt relief, with a ceiling of 10% placed on the proportion of government revenue transferred to creditors.

None of this diminishes the responsibilities of LDC governments. Many have conspicuously failed to develop effective poverty reduction strategies needed to distribute the benefits of growth to the poor.

Major feature. The UN conference on least-developed countries, Brussels, 14-17.5.01 should be an opportunity for rich nations to seriously discuss the trade and debts of the poor. The author, senior policy adviser for Oxfam, fears it may turn into little more than a talking shop.