Inequalities associated with the global trading system + Letter to Mr David Walker Essay
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As a third world businessman I constantly bear witness to the inequalities and injustices associated with the global trade system. These inequalities and injustices could potentially be detrimental to the future stability and security of many African economies which primarily rely on the export of agricultural produce for survival (Clapp, 2006:563). The concept of agricultural protectionism is one that is a highly divisive issue that will render many Africans countries becoming susceptible to economic stagnation and ultimately economic declination as their ability to compete in the Global markets is significantly reduced.
Agricultural protectionism therefore places an unfair burden on African countries and completely undermines the concept of free and liberalized trade (Clapp, 2006:564).
One example can be seen in The United States, the USA spends 2-4 billion dollars annually subsidizing American cotton farmers which have severe repercussions for African farmers (Clapp, 2006:565). In 2003 US agricultural exports sold for anywhere between 10 percent and 50 percent below the cost of production, similarly, The European Union also exports key commodities for less than the cost of production.
In other OECD countries, agricultural subsidies rose from US$271.2 billion in 1986-88 to US$330.6 billion in 1998-2000 (Clapp, 2006:565). In Africa, farming accounts for up to 70 percent of employment and is one of the main sources of income for many people living in poverty and therefore the protectionist policies of OECD countries and other rich countries poses severe implications for the future sustainability of many African economies (Stiglitz, 2006).
Throughout Africa there have been many industries that have been severely hit by competition from highly subsidized agricultural produce from the European Union and The USA. One prime example can be seen in Namibia where a 600% increase in EU beef exports to South Africa has severely hampered the ability of Namibian cattle farmers to compete in the market as the surplus of EU beef floods the market thus lowering prices (Hooper-Box, 2003).
Other industries that have been affected include the canned food sector which has experienced a period of stagnated growth over the past ten years whereas the canned food industry in Europe has, in the same period, doubled and continues to experience growth (Hooper-Box, 2003). It is therefore of the utmost that the EU and USA be forced to cut back on export subsidies in order to ensure the complete, harmonious and sustainable development and growth of the developing world. 2001 Nobel Prize winner Joseph Stiglitz emphasizes the importance in developed countries opening their markets to the developing world without ‘political or economic reciprocity or conditionality’; such a mentality would vastly aid the crippling situation in the developing world (Stiglitz, 2006).
The inequalities present in the global trading system have adverse affects on the developing world as the ‘dumping’ of produce on global markets result in price deficits which hinders economic growth and therefore sparks reductions in employment and social development rates (Stiglitz, 2006). The gross imbalance in the global trading system according to Stiglitz, is primarily due to economic globalisation out pacing political globalisation.
Agricultural protectionism may not be the cause of poverty and underdevelopment in Africa; however the liberalization and implementation of free trade routes without barriers would sufficiently aid and improve the perilous situation in Africa. Africa is in dire need of investors and the opening of global trade markets would entice investment and therefore encourage the much needed economic growth. The strict implementation of regulations is a necessity in policing the detrimental effects that globalisation is having on the developing world.
Clapp, J. (2006). WTO Agriculture Negotiations: Implications for the Global South Third Quarterly, Volume. 27, No.4. Routledge, Taylor and Francis Group. 2006.
Hooper-Box, C., (2003). SA in fight-back as farm subsidies cripple poorer nations. The Sunday Independant, 23 September. P.1.
Stiglitz, J., (2006). Why Stiglitz’s positive take on globalisation isn’t realistic. The Sunday Independant, 17 September. Business report section.