23. Memorandum submitted by the Catholic
Bishops' Conference of England and Wales
"TRADE AND SOLIDARITY"
A statement of the Catholic Bishops' Conference
of England and Wales and the Catholic Bishops' Conference of Scotland
Happy are they who hunger and thirst for
what is right; They shall have their fill (Matthew 5: 6)
SUMMARY
This publication forms a natural sequel to our
statement on debt relief for developing countries, published in
1999.[34]
Countries cannot emerge from poverty on the basis of debt relief
and international aid, in the absence of just trade relationships.
Despite all the efforts made to transform the situation, the economic
and trade relationships between the wealthy and the poor countries
of the world remain deeply unjust.
We reflect on the status of international trade
rules which, provided they are just, are essential to prevent
the unchecked dominance of the most powerful countries. But any
specific set of trade rules will be open to challenge, since the
negotiations by which they are agreed never take place in isolation
from the relationships of power between the negotiators. Substantive
justice in part depends on procedural justice, and this is difficult
to achieve.
We consider especially the destructive effect
on the developing world of twin policies driven by the wealthy
countriesenforced liberalisation and sustained protectionismand
go on to examine the obstacles faced by poor countries in challenging
these practices. We pay particular attention to the functioning
of the World Trade Organisation and the European Union's Common
Agricultural Policy. Over against these formal structures, we
consider the promise (and its limits) represented by the fair
trade movement. Finally, we consider more explicitly the criteria
enunciated in Catholic Social Teaching. The overarching concern
of the document is the universal common good, to which Pope John
Paul appealed once again in his message for Lent this year:
Faced with the tragic situation of persistent
poverty which afflicts so many people in our world, how can we
fail to see that the quest for profit at any cost and the lack
of effective, responsible concern for the common good have concentrated
immense resources in the hands of a few while the rest of humanity
suffers in poverty and neglect? Our goal should not be the benefit
of a privileged few, but rather the improvement of the living
conditions of all.
I. INTRODUCTION
In 1999, in association with CAFOD and SCIAF,
our two episcopal conferences published Life, Debt and Jubilee,
a statement on poverty elimination and the remission of the international
debt of the world's poorest countries. The campaign for debt remission,
signalled in 1994 by Pope John Paul II's apostolic letter Tertio
Millennio Adveniente, and supported by the Church along with
many others, was the impulse for the Heavily Indebted Poor Countries
(HIPC) initiative for debt reduction agreed by donor countries
in 1999. That initiative remains a partial measure, however, and
further debt cancellation is needed to lift the burden of unpayable
debt from the poorest countries.
But the human and economic development of the
poorest countries requires changes even more far-reaching than
debt relief. Specifically, it requires that international trade
should be ordered justly. Without a system of international trade
that recognises the present position of weakness of the poorest
countries, many of them are likely to fall back into unpayable
arrears of debt from which they were partially rescued.
Our focus in this document is therefore the
economics of trade, especially as it bears on developing countries,
as a central element in international economic justice and integral
human development. We have written it once again in association
with the Bishops' Conferences' own development agencies, CAFOD
and SCIAF, and in relation to the current Trade Justice Campaign.
These subjects are complex and are contested
at almost every point. There are , for example, divergent theories
of social justice itself, with different philosophical and theological
foundations. In the case of development, widely differing opinions
are held about the necessary elements of successful economic growth
and social progress, and the relationship between these elements.
They might include the role of the state in economic development,
the process by which communities on the margins of economic and
social life are enabled to develop their capacity to participate
more fully in civil society, the proper role of international
rules and institutions, the question of when and how national
markets should be opened to international competition. However
complex such an analysis becomes, our faith compels us to understand
and respond to the fundamental structures that so deeply affect
the lives of poor people.
Our purpose is to offer an account of current
and crucially important thinking about trade justice from the
perspective of the rich tradition of Catholic social thought.
Some fundamental aspects of that tradition are the following:
The fundamental dignity of every
human person and community, each with rights that must not be
foregone or denied, each with a responsibility to contribute to
the common good.
The universal destination of the
goods of Creation.
An economic system that serves the
human person and promotes both freedom (the freedom of all, not
only that of a social or national elite) and solidarity.
The active recognition that human
fulfilment can only be attained in communities of justice.
The recognition that social justice
cannot be attained by eroding human rights and freedoms, and that
human dignity and freedom must be universal and cannot be achieved
by denying the dignity and freedom of others.
All these elements are grounded in the Christian
belief that we are created for God and destined for God as a people,
the Body of Christ, and that any conception of human life that
reduces it to the status of an object or instrument must be rejected.
II. SOCIAL AND
ECONOMIC CONTEXT
We begin with the scandal of poverty. Half the
world's population, some 3 billion people, live on two dollars
or less a day. Of these 1.2 billion people, 20% of the world's
population, live in extreme poverty on less than one dollar a
day. This poverty occurs in a world of plenty, in a global economy
capable of satisfying all the demands of its richest consumers
but seemingly and scandalously unable to meet the needs of vast
numbers of the poorest, whose needs ought to be at the heart of
public policy. That is why poverty is the proper starting point
for all discussions about aid, debt cancellation and trade.
Poverty was also the starting point for Pope
Paul VI, whose encyclical Populorum Progressio in 1967
called rich people and rich nations to acknowledge their responsibilities
to poor people and poor nations. Writing of the post-colonial
world, he warned of the danger of a widening division between
rich and poor countries.
it is only too clear that these structures
are no match for the harsh economic realities of today. Unless
the existing machinery is modified, the disparity between rich
and poor nations will increase rather than diminish; the rich
nations are progressing with rapid strides while the poor nations
move forward at a slow pace. The imbalance grows with each passing
day: while some nations produce a food surplus, other nations
are in desperate need of food or are unsure of their export market.[35]
The specific structures to which he referred
have changed, but his description remains relevant. For economic
and power relations between the rich countries of the North and
the poor countries of the South are as uneven as ever. Only faltering
progress is being made towards the United Nations Millennium Development
Goal of halving the proportion of the world's population living
on less than one dollar a day by 2015. Good progress towards the
attainment of this particular goal is being made by some countries,
most notably China which accounts for one fifth of the world's
population, though China's progress in this respect is far from
matched by a more general respect for human dignity and human
rights. Many other countries, especially those of sub-Saharan
Africa, are not on course to meet the objective. Some countries
are actually becoming poorer: perhaps as a consequence of their
own bad policies or of those forced on them by the international
financial institutions; perhaps as a consequence of violent conflict,
mismanaged globalisation, the impact of the HIV/AIDS pandemic,
or environmental degradation.
