Making trade work for development: rights are the wrong approach

Author:
Mareike Meyn
Publisher:
Overseas Development Institute

The suggestion that trade should be considered a human right is interesting, but to be useful it needs to be developed much further. In particular it is necessary to address two key questions: What favourable features of trade would considering it as a human right help to highlight? And is it possible to identify compliant and non-compliant behaviour?

One argument for considering trade as a human right is that trade is an instrument for economic growth, and job creation should occur under ‘just and favourable conditions’ – just as it is foreseen for work. But what are ‘just and favourable’ conditions? It may be related to wage levels, but the UN Declaration is silent here, possibly because there may be a trade-off with the volume of employment. The debate on this topic (for example around a minimum wage) is well known. The same applies to international trade – it is disputed among developing countries whether their compliance with basic international labour standards is desirable or whether it will diminish the competitive advantage (cheap labour) they have over developed countries. This may explain, for example, why the vast majority of developing countries reject the idea of fixing labour and environmental standards at the World Trade Organization (WTO). We should certainly support developing countries’ attempts to implement decent labour standards, but, when pushing first-world regulations in a third-world context, we must be aware of possible negative consequences.

Extending this argument, the discussion appears to be focussed on international trade – but this is only one part of ‘trade’; any human right should apply equally to domestic trade. Let us assume Country X is a developing country with a skewed income distribution with most of its workers receiving only a small share of added value. It exports a good to the developed Country Y that is mainly consumed by lower income groups. Why is justice enhanced by making the (poor) Country Y consumers pay more when this will simply accrue to the rich in the developing Country X – with no trickle-down effects for the poor?

If we argue the concept of ‘international trade as a human right’ means that trade shall be ‘fairer’ we run into all sorts of similar problems. Most economist would argue that trade is developmental because it enables countries to exploit their comparative advantages, to benefit from competitive inputs and to grow. Though this liberal approach towards trade has been disputed, it is even more disputed what can be understood under ‘fair’ trade.

Consider the example of subsidies. Obviously, subsidies distort prices and thus competitiveness and trade flows because uncompetitive producers get an incentive to produce and export their products. The famous examples of US cotton resulting in low world market prices for West African farmers and EU chicken exports into West Africa making domestic production unviable can be cited here. On the other hand, net food importing developing countries depend on cheap (subsidised) imports to feed their poor consumers. It may be poverty alleviating and pro-development to favour the West African chicken producers over consumers, but it may not; how would a ‘human right’ distinguish between the two possible situations?

Protection measures in developed countries are another area where it is difficult to establish a clear moral high ground. On one hand, poor countries in Latin America and Asia suffer from EU market protection for selected agricultural products, such as bananas, rice or sugar. On the other hand, most African, Caribbean and Pacific countries enjoy preferential access in the EU market for these goods. Simply put, the current trade regime produces winners and losers but its reform is likely to to produce (different) winners and losers.

Of course we can argue that trade should be ‘fair’ in a sense that it enables producers to earn a decent living (which comes back to the concept of ‘work as a human right’). However, we also need to acknowledge that any ‘fair trade scheme’ creates outsiders who cannot, qualify for the scheme (see, for example, Is there a gap in the market for a new 'Good for Development' label?). However, these producers might still create positive development impetuses, such as enabling workers to invest in education and health services.

What we need is a differentiated discussion about the winners and losers of the current trade regimes and what reforms that create as many winners as possible should look like. Unless further elaborated and nuanced, there appears to be a danger that the bald concept of ‘trade as a human right’ will obscure these trade-offs and serve to undermine rather than promote the task of helping the poor to benefit more than they do at present from trade.

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