The UK Government and the Trade Justice Movement – why free trade isn’t fairer

The fundamental difference between the Trade Justice Movement and UK Government

Trade Justice Movement, June 2003 - new version available soon

• The Trade Justice Movement, which is made up of more than 50 leading UK aid agencies, environment campaigns, trades unions, churches and consumer groups, is challenging the government to overhaul its current thinking on globalisation.

• The UK Government believes unfettered free trade can deliver a triple whammy - reducing third world poverty at the same time as benefiting British consumers and British businesses.

• The organisations in the Trade Justice Movement say, 'No, it can’t'. The benefits of trade will only reach the poor – at home and in the Third World – if international trade rules are deliberately weighted in favour of poor people and the environment.

• The Trade Justice Movement says the UK Government is currently using its voice at international bodies such as the European Union and the World Trade Organisation to press for unfettered free trade and increasing powers for multi-national corporations. These policies are destroying poor people’s livelihoods in both developed and developing worlds and leading to unsustainable use of the Earth’s natural resources.

• The Trade Justice Movement says the UK Government is pushing these free trade policies in the face of historical evidence that these are not the key to helping very poor countries develop.

The trade justice litmus test for the Government

• For the UK Government truly to support trade justice it must stop pushing developing countries to open up their markets. Instead it should concentrate its efforts on pushing for fundamental change of existing trade rules so that they are weighted to benefit poor people and the environment.

• The trade justice litmus test at the forthcoming World Trade Organisation Ministerial Meeting at Cancun, Mexico, will be whether the UK gives up its insistence on launching negotiations on new issues in the WTO, and instead champions the issues that poor countries want addressed.

Disagreement on the forthcoming WTO Ministerial Meeting in Cancun, Mexico

Is it a Development Round?

What does the Trade Justice Movement want?

• After years of getting a raw deal at the WTO, developing countries are still looking for major gains, which have been promised in the past but never delivered. These include:

  • Special and Differential Treatment: fundamental change of WTO rules to recognise that poor countries need different kinds of policies compared to rich countries.

  • Agriculture: reform of the biased WTO Agreement on Agriculture, which currently allows rich countries to support farmers to the tune of $1 billion a day, resulting in environmentally damaging overproduction and the dumping of artificially cheap crops on third world markets. Compounded by WTO, IMF and World Bank rules that prevent poor countries from supporting or protecting their own farmers, hundreds of thousands of third world farmers are losing their livelihoods.

  • Access to medicines: urgent need for poor countries to buy cheap versions of patented medicines to treat diseases such as HIV/AIDS, TB and malaria. Implementation of a WTO agreement to address the issue is being blocked by the USA.

What does the UK Government want?

• The UK Government agrees in part with the Trade Justice Movement on the need for reform of European farm subsidies and for an agreement on patents on medicines.

• However, instead of prioritising these and other issues of greatest importance to developing countries, the government is pushing forcefully for four big new issues to be added to the negotiating agenda – and for poor countries’ needs to be met only as part of a package including these issues.[1]

• The Trade Justice Movement argues that this is fundamentally unfair. Why should poor countries yet again have to negotiate even more issues in return for addressing the injustices and bias of previous trade agreements?

Why the fundamental disagreement between the Trade Justice Movement and the UK Government on new issues at the WTO?

Part of the reason poor countries got such a raw deal in the past was that they lack resources to fund big negotiating teams to tackle many issues at the same time. Compare the European Union, which had 502 representatives at the last WTO Ministerial Meeting in Doha, with Haiti, which had none.Recent aid to boost poor countries’ negotiating ability has made only minimal difference to the imbalance in their negotiating power. With the already heavy burden of negotiations, poor countries go into any talks on new issues massively disadvantaged.

• The UK Government argues that four proposed new issues – investment, transparency in government procurement, competition policy, and trade facilitation – would benefit poor countries by stimulating much-needed private foreign investment.

• The Trade Justice Movement argues that foreign investment has a role to play in development if it uses natural resources sustainably, and reduces poverty by helping countries to build up their economies, for example through government rules requiring foreign companies to transfer technology and employ local people. Any agreement in the WTO – with its inbuilt bias for removal of government controls over businesses[2] – will make it harder, not easier, for poor countries to ensure that foreign investment really benefits their people.

• The UK Government argues that any WTO investment agreement would be “bottom up” – allowing developing countries to choose which industries were included – like the current negotiations on trade in services, GATS. But poor countries’ experience of GATS is that they have come under intense pressure from more powerful countries to offer up vast chunks of their economies[3].

• UK Government policy flies in the face of evidence of rich countries’ own experiences. In their early stages of development most now successful economies – including Britain, the USA, and East Asian Tigers – gave special treatment to their own industries[4]. We only opened up areas such as investment and government procurement to foreign competition once our industries were strong enough to compete. In effect, by pushing poor countries into liberalising these areas, rich countries are kicking away the ladder they themselves used to develop.

• For all the reasons outlined above, the Trade Justice Movement opposes the expansion of WTO negotiations into new issues at Cancun.

(for more detailed information see ‘Unwanted, Unproductive and Unbalanced: Six Arguments Against an Investment Agreement at the WTO').

Other major differences between the TJM and the UK Government

Regulating multinational companies

• The UK Government says that behaviour by some multinational corporations that harms local communities or the environment is best addressed through voluntary codes of conduct – they claim binding regulations would deter investment.

• The Trade Justice Movement argues that we would be horrified if companies operating in the UK were only regulated by voluntary codes, so why accept it in other countries? Companies already meeting high social and environmental standards would benefit from international regulation; they could not then be undercut by companies operating to much lower standards.

• A low level of red tape isn’t the most significant factor in attracting investment. In fact, developing countries that currently attract most investment, such as China and India, also have higher levels of corporate regulation.

Opening poor countries’ markets to foreign competition

• The UK Government claims that developing countries’ could lift millions of people out of poverty by opening their markets to foreign imports through eliminating tariffs and subsidies and making binding, effectively irreversible commitments to allow foreign investors access to service markets. And they claim that the impact on “losers” of this trade liberalisation, such as lowered prices for farmers and lost manufacturing or service sector jobs, are short-term and can be addressed by other government policies.

• The Trade Justice Movement challenges the UK Government to produce historical evidence to back this claim. And points to a much more complex relationship between trade liberalisation and poverty reduction. Countries which rapidly opened their markets to free trade, such as Zambia, Haiti, Mali, Nepal and Peru, suffered sharp increases in poverty in the 1990s; while economies such as Taiwan, South Korea and Mauritius successfully grew using quite different policies, only opening their markets once they had developed.

Fair and democratic policy making

• The UK Government believes there is nothing fundamentally wrong with the way the WTO conducts its business – that it is a voluntary organisation and each member has equal rights.

• The Trade Justice Movement says the great imbalances in power between countries negotiating at the WTO favours the largest and richest players. It is also critical of the way crucial negotiations are increasingly being conducted in so-called “mini-ministerials” and other closed meetings that are “by invitation only”.

Trade Justice Movement, June 2003