Source: National Academies - Issues in Science and Technology

Trade liberalization can increase poverty in low-income countries if not handled carefully

World trade talks are heating up, with WTO members struggling to make a deal on the main issues of a new trade pact by a ministerial meeting in Hong Kong in December.  Of all the thorny issues they face, none has more impact on a potential deal—and the well being of legions of poor, than agriculture. 

Why? Because the global chess game of trade negotiations reflects the more fundamental reality of how the world’s population makes a living.  In rich countries, most people work in service industries or manufacturing.  In poor countries, agriculture is typically the largest employer.  In India, for example, farmers make up 60% of the economically active population, while in China the proportion is about 50%.  In low-income countries, an average of 68% of the labor force makes a living in agriculture.

Most attention to agriculture has been focused on the current fight between the US and the European Union over who will make the deepest cuts in tariffs and domestic subsidies, with their main concern being the consequences for their own well-off farmers.  A secondary issue, to date, has been the desire of some developing countries to export their farm goods to rich country markets.  But nearly absent from the debate has been the question of what happens to small, subsistence farmers in their own local markets in developing countries as a result of global trade.  In fact, this issue is probably the biggest factor in determining whether the trade talks produce growth and opportunities for the poor in the developing world or instead end up deepening their poverty and further marginalizing those who have least.

Why should the rich world care?  Sandra Polaski argues that the US, EU and other wealthy countries have plenty at stake:  their own economic self-interest, their need for global stability and security, and the perception of the global public about whether the global trading system is basically decent and fair or not.

In the article, Polaski outlines the issues and interests at stake in a high-risk economic game with no safety net for the poor.  She presents a proposal for dealing with subsistence farming in the WTO talks that would defend the most vulnerable households and allow the overall trade talks to proceed.

Click here for the full text of the article.