Free Trade Food First

Comparative Advantage Major idea of Free Trade: –Comparative Advantage Each country exports what it produces best Money used to import what it cannot grow This could alleviate hunger and poverty

Problems with Comparative Advantage Exports have boomed in Third World countries Hunger has gotten worse Those who profit from exports are not the poor Wealthy do not use profits to benefit the poor Export crops displace food crops –Brazil –Bolivia –Chile –Thailand Soybeans in Brazil

Brazil 1970s: Soybeans become #1 export Most goes to feed livestock in Europe, Japan Rice (staple food) production fell, hunger grew By 1990s: Brazil ranks third in world in Ag exports ¼ of Brazil’s population lives below poverty line Hunger program in Brazil

Brazil 2003 Food Exports Soy products –$8.1 Billion Sugar –2.1 Billion Chicken –$1.7 Billion Coffee –$1.5 Billion Beef products –$1.5 Billion Orange Juice –1.2 Billion

Brazil Ag Frontier Cerrados: –207 million hectares –high plains Only 20 million hectares cultivated (2003) –100 million hectares still available for crops Equivalent to all the U.S. land used to grow corn, soy, wheat, and feed grains.

Chile 1990s had become world’s #1 exporter of table grapes –90% of world trade in grapes Sales mostly to U.S. Poverty widened dramatically –1970s poor = 20% population –1990s poor = 41% population

Free Trade Can be exploited by big corporations –to move farming, factories to where labor cheap Large corporations get huge subsidies –from governments eager to attract investment If unions raise production costs – strike for higher wages –company moves on

Fair Trade Idea: support fair export prices for small producers in developing countries through co-ops: –Coffee –Tea –Bananas –Cocoa –Mangos –Pineapples –Crafts 5 million growers in 40 countries $180 million sales in U.S. (2002)

Globalization Some companies seek: –Lowest wages –Most lenient regulations –Cheapest resources “Race to the Bottom” –People compete to work for less –Accept part time employment –Forgo health insurance –Forgo occupational safety regulations

Slash and Burn Capitalism Large export farming operations set up in a place for a few years: Melons in Mexico: 7 years before unprofitable –Overused chemicals –Increased pest resistance –Increased wages Pullout caused economy to slump Cheap for another multinational to come in Cycle leaves economy and ecology in decline

NAFTA Resulted in loss of jobs in both US and Mexico Jobs in Mexico lost by flooding country with cheap mass produced goods 28,000 local companies out of business Unemployment in Mexico doubled Number at or below poverty increased from 32% to 51%

Bubble Up Economics After WWII, Japan, Taiwan, Korea huge economic growth No Free Trade Prohibited food imports, direct foreign investment Land Redistribution Government subsidies and tariff protection of domestic manufacturing Incomes and purchasing power of poor peasants and workers raised: Workers and peasants became strong domestic market After market strong, opened borders Tokyo

World Trade Organization Is it a dictatorial tool of the rich and powerful? Does it destroy jobs? Does it ignore concerns? –health –environment –development WTO says emphatically no!

WTO Says Misunderstanding: The WTO destroys jobs, widens the gap between rich and poor. Answer: Not true, inaccurate and simplistic. –Trade can be a powerful force for creating jobs and reducing poverty. –Sometimes adjustments are necessary to deal with job losses –The alternative of protectionism is not the solution. 1.5 billion people are still in poverty, but – trade liberalization since World War II has contributed to lifting an estimated 3 billion people out of poverty.