Thought for the Day

[bcholmes]

What happens to poor countries when they embrace free trade? In Haiti in 1986 we imported just 7000 tons of rice, the main staple food of the country. The vast majority was grown in Haii. In the late 1980s Haiti complied with free trade policies advocated by the international lending agencies and lifted tariffs on rice imports. Cheaper rice immediately flooded in from the United States where the rice industry is subsidized. In fact the liberalization of Haiti's market coincided with the 1985 Farm Bill in the United States which increased subsidies to the rice industry so that 40% of US rice growers' profits came from the government by 1987. Haiti's peasant farmers could not possibly compete. By 1996 Haiti was importing 196,000 tons of foreign rice at the cost of $100 million a year. Haitian rice production became negligible. Once the dependence on foreign rice was complete, import prices began to rise, leaving Haiti's population, particularly the urban poor, completely at the whim of rising world grain prices. And the prices continue to rise.

What lessons do we learn? For poor countries free trade is not so free or so fair. Haiti, under intense pressure from international lending institutions, stopped protecting its domestic agriculture while subsidies to the U.S. rice industry increased. A hungry nation became hungrier.

In a globalized economy, foreign investment is trumpeted as the key to alleviating poverty. But in fact, the top beneficiary of foreign investment from 1985-95 was the United States, with $477 billion. Britain ran a distant second at $199 billion. Mexico, the only third world country in the top ten, received only $44 billion in investment. When the majority of this money fled the country overnight during Mexico's meltdown in 1995, we learned that foreign investment is not really investment. It is more like speculation.

— Jean Bertand Aristide, Eyes of the Heart

Comments

[aquaeri.livejournal.com]

I think it's notable that there's nothing free about "free trade". I have never understood what the justification is for subsidies for products that can then be sold as "free trade".

[hmms-sio.livejournal.com]

This for me is an example of barking up the wrong tree. It's not Haiti's fault or free trade's fault that the US subsidizes it's farmers.

[bcholmes.livejournal.com]

I'm not quite sure I understand what you're saying.

From my point of view, what's being said is that the theoretical arguments about trade don't actually seem to manifest in reality. And, what's more, the strongest proponents of free trade exercise a great deal of hypocrisy w.r.t. "leveling the playing field".

[sarah-dragon.livejournal.com]

I think thats spot on. The larger nations are not interested in tariff-less trade that facilitates Supply and Demand, they want no barriers to turning small countries from potential competitors into resources (immigrants, intellectuals, and stuff like oil) and then subsequently into markets. It has always been my contention that we practice more mercantilism than capitalism, something America points too as one of the reasons for our initial break away from Britain.

Free Trade is supposed to facilitate healthy competition for all involved, but instead of the US facilitating its farmers by offering them better education to be better farmers or to do something else, they instead subsidize them, creating a class of indebted people constantly on the brink of going under and also destroying the related markets in places like Haiti.

Similar things are done to Africa with the help of the World Bank etc...

[hmms-sio.livejournal.com]

sarah_dragon says it much better than I do. I got the feeling you were opposed free trade, but I guess like me, you are opposed to the moquery that is made of it.