Helping the Rich, Harming the Poor

Helping the Rich, Harming the Poor

By Sebastian Mallaby

5th November, 2001.

Here's some of why we have an image problem in the world's poor nations.Some 2.8 billion people subsist on less than $2 a day. We in the rich world preach that if they work hard they will climb out of poverty. But then we impose our highest import taxes on precisely those industries in which most of the poor work -- farming and low-tech manufacturing.

Because of this discrimination, the average worker in the poor world faces tariffs roughly twice as high as the average worker in rich countries, according to the World Bank. It's as though we hit minimum-wage workers in the United States with twice the normal sales tax.The biggest low-tech manufacturing sector is textiles. Well, the rich world hits textiles not just with tariffs but with quotas. A quota is a flat prohibition on selling too much, imposed by Westerners who supposedly rejoice in a swashbuckling pro-success culture. If Sam Walton sells a lot, he's an American hero. If a Pakistani shirt factory sells a lot, then naturally that's illegal.

The world's poorest farmers, who lack seeds and tools and malaria tablets, could use a little government assistance. Well, rich governments happily lavish about $1 billion a day on farm subsidies -- but these are for their own malaria-free farmers. Taxpayer support for farmers in rich countries is six times larger than all development assistance to poor countries, according to World Bank calculations.

The rich world's subsidies do not merely pass poor farmers by; they actually hurt them. The subsidized farmers grow more food than they would otherwise, which pushes down world prices and punishes Third World producers. Overproduction by European wheat farmers, who derive fully half their income from subsidies, cripples the export prospects of rivals such as Argentina, a country that is about to default on its debt because it can't export enough to keep to its repayment schedule.

Subsidies have another effect too. By rewarding high farm output, they encourage overuse of fertilizer, which is one reason why agriculture contributes about one-fifth of global greenhouse gases. Meanwhile the rich subsidizers declare they can't possibly expand trade with the poor world because of its shameful disrespect for the environment.

Full trade liberalization could eventually boost the annual income of developing countries by anything between $200 billion and $500 billion, according to World Bank numbers. That would be more than enough to pay for universal primary education in the developing world (which would cost $9 billion a year, according to UNICEF), plus any number of other worthwhile projects. But the rich world has not made this a priority. Its leaders spout sentimental speeches about protecting family farmers, as though retaining a symbolic vestige of the pre-industrial age justifies condemning Africans to genuine pre-industrial misery. What has been the rich world's priority?

Well, it has created an intellectual property system that threatens to transfer an annual $20 billion (again, according to the World Bank) from the poor to holders of patents in rich countries. Intellectual property law is useful once a country is rich enough to afford existing inventions and wants to give firms incentives to invent more; it is harmful in poor countries that just want to buy existing technology cheaply.

But in the Uruguay Round trade deal of 1994, rich countries insisted that the whole world accept their own totally inappropriate standards of patent protection.Yes, poor countries could do more to help themselves. They could cut out corruption, stop building palaces and even scrap some of their own trade barriers. But the dysfunctional states of the poor world are to some extent the product of poverty itself, whereas the rich world has less excuse for its myopia.

We appease domestic protectionists at the expense of the world's poor, and then we wonder why globalization and American power are so widely resented. Since Sept. 11, people have been saying we need to win the war of hearts and minds -- especially in Muslim nations but also in the court of world opinion generally. And yet not everybody seems to understand what this will take. Congress is cooking up another foreign aid bill that offers less to the world's impoverished billions than it spends on the domestic farm lobby each year. And it is resisting administration efforts to open up our textile market to Pakistan, a wobbly American ally that is losing thousands of jobs because of the uncertainty created by the Afghan conflict.

There is, however, one thing we may be about to do to redress the grievances of poverty. At a summit that starts Friday in the Persian Gulf state of Qatar, the world may launch a new round of trade negotiations. The industries that most matter to the poor -- agriculture and textiles -- will be on the agenda, as will a fix for the intellectual property system. It is hard to overstate the importance of success at this summit. And it is hard to overstate the extent to which many in Washington seem indifferent to it.

The writer is a member of the editorial page staff.