The US Bullies Poor Countries on Trade

By Oxfam

Washington, DC—The US, along with other rich countries and international financial institutions, is pressuring developing countries to open their markets for rice and other basic foods, while maintaining heavy subsidies and protections for its own producers, international agency Oxfam said in a new report released today.

Forcing the opening of markets for rice and other basic commodities in developing countries can have disastrous effects on poor farmers, according to the report. But the US continues to forge ahead irrespective of the consequences for development. Entitled "Kicking Down the Door," the Oxfam report highlights the inequities in global trade policies and calls for meaningful attention to development issues in ongoing trade negotiations.

"There's a great potential for trade to reduce poverty, but in trade negotiations, the US uses strong-arm tactics to force developing countries to make harsh concessions that are detrimental to their development," said Stephanie Weinberg, Trade Policy Advisor at Oxfam.

The Dominican Republic and Central America Free Trade Agreement (DR-CAFTA) currently being considered for approval by the US Congress will require these developing countries to open their markets to dumping of US rice and other commodities and forbid use of adequate safeguards to ensure food and livelihood security and rural development. CAFTA also blatantly ignores the fact that US farmers receive extensive subsidies and domestic supports, estimated to be around $18 billion this year alone.

Rice provides a clear example of the harm that can be caused by highly subsidized products being dumped into a developing country. Between 2000 and 2003, it cost on average $415 to grow and mill one ton of white rice in the US. But US rice was dumped on export markets for only $274 per ton, 34 percent below the cost of production. Subsidies made up a large part of the difference. In Honduras tariff reductions for rice in 1991 led to a flood of US rice imports and a resulting plunge in the price of rice paid to farmers, causing Honduran rice production to contract drastically. Over the course of a decade, the number of Honduran rice producers fell from 25,000 to fewer than 2,000, employment from rice dropped from 150,000 to fewer than 11,200 jobs, and production contracted by 86 percent. Honduras now has to use its scarce foreign currency to buy rice, more than $20 million annually, up from less than $1 million in 1989. Consumers didn't benefit either: They actually paid 12 percent more for rice in dollar terms.

"Last year, the US spent $1.3 billion on subsidies for a rice crop that is valued at around $1.8 billion," Weinberg continued. "DR-CAFTA will pit developing country farmers in a competition with the US Treasury that they will undoubtedly lose. Trade should create more opportunity for development and growth, not be used as a tool to promote the dumping of subsidized commodities. Central American countries should have the right to protect themselves."

The Oxfam report makes several recommendations, calling for future trade negotiations to allow developing countries to regulate imports that threaten to undermine farmers' livelihoods and for rich countries to stop negotiating bilateral trade deals to force open developing country markets. Oxfam also calls on the IMF and the World Bank to stop forcing poor governments to cut their tariffs unilaterally. Lastly, the report advises developing country governments to ensure that their farm policies promote poverty reduction.

"Rich countries need to make every effort to ensure that agreements reached at the Hong Kong Ministerial and beyond are truly reflective of the goal of eliminating poverty," Weinberg added. "Tragically, CAFTA will keep Central American countries from benefiting from any future policy flexibility granted to developing countries at the WTO and will permanently shut down their ability to regulate trade to meet their development objectives."

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