This situation is not new. The plight of the
poorest countries, and particularly the debt crisis affecting
them, has been amply documented since the mid-1980s. It was then
becoming clear that the new market-oriented policies dominating
the thinking of donor and creditor countries and the international
financial institutions would not enable the poorest countries
to achieve the economic growth needed to lift them out of poverty.
Since then, the share of global income, trade and wealth accruing
to the poorest countries has diminished, not increased.[36]
At the same time it is important to bear in
mind that there are enormous differences between developing countries.
At one extreme there are China and India, with a third of the
world's population between them, and over half the world's extremely
poor people[37]that
are at the same time burgeoning industrial and trading powers.
At the other there are extremely poor countries in sub-Saharan
Africa that deteriorated economically in the 1980s and 1990s and
will require special assistance over a number of years to enable
them to engage profitably in world trade. In between there are
countries regarded as success stories, such as Malaysia, Chile
and Mauritius; countries that are making promising progress, albeit
from a low starting point, such as Ghana and Mozambique; and a
great number of countries that are just about holding their own.
Finally there are a number of countries racked by conflict which
blocks and reverses development. For them durable peace is an
essential precondition for poverty reduction, economic growth
and trade.
III. THE GLOBAL
RESPONSE TO
POVERTY
We do not suggest that the plight of the poor
has been ignored, whether by governments, by the international
financial institutions, or by civil society. On the contrary,
the 1980s and 1990s saw vigorous and relatively successful campaigns
in the UK for increased aid and debt cancellation, to which members
of the Christian churches contributed out of all proportion to
their numbers. This success reflected the campaigners' cogent
analysis as well as their capacity to mobilise widespread public
support, as they demonstrated convincingly that developing countries
could not recover from the setbacks of the 1980s without significant
additional aid and debt cancellation.
Official and institutional analyses of the poverty
of developing countries have also changed since the 1980s. The
International Monetary Fund (IMF), the World Bank and governments
around the world (though, significantly, not yet the World Trade
Organisation) have adopted the Millennium Development Goals.[38]
A measure of debt relief has been accorded to the poorest countries;
modest increases in development assistance were promised at the
United Nations "Financing for Development" Conference
held in Mexico in 2002; in late 2001 the agreement to launch a
new round of trade negotiations was described by trade ministers
as the "Doha Development Agenda", and sought to place
the needs of developing countries at the heart of the work programme;
and, at the "G8" meeting in Canada in June 2002, a substantial
section of the Africa Action Plan was devoted to "Fostering
Trade, Investment, Economic Growth and Sustainable Development".
IV. TRADE AND
DEVELOPMENT
In 1999, in our joint statement Life, Debt and
Jubilee, we endorsed the Jubilee 2000 campaign for debt cancellation.
In fulfilment of the Old Testament promises of
Jubilee, Christ announced good news to the poor and the release
of prisoners, and proclaimed "the year of the Lords favour".
Today it falls to us, the peoples of the rich countries, and particularly
to the governments acting in our name, to honour in some measure
this majestic promise to the poor and the enslaved.[39]
Now we turn our attention to trade and trade
rules because these have even more serious consequences for the
people of the developing world. In the 1960s, Pope Paul VI already
saw that development aid would accomplish little in the absence
of equitable trading relations. His concern has become all the
more urgent as it is clear that world trading patterns have still
further disadvantaged the poorest countries.
. . . all these efforts will prove to be vain
and useless, if their results are nullified to a large extent
by the unstable trade relations between rich and poor nations.
The latter will have no grounds for hope or trust if they fear
that what is being given them with one hand is being taken away
with the other.[40]
Trade is not inherently bad for development:
it all depends how it is managed and conducted.[41]
Indeed, trade is essential for development because, as the United
Nations "Financing for Development" Conference concluded
in 2002, trade is in many cases "the single most important
source of development financing", and because the income
that a country and its people earn from trade, unlike aid or debt
cancellation, does not depend on the good will of others. Trade
develops people's capacity to meet their own needs, and builds
mutual and sustainable economic relations between peoples.
Yet the current imbalances in world trade are
dramatic. Africa, the poorest continent, with 10% of the world's
population, accounts for just 1% of world trade, a proportion
that has halved in the last twenty years. The majority of Africa's
people, especially those south of the Sahara, live on less than
a dollar day. Their overwhelming concern is sheer survival for
themselves and their families. Most would not think of themselves
as exporters or importers. Yet even the poorest Africans eat food
made from imported grain and wear second-hand clothing from developed
countriescollected, baled and shipped to Africa for sale
in local street markets. The pills they take for everyday ailments,
if they can afford them, are almost invariably imported. Some
of them work on coffee and cocoa farms or tea plantations, exporting
to the shops and cafeés of the developed world. If trade
is fundamentally important yet is marked by such dramatic disparities,
the issue needs urgently to be addressed.
Of course we do not suggest that aid and debt
relief can now be disregarded. In the short term some countries
have no chance of simply trading themselves out of poverty. Advances
in trade justice will need to be accompanied by debt remission
and higher levels of aid.[42]
Trade justice on the one hand, and the adequate provision of aid
and debt relief on the other, are mutually dependent conditions
for development.
V. TRADE AND
TRADE RULES
Trade is more complex than debt. Trade is the
continuous, year-after-year activity that countries and peoples
must undertake to earn their keep in the world. It is affected
by two forces: the capacity to produce and deliver goods competitively;
and the existence of several intersecting sets of trade rules
and agreements. Provided that they are equitably negotiated, such
rules form the essential guarantee of an ordered commercial system,
in which there is some protection against the untrammelled power
of the wealthiest countries and corporations.
