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Sugar farmer in Kenya
Sugar beet farmers in Kenya

What is the main problem?

Developing nations and Western campaigners say the rules of the world trading system are biased in favour of the rich countries. They say the developed world subsidizes many of its farmers, who then compete on unfair terms with farmers in poor nations - who can't afford subsidies.

This is why farmer in some countries like Haiti say they can't compete with imports such as U.S. rice. The rich countries though say they're entitled to subsidize farmers for social and cultural reasons and claim many subsidies don't distort trade.

The poor countries also say the rich world uses other methods to bar their imports - quotas, tariffs, and non-tariff barriers such as allegedly excessive labelling and health rules. But the rich countries say they must protect the health of their consumers, and no politician will win votes by lowering hygiene standards on food.

What is happening as a result of this lack of fair trade?

Half of the world's population, three billion people, live on less than two dollars a day. Most of them are peasant farmers. The allegation is that the rich countries preach the theory of 'comparative advantage' - that everyone can benefit from free trade by selling what they produce best.

But, the charge goes, the poor countries' comparative advantage is that they can sell farming produce cheaply - and yet that's exactly what the world's trade system stops them doing. Meantime the rich countries insist the world lowers barriers and subsidies on the manufactured goods which are its "comparative advantage."

Who is responsible and why have they done it/why isn't it fair?

There are rules for trade set by the World Trade Organization and various other agreements between nations. The EU for example has an agreement with the world's poorest countries to allow privileged access to their markets for food and other products under the "Everything but Arms" agreement.

But campaigners say that in the past the IMF and World Bank have pressured developing countries into opening their markets without giving them a full quid pro quo and abandoning their own subsidies.

The US government for example preaches free trade but recently increased many subsidies to its farmers under the US Farm Trade Bill. In an interview with the BBC World Bank President James Wolfensohn says: "Negotiations between the rich countries and the poor countries are continuing under the so-called "Doha Round" of talks.

However some farmers like coffee farmers don't face competition from subsidised crops - perhaps because there are no growers to protect in Europe and the US. Instead they suffer from "terms of trade" - declining prices for many agricultural commodities, particularly ones in over-supply like coffee.

Some claim coffee farmers could have done more to process and market their own produce - rather than standing by while countries like Germany seized the initiative and built up their own industries. But campaigners point out that with the market dominated by a few big processors - using economies of scale to produce cheaply in a globalised market - there's now little hope of the Third World competing with the multinationals.

How much money is at stake here?

World Bank President James Wolfensohn told the BBC: "In total something of the order of $50bn is given in overseas development assistance, but more than $350bn is given in agricultural subsidies in the rich countries. So it far outweighs the level of development assistance that is given. In addition to the subsidies there are of course tariff barriers and other barriers to entry, so it is very clear that development will not take place at the pace we would all like unless we address the question of liberalisation of trade."

Are there any solutions?

Removing subsidies would losers as well as winners - from Lincolnshire sugar beet farmers to Italian tomato farmers. Altering many non-tariff barriers could lead to an outcry from consumer groups.

But consumers can do something directly about deteriorating terms of trade for farmers by paying something extra for so-called "fair trade" goods. However even these are not without their critics - some claim they send false price signals, distorting the free market even further, and perhaps giving farmers false hope that their products have a viable economic future.

In the absence of compulsory international labour standards or guaranteed prices, most consumers still prefer to go for the best available value, leading to producers undercutting each other so offer the best possible value.

Ready, Steady, Trade

The Ingredients


The Recipes



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