'Trade Justice' Betrays the Poor and the Sick
By Philip Stevens
Jun 30, 2005
In the build up to the G8 summit here in the United Kingdom in early July, it's becoming increasingly difficult to switch on the TV or radio without hearing some activist or rock star demanding 'trade justice' for the world's poor.
The current most vocal proponent of 'trade justice' is the celebrity-endorsed Make Poverty History coalition, which hopes to encourage the leaders of rich and poor countries to curtail free trade in the belief that it damages the poor and vulnerable.
The theory behind 'trade justice' is simple: Unfettered free trade allows powerful western companies to swamp the markets of poor countries, whose industries and farmers have no chance of competing in either quality or cost. Factories, farms and jobs all go to the wall.
In order to stop this from happening, Make Poverty History is pushing the idea that poor countries should erect protectionist tariff barriers for foreign imports, so that nascent local industries can have a chance to build themselves up.
The only problem with this idea is that it doesn't work. It plays havoc with economies and results in all kinds of economic and human disasters. Brazil tried it in the 1950s and 60s, and is still suffering from its effects today. After a period of breakneck industrialisation Brazilian industry quickly became grossly inefficient and uncompetitive. People who had moved into town looking for work ended up unemployed and destitute in slums. Inflation and the public debt got out of hand.
And Brazil was a success story compared to Kenya, Ghana and the other African countries that erected protectionist barriers during the 1960s. Their economies were stagnant for two decades.
Despite such evidence, the new moral legitimacy conferred upon trade protectionism by western anti-poverty campaigners means that it is once again being seriously discussed as a way to spur growth.
This would be a disaster for the world's poor, who need less - not more - protectionism. Even today there are too many examples of trade protectionism hurting those it is ostensibly designed to help. In Africa, for example, governments are using these very same arguments to justify slapping punitive tariffs on drugs.
For example, the governments of Tanzania and Kenya claim that the best way to get medicines to their sick is to bolster the local pharmaceutical industry by hindering imports of foreign medicines. This madness leaves the sick with the choice of waiting for local industries actually to produce the goods they need, or stumping up the extra money for the heavily taxed imported medicines. The story is the same in countries from India to Brazil.
With policies like these, it is hardly surprising that in certain parts of sub-Saharan Africa over 50 per cent of people can't access the medicines we take for granted. The extra cost on medicines created by government tariffs hits the poorest most, because they have to pay for medicines out of their own pockets, owing to the lack of functioning health insurance systems.
But protectionism does not guarantee the emergence of efficient, cheap manufacturers that will be able to meet all the demands of the local market. Far from it. Shielded from international competition, history tells us that protected industries produce a more limited range of expensive and poor quality goods. When it comes to medicines, only the best quality will do.
So using tariffs as a justification for helping the sick is a bizarre claim - it's simple industrial policy, and a misguided one at that. It hurts the sickest and poorest most of all, while doing little to achieve its stated aim of encouraging local industry.
Regrettably, this kind of policy is also entirely consonant with the 'trade justice' demanded by the increasingly influential Make Poverty History coalition. It seems obvious that people should be free to get the best medicines for their illnesses without governments putting all kinds of barriers in their way. Let's hope that African leaders ignore their demands for protectionist 'trade justice' and make trade free: the alternatives are too depressing to contemplate.
Philip Stevens is director of health projects at International Policy Network and co-ordinator of the Campaign for Fighting Diseases.
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