Freedom to trade

(25) Farmers of the World Unite

(This post was originally written yesterday, but since the host for our blog was doing "maintenance work", I'm only able to post this now.)

Just a few moments ago, two of the members of the Freedom to Trade coalition became embroiled in a very heated argument with demonstrators down in the lobby of the convention centre.  They were carrying signs, using whistles, and screaming in order to attract attention for their protectionist pleas for more subsidies and a "fairer" price for their pastoral produce. 

As some say, if you can’t beat ‘em, join ‘em.  So we did.

With many journalists present and cameras rolling, we decided to take the argument to them by exposing their tired (rustic?) arguments for what they really are.  Campaining for more protectionism in any of its forms only makes the production of food less efficient – clearly something they weren’t prepared to hear! They were also none to pleased when we accused trade distortions as being "morally offensive".

By demanding to know who we represented – and replying by saying only ourselves - we posed them the same question.  For those who aren’t informed about such matters, it seems that 25 campaigners with signs are now representing ALL farmers EVERYWHERE.  That’s right, from subsistence farmers cultivating rice in Madagascar (who can’t export their products to Korea) and Canadian milk farmers feeding at the trough of the Canadian taxpayers.

According to them, since we don’t “produce” anything because we don’t work on farms, we don’t deserve to have a say in the way our tax money is spent!  While they are obviously economically illiterate, they also fail to realise that any no strong economy derives more than 10% of its GDP from the agricultural sector.

In response to our efforts to point out the absurdities of their arguments, they became increasingly aggressive, to the point where one “farmer” was threatening to hit one of us, prompting WTO security to make an entrance to, effectively, protect the protectionists! (While it would have been amusing to see Jose Bove being carried away by the police.)

The F2T coalition out here exposing protectionist arguments one vested interest group at a time.

Bring on the GATS

While much of the bluster in Hong Kong has been over agriculture, it seems that the General Agreement on Trade in Services (GATS) is rapidly becoming another controversial sticking point.

Left-wing activists and trade unions are pushing the line that the GATS will require wholesale privatisations of public services and utilities, bringing with it extortionate user charges and social chaos. This spin is being eagerly lapped up by certain developing countries.

This is misleading.  GATS retains flexibilities which allows signatories to opt in and opt out of what they choose.

But the real shame is that poorer countries stand to gain a great deal from the GATS.  Competition and private provision of utilities such as water would be a good thing . The majority of public utility monopolies in poorer countries provide a woeful service. Access to water is often determined by bribes or favour-calling from friends in the bureaucracy.

Where water has been privatised - such as in Chile and Guinea - both supply, quality and access rates have increased dramatically.

More broadly, it is worth pointing out that no country has ever got rich from agriculture alone. Services are where the money is.

Lower-income countries should be doing everything in their power to encourage the development of service sectors in order to provide both jobs and prosperity. The GATS is a useful tool for moving in this direction.

WTO talks killing Ghanaian rice?

In an article titled “WTO talks killing Ghanaian rice- No markets for farmers means no money for Ghana,” which appeared in the December 14, edition of the Ghanaian Chronicle, Ghana’s only farmer representative at the WTO talks in Hong Kong to Nashiru Mohammed, who is President of the Peasant Farmer's Association is asking Ghana to impose stiff tariffs on imported goods such as cotton, poultry and rice because they are competing on an uneven keel with local production.

It was refreshing however, to hear read from the Government representative at the WTO dismiss the assertion that tariffs are the problem.  But he was unfortunately evasive on the real reasons why farmers can't add value to increase their market share.

The real determinants here are high import taxes on agricultural machinery. I have always argued that import taxes are indeterminate until the day you get your imported goods into your home. A best estimate on imported used saloon car is almost 100%. Port authorities demand 50% of the original value of the car, 12.5% VAT, Regional levy of 0.5%, 1% CIF value, haulage tax which varies, and bribes to facilitate speedy paper work.  Imagine how much will be slammed on heavy agricultural equipment when we know in Ghana that we do not have enough rice mills, even the technologically archaic!

In a related article, a farmer said, “All we want is for the [Ghanaian] government to assist us to acquire simple processing machines, so that on a small scale we can start to process our produce, which will help us to cut back on losses during the periods of glut". The second reason obviously is very access to credit. It is very difficult to access loans when you are a subsistence farmer in Ghana because your collateral isn't big enough. And even when the collateral exists for large scale farmers, the cost of borrowing is prohibitive - almost 28% across board. These high cost of production translates into higher prices for ordinary Ghanaians.

Indeed, some savvy Ghanaian businessmen have helped both local farmers and consumers, for instance by providing locally produced rice in packages. But that ensures the rice isn't stale when it reaches the consumer. Similarly, other Ghanaian entrepreneurs now collaborate with their Italian counterparts to produce tomato paste brands with Akan names, Ghana 's widely spoken language.

Yes, attitudes are part of the problem. - I agree that locally produced rice is more nutritious but that is not an excuse to ban or increase tariffs against imported rice.

If we did ban rice and tomato imports, just how would we feed ourselves? Ghanaians depend on rice as a major staple in our diets, yet local production caters for only 30pc of the rice we consume. Where is the remaining 70pc supposed to come from?

Rock star economics

Here's a thought-provoking piece by Paul Theroux in today's New York Times (subscription required). 

Campaigning around the world is clearly good for the careers of people like Bono and friends. But Theroux's personal experience teaching in Africa and having to come back to the same place 40 years later offers a slightly more nuanced perspective as to how little "aid for trade" schemes being discussed here in Hong Kong - as opposed to concrete agreements that bring down the barriers to free trade - will work to actually help anybody but unaccountable kleptocrats.

World Aid Organisation?

The trade ministers of the World's 'Least Developed Countries' are no doubt rubbing their hands in glee following the offers of cash that have been made on behalf of taxpayers in Europe and the US by our trade ministers. And so they should be. Now their wives can demonstrate their commitment to trade liberalisation right here in the bazaars of Hong Kong by purchasing essential items such as Cartier watches and Gucci handbags. 'Aid for trade' indeed.

Trade negotiators agree on something!

Given the very negative media coverage of the proceedings here in Hong Kong, which has focused on the vicious gladiatorial battle being waged in the green arena between Peter the Red and Robert the Redder, I was most surprised to receive an email from the WTO Secretariat announcing "WTO Ministers successfully approve Tonga's Membership at Hong Kong Conference." Now, that's what I call a result.

More pictures of the Freedom to Trade rally

the Hong Kong Capitalist has more pictures of the rally to break down trade barriers

Demonstrators call for removal of trade barriers

HONG KONG, 15 DECEMBER:  The Freedom to Trade (F2T) coalition staged a peaceful demonstration this afternoon calling for governments to remove barriers to trade throughout the world. The demonstration involved members of the F2T breaking chains and tearing down walls, representing the many barriers to trade imposed by our government, trapping billions in poverty.  Read the press release:

Andrew Shuen of Hong Kong’s Lion Rock Institute said: “50 years ago Hong Kong was an impoverished fishing village. Today, it is Asia’s richest city. This amazing transformation has been made possible through unilateral free trade.”

Click here for pictures of the demonstration

some more photos of the F2T rally

A state official and his henchman stand in front of the barriers to trade and announces that by popular demand they will soon be torn down (click on thumbnail for full-size image)

The henchman (a Mr Work) removes the chains that bind the protective tariffs.

Breaking down barriers to trade - literally

Not all the protesters at the WTO are Korean farmer protectionists who oppose free trade. Today (Thursday), a symbolic wall ('trade barrier') was erected and smashed down by those who believe in real free trade. Flagrant Harbour has some good pictures.