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Sunday, 14 October, 2001, 20:39 GMT 21:39 UK
Trade 'benefits the poor'
Docks in Hanoi
Trade can raise the income of developing countries
by BBC News Online's Steve Schifferes

A new trade round would benefit the world's poor, according to a new report.

The claim comes as world leaders are preparing to restart trade talks in the Gulf Arab state of Qatar in November.

There is a very strong possibility that the introduction of trade and labour standards linkages would be exploited by protectionist interests in wealthier countries

Trade Liberalisation and Poverty, CEPR
Many developing countries have been sceptical of the plan, arguing that in the previous round of trade talks they gained relatively little.

But according to Professor Alan Winters, since the terrorist attacks in the United States there is a new spirit of cooperation among rich countries.

He says that the "bigger premium on cooperation" means that there is now a better chance than ever of securing "serious liberalisation on issues that are of interest to developing countries".

Agriculture tops the list

According to the report by the Centre for Economic Policy Research, the top issue for developing countries is the liberalisation of agriculture.

Previous trade rounds have done little to reduce the barriers to agricultural exports, with tariffs in rich countries averaging 15% compared to only 1.5% for manufactured goods.

Because most poor people in developing countries live in rural areas, opening markets for agriculture - along with more support for rural development - would have the biggest impact on poverty reduction.

But many developed countries still provide heavy subsidies to agriculture, including the European Union, which spends $60bn a year on the Common Agricultural Policy.

More migrants

Another report author, Neil McCulloch of the Institute of Development Studies, argues that the liberalisation of the services sector - much criticised by some development activists - could also benefit the poor.

He says that the most gains could be made by opening up the tourist sector and by liberalising the "movement of natural persons", i.e. immigration.

In particular, an increase in temporary unskilled migrants from poor to rich countries could boost the income of developing countries by as much as $300bn a year.

Mr McCulloch dismisses the fears of anti-globalisation protesters that trade agreements will force poor countries to open up public services to competition from multi-national companies - although he says that policies of the World Bank and International Monetary Fund may sometimes favour privatisation.

Keeping promises on clothing

Alan Winters points out that developing countries have yet to see the benefits of promises made in the last trade round to open up Western markets to textile and clothing imports, with full liberalisation promised on 31 December 2004.

But he says that the delay in launching the new trade round means that developing countries should be able to enforce that promise.

He also accepts the view of many developing countries that the "trips" (trade-related intellectual property) agreement on patents and copyrights has forced poor countries to pay more than they can afford for vital medicines.

But he warns them against re-opening this area for negotiation, arguing that the existing agreement has enough flexibility to deal with such issues, and a new agreement might be even less favourable.

Benefits for the poor

Overall, the research points to two fundamental truths - that countries open to trade generally have higher growth rates, and that growth is good for the poor.

But they accept that growth must be targeted on the poor - and that the poor must have a voice in designing those policies.

The researchers say that the implementation of core labour standards - giving freedom to organise and banning child and forced labour - will reduce poverty.

But they warn that using trade as a weapon to enforce these standards could backfire - citing the case of child labourers in Bangladesh who lost their jobs after the US introduced trade sanctions.

"There is a very strong possibility that the introduction of trade and labour standards linkages would be exploited by protectionist interests in wealthier countries," the report says.

And they argue that environmental standards should also be left out of trade agreements, citing the danger that they too could be used as an excuse for protectionism.

Most developing countries back these arguments.

But many pressure groups in the United States, supported in the US Congress by the Democratic Party, say they will only support a new trade deal if it includes provisions on labour and the environment.

If trade talks in Qatar are not going to run into the sand - as happened in Seattle in November 1999 at the last attempt to launch a new trade round - it is this issue above that must be resolved.

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