FACT SHEET ON TRADE

Introduction:

The UNDP reports that 70% of the grains from the last round of multilateral trade liberalization will go to develop countries and most of the rest to the large export-oriented developing countries. In contrast, the 47 poorest, least developed countries will lose about US$ 3 billion over five years due to lost export opportunities and rising costs especially for food.

The UN conference on Trade and Development found that: “In almost all developing countries that have undertaken rapid trade liberalization, wage inequality has increased, most often in the context of declining employment of unskilled workers and large absolute falls in their real wages.”1 

Liberalization in Africa also includes financial services. This entails insurance, banking, securities, assets management, pension funds, financial information, financial advisory and other services. All these if carried out were seen to “enhance and strengthen the capital market efficiency, bringing financial stability, stimulate innovation and provide the consumer with the broadest range of services at the lowest cost.”

CRITIQUE: On Banking:

On average a majority of women in Africa have not benefited a great deal from any bank loan or lending system. Liberalizing banking narrowed further women’s chances of accessing capital. This reduced access has been used to justify micro-credit as one of the ways to have women access finances for trade and income generation. It has been established that micro-credit does not empower the very poor women.

On Financial information:

Agricultural producers benefit from access to financial information, including updates on global price trends and this directly informs their farming and marketing activities. This does not benefit the illiterate rural subsistence female farmers.

Labour and Insurance:

The gender dimension of market liberalization needs to begin with production. It needs to include analysis of policies that promote high value crops such as Vanilla that do not consider how labour intensive crop pollination for example is.

Labor analysis has often excluded how produce is often transported on women’s heads. 

Whereas insurance helps WTO farmers protect themselves even from natural disasters or weather shifts, most African national laws related to production and distribution are aimed at trade liberalization that aims at removing all trade restrictions. The result of that is that, all policy instruments that would have protected the entitlement of the poor, woman are excluded from the markets. Further more, elimination of price control opens one up to price exploitation. This has been the case for most rural women who tend to price their goods according to their needs or the price offered.

Trade liberalization and manufacturing:

According to some studies, The major outcomes of trade liberalization in Zimbabwe relating to manufacturing export performance showed agro-processing as a high growth sub-sector between 1990-95 with diary products recording 18.5% average growth, meat recording 40%, grain foodstuffs 11%, and beverages 86.2%. That indicates the agro-based potential to generate “export competitiveness, in an open market economy in the absence of serious externalities.” The worst performance among traditional export were Iron, Steel with a negative growth of 21%, Ferro alloy with 6.7%, textile with 7.3% and clothing 11.2% negative growth.

Ghana’s manufactured exports earned $ 3.5 million in 1986 and increased to $ 14.7 million in 1991. This seems to suggest that there was growth but does not show the fact that there was a shift of resources from the inefficient to efficient enterprises. Dis-aggregated data will show that growth came mainly from domestic resource based firms that already had established markets i.e. wood and aluminum.

There was a big decline in manufacturing from 19991 by 12% due to high interest rates and cost of foreign currency in Zimbabwe. This drop was attributed to weak performance of textile, clothing, footwear, wood, furniture, paper, printing, transport and equipment.

Market access:

“The most publicized benefit of the Africa Growth Opportunity Act (AGOA) is that it offers duty and quota-free access to African products in the US market. A particular emphasis is on textiles. Those countries which have textile export capacity may benefit from the provisions off AGOA and even these benefits may be limited. For instance, as regard countries with per-capita incomes less than $ 1,500 which are supposed to have special concession under the act. The fifth annual report on US-Africa trade (published in November, 1999, by the US International Trade Commission) shows that in textile trade between the US and Africa, most of these countries import substantial proportions of used textile products from the US including used clothing, scrap twine, used rags. (87% of Benin’s textiles import from America, and 87% of Tanzania, 74%-Ghana, 61%- Kenya, 95% for Niger). In the report’s own words, these levels of import of used textile materials are related to the increasing levels of poverty in these countries. At the same time most economic observers have noted that the levels of poverty in those economies which are related to use clothed imports also have direct relationship with the collapse of local markets for local clothes industries.”

“A substantial portion of US agricultural exports to [Africa] benefited from US government programmes.” These included the export guarantee programs that increased 38.9% over the previous year, the Export Enhancement Programme, and Diary Export Incentive Programme, to the tune of $ 103.6 million. The main commodities under these programmes included Soyabeans, corn, wheat, rice, poultry and cheese. US exports of grain to African countries in 1998 rose by $ 22 million, a close equivalent of $ 25 million spent under the export guarantee programme to support grain export.

