In Free Trade, We Trust

Published on 18th April 2005


The past week saw a gathering of the world?s most notorious advocates of foreign aid to celebrate the Global Week of Action on Trade. An advertiser?s announcement in the Ghanaian newspaper, the Daily Graphic, predicted a ?big showdown with the current obnoxious world trade regime, which has contributed immensely to the worsening poverty levels in the developing world?.

Oxfam and Christian Aid can be powerful social advocates, but in many cases, their economics are just plain wrong. In reaction to our extreme poverty, these bodies and their local counterparts conclude that Ghana?s farmers are suffering at the hands of the World Bank, the International Monetary Fund and the World Trade Organization.

One of their solutions to our problems is eliminating farm subsidies in the West, which would indeed be a good thing.  But it is sad that these bodies including ISODEC, MAPRONET, SEND and the Third World Network have no principles. They ignore history, peddling the misguided belief that poverty, famine, global warming and corruption can be solved with more foreign aid and other policies that have already failed Africa.

Most people would agree, though, that dealing with the World Bank and IMF is like playing with loaded dice. They do advocate free trade measures - but also forces foreign aid and flawed development strategies on us. Even the average Ghanaian knows that these ?reform? programs have achieved nothing other than to enable bureaucrats to procure gold-plated Mercedes Benzes for themselves and their cronies.

Unlike their counterparts in the real world, international aid agencies are allowed to contradict themselves. On one hand, they oppose subsidies in wealthy countries, which are indeed part of the problem, while other, they promote subsidies to local farmers and businesses in poor countries to shield them from the effects of free and open trade.

In Ghana, the global week of action on trade launched a campaign to protect local rice, tomatoes and poultry farmers from cheaply imported ones. The Country Program Manager of Oxfam GB, Mr Sam Danse, called on the government to impose taxes on imported rice to establish a fund to boost the agricultural sector. Already the local tax build up on rice is about 38%, the highest in West Africa.

But this is exactly where the hypocrisy and misguided solutions to the problems of farmers lie. They know for a fact that Ghanaian farmers as well as other entrepreneurs are inundated with punitive taxes and high costs of capital, not to mention the fragmented land tenure systems that lead to low crop production.

Yet there are many mouths to feed in Ghana, as rice for instance, has become a major staple. Ghanaians are said to consume 500,000 tons of rice annually. Local production caters for only 150,000 tons and the rest is imported.

If importation of rice and tomato concentrates are banned today, as these aid agencies advocate, just how will we feed ourselves? These aid organizations have failed to comprehend the bigger issues, which are prerequisites for eliminating poverty. In most African nations, subsidies are the first step towards more corruption and power for the politicians and vested interests, and fewer choices for consumers.

Often the World Bank?s structural adjustment programs Ghana adopted in 1989 are easy targets for cases of ?flawed liberalization?. True, there has been many blind sides of these programs, but very often governments acquiesce in shady liberalization deals has been our nemesis.

People?s attitudes are important in this equation. Today?s average Ghanaian consumer has suffered because of shoddy and defective goods manufactured locally by protected industries that do not have to compete in an open market. Who can blame us for buying higher quality foreign goods? Some savvy businessmen have learned to successfully compete, for instance, by providing locally produced rice in sophisticated packages, which ensure that the rice isn?t stale when it arrives to the consumer. Similarly, some smart Ghanaian entrepreneurs now collaborate with their Italian counterparts to produce tomato paste brands with Akan names, Ghana?s widely spoken language. One of these hotly pursued products is called ?Obaapa? which translates as ?great woman?.
Protection for local producers also means that African countries trade less with each other . WTO?s 2001 statistics show that Africa?s share of intra- and inter-regional trade flows to Western Europe alone was 51.8 %, while it was a paltry 7.8% within Africa.

This suggests that Africans, and especially our leaders, need to focus on improving the well being of the average person through real reforms. The solution lies partly in encouraging intra-regional trade.

More broadly, the solution for African countries is to adopt institutions to encourage development. Decentralizing ownership and control of natural resources and other assets would be an important first step. An effective, transparent and accountable legal system would be another.

When combined with respect for private property and the rule of law, these broad reforms would encourage entrepreneurship, innovation and even environmental protection amongst average people because they empower people, rather than the politicians. As economies grow and develop, people will be able to afford better technologies, clean water, superior energy sources, better healthcare, and insurance.

You won?t hear this from these aid agencies, though. Why are they silent on the very stark realities, which are the fundamental causes of poverty in Africa?

Frankline Cudjoe is the founder of Amani Center in Ghana.

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