June 04, 2005

Why world poverty is a trade issue ?

Follow-up to Murdering the humanity from Ritesh's blog

Benin, once known as the 'White Gold' of Africa becuase of its cotton farms is one of the poorest nations of the world. It ranks 161st out of the 177 poorest countries. 60% of the nation's export depends on cotton. But the same cotton is leaving farmers in debt because of the falling prices. They cann't grow anything else on the barren land. In 2002 alone, the GDP of Benin fell by 1.4 per cent and export earnings by 9 per cent as a direct result of the falling price of cotton.

The Big question is that why this is happening.

Have a look at some of the facts. The US is the world's largest exporter of cotton. American cotton farmers receive $3.9bn a year in Government subsidies -which is more than the entire GDP of Benin and three times the annual amount the US gives in aid to Africa.The American government pays its farmers to produce cotton, spending $14.8bn between 1998 and 2002 on subsidies, compared with the $20bn dollar value of the crop. Cotton is currently 48 cents per pound – 30 cents less than it costs American farmers to grow their crop.

The World Trade Organisation ruled last year that America's cotton subsidy system was illegal as it resulted into massive market distortion and kept the price of cotton artificially low. Around 60,000 farmers have stopped growing cotton in Benin because they cann't compete with the prices.
Oxfam, the agency behind this research believes that, while measures to increase aid and for debt relief are vital, African nations such as Benin cannot escape poverty until the trade issue is finally addressed. If the issue is legalised it would mean a wholesale review of subsidies paid to farmers in the US and in Europe to give Africa the chance to begin to compete. This would be decided only after the next G8 summit.

And cotton is just one of the graphic examples as how such decisions by government destroy the poorest farmers of poorest countries.


- 2 comments by 1 or more people Not publicly viewable

  1. It's a sad state of affairs. As long as such special interest groups continue to fund elections, threatening to withdraw support in the event of their privileged position being challenged, little will change.

    04 Jun 2005, 20:39

  2. However much I think government subsidies such as this should be stopped, I find it a bit rich for Oxfam to research something like this yet promote fair-trade products. They may have good intentions but they are still in effect a subsidising production themselves and to ask others to stop doing something that you are also doing just isn't going to happen.

    04 Jun 2005, 20:43


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