Rules are legitimate insofar as they are just
to all: that is, provided that they do not systematically favour
particular interest groups. But we know all too well that rules
of any kind are rarely drawn up from scratch, and that they are
not a pure reflection of an abstract "fairness" that
treats all strictly alike. Trade rules emerge from lengthy multilateral
negotiations or trade treaties between countries: inevitably they
largely reflect the balance of power between those countries.
Negotiations are subject to energetic lobbying by corporate interest
groups. Governments, too, are typically cautious and defensive
in their approach to trade reform, often identifying the "national
interest" with the interests of their most powerful companies
and economic sectors. It is not surprising that trade reforms
designed to benefit poor people and poor countries have met fierce
resistance.
We too believe that "fairness" is
not enough, and that it is not always just, to treat all parties
strictly alike. In our case, the Church's "preferential option
for the poor" leads us to believe that the rules governing
global financial and economic systems, including trade, must be
guided also by principles of solidarity and compassion. We therefore
hold that the notion of "trade justice" must embody
measures to benefit the poorest, to counterbalance the enormous
disadvantages that weigh them down from the start.
Changes to the rules under which trade is currently
managed will have consequences far into the future and will impact
variously on different groups of people. For example, they will
affect farmers, north and south, whose livelihoods could for better
or worse be drastically affected by changes to the European Union's
"Common Agriculture Policy", or by the USA's trade regulations,
as well as those garment and textile workers in developed countries
that face competition from East and South Asia. These are matters
to which we shall return.
In this document we have focused particularly
on the European Union and its role in international trade. This
is because the European Commissionspecifically its trade
commissioner, currently Pascal Lamynegotiates at the WTO
on behalf of its 15 member states. The UK does not negotiate directly
on its own behalf but has to come to a common position within
the EU.
VI. TRADE AGREEMENTS
AND NEGOTIATIONS
The most important trade negotiating body is
the World Trade Organisation, based in Geneva, currently with
146 member states and more queuing up to join. The WTO came into
being after the completion in 1994 of the seven-year "Uruguay
Round" of trade negotiations. In addition there exist over
two hundred regional trade agreements, such as the North American
Free Trade Association (NAFTA) linking the USA, Canada and Mexico,
which came into force in 1994. Negotiations are under way to create
a Free Trade Area of the Americas, covering all countries except
Cuba.
The standard belief underlying trade negotiations
is that liberalisation, the progressive and reciprocal reduction
of tariff barriers, will deliver benefits for all, rich and poor
alike. The advocates of free trade point to the tit-for-tat imposition
of tariffs in the 1930s that formed the economic backdrop to the
Second World War, and argue that an integrated, mutually dependent
world economy will reduce the threats of economic nationalism
and beggar-thy-neighbour policies.
Indeed, the Uruguay Round and the WTO may well
have brought benefits to some developing countries. The share
of exports from developing countries in total world exports increased
from 23% in 1991 to 31% in 1998,[43]
creating employment for tens of thousands of workers. Aggregate
statistics, however, should be treated with caution. Always there
are winners and losers. In fact the gains have been concentrated
in relatively few countries, while others have barely maintained
their exports or have lost ground. Within countries, too, some
have gained, some lost. In fact, it is often the poorest who have
lost from trade liberalisation, for they may lack the experience
and capacity to contribute to the new export-orientated industries,
and so have little to offer the global market. It is clear that
to achieve poverty reduction on the scale envisaged by the Millennium
Development Goals, the poorest countries will need to integrate
with the global economy rather than marginalise themselves from
it. The central question, however, is the terms on which integration
takes place. If trade rules are to take account of the needs of
the poorest and most vulnerable sectors of society, the process
of liberalisation must not override such primary development goals
as poverty reduction, health and education.
The manner in which trade liberalisation is
being driven forward today gives rise to additional problems.
The rich countries of the north resist reducing the support they
give to many of their own industries: for instance, they continue
to subsidise agriculture and have not yet fulfilled their commitment
to dismantle barriers protecting their textile industries. Even
advocates of trade liberalisation acknowledge that the protection
given to agriculture by the European Union, Japan and the United
States contradicts their demand that developing countries should
continue to reduce their tariffs on imported goods. The powerful
countries seem sometimes to adopt an almost crude approach: "You
liberalise, we subsidise".
To speak positively, we note that the European
Union maintains a web of preferential trade agreements, giving
some of the poorest countries (mainly former colonies in Africa,
the Caribbean and the Pacific) access to European markets while
levying higher tariffs on food imported from others. In September
2001, the European Union moved to widen this preferential access,
proposing its "Everything but Arms" initiative to remove
tariffs on imports, on all products except arms, from the 48 Least
Developed Countries. Even in this case, however, concerted lobbying
by European producers resulted in a substantial dilution of the
proposals for sugar, rice and bananasprecisely those products
in which developing countries enjoy a significant competitive
advantage.
VII. TRADE, AGRICULTURE,
AND THE
LIVES OF
THE POOR
Despite its positive aspects, the Uruguay Round
continues to be a source of recrimination between developing and
developed countries because it permitted the industrialised countries
to continue to protect and subsidise agriculture and their textile
industriesprecisely those areas in which developing countries
enjoy comparative advantages that would allow them to benefit
from trade. In industrialised countries agricultural subsidies
and support are now worth approximately £200 billion a year.
As a consequence European exporters are able to sell food to developing
countries for even less than the cost of production. Agricultural
subsidies were introduced originally in the 1950s to enable the
European Union to become self-sufficient in food, but they now
no longer seem an appropriate way to achieve the necessary aim
of supporting the numerically small and economically vulnerable
rural communities in Europe.[44] This
matter is so important because of agriculture's crucial place
in developing countries. Whereas agriculture provides employment
for 1% of the labour force in the United Kingdom and the United
States, and no more than 4% in the European Union as a whole,
in some African countries up to 80% of the population depend wholly
or partly on agriculture for their livelihood, so that a prosperous
agricultural sector is a key step on the road to development.[45]
Farmers in developing countries who earn a surplus provide a market
for the production and distribution of other locally-made goods
such as farm implements, household utensils, agricultural chemicals,
and perhaps even a radio or television. Artificially cheap imports
destructively undercut the prices local farmers must charge to
survive, and therefore blight local economies.
