From poverty to power - Oxfam-Québec

FROM POVERTY TO POWERhigh- and middle-income countries, and only $2.72 goes to lowincomecountries, even though they contain nearly 40 per cent of theworld’s people. 181Under the aegis of structural adjustment programme agreementswith aid donors or bilateral and regional trade agreements, manydeveloping countries have sought to improve their trade balance andattract investment by reducing border tariffs and import and exportquotas and, more widely, by reducing state regulation of trade. Tradeliberalisation also includes cutting subsidies or restricting the abilityof governments to impose rules on investment, and can cause surgesof cheap imports against which small farmers or local labour-intensivemanufacturers are unable to compete. 182 As firms have sought tomodernise production and recruit more skilled workers, the differencebetween skilled and unskilled wages has risen.In its 2006 World Development Report on equity, the World Bankconcluded that opening up to trade has been associated with risinginequality in earnings in many countries over the past two decades.Trade liberalisation has also cut into one of the few easy ways for poorcountrygovernments to raise revenues.In agriculture, the success of exporters such as Chile and Botswanagives some credence to the liberalising agenda. However, in countriessuch as Korea, Malaysia, and Indonesia, smallholder developmentstrategies were underpinned by government use of tariffs to stabilisedomestic prices (protecting floor prices for farmers as well as ceilingprices for consumers) and thereby encourage investment. Retainingtariff flexibility is particularly important because other instruments,such as quotas, were largely prohibited in the WTO’s 1994 UruguayRound agreements. 183In manufacturing, countries with successful growth records –such as South Korea, Taiwan, Viet Nam, China, and Mauritius – havedeveloped core industries behind protective barriers. Trade barrierswere gradually lowered once these sectors started to becomeinternationally competitive. Rich countries are now demanding thatdeveloping countries cut tariffs significantly, even though theythemselves once used high tariffs to protect their own fledgling industries.When they were at the same level of development as sub-SaharanAfrica is today, the USA had an average tariff of 40 per cent, Japan186