[OPE-L:7733] NYTimes.com Article: Rich Nations Are Criticized for Enforcing Trade Barriers

From: Rakesh Bhandari (rakeshb@stanford.edu)
Date: Mon Sep 30 2002 - 18:12:58 EDT

This article from NYTimes.com

Rich Nations Are Criticized for Enforcing Trade Barriers

September 30, 2002

WASHINGTON, Sept. 29 - 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

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 I.M.F. 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
I.M.F., so it doesn't have to listen."


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