The protection and subsidies provided to the
dairy industry in the EU, for instance, amounts to two dollars
a day per European dairy cow, the income level of half the world's
population. Over-production inevitably results, and surpluses
are exported todumped indeveloping countries where
farmers, producing without subsidy, cannot compete. In Jamaica
and South Africa the export of milk powder from the European Union
has driven small dairy farmers out of business.
NAFTA, the trade treaty linking the US, Canada
and Mexico, offers another example of the dangers of combining
trade liberalisation between unequal partners with the preservation
of subsidies by the wealthy. The livelihoods of tens of thousands
of small family farms have collapsed because Mexico was pressed
to reduce tariffs on imported maize, even though United States
farmers continued to receive generous subsidies from their government.
VIII. THE CHALLENGE
POOR COUNTRIES
FACE IN
TRYING TO
CHANGE THE
RULES
How has all this come about? For a start, developing
countries lacked capacity to negotiate effectively in the Uruguay
Round. Even now, after the establishment of the WTO, 24 developing
countries are without a representative there, so learn only at
second-hand what is being negotiated. Other countries may often
have only two or three delegates who must strive to follow parallel
negotiations, involving multiple meetings on different subjects
on the same day. The rich nations of the north, by contrast, maintain
large permanent delegations in Geneva and can fly in expert trade
lawyers for key negotiations. Their governments and delegations
are constantly lobbied by multinational corporations seeking to
safeguard their existing operations and to exploit new opportunities.
In such ways, the capacity and skill of developed countries in
using WTO rules to their own advantage puts developing countries
at a severe disadvantage.[46]
Trade negotiations do not take place in a world
insulated from other commercial and political pressures. Developing
countries might be induced to adopt positions by the offer of
preferential bilateral relations with powerful northern countries,
by defence deals, or by the threat of reducing aid. Such negotiations
will rarely produce just results. Indeed, no human institution
can be sealed off from the realities and the stark inequalities
of power and wealth. In his encyclical letter Populorum Progressio,
Pope Paul VI stressed this point forcefully.
When two parties are in very unequal positions,
their mutual consent alone does not guarantee a fair contract;
the rule of free consent remains subservient to the demands of
the natural law . . . trade relations can no longer be based solely
on the principle of free, unchecked competition, for it very often
creates an economic dictatorship. Free trade can be called just
only when it conforms to the demands of social justice.[47]
Nevertheless, in this area too, some commendable
steps have been taken to right the imbalance. Developing countries
are beginning to work in groups, sharing information and expertise,
so that each member state knows its interests are being considered
without necessarily being separately represented. In this way
they can become more of a counterweight to the longer-established
regional blocs. This organisation and determination played an
important part, for example, in determining the outcome of the
Doha meeting of the WTO. Developing countries have also made a
forceful case for special flexibility in protecting their small
farmers from the dumping of staple food crops, a case which has
been to some extent accepted by the European Union and other developed
countries in the negotiations.
IX. THE WTO AND
INTELLECTUAL PROPERTY
The Uruguay Round gave the WTO responsibility
for the establishment and oversight of a global system of intellectual
property rules, known as TRIPs (Trade-Related Intellectual Property
Rights). It is intended that every country will ultimately enshrine
the rules of the TRIPs agreement in national legislation. The
agreement gives patent holders a monopoly over their patented
products for a period of 20 years. During this period they may
decide to manufacture the product themselves or may license their
patent to other companies which will pay royalties. The purpose
of patent regimes is to reward (and therefore stimulate) the effort
and investment required to bring new products to market.
Currently developed countries hold 97% of patents
worldwide, and over 96% of research and development is conducted
there. They compete fiercely among themselves, and the rules are
designed to regulate that competition. Thus the dominant perspective
of the TRIPs agreement is that of highly developed economies.
In 2002 the Commission on Intellectual Property, set up by the
UK Government's Department for International Development concluded:
Too often, the interests of the "producer"
dominate in the evolution of intellectual property rights policy,
and those of the ultimate consumer are either not heard or not
heeded. In discussions of intellectual property rights between
developed and developing countries, a similar imbalance exists.
Developing countries negotiate from a position of relative weakness.
The difficulty is that they are second-comers in a world that
has been shaped by the first-comers.[48]
The Commission therefore concluded that intellectual
property rules were too often skewed in favour of commercial interests
based in developed countries. Conversely, developing countries,
especially the poorest, had little to gain from a stringent international
patent system.
This imbalance may be illustrated by the current
dispute about patents and the drugs needed to treat HIV/AIDS and
its symptoms. HIV/AIDS is first and foremost a human tragedy of
almost unimaginable proportions, devastating families and whole
communities. But it is also an economic disaster: in robbing countries
of millions of workers in the most productive years of their lives,
it has also crippled the economies of sub-Saharan Africa. Other
diseases, particularly malaria and tuberculosis, also cause millions
of deaths in developing countries, in large part because effective
drugs are beyond the financial reach of all but their richest
citizens.
Health and development organisations are calling
for the drugs needed to treat these diseases to be made readily
available on the basis of need. However, the pharmaceutical companies
that develop the drugs, and some governments of developed countries,
insist that the patent system and the companies' control over
the price of drugs are necessary to protect the research that
will lead to new medical discoveries. These battles are being
fought out in WTO committees. It is governments that negotiate
at the WTO, but they are heavily lobbied and influenced by their
pharmaceutical companies, which fear that concessions might erode
profits and future research capacity. Only a tiny percentage of
drug sales and profits are generated in the poorer developing
countries, however, and the marginal cost of producing drugs,
once the research and clinical trials have been completed, is
very small. For these reasons, at least in the short term, pharmaceutical
companies would lose little if their drugs were sold more cheaply,
or were manufactured by low-cost producers in countries such as
India, South Africa or Brazil.
The Church values the contribution that private
enterprise can make to development, yet also insists that the
principle of private property must always be weighed against the
social welfare and the basic needs of poor people. As the 1997
document The Common Good expressed this principle, ownership is
governed by a "social mortgage". `Past abuses of the
ownership of wealth have led Catholic Social Teaching to accept
significant restrictions on the rights of property owners'.[49]
In fact, individual and company gain can never be made absolute
over and against the common good.
