s discussed on page 6, Haiti could be described as a true `liberalisation poster child', having
embraced all the main trade policy recommendations of the international financial institutions.
These are the same trade policy recommendations that continue to be followed by many
developing countries.
For example, four Central American countries and the Dominican
Republic have recently signed the new CAFTA-DR free trade agreement with the US.
Among the likely winners from this agreement are US exporters of corn, poultry, rice, dry
beans, dairy and vegetable oils many of the same sectors in which Haitian small farmers
have lost out. Similar losses can be expected in these countries, where domestic farmers will
be similarly uncompetitive.
Governments in the region should be extremely concerned about the potential negative
impacts of trade liberalisation and could draw the following important lessons from Haiti's
experience:
1. Gains from trade, in terms of increasing exports, should not be considered to be an
automatic effect of trade liberalisation.
Without complementary export promotion policies,
trade reform is unlikely to make exporters (and potential exporters) more efficient and
ready to compete on international markets.
2. While expecting automatic export responses to liberalisation is overly optimistic, the export
sector can also be negatively affected if import competition drives down the overall
productivity and viability of the agricultural sector.
While Haiti's experience might be
extreme, it does highlight a lesser-known danger.
3. Gains from trade, in terms of lower prices for urban consumers, are automatically included
in any economic modelling exercise.
However, they should not be considered an
automatic gain from trade liberalisation in developing countries.
Weak or non-existent
competition law, compounded by the presence of elite, oligarchic business interests
means that consumers can fail to benefit from lower import prices for long.
Urban
consumers might also suffer if their incomes fall due to increasing rural-urban migration
and may become more vulnerable to changes in international trade patterns if they depend
heavily on imported food.
4. It is critical that developing countries recognise the sectoral losses that are likely to occur
in agriculture, and assess their impact on poor farmers.
Import surges can easily be
predicted if production and transport costs are compared with those of potential exporting
countries (especially where there is such proximity to the US).
There is no reason for such
losses to be borne, when exemptions could be negotiated for particularly sensitive
products, with food security and the protection of rural livelihoods in mind.
Much more
attention should be given to defensive interests in trade liberalisation negotiations and a
`do-no-harm' principle should be adopted, given the serious risks posed to poor farmers.
In
cases where imported products benefit from subsidies in developed countries, there is an
even stronger argument for developing countries to be able to take defensive measures
against import competition.
5. Decreasing rural incomes will lead to increased poverty and food insecurity, often amongst
the poorest and most vulnerable people.
Allowing unfettered import competition in
sensitive sectors, in order to achieve some marginal and unpredictable gain for a more
privileged urban population, is a highly questionable strategy for any developing country
government.
6. A fall in rural incomes is likely to lead to higher levels of debt among the rural population,
an increase in rural-urban migration, a bigger shantytown population and more stress on
background image
35
ill-prepared urban resources.
103
This is also likely to mean a reduction in the real incomes
of the urban poor, and in turn sets the stage for increased crime, and even political
instability, as has been very vividly demonstrated by Haiti's recent history.
7. The majority of poor, small farmers will not be able to manage an effective transition to a
new activity on their own. They are risk-averse and lack the necessary assets, technology
and knowledge to invest in producing new crops and exploring new markets.
It is
extremely difficult to manage such a huge transition and it carries great risks for the poor,
unless sensitive sectors are identified and protection strategies adopted.
8. Agricultural trade liberalisation can result in de-industrialisation where semi-industrial
agricultural supply chains function.
This can lead to a further loss of investment for small,
medium and large businesses which have built up infrastructure, technical knowledge and
productivity in their chosen sector.
Not only can this affect businesses, but it can also
result in donors losing investments, where they have been involved in supporting the
development of semi-industrial supply chains.
The IMF's analysis of trade liberalisation in Haiti
104
found that the country did not benefit from
trade liberalisation as expected, attributing this to the slow pace of other critical reforms such
as privatisation.
But there is no theory to say that, to be successful, trade liberalisation needs
to go hand-in-hand with privatisation.
Trade liberalisation alone is supposed to be sufficient to
bring net gains.
The most the IMF can maintain, therefore, is that trade liberalisation in Haiti
would have achieved even better results with privatisation.
Seeing the balance of results in
Haiti, this is clearly an untenable position.
The World Bank's analysis of these lessons from Haiti would be more likely to point out the
`supply side constraints' in the country.
In line with some of its recent policy research, it would
no doubt argue that the main reasons that the country has not flourished with an open
economy are: poor governance, political instability, corruption, low levels of health and
education and low agricultural productivity.
105
Such an analysis, of course, amounts to an
admission that liberalisation can only benefit a developing country if certain conditions are in
place first.
This is not, however, the position the World Bank takes when recommending trade
policy reforms: it routinely advises liberalisation to any developing country, regardless of
whether they fulfil governance, stability and productive investment targets.
It is cold comfort for Haitians to be cited such reasons for failure.
Supply-side constraints were
already extremely visible in Haiti before liberalisation, so they are an unconvincing excuse
when used to explain the damage caused to farmers' livelihoods.
Posted by Lionne on 4/24/08 7:39 PM
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