25 May 2003

Kenya: The Folly of Free Trade

Nairobi — A cow from Europe can afford to live in a five star hotel in Kenya for a whole year. Funny but true. Whereas in Africa people live on less than a $1 a day, Europe subsidises each cow with $2 a day. And that is the folly of free trade.

It is estimated that rich countries spend $1 billion a day subsidising their agriculture. The present trend has led to expensive food in developed countries and poorer farmers in developing countries.

The World Trade Organisation (WTO) Agreements aim to create a trading system which is without discrimination, freer, predictable, more competitive and more beneficial to developing countries.

Unitad head of competition and consumer policies Philippe Brusick (right) confers with Trade and Industry Minister Dr Mukhisa Kituyi before the closure of a WTO conference in Nairobi recently.

More than 97 percent of world trade is now regulated under WTO Agreements but the lack of access to markets in developed countries has continued to impact negatively on Third World economies.

High and complex tariffs remain a major barrier in accessing developed markets. For instance most developed countries have set high tariff peaks - reaching as high as 350 percent - most prevalent in major food crops, fruits, vegetables and processed products.

"Definitely, when tariffs are high, it is passed over to the consumer," observes Senior Assistant Director in the Department of External Trade Elijah Manyara.

A number of issues, he says, affect free entry into foreign countries. Besides the tariffs, there are the quantitative restrictions. This is where a country gets quotas, meaning it can only export a certain portion of it's products resulting in a loss if there was an excess in production.

"A foreign country can invoke the safeguard measures to a quantitative restriction or a higher tariff to protect its infant economy from injuries," notes Manyara.

Kenya is of the view that developing countries should have access to new, simple and transparent safeguard mechanisms to protect their domestic markets against import surges for products that are designated as strategic for development and food security as specified in members' schedule of commitments.

"A farmer in Kenya meets all the costs because the government does not have money to give subsidies. WTO does not approve these subsidies because of the distortion effects in an economy," says Manyara.

A subsidy he says, is only allowed in special cases. A five percent subsidy is allowed for developed countries and 10 percent to developing countries. Beyond here, subsidies become actionable.

In special cases, the subsidies can be used for research purposes, regional development and environmental purposes.

"Giving subsidies is opening a free market to all thus inviting war. International trade is thus reduced to a rich nations' affair," he says.

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