All too often, the fruits of scientific progress,
rather than being placed at the service of the entire human community,
are distributed in such a way that unjust inequalities are actually
increased or even rendered permanent. The Catholic Church . .
. has consistently taught that there is a "social mortgage"
on all private property, a concept which today must also be applied
to `intellectual property' and to "knowledge". The law
of profit alone cannot be applied to that which is essential for
the fight against hunger, disease and poverty.[50]
X. COMMODITIES
AND THE
TERMS OF
TRADE
The issues for those developing countries that
depend on the export of such commodities as coffee, tea, cocoa
and sugar, are different againand are still more complex.
Although frosts, blights and droughts in one region may raise
short-term prices elsewhere, the trend of commodity prices has
been relentlessly downwards. For there is a limit to the market
for primary products: after all, as people's income increases,
they do not drink more and more coffee or tea. Yet many developing
countries, still operating within the economic role first assigned
to them by colonial powers, depend overwhelmingly on exports of
raw materials to pay for such essential imports as medicines,
buses, oil, communications equipment and agricultural machinery
and chemicalsof which the prices have risen inexorably.
This continuing shift in the terms of trade, when linked with
the declining value of many small countries' currencies, and the
control of supply chains by the major transnational companies,
is a critical obstacle to economic growth and development.
Even those countries that have diversified away
from primary commodities face a hard struggle. The second step
on the development ladder for many countries has been the establishment
of a clothing industry dependent on plentiful cheap labour (usually,
overwhelmingly female), willing to accept low wages for long hours
of fast and accurate sewing. So many countries have taken this
route, however, that fierce competition has driven prices down,
so that the terms of trade are moving against them too. Massive
exports of used clothing from industrialised countries further
undermine clothing and textile industries in developing countries.
It is estimated, for example, that imported used clothing accounts
for up to 60% of the entire clothing consumption of Ghana.[51]
While there are no easy solutions to these problems,
UNCTAD suggests that middle income countries, such as Mexico or
Thailand, could "make space" for less developed countries
by moving out of the more labour-intensive industries like textiles
and electronics, which use large numbers of relatively unskilled
workers in repetitive tasks. To achieve this they would need to
invest more in the skills of their workers so that they could
undertake more technically challenging work, such as design, and
add more value to their products. Such countries would need also
to rely less on exports to the markets of rich countries and seek
to develop their own internal markets.[52]
This in turn would entail adopting tax and policy measures to
distribute income more evenly among the population.[53]
For many countries there are further and more
fundamental problems: that they would be unable to take advantage
of reforms designed to benefit poor countries. Many do not have
the capacity to produce goods of sufficient quality to sell in
the world market and lack the organisation and entrepreneurial
capacity to take advantage of the opportunities for trade that
do present themselves. In parallel with the need to make trade
rules more favourable to poor countries, international institutions
and donor countries should be helping developing countries to
build up their capacity to trade.
XI. EQUITABLE
PARTICIPATION
The alternative to a relentless drive towards
trade liberalisation is the agreement of trade rules that acknowledge
more explicitly the chasm in economic strength and trading capacity
between rich and poor countries. The restoration of the "level
playing field" advocated in so many discussions of trade
will not of itself balance a system that is so seriously distorted.
An affirmative approach would allow developing countries both
to protect their industries and to provide subsidies, within agreed
limits. Such protection could be graduated, to be reduced as countries
progressed economically, using indicators such as income per head.
Such an agreement would in some measure restore policy-making
on trade to individual countries rather than locating it entirely
in a set of rules administered through the WTO. The agreed rules
could still function to avoid the dangers of economic nationalism
to which we referred earlier.[54]
A counter-argument has been made, that such
freedom could be used, for example, to protect inefficient local
monopolies that survived only by enjoying political patronage.
This danger would be reduced by the integration of trade policy
into the consultations on poverty reduction that the seventy poorest
countries must undertake to qualify for debt relief and assistance
from donor nations and the World Bank. We are slowly moving towards
a situation where transparency regarding all international economic
relations, including trade, is becoming the norm. This trend emerged
from the concern that resources released by debt cancellation
ought not to be squandered in luxury spending or prestige projects,
but need to be invested in education, health and infrastructure.
In order to qualify for debt relief, debtor governments undertook
to consult with civil society in drawing up Poverty Reduction
Strategy Papers (PRSPs) that were designed to set out priorities
for poverty reduction.
While experience with PRSPs to date has been
mixed, the best offer an encouraging way forward for countries
to create a consensus around poverty reduction and development
priorities. Being such an essential element of poverty reduction,
trade could usefully be included in poverty reduction consultations
alongside debt relief and aid. For the freedom of choice offered
by the PRSP process to be genuine, consultation must not be limited
to discussions of how to deregulate and liberalise trade, as mandated
by the international financial institutions, but must extend to
the question of whether and when to liberalise trade. This is
not to say that trade policy ought to be determined solely by
the demands of poverty reduction. A comprehensive approach, however,to
include also such matters as sustainable development strategies
and conflict managementwould reflect the Church's concept
of integral human development.[55]
XII. THE FAIR
TRADE MOVEMENT
The advancement of the poor through trade, however,
requires more than action to change the structures of international
trade. We have emphasised what governments, especially the governments
of developed countries, can do by injecting into trade negotiations
a proper concern for development. At another level, there is a
heartening trend for major companies to commit themselves to ethical
trading policies. Further, individual consumers in affluent societies
will have to bear some of the cost of a system of trade and trade
rules that ensures that producers, whether farmers or workers
in garment and electronics factories, can aspire to the "decent
work"which includes a living wageadvocated
by the International Labour Organisation, and by the social teaching
of the Church.
. . . the criterion for these pacts and agreements
must more and more be the criterion of human work considered as
a fundamental right of all human beings, work which gives similar
rights to all those who work, in such a way that the living standard
of the workers in the different societies will less and less show
those disturbing differences which are unjust and are apt to provoke
even violent reactions.[56]
One striking sign of hope in recent years has
been the progress made by the "fair trade movement".
