TCS Daily

Keeping the Poor, Poor

By Alan Oxley - June 24, 2005 12:00 AM

Helping the under privileged can be hard work. Take Oxfam's recent experience in Sri Lanka. Customs authorities insisted it pay US $1 million in duties on 25 four wheel drive vehicles imported by Oxfam for tsunami relief. Naturally, Oxfam objected. Shouldn't Sri Lanka contribute to help its own people as well?

A case can be made for that, but not by Oxfam given how it encourages developing countries to regulate trade.

Oxfam plays a tricky game on trade. By and large it strongly associates with the other major Non-Governmental Organizations (NGOs) who oppose free trade -- the Worldwide Fund for Nature, Greenpeace, Friends of the Earth and the Third World Network -- and demonize the World Trade Organization (WTO). However it often represents itself as pro trade and a supporter of trade liberalization. In fact, Oxfam used to argue free trade benefited poor countries.

A few years ago, Oxfam mounted a very successful public relations campaign against the EU Common Agricultural Policy, pointing out that EU programs give cows more benefits than people. It made the piebald cow a televised symbol of how trade protections in rich countries harm poor countries. Free traders have pointed out for years that farm subsidies in rich countries block cheaper imports from poor countries. Oxfam won plaudits, including from some free traders who didn't bother to look at Oxfam's general philosophy and what else it was promoting.

While running the anti-EU agriculture campaign, it also campaigned in the WTO that developing countries should not be required to cut their own trade barriers. It maintained this position and is urging developing countries to insist on this in the Doha Round of negotiations in the WTO. Urging developing countries to keep trade barriers in place is urging them to commit slow economic suicide.

Oxfam now has a different approach to trade: rich countries should give poor countries protected access with special quotas. It opposed the removal of quotas on textiles and clothing by the US and the EU (which the WTO mandated) because some developing countries would find it hard to compete against more efficient producers like China. They would rather see all countries suffer under a quota system than allow more productive developing countries to begin to creep out of their third world status.

When rich countries provide special access (usually with quotas limiting imports), they restrict access to protect their own producers. Caribbean sugar producers get limited, but guaranteed, access to the EU sugar market. They get the high price the protected EU market provides, but they are captive suppliers. Worse, Caribbean producers become as globally uncompetitive as sugar producers in the EU. They cannot compete in larger world markets which trade at lower prices. This model is a development trap. Yet Oxfam has the temerity to claim it creates "trade justice."

Sri Lanka had a defensible position over its import duties. Duties are an important source of revenue. If rich countries want to help abate the impact of the tsunami, why not allow part of that assistance to be in the form of government tax collection? Sri Lanka is simply mimicking the strategy Oxfam has used in "helping" the developing countries assert their sovereignty over regulating imports.

Alan Oxley is host of the Asia Pacific page of Tech Central Station and a former Ambassador to the GATT.


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