According market access its appropriate value

Sta. Ana is coordinator of the NGO Action for Economic Reforms.  This article was published in the Opinion Section, Yellow Pad Column of BusinessWorld, December 19, 2005 edition, page S1/5.

The article “WTO and Market Access:  False Hope?” (BusinessWorld, 5 December 2005) elicited a rejoinder from the advocacy officer of Oxfam United Kingdom’s Manila office.

The Oxfam officer says that the article I wrote “is a caricature” of Oxfam’s position. Unfortunately, the Oxfam officer’s response misses the point.  She defends Oxfam, when the said article is not really about Oxfam’s position.

The main points of that article are: Is market access a cutting-edge position for progressive advocacy? Is market access a determinant of long-term growth and hence poverty reduction?

My answer is no. I back up my argument with scholarly evidence, drawing from Dani Rodrik’s comparison between Mexico’s disappointing economic performance and fall in standard living on the one hand, and Vietnam’s sustained growth coupled with drastic poverty reduction on the other hand. (Mexico enjoys market access to the US, while Vietnam is not a member of WTO, and during a critical period, was a victim of a US trade embargo.)

Whether Oxfam supports market access is not an issue at all.  What we must guard against is overselling or overvaluing the benefits of market access.  Anyone who advocates market access but does not provide the caveat—that is, does not explicitly state the limits of market access—is overselling the idea and even contributing to the mis-education of the public.

But Oxfam, too, is vulnerable to the criticism that it overemphasizes the role of market access. In its rejoinder to Walden Bello (3 May 2002), Oxfam says that “we make no apologies for attaching importance to improved market access. Northern protectionism is at its most excessive and arbitrary in precisely those areas—such as textiles and agriculture—where developing countries in general and the poor in particular stand to gain most.”

The assertion “that the poor in particular stand to gain most” is open to challenge.  In the first place, market access in itself will not translate into gains for poor countries.  Market access does not address either the inter-country and intra-country distributional issues.

The Oxfam advocacy officer likewise attaches great importance to market access, manifested in this statement that I quote verbatim “We do advocate for market access for developing countries especially for those who economies are overwhelmingly dependent on it like some African countries who depend on cotton exports to the US.”   (Pardon the grammatical lapses and the awkward syntax.)

I hope the Oxfam advocacy officer is not suggesting that the poor African countries remain dependent on market access for their cotton exports and continue depending on cotton for export revenues.

For the sake of argument, let’s assume that access of cotton products from developing countries to the US market is granted. Will this translate into really substantial gains for a cotton exporter like Mali, one of the world’s most impoverished countries characterized by glaring social inequality?

A cotton-exporting country like Malawi will gain from market access and removal of the US cotton subsidies. The price of cotton and value of cotton exports will rise. But there is no definitive answer as to how significant the gains will be for sub-Saharan Africa.  The Food and Agricultural Organization (FAO) thus makes a cautious, qualified statement: “Agricultural trade and further liberalization can unlock the potential of the agriculture sector to promote pro-poor growth, but these benefits are not guaranteed.”

Mali’s cotton exports are competing with countries that are more efficient in cotton production such as Australia and Brazil.  Mali is likewise competing with countries that have strong potential to become top export producers of cotton such as China.  Mali also competes with other poor countries such as its neighbor Cote d’Ivoire, Chad, and Mozambique for market share.  To gain competitive advantage, poorer countries do resort to beggar-thy-neighbor practices—a race to the bottom.

From a development perspective, is it a wise strategy to further intensify cotton exports in the wake of greater market access, given that cotton and gold already account for 80 percent of Mali’s export earnings? Wouldn’t diversification be a better strategy? It is Mali’s misfortune that recent economic downturns resulted from the plunge of the commodity prices of cotton and gold. Primary commodities like cotton are most vulnerable to the sharp fluctuation in world prices.

Further, the incentive to produce more cotton in light of market access will lead to a change in the preferences of domestic agricultural producers. This entails costs and tradeoffs.  For example, labor, capital and land once devoted to, say, rice and corn will now be used for cotton production.  Will this tradeoff be acceptable, given that Mali is prone to severe food shortages?

And the last point on market access: it is not a one-way street. A poor country like Mali also has to open up its economy to imports. Thus, Mali might garner export gains arising from market access, but its domestic market will suffer losses.

In closing, I wish the Oxfam advocacy would guide its partners worldwide to the new frontier, carrying cutting-edge positions.

But this is what I hear or read from Oxfam: “World trade could be a powerful motor to reduce poverty, and support economic growth.” Or this: “Trade is one of the most powerful forces linking our lives, and a source of unprecedented wealth.”

These propositions are nothing new.  They can be found in economics textbooks; you can hear them from Gerardo Sicat and the rest of the UP 11.  Let the International Monetary Fund, World Bank, World Trade Organization and mainstream economists articulate such propositions.

Now, compare Oxfam’s key statements to what Rodrik—that young and brilliant economics professor from Harvard—says:

“Countries that have done well in the recent past have done so through their own efforts. Aid and market access have rarely played a critical role….

“It is far from clear that expanding market access and boosting aid are the most productive use of valuable political capital in the North. Development should focus not on trade and aid, but on improving the policy environment in poor countries.”

Amen to that.

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