This movement is also a an exercise of solidarity and personal
responsibility, and has encouraged individual buyers to bear in
mind the global impact of their purchases, thus emphasising that
our choices matter, as a personal contribution to a fairer system.
As people become more conscious of what they buy, they also become
more aware of the political and structural realities, and are
better placed to advocate for change. This awareness also helps
prevent the dangerously facile assumption that the world's injustice
can be remedied by some adjustment of "the system",
without our personal commitment to allow our own lives to change.
As the Catholic Bishops' Conference of Scotland wrote in a pastoral
letter on development, in 1995:
The poor and the hungry, the sick and the persecuted
are still with us, not because it was unavoidable, but as a result
of economic and political decisions. These decisions are made
consciously by governments and multinational companies. They are
also sustained by our way of life and unconscious consumer habitsthe
things we buy to eat, drink, wear and usewhich can have
a devastating effect on the economics of faraway countries.[57]
No system, however universal and complex, functions
without the element of human choice. It is part of Christian witness
in this matter to insist that personal lifestyle and the global
economy are not separable realms of reality.
Fair trade purchases come, literally, at a price:
consumers pay more for their product. Those who are supporters
of fair trade do so voluntarily. They are presently a relatively
small minority, though their number and influence are rising.
For instance, many supermarket chains, major economic actors,
have over the last few years been pressed into offering such products.
The fact that relatively affluent consumers will make some personal
gesture of sacrifice and solidarity is highly significant.
The fair trade movement has helped influence
corporate conduct too, such as the codes of practice by which
large retailers in the UK undertake to ensure that certain health,
environmental and labour standards are observed in the factories
that supply them.
Naturally we cannot rely on voluntary codes
and individual (or even collective) expressions of concern to
change a system that is biased against the poor. The principle
of subsidiarity requires that decisions be taken as close as possible
to the people and communities who will be affected by them, and
is frequently deployed as an argument against excessive centralisation:
but it can also rightly be invoked to justify regulation at a
national or international level, when local or individual action
would be insufficient. The regulation of global markets is such
a case. As we have argued throughout, just international agreements
and standards are necessary to regulate markets that are so heavily
weighted against the poor.
Now that commerce and communications are no
longer bound by borders, it is the universal common good which
demands that control mechanisms should accompany the inherent
logic of the market. This is essential in order to avoid reducing
all social relations to economic factors, and in order to protect
those caught in new forms of exclusion or marginalisation.[58]
XIII. POLICIES
OF PROTECTION
AND SUPPORT
IN THE
WEALTHY COUNTRIES
In the light of Catholic Social Teaching, we
believe that the wealthy countries of the north must implement
reforms in their own domain if globalisation is to be made to
work for the poor. In particular, negotiations are under way to
reform the Common Agricultural Policy (CAP) of the European Union
but progress is glacially slow. The CAP currently accounts for
45% of the entire European Union budget, yet it hardly serves
the well-being of smaller European farmers, for even with the
subsidies and protection provided by the CAP small farmers in
Europe are hard pressed to earn a living wage. Meanwhile, the
CAP undermines the livelihoods of millions of farmers overseas.
Already it is recognised that the CAP is unsustainable and cannot
survive in its present form once Poland and the other nine "accession
countries" qualify for equal treatment in 2012. But nine
years is a long time to wait for developing countries that are
mired in poverty.[59]
The most damaging form of protection in the
European Union is export subsidies, which reward over-production
and encourage the dumping of surplus products in export markets.
We believe these should be phased out as soon as possible. Secondly,
both the European Union and the United States should reduce the
subsidies paid directly to farmers. It is increasingly being argued
that the least damaging form of subsidy is to pay farmers to preserve
biodiversity and to maintain the countryside by making environmental
investments, such as planting and preserving hedgerows and moving
to less chemical-dependent forms of agriculture. Accordingly,
some experts are speaking of the shift from a "Common Agricultural
Policy" to a "Common Rural Policy" that will include
livelihoods dependent on the environment and recreation as well
as production, and will accept that farmers are not the only sector
of society with a vital interest in the countryside. This approach
seems highly promising, so long as farmers are not unjustly penalised.
Following this approach, the European Commission
has proposed certain significant changes to the CAP as part of
its "mid-term review" (2000-06). Subsidies might be
decoupled from production and exports, and directed more towards
supporting rural development and environmental protection.[60]
Meanwhile, it has been agreed to limit the budget
for CAP at roughly its current £30 billion per annum. When
the new member states join in 2004, the same amount will begin
to be spread more thinly. By the time they qualify for equal treatment
in 2012, everyone will be receiving less than they do now.
It is evident that the European Commission is
making genuine attempts at reform, and these need to be acknowledged
and encouraged. Such reforms will be difficult to achieve, and
indeed they are being fiercely resisted by some member states.
One ought to remember, however, that throughout the 1980s and
1990s, heavily indebted countries were forced to undertake painful
and far-reaching reforms to liberalise their economies and open
them up to market forces. Across the developing world hundreds
of thousands of workers in state-run enterprises and government
offices lost their jobs and received scant compensation. Farmers
who had received subsidised fertiliser and pesticides were suddenly
obliged to pay the full market price. Factories closed and laid
off workers when they were forced to compete with imported products
on which import duties had been scrapped. These measures were
together known as "structural adjustment". The resources
available to Europe and the United States to cushion the shock
of reform, and to promote training and assistance for those adversely
affected, are incomparably greater than those that were made available
to developing countries for their structural reforms. It is vital
that the costs of reform are not borne by the poorest and most
vulnerable members of our own society: yet it can still be argued
that the implementation of such reforms would constitute the necessary
"down payment" on the part of developed countries, so
globalisation can work for the poor.[61]
In discussing reforms that should be made by
industrialised countries, we should not ignore what developing
countries can do for their own development. As has been noted,
some countries have progressed in the face of an international
system seemingly loaded against them. Governments in developing
countries have their own responsibility to strengthen the judiciary,
tackle corruption where necessary, promoting administrative transparency,
and nurture democratic politics, as well as to work directly for
poverty reduction. These goals are collectively termed "good
governance", and we know this cannot be taken for granted
anywhere in the world. But trade and investment will come only
if the conditions to sustain it are present; and experience suggests
that good governance does more to encourage foreign and domestic
investment, trade and enterprise than any number of externally
negotiated agreements.