Export Trade, family incomes and jobs:

According to Boaventua Mondlene, the General Secretary of workers’ Union, about 6,000 workers in Mozambique’s cashew nut processing industry lost their jobs in year 2000, bring the number of unemployed cashew workers since the cashew sector crisis that began in 1997 to 8,500.

The other result beside the loss of jobs and income has been the fall in prices; “the producers are earning less contrary to the arguments of the World Bank and government.” India the biggest processor of raw cashews had for a period had a bad harvest. So the World Bank forced Mozambique to liberalize and export the raw cashew nuts to India than process them locally would fetch better income.

The price in 1999 to Indian companies dropped to US $ 700 a tone to US $ 415 a tone mostly because the Indian cashew rose.

Tariffs, land and food security:

The agricultural sector of developing countries that provide food and employment to the majority of the world’s poor is particularly vulnerable to the negative consequences of trade liberalization.

As part of the conditionality for debt relief, Mozambique was forced to reduce its tariffs on cashew nut from 20% to 14%. This practically destroyed the cashew nut production. In both those instances, women loose. They are not in the export business; they were the first to loose jobs when the cashew industries closed. They lost access to land for cassava production because the land had to be used for more commercially viable (export) crops such as cashew.

Production in Uganda’s fish sector increased with the advent of export trade in fish mostly to the European markets. With liberalization, export trade declined. Export trade raised the price of fish and rendered it unaffordable for the local communities and yet it is their chief source of protein.

Emphasis on export especially in non-traditional crops, subsistence- farming context leads to heightened food security. This is worse in rural areas where a majority of households are tenants living on pieces of an acre or less. For Agro-based economies, agriculture was primarily for domestic consumption first, and then the surplus was for trade. Under WTO, agriculture is purely for commercial consideration. So that equity is not a major factor when Kenyan fisher-women are out competed by large fishing firms that catch fish for processing as animal feeds in Europe. These Kenyan women lost monopoly on fish trade, food security and income.

With liberalization of markets, Tanzania and Uganda have circumbed to import surges and dumping of used or second-hand clothes and other goods of inferior quality. 90% of Tanzania’s textile mills that used to employ mostly women closed as a result of liberalization.

South Africa was flooded with E.U beef that was selling at one third of the high quality of local beef in SADC region.

In Zimbabwe, small-scale farmers were encouraged to plant tobacco for export but with a glutt the price dropped from Z $ 8.03 per kilogram. The increase in land under tobacco did not leave enough land for food production and yet the drop in price reduced the amount of food that farmers would buy.

Trade and Economic growth:

Drug trafficking is now Mozambique’s biggest business. The value of illegal drugs passing through Mozambique is probably more than all the legal foreign trade combined, according to international experts. Income from this industry is having a major, albeit unrecorded, impact on the Mozambican economy. Indeed, drug money must be one  factor for Mozambique’s record in growth in recent years, and yet there isn’t much attention on this trade.

The chairman of the Mozambican Stock Exchange  (BVM), Jussub Nurmamade, said on that the rapid growth of the BVM was “unique.” “We started with US $ 3 million, and that is hardly two years ago,” Today the value of five companies listed on the stock exchange plus government treasury bonds and bank bonds amounts of $ 60 million, and Nurmande predicted it would rise to $ 100 million by October. Last year, BIM became the first Mozambican stock exchange private company to issue its own bonds, which are now traded on the Mozambican stock exchange. The bond issue for (then more than $ 5 million), maturing over five years. How can a small economy like Mozambique’s find $ 100 million in such a short time? What makes Mozambique “unique” must be drug money.

Trade and Health:

Trade in food commodities has had a direct impact on human nutrition especially on mothers and children. Uganda for example has one of the highest number of children with stunted growth. This affects both physical, mental development and economic returns in the long run.

Health is further jeopardized in areas where water is being privatized as is the case in Ghana. This is worse for people living with HIV/AIDS who need water for taking medication and for laundry.

Uganda that has a visible number of people living with HIV/AIDS only 32% of Ugandans have access to safe water. In the Meantime, the Trade Related Intellectual Property Rights (TRIPs) agreement within the WTO only benefits pharmaceutical companies especially when it extends patenting protection to 20 years. The poor people living with HIV/AIDS in the mean time, cannot afford drugs and have limited access to water even for swallowing medicine!