International trade has the potential to help countries lift millions of citizens out of poverty. But the international trading system benefits the wealthy countries at the expense of poorer countries, making it very hard for those poorer nations to use exports to grow their economies.

 

If developing countries could access just 1 per cent more of the value of world trade, more than 100 million people could lift themselves out of poverty.

 

Free trade is promoted by the World Trade Organisation (WTO) and many rich countries as an ideal trading system. It aims for easier trade between countries by reducing trade protectionism. But free trade doesn’t always benefit developing countries.

 

The countries that are now wealthy did not get where they are through free trade – they were able to protect local industries to allow them to develop. Ironically, today’s developing countries are pushed into policies of free trade.

 

Decision making through the WTO is complex and poorer countries can’t afford to send as many representatives to WTO discussions as rich countries. Rich countries tend to have more power in negotiations so the rules decided often reflect their interests.

 

The benefit of the WTO comes from countries not having to negotiate their own agreements with every other country they want to trade with. The WTO can ensure negotiated rules are kept and through the WTO poor countries can band together to increase their bargaining power.

 

A particular free trade concern is dumping: if countries have unfettered trading access to a poor country, they can flood the markets with subsidised agricultural products at a price lower than they were produced at. This pushes down prices, decreasing the incomes of poor farmers, moving more of them into poverty, not out of it. Reductions to agricultural subsidies are discussed through the WTO, in an attempt to make the playing field more level.

 

On the other hand, access to rich country markets can allow poor countries to sell more of their products. But rich countries can to prevent the arrival of competitive products using tariffs (taxes on imported goods), quotas (limitations on the number of an item that can be imported), and high levels of sanitation and quality documentation requirements that they know developing countries cannot meet or prove. They often focus these conditions on higher-value manufactured products, effectively forcing developing countries to produce and rely on lower-value basic commodities like coffee, cocoa and sugar.

 

While trade has massive potential to assist developing countries to improve the conditions of their people, in many cases they are not equipped to be involved. They need support to build up their transportation, communication and legal systems and up-skill their workforce so trade can operate to their benefit. Trade is not a stand-alone solution, but works best when combined with development assistance.

 

• There is more information on the World Vision New Zealand Topic Sheet: Trade – a way out of Poverty?
• World Vision research into international trade can be found on the World Vision International policy and advocacy website

 

New Zealand is a member of the WTO and takes part in international markets. Although we are just a small trading player, we tend to have a degree of power and respect – to the extent that a New Zealander chairs the Agriculture Committee, and former Prime Minister Mike Moore headed the WTO between 1999 and 2002.

 

It is often said our trading interests are similar to those of developing countries, especially in relation to agriculture.

 

If development was one of the aims of New Zealand’s trade agenda, we could advocate on behalf of developing countries and ensure they are not bullied by more powerful nations. We could ensure that when we go into negotiations with individual countries, we take into account their future development as well as our interests.

 

New Zealand offers preferential access to products from Least Developed Countries, and has been offering duty-free and quota-free access since 2001. We could extend this to give all developing country products preferential access to our market.

 

The New Zealand Agency for International Development  is the Government body responsible for overseas poverty elimination. Harnessing international trade for development (part a part b) is NZAID's policy statement on trade and development.

 

The Trade Negotiations Division of the Ministry of Foreign Affairs and Trade must balance New Zealand's own interests with the needs of developing countries.