XIV. CATHOLIC
SOCIAL TEACHING
AND TRADE
The economy is not to be taken as the ultimate
determinant of human life. Pope John Paul II has stressed that
"economic freedom is only one element of human freedom",
and that "the economy is only one aspect and one dimension
of the whole of human activity".[62]Without
a sound economy and the capacity to participate in it, however,
most people will be impeded from realising their full human potential.
As we have argued, the governments of developing countries can
themselves do much to improve the human and economic rights of
their citizens without reference to external rules, and with comparatively
little external help. Not least, trade is an internal civil activity
before it becomes an international process.
However, the external economic environment does
much to determine the scope for developing countries' advancement.
If all their efforts to earn their way in the world and invest
in poverty reduction are frustrated by falling commodity prices;
if their rural livelihoods are undermined by the dumping of surplus
food; if their exports are systematically blocked by trade barriers;
then the developed world is colluding in a worldwide denial of
economic and social rights. In arguing for more aid or for debt
cancellation, it is easy to fall into the trap of regarding the
people of the developing world as objects of philanthropy. We
need a fuller concept of solidarity and partnership.
It will be necessary above all to abandon
a mentality in which the pooras individuals and as peoplesare
considered a burden, as irksome intruders trying to consume what
others have produced. The poor ask for the right to share in enjoying
material goods and to make good use of their capacity for work,
thus creating a world that is more just and prosperous for all.[63]
As we argued in the section on Fair Trade, rules
can set limits to individual and corporate self-interest, for
the common good. But the search for trade justice transcends any
possible system of rules, since justice is a virtue, the fruit
of the acts of free human persons: thus trade justice requires
the active participation of consumers, producers and workers.
As we have seen, Catholic Social Teaching identifies
the economy as fundamentally directed towards the well-being of
persons and communities. We can therefore apply to trade the same
criterion that Pope John Paul II applied to globalisation in May
2003, when he addressed the Pontifical Academy of Sciences:
There can be little doubt of the need for guidelines
that will place globalisation firmly at the service of authentic
human developmentthe development of every person and of
the whole personin full respect of the rights and dignity
of all.[64]
Trade, like globalisation, is not an end in
itself it is evaluated by its relationship to a more comprehensive
human good. It is in this spirit that we would advocate that the
World Trade Organisation, though principally a negotiating forum
for trade and an arbiter of trade rules, could fruitfully adopt
the Millennium Development Goals as the over-arching framework
for its policies. This step would enable it to call negotiators
and the governments they serve to look beyond narrow national
advantage to the wider interests of humanity.
The Pope's criterion for a humanly acceptable
globalisation has also been adopted in a document written in December
2000 the British Government's Department for International Development,
a White Paper entitled, Eliminating World Poverty: Making Globalisation
Work for the Poor.
Globalisation, a priori, is neither
good nor bad. It will be what people make of it. No system is
an end in itself, and it is necessary to insist that globalisation,
like any other system, must be at the service of the human person;
it must serve solidarity and the common good.[65]
All that we have said suggests that if globalisation
is to enhance human welfare, rather than to embody the dominance
of the wealthiest countries, the Church and other communities
of faith as well as governments, international organisations,
civil society organisations and individuals must all play their
part.
The promotion of justice is at the heart of
a true culture of solidarity. It is not just a question of "giving
one's surplus" to those in need but of helping entire peoples
presently excluded and marginalised to enter the sphere of economic
and human development. For this to happen, it is not enough to
draw on the surplus goods which in fact our world abundantly produces;
it requires above all a change of lifestyles, of models of production
and consumption, and of the established structures of power which
today govern societies.[66]
It is governments that negotiate the ground
rules of trade in the WTO and elsewhere. But it is the function
and duty of governments to act in the name of and with the mandate
of their peoples. As the Jubilee 2000 campaign for debt remission
showed, ordinary people acting together can deeply affect government
policy. Many of those who campaigned on debt are now aware that
trade rules must be changed in order to prevent the countries
that have benefited from debt cancellationinadequate though
it may befrom falling back into unpayable debt. Such campaigning
is solidarity in practice. Such collective action expresses the
Christian conviction that the "market", properly understood,
can allow for a balancing of freedom with responsibility and of
prosperity with solidarity. A global market calls for global solidarity.
A global world is essentially a world of
solidarity! [67]
Catholic Bishops' Conference of England and Wales
June 2003
"in terms of purchasing power parity, the average
income gap between poor and rich countries widened in the 1990s
from 1.54 to 1.73." Rigged rules and Double Standardstrade,
globalisation and the fight against poverty, Oxfam, 2002.
page 67. These ratios are based on figures provided by the UNDP
Human Development Reports for 1994 and 2001.
"Sub-Saharan Africa has suffered a catastrophic
loss of market share, extending over three decades. During the
1990s the region lost another quarter of its world market. It
now accounts for only 1.3% of world trade." Ibid.
page 69.
1) to eradicate extreme poverty and hunger;
2) to achieve universal primary education;
3) to promote gender equality and empower women;
4) to reduce child mortality;
5) to improve maternal health;
6) to combat HIV/AIDS, malaria and other diseases;
7) to ensure environmental sustainability;
8) to develop a global partnership for development.
http://origin.island.lk/2002/03/17/busine06.html
34 Life, Debt and Jubilee, 1999, published by
the Catholic Bishops' Conference of England and Wales and the
Catholic Bishops' Conference of Scotland, in association with
CAFOD and SCIAF. Back
35
Populorum Progression, (Pope Paul VI), Vatican City, 1967;
para 8. Back
36
"World inequality has increased (using the same sample of
countries) from a Gini of 62.5 in 1988 to 66.0 in 1993. This represents
an increase of 0.6 Gini points per year. This is a very fast increase,
faster than the increase experienced by the US and UK in the decade
of the 1980's. True world income distribution, 1988 and 1993:
First calculation based on household surveys alone, Branko
Milanovic, World Bank, Development Research Group. . . Back
37
People living on under one dollar a day-450 million in India and
200 million in China. Source: World Development Report 2002,
World Bank, Washington DC 2002. Back
38
The eight Millennium Development Goals are as follows; Back
39
Life, Debt and Jubilee, Section 2. Back
40
Populorum Profession, para 56. Back
41
As this document goes to press, Stephen Byers, till recently the
Trade and Industry Secretary, wrote: "No one should doubt
the hugely significant role that international trade could play
in ending poverty. In terms of income, trade has the potential
to be far more important than aid of debt relief for developing
countries. For example, an increase in Africa's share of world
exports by just 1% could generate around £43 million-five
times the total amount of aid received by African countries".
