Trade for life: making trade work for poor people

Globalisation and trade should help to bring the world’s rich and poor closer, but evidence shows that quite often the opposite is happening. Is there an alternative that will improve the plight of the poor?

In this report, Christian Aid urges that global trade rules be changed radically to work in the interests of the poorest countries. The report argues that the World Trade Organisation’s (WTO) decision-making processes are biased against the poor, that many WTO agreements harm rather than help the poor, and that in many areas there are no rules where rules are needed.

For a decade, global trade rules have been negotiated through the WTO and they will soon be renegotiated. In theory, the WTO operates by consensus, but in practice, decision-making is dominated by powerful countries and business lobbies, and the interests of developing countries are marginalised. In addition, transnational corporations (TNCs) have secured unprecedented power across the global economy, but there are currently no binding international regulations to hold them to account.

Agreements already made in the WTO are deepening poverty and extending inequality by protecting TNCs, and by limiting development strategies used by developing countries.

Seven existing trade rules in particular are detrimental to the interests of the poor:

• Developing countries are restricted from raising adequate barriers against cheap food imports, although rich countries retain export subsidies.
• Countries must open up their service sectors to foreign investors.
• Regulation of foreign investment is limited.
• Developing countries are limited in their use of agricultural subsidies.
• Governments are limited in their use of industrial subsidies to promote domestic manufacture.
• Rich countries can retain import barriers and restrictions against developing country exports.
• Countries must introduce patenting laws that can give TNCs rights over knowledge and natural resources.

Many WTO principles should be reversed. Currently, the WTO limits differential treatment for poor countries, restricts private sector regulation by national governments, treats domestic and foreign companies the same, and enforces the primacy of global rules. However, the WTO should treat differently rich and poor countries as well as domestic and foreign companies. It should encourage sensible private sector regulation and emphasise national and local decision-making, while addressing global problems through global rules.

Changes should also ensure that rules are decided fairly and democratically, guarantee that rich countries as well as poor abide by the rules, and regulate TNCs effectively. A global trading system that explicitly favours the severely disadvantaged is needed, and the seven key trade rules should be rewritten, prioritising their needs:

• Developing countries must be free to protect themselves against cheap imports that undermine domestic production.
• Mandatory opening up of service sectors to foreign investment should not be required.
• Developing countries must be free to pursue investment policies that suit their domestic development purposes, and to regulate foreign investment appropriately.
• They should be allowed to promote national and local food security policies.
• They must be able to support domestic industry.
• They must be allowed fair access to rich country markets.
• Adequate safeguards are needed against biopiracy and the misuse of patenting.