From the TUC

DFID trade advocacy fund ignores “big society”

12 Sep 2011, by Guest in International

DFID has just launched its new trade advocacy fund to help poor countries better participate in trade negotiations. The fund is welcome, but it’s missing a vital component: it doesn’t support those often marginalised by trade liberalisation – from workers to smallholder farmers – to have their voices heard during trade talks.

To be sure, the fund has good features. It will provide sorely needed technical assistance, training and logistical support for developing country trade negotiators. It is quick and flexible, and importantly, is independent from the UK government, avoiding the nasty use of trade assistance to soften up weaker negotiating partners to accept a bad deal.

But the fund stops short at supporting civil society organisations, because – as it’s otherwise very thoughtful feasibility study implies – workers or farmers don’t need a voice because trade bureaucrats with the right training will know what’s best for them (see page 13).

This is flawed. Firstly many governments just don’t represent their citizens – Fiji, Zimbabwe, Sudan and Swaziland come to mind over the last few days.

And take Egypt as an example: President Mubarak’s economic liberalisation over the last decade triggered economic growth, but it was highly concentrated and came at the expense of hundreds of thousands of workers who were dumped on the scrap heap. In response nearly two million workers engaged in some 1,900 strikes or other forms of protest from 2004 to 2008. These were the seeds of Egypt’s revolution.

But secondly, even where governments are democratic, the interests of workers often gets drowned out by stronger business lobbies, stronger negotiating partners, or stronger government priorities.

This is a massive risk for Egypt on its fragile path to democracy that is worth spelling out. Our Foreign Office, among other key players in the international community, have identified “greater market openness” as a priority for Egypt. Yet the EU Sustainability Impact Assessment for a possible trade deal with Egypt came up with the sobering conclusions that unless “appropriate preventative and mitigating measures were put in place”, trade liberalisation could result in:

  • a significant short term rise in unemployment, which could continue into the long term if not successfully mitigated; a fall in wage rates associated with increased unemployment;
  • a significant loss in government revenues in some countries, with potential for consequent social impacts through reduced expenditure on health, education and social support programmes;
  • greater vulnerability of poor households to fluctuations in world market prices for basic foods;
  • adverse effects on the status, living standards and health of rural women, associated with accelerated conversion from traditional to commercial agriculture. (from page viii)

That is trade-policy-consultant-speak for an absolute disaster. The actual modelling for Egypt shows, “… a decline in employment of approximately 8% of the total workforce” (page 24) under the liberalisation scenario considered. With a labour market of over 26 million people, that means dumping about two million of them out of work.

Instead, trade liberalisation needs a range of supportive measures to ensure this doesn’t happen. As we’ve just outlined in our submission to the EU on trade policy, this includes proactive industrial policies creating green and decent jobs, training and education, quality public services, social protection and respect for fundamental rights at work. It also needs liberalisation to proceed with the policy space, and at the pace it takes the workforce to fairly adjust.

It’s a point accepted by mainstream experts. As the WTO, OECD, ILO and World Bank concluded recently in a report to the G20:

The benefits of trade generally outweigh the costs associated with the reallocation of labour and capital to more efficient uses. However, if support for open markets is to be sustained, those costs need to be recognised and policies put in place to assist workers and communities to adjust to a more competitive environment.

The problem is, without a stronger voice for workers, that second sentence nearly always gets swept under carpet the during trade negotiations. This is true for workers in the developed world, let along in Egypt, where a nascent independent union movement is still very fragile. So if DFID wants to help the vulnerable, it’s time to help them speak up louder.