The Guardian, 19 May 2003. Back
42
No doubt, also, the satisfactory development of some countries
will require reform of their systems of governance. That is not
the subject of this document, though it is mentioned briefly in
Section 12. Back
43
Globalization and Human Development in South Asia 2001,
Mahbub ul Haq Human Development Centre Back
44
The World Bank's Global Development finance report for 2003, released
in April, calls on industrial countries to reduce agricultural
subsidies and trade barriers that discriminate against exports
from developing countries. Regarding the role of developed countries,
the report said that they could support development most directly
"through coherent aid and trade policies that promote development." Back
45
We naturally acknowledge that in some European countries, such
as Ireland, the agricultural sector remains highly significant. Back
46
It is true that the WTO disputes carrying the heaviest financial
penalties have been conducted between developed countries themselves. Back
47
Populorum Progression, para 59. Back
48
Integrating Intellectual Property Rights and Development: Report
of the Commission on Intellectual Property, London, September
2002, Executive Summary. Back
49
The Common Good and the Catholic Church's Social Teaching,
Catholic Bishops' Conference of England and Wales, 1996, Section
109. Back
50
Address to the Delegation of Jubilee 2000 by Pope John Paul
II, Vatican City, 23 September 1999. Back
51
Research by the Swiss Academy for Development, quoted in Issues
related to the Implementation of the Agreement on Textiles and
Clothing (ATC) and other WTO Agreements & Their Implications
for Developing Countries, paper by Xiaobing Tang, P11 (60th
Plenary Meeting of the ICAC-Cotton: An African Renaissance Victoria
Falls, Zimbabwe, 16-21 September 2001. Back
52
Trade and Development Report 2002, (Chapter IV: "Competition
and the fallacy of Competition"), UNCTAD, New York and Geneva,
2002. Back
53
In Mexico, a country with an average income per head of $5,080,
the top 10% of the population receive 41% of national income and
over a third of the population live on an income of less than
two dollars a day. World Development Report 2002, World Bank,
Washington CD, 2002. Back
54
A similar point can be made about investment. Given the imbalances
already present in the WTO system, the injustices that need to
be corrected and the sheer complexity of the issues currently
under negotiation, it may seem surprising that the developed nations,
including the European Union, wish to add to the WTO's negotiating
mandate four new issues (investment, competition, transparency
in government procurement and trade facilitation). The objective
of the proposed negotiations is unlikely to oblige the governments
of developing countries to treat foreign investors in precisely
the same way as they treat companies on foreign own countries.
Developing countries would be prohibited from imposing special
conditions on foreign companies: from compelling them, for instance,
to transfer technology to local companies or from requiring a
certain proportion of their inputs to be provided by local firms.
The rationale for such an investment agreement is that developing
countries urgently need foreign investment and the benefits that
it can bring; and that investors need to be reassured that they
will be treated fairly before they make a sizeable commitment
to a developing country. Yet it is not clear that an investment
treaty would work in this way. Indeed, the substantial flows of
direct foreign investment to countries like china and Indonesia
in the 1990s were achieved without the need for any international
treaty. The desire for a treaty that will ensure "equal treatment"
contrasts with the positive discrimination towards their own industries,
shown in the past by governments of today's developed nations
as a means of building up their competitive strength, technology
and expertise. Back
55
An interesting recent report written for the Commission of the
Bishops' Conferences of the European Community (COMECE) proposed
that trade issues could best be addressed in the context of wider
development concerns such as environment, labour, and health.
The instrument for this integrated approach would be a forum bringing
together the directors of the international agencies responsible
for these matters, together with a delegated group of world leaders
which the report terms the "3G", the "Global Governance
Group", formed possibly by those governments that are represented
on the boards of the World Bank and the IMF. See, Global Governance:
our responsibility to make globalisation an opportunity for all.
A report to the bishops of COMECE, 2001. Back
56
Laborem Exercens, (Pope John Paul II), Vatican city, 1981;
para 18.3. Back
57
"Towards a world of solidarity", Catholic Bishops' Conference
of Scotland, 1995, a letter marking the 30th anniversary of SCIAF. Back
58
Address by Pope John Paul II to the Pontifical Academy of Social
Sciences, (27 April 2001). Back
59
As Britain's trade relationships are conducted through the European
Union, any critical note in these comments is not intended to
reflect anti-European sentiment, but only our own responsibility
from the perspective of Britain. Back
60
It is true that this process is no more than a "review",
and that any fundamental reform must wait until the renegotiation
of the EU's financial perspective post-2006. Back
61
This document focuses on trade justice, so we do not discuss the
suggestion that there are many things wrong with the CAP besides
its impact on developing countries. Catholics teaching on respect
for Creation, for example, could also inform the Church's response
to the impact of CAP on the environment and rural economy. This
document is written from the perspective of England and Wales:
so we simply note the longer-term task for the Church itself in
European countries with agricultural sectors, such as Poland. Back
62
Centesimus Annus, (Pope John Paul II), Vatican City, 1991;
para 39. Back
63
ibid; para 28. Back
64
Address by Pope John Paul II to the Pontifical Council of Social
Sciences, (2 May 2003). Back
65
Address by Pope John Paul II to the Pontifical Academy of Social
Sciences, (27 April 2001). Back
66
Centesimus Annus, op. cit, para 58. Back
67
Statement by John Paul II to United States President George W
Bush, (23 July 2001). Back
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