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Rich nations criticized for barriers to trade
( 2002-09-30 10:10 ) (7 )

The G7 Finance Ministers pose for their official group photo at the Blair House in Washington, September 27, 2002. The ministers are attending the IMF and World Bank annual meetings in Washington this week. [Reuters]

For all the polite nods toward the protesters outside, those in charge of the World Bank and the International Monetary Fund offered few apologies this weekend for the many failed attempts to increase prosperity in the world's poorest countries.

Reflecting the views of their biggest shareholders — governments of the world's richest countries, led by the United States — both institutions continued to push poor countries to take steps to stimulate business: privatize industry, improve financial management, embrace free trade.

But as the two institutions wrapped up their annual meetings here today, people inside and outside the elite gathering attacked what some described as a major hypocrisy of the rich countries: their own continued barriers to imports, particularly of agricultural products and textiles.

James D. Wolfensohn, president of the World Bank, accused wealthy countries of "squandering" $1 billion a day on farm subsidies that often have devastating effects on farmers in Latin America and Africa.

Stanley Fischer, who was the fund's deputy managing director in the 1990's, said protectionist policies by the United States, Europe and Japan were "scandalous."

Oxfam International, a nonprofit group focused on world poverty problems, issued a scathing report in which it charged that subsidies to big American cotton farming operations were wiping out African rivals.

The criticisms are not new. But they are more intense this year, and they carried a special sting for the United States. Earlier this year, Congress passed and President Bush signed a bill that authorizes more than $100 billion in farm subsidies over the next eight years.

"It is hypocrisy to encourage poor countries to open their markets while imposing protectionist measures that cater to powerful special interests," said Nicholas Stern, chief economist of the World Bank.

Mr. Stern estimated that the average cow in Europe received about $2.50 a day in subsidies, and that the average cow in Japan received nearly $7 a day. By contrast, he said, 75 percent of the people in sub-Saharan Africa live on less than $2 a day.

On Friday, just as financial leaders from the Group of 7 major industrialized nations were about to meet, Brazil filed a legal complaint against American cotton subsidies at the World Trade Organization.

Brazilian officials contend that American cotton subsidies contributed heavily to a downward spiral in cotton prices that cost Brazil $640 million last year. India, another big cotton producer, estimated that American subsidies eroded its export revenues by $1 billion last year.

The Bush administration agrees in principle with the goal of reducing subsidies, which encourage overproduction and tend to depress prices, as well as tariffs and quotas that block imports.

In July, not long after Congress passed the new farm bill, the United States trade representative, Robert B. Zoellick, proposed that countries around the world agree on a sharp reduction in both kinds of protection. Because the plan calls for even deeper cuts in Europe than in the United States, American farm groups say they support it.

Protectionism in wealthy countries has a disproportionately large effect on poor countries, because the biggest barriers are on farm products and labor-intensive products like textiles.

According to the World Bank, exporters from Bangladesh pay about as much in tariffs to the United States as exporters from France do.

Oxfam, which analyzed the effect of American cotton subsidies on African producers, estimated that American cotton subsidies eliminated 1 percent of the total economic output in three impoverished African nations — Burkina Faso, Mali and Benin.

Mali lost about $43 million as a result of plunging cotton prices, which was significantly more than the $37 million in foreign aid it received from the United States. Over all, according to Oxfam, the American government spends three times as much on cotton subsidies as it does on foreign aid for all of Africa.

Other economists caution that farm subsidies are not the only reason for declining commodity prices. Prices for many other commodities have plunged in the last two years, partly because of the weak global economy and partly because of the rise of new producers.

Uganda, which has been diligently rebuilding its economy, has been battered by a huge decline in world prices for coffee — its biggest export. But the International Monetary Fund and the World Bank can put much more pressure on poor countries than on rich ones to open up markets.

"The IMF tells the United States that it should drop its subsidies too," noted Mara Vanderslice, a spokesperson for Jubilee, an organization that campaigns for debt relief. "But the United States doesn't borrow any money from the IMF, so it doesn't have to listen."