Cautious optimism and holistic thinking: Thoughts on WTO’s ruling on EU’s sugar subsidies
Last week was another big win for developing countries. In a preliminary decision that stirred the world, the World Trade Organization ruled against the European Union’s sugar export tariffs, in a case brought forward by Brazil, Thailand, and Australia. While European producers fumed, free trade economists and sympathetic international campaigners hailed the decision as “a triumph for developing countries and a death knell for unfair EU sugar export subsidies.”
While the decision represented a welcome move into a new direction of greater equity between developing and developed countries, the case raises a number of questions that trade justice advocates should consider even as they celebrate the ruling.
The main question is whose victory is it? Press reports hailed the ruling as a triumph interchangeably for developing countries, sugar producers, and the poor overall. As always, the reality is more complex.
That plaintiffs Thailand, Brazil, and Australia emerged victorious is clear. But, for the record, these countries are not the poorest of the poor. Rather, Australia is often considered a developed country. Brazil is a waking giant that is taking its rightful place in South America. Thailand is likewise known as an emerging market economy. All have a great capacity to produce. They are strongly integrated into the global market and stand ready to gain as soon as European barriers come down.
They are part of a growing group of so-called emerging and transition countries. Together with India and China, Brazil is ready to compete with the developed countries in manufactured goods and agriculture. Their growing economic power and their size is emboldening them to challenge developed countries at the WTO, the UN, and the World Bank. These are the real winners of the recent events.
Often this is for the best, as in the sugar case at hand or at negotiations of the Free Trade Area of the Americas. Ready to take on their own independent place in the international political arena, they are ready to challenge Northern dominance in global institutions. Since this is a fight for international equity, civil society campaigners sympathize with transition country governments.
Yet, the same campaigners also know that whereas Northern governments have over the years deepened their democratic institutions, rarely is this a case in transition countries. Often it is transition country governments that are least cooperative in the area of environmental reform, civil liberties, or social welfare. Where overt repression no longer exists, enthusiasm for deep democracy is missing. Freedom of information acts are non-existent. Absent is sympathy for environmental concerns. Accountability to citizens is often absent.
Similarly, the same enthusiasm that encourages transition countries to challenge entrenched Northern interests dissociates them from their more impoverished neighbors. While Brazilian intransigence in the WTO ministerial in Cancun protected the interests of Paraguay and Ecuador, the tables can turn quickly. When Brazil talk of economic integration with Bolivia, the latter should be cautious lest it be overwhelmed by its Lusophone neighbor the way it was historically by American interests.
Those who admit that not all developing countries stand to benefit from the WTO decision, will nonetheless hold that the ruling is a victory for the poor in the more robust sugar-producing countries. After all, there will be more jobs in the expanding sugar industry that can absorb the rural poor in Brazil, South Africa, and Thailand. This national level is another place to think carefully about the social reality. If we zero in on Brazil, we can agree that the direct winners are the sugar producers.
While World Bank research regularly claims that cutting agricultural subsidies and increasing exports from developing countries can lift millions out of poverty, a quick web search reveals a more complex picture. It echoes a saying of Honduran friends, when officials describe the positive macroeconomic outlook, they say the Honduran economy is doing fine, it’s just most Hondurans that are suffering. This is no surprise to labor activists who are familiar of the wide gap between the interest of sugar sector and the plantation workers.
As in other export agriculture activities, the conditions in the Brazilian sugar sector are quite appalling. In an interview published under the title “Bitter Sugar,” the Latin American secretariat of the International Union of Food, Agricultural, Hotel, Restaurant, Catering, Tobacco and Allied Workers’ Association notes that “the sugar cane sector was ever responsible for a spread of misery and exclusion”
“The economy of the sugar cane generated a human sub-race which was a byproduct of hunger. The model of sugar cane production was always harmful, both socially and environmentally.”
The report adds, “The efficiency and low cost of Brazilian sugar production find an explanation in the lack of social benefits and the destruction of the environment.” Ironically, it is the same efficiency that is praised by free traders who see Brazil as a rightful exporter with a comparative advantage.
Finally, while some Northern civil society campaigners have frowned upon established European sugar interests such as British Sugar, Beghin Say, and Sudzucker, Latin American unions note that the Brazilian industry applies strong pressure in the political establishment nationwide and at all levels of government. Campaigners should be asking whether we are trading European elites for Brazilian ones?
In spite of these caveats, the elimination of Northern subsidies will doubtless cut excessive dumping and will raise the world sugar prices. The World Bank estimates that the gains can be as much as 40% on the world market. The result will be that even if the majority of the gain goes to competitive Brazilian, Thai, and Australian producers, some benefits will trickle down to sugar producers in least developed countries like South Africa, Malawi, and Ethiopia.
Without rejecting that argument, another look at the national level in these countries will confirm the inequalities within. According to Oxfam, “As in other countries, the relationship between sugar exports and poverty reduction in South Africa is complex. Historically, the sugar sector has been characterised by exploitative labour practices, inadequate protection, and low wages, with women workers suffering the worst conditions.” In Ethiopia “pastoralists could see their grazing rights eroded, and greater sugar processing could pollute the Awash river.” In Malawi, the sector is still dominated by large estates.
All this is not to throw a wet blanket on what is a decisive victory for developing countries. This is just a call for cautious optimism and holistic thinking. With a cool head, a sharp eye, and a long-range plan, civil society can better ally itself with the poor on the ground. With greater coordination with Southern civil society, a multifaceted campaign strategy can be honed that mixes trade work internationally with a push for strong labor, land, and political reforms domestically in Brazil, South Africa, and Malawi.
Internationally, least developed countries can band together to form coherent blocks to protect their interests. Where needed, they can side with transition countries in international forums like the WTO. In other cases, they can take an independent stance to protect their own fledgling productive sectors if today’s fair trade warrior Brazil becomes a free trade ideologue tomorrow.
Meanwhile, strong domestic labor legislation in all countries must address the low wages, child labor, and restrictions on unionization. Land reform can tackle the resource concentration that results in sugar production reinforcing patterns of inequality. Meanwhile, strong political reforms, such as a strengthened parliamentary role, can ensure that Southern and transitional governments begin to answer to their civil society and not their economic elites alone. In this way benefits accrued from greater exports can do more than trickle down.
Taken together, a redistribution of power can be achieved both among and within countries. Now that’s something to get excited about!
The writer Leonid Sapozhnikov can also be contacted at [email protected] . He is a policy analyst for a humanitarian relief and development non-profit in Washington, DC and works on issues related to trade, external debt, and funding levels to low-income countries
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