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HONG KONG - When the recent World Trade Organization (WTO) ministerial meeting in Hong Kong was being planned, optimists touted it as a triumph for free trade. The fact that it was held in a territory considered a bastion of free trade is itself significant. The Hong Kong authorities were anxious to hold the talks, in spite of the failure of Cancun talks two years ago, in part because Hong Kong is keen to re-affirm its identity as a world city.
Since the handover back to China, Hong Kong has been lumbered with an identity crisis. Is it a world city or just another Chinese city? The WTO meeting was a chance for Hong Kong to demonstrate that not only can it succeed where Mexico failed, but is also a chance to demonstrate Hong Kong's free trade credentials in a bid to attract more trade to these shores.
Flashback to 1884 when R.M. Martin, the Br itish Colonial Secretary is supposed to have reported to his government after a visit to the then barren and largely uninhabited Kowloon peninsula. "There does not appear the slightest probability that, under any circumstances, Hong Kong will ever become a place of trade."
Mister Martin would probably be turning in his grave if he knew that today Hong Kong boasts one of the most successful economies in the world, a feat it has achieved largely through free trade. Its resilience goes back to the post-war recovery and its miraculous emergence from the embargo imposed on China during the Korean war.
Hong Kong then proceeded to build its economy around manufacturing and following China's open door policy in 1978, it shifted its manufacturing base to the Pearl River Delta to take advantage of low manufacturing and wage costs there. Hong Kong is now a major logistics, service-sector and financial services economy.
The purveyors of the free-trade paradigm see Hong Kong as the true exemplar and a model for developing countries that for a week, during the WTO talks, clamored for their fair share of trading opportunities and the removal of subsidies and tariffs that continue to subject their people to poverty.
There are just a few minor problems with this model, which makes it just a wee bit unachievable by the world's poorest nations in the near future and which ultimately cast doubt on the ability of poor countries to realize meaningful change for their citizens through bodies like the WTO.
Currently, the countries whose economies rely almost entirely on agriculture, including Guinea-Bissau, Congo, Burundi and Sierra Leone are also among the world's poorest. Almost 70% of Guinea-Bissau's GDP (Gross Domestic Product) comes from agricultural production. Considering the vagaries of the weather, the declining prices of agricultural products on world markets where prices are determined in auctions or through rules such as those "negotiated" within the WTO framework, these countries will need nothing short of a miracle to improve their fortunes through trade.
Agriculture is both a blessing and a curse for developing nations. The situation is exacerbated by the fact that agriculture remains the major stumbling block toward a comprehensive and successful agreement, with the richest nations unwilling to make anything more than token concessions.
If you look the economies of the richest countries in the world, you'll find that they are also the least dependent on agriculture. The freest economy, Hong Kong, has never been known for its agricultural credentials, even though its earliest beginnings were in fact fishing and rice-growing communities. Today, agriculture contributes a negligible 0.1% of GDP.
It is understandable that poor countries resist efforts to have their markets flooded by imports from the developed world. And that is one major problem they face: providing access to their markets while finding the door perpetually closed to their own products, yet they are more dependent on agricultural produce than the developed world. For them free trade in the Hong Kong fashion is not a realistic option.
It takes a combination of factors to achieve Hong Kong's level of economic sustainability, even without the obstacle of an outmoded agricultural sector. It requires sound macro-economic policy and visionary political leadership. This is where most African countries appear to have missed the boat. Even if one were magnanimous enough to forgive the political ineptitude of the past, it is inexcusable that economics continues to be sacrificed on the alter of political survival.
Kenya is a sad example. Take President Kibaki's decision to burden tax-payers with an unimaginable 34 ministries while in years gone by, when his credibility rested on his reputation as a "noted economist" he believed the country needed no more than 15 ministries. By allowing himself to be manipulated by self-seeking politicians who demanded jobs for their cronies before accepting positions in the newly-constituted cabinet the president lumbered Kenyans with an economic burden that cannot be justified by the struggling economy.
In Hong Kong democracy remains a mere hope for the progressive-minded and the intellectual middle class and a source of great trepidation for the authorities and the business elites. A vast majority of the ordinary people are more concerned about livelihood issues than how leaders get into power. It is about priorities and opportunities.
The prevailing view is that if you have sufficient faith in the key institutions, like the police, judiciary, anti-corruption watchdogs, and in the checks and balances that prevent wanton abuse of power, socio-political stability is assured. This stability creates an environment in which you can go about your day-to-day life enjoying your civil liberties and pursuing a livelihood. In short, if you have a system that works, it might not matter much who occupies what seat.
Thus, while the Far East is not exactly a bastion of democracy, except in one or two isolated cases, the successful economies have got to where they are through sound economic decision-making. It's not a perfect system; in Hong Kong, key casualties of this economics-is-everything logic include the environment and public health.
The developing nations complain, and rightly so, about the unfairness of trade in this era of globalization. They lament the poor prices for their agricultural produce and minerals, the high prices they are forced to pay for necessities like drugs, the dumping of goods, their inability to penetrate foreign markets and so forth. All these are genuine concerns and it remains to be seen what difference the upcoming Doha round of talks will make.
The Hong Kong meeting resulted in some achievements for poor countries, but Africa in particular shouldn't rush to get the champagne out. A perusal of the fine print reveals that whatever concessions the richest countries made will not transform the continent over-night.
While fighting for a level playing field and the removal of shackles imposed by globalization remain critical, the benefits of international trade must also be seen within the context of domestic governance, politics and infrastructure. It is all very well to demand lower tariffs and access to foreign markets. But if the person preventing a farmer in Africa from getting a better price for his cotton, cocoa and tea is the local middleman who insists on paying peanuts because he has his own profit margin to worry about, the farmer has little to look forward to.
The middleman is typically a bullying individual opportunist, inefficient cooperative or highly politicized marketing board. It makes no difference, or as they say in Kenya, "the difference is the same." The small producer in the developing country is up against all manner of obstacles, some economic, some political, others infrastructural. Poor roads and communications systems will also eat into the profit through the inefficiency built into the stone-age storage and transportation systems.
And it is not up to the small farmers to build and maintain the nation's telecommunications, road and rail network. It is the duty of the government. But if the government fails to provide this basic infrastructure, including security and reliable electricity supplies, it fails the citizenry and condemns them to poverty.
Hong Kong's excellent infrastructure, including a world-class road and rail system and one of the world's most efficient container ports, is recognized as one of the key factors in the territory's economic success. The leaders, going back to the British colonial administration, understood that in order to tap into the territory's hard-working and innovative workforce, you needed to provide them with a working infrastructure. This includes a sound educational system and an affordable and efficient banking system.
These things don't have to remain a dream for people in developing nations. They are basic necessities that tax-paying citizens have a right to expect. It doesn't matter how vociferous the demonstrations at WTO meetings get. Trade is useful, and if done well, is capable of lifting sectors of the population from poverty.
But at the end of the day, the best thing that can happen for the poor in the developing nations, in particular Africa, is for their own leaders to start addressing the needs of their own people. This means they must seriously tackle endemic corruption even if it means confronting their own relatives, business associates and golfing buddies, and upholding the rule of law. They must stop wasting resources on grandiose projects and bloated bureaucracies.
The duty of the ordinary people in a viable governance system is to hold their leaders to account. Otherwise, whatever benefits accrue from international trade will be filtered through the structures of corruption that for three decades turned foreign aid into a feeding frenzy by the well-connected.
© 2006, GENERATOR 21.
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