Tariff

World Trade

In September, the world's trade ministers meet in Mexico. Most trade problems are left unsolved as the richer countries refuse to recognise the concerns of the poorer countries. The UK newspaper, The Independent, publishes a report on the unfair state of world trade.

According to this report, the poorer countries have 40% of the world's population but receive only 3% of the world's trade income. Richer countries make up 14% of the world's population but take 75% of the profits from world trade.

Import taxes and tariffs imposed on goods from the poorer countries are, on average, 4 to 5 times higher than the taxes imposed on the goods traded between the richer countries. They can be even higher; an example given is a shirt from Bangladesh being taxed 20 times more by the USA than a similar item from the UK. Clothes from India are taxed at 19% by the USA. Similar clothes from France, Japan and Germany are taxed between 0% and 1%.

The average tax on goods from Vietnam (a poor country) to the USA is 8% compared to 1% for goods from the Netherlands (a rich country).

In addition, the more value that is added to goods, the higher the tariffs. Raw cocoa beans can be exported into the European Union with no tax. If the raw beans are converted to cocoa butter, this is taxed at 10%. Cocoa powder is taxed at 15%. Chocolate is taxed at more than 20%. This means that the poorer countries are encouraged to sell their raw materials to the richer countries rather than process them and add value to them.Germany processes more cocoa than the Ivory Coast (the largest producer). The UK grinds more cocoa than Ghana (another large producer). Poorer countries produce 90% of the world's cocoa but less than 5% of the world's (more valuable) chocolate.

Trade tariffs cost poorer countries a lot of money and help keep them in poverty. Brazil loses $ 10,000 million in trade because of agricultural tariffs.Mozambique loses $ 100 million a year because of European trade tariffs - nearly as much as it receives in aid from Europe.

Poor countries end up paying 15 times more in trade taxes than the rich countries.

In addition, rich countries spend $ 1,000 million per day on subsidising agriculture. Six times what these countries give in aid to poor countries. The subsidies generate surpluses of items like sugar and cotton that are then dumped on poorer countries. By selling these products at less than the cost it takes to produce them, farmers in the poorer countries go out of business, adding to poverty and destitution. Rich countries spend more on farm subsidies than the combined Gross National Product of all the countries of Africa.

The effects are also felt in the richer countries. Families in Europe pay on average $ 1000 per year to the continent's farmers. Of this, half goes to just 5% of the largest and richest agricultural companies. In France, 25% of the smaller, poorer farms receive nothing while the larger, richer farms receive the bulk of the subsidy. In the UK, large sugar farms receive $ 90,000 each. Milk and cereals are similarly subsidised. These subsidies are part of the Common Agricultural Policy (CAP). The CAP has the effect of taking money from Europeans and giving it to large companies that use it to impoverish the poorer countries of the world. Smaller farms in the richer countries are impoverished because they too cannot compete against the favoured giants.

In the USA, $ 13,000 million per year is given to cotton farmers. As in Europe, the poorest cotton farmers receive the smallest amount of subsidy: 50% of the farms receive 5% of the subsidy money while the richest 7% receive half of the payments. $ 10,000 per year is paid to corn farmers. Acording to Oxfam, corn farmers in Mexico "are competing not against US farmers but against US taxpayers and the world's most powerful treasury. It is difficult to think of a starker illustration of unfair trade in practice".

UK journalist, Paul Valley, summarises the unfair nature of world trade: "Behind the complexity lies a stark moral issue. The West preaches free trade and, under the threat of cutting off aid and loans, we force Third World countries to open their markets to our goods. And yet at the same time we slap taxes and tariffs on what they sell to us."