Saturday, November 08, 2008

Liberalizing trade

A good interview in IPS today about trade liberalization to help cut poverty. The interview is with Peter Draper, head of the Development Through Trade Programme of the South African Institute of International Affairs. Draper tells Kristin Palitza of the IPS that combining domestic and regional trade polices can be a big help to fighting poverty.

IPS: What are South Africa’s core regional trade policies aimed at creating growth?

Peter Draper: South Africa subscribes to the Southern African Development Community (SADC) free trade agreement, which has been in place since 2000. Its core aim is an asymmetrical phasing down of tariffs to liberalise trade.

Another growth-creating strategy is the building of regional infrastructure, through spatial development, to build productive capacity with the region. This means that money is invested to improve transport corridors, building roads and railways and putting in electricity and telecommunications infrastructure, because there is a realisation that the absence of transport links between cities and countries is a key blockage [to economic growth] within the region.

IPS: Does the South African government link trade liberalisation to sustainable development and poverty alleviation?

PD: Those are undoubtedly underlying objectives. Trade liberalisation can be linked to poverty alleviation from two perspectives: a) the prices consumers have to pay for goods and b) potential benefits of high tariffs for producers protection.

In South African trade policies, I don’t see the consumer perspective coming through. Policies are purely concerned with producers. South Africa generally follows an industrial policy approach without a sustainable development perspective. That is a problem, because the average South African loses out.

IPS: What has been the impact of the recent food crisis on agricultural production in South Africa?

PD: The impact on farmers will be positive in the medium-term, because they will produce more food and make more money due to higher food prices. This is key to regional development.

However, an increase in food prices has a negative impact in the short-term for consumers, particularly the urban poor. In addition, constant, serious fluctuation in food prices will create uncertainties that could destabilise the markets.

IPS: What kind of trade policies could incentivise food production, entrepreneurship and poverty eradication?

PD: That’s a difficult question. It largely depends on developed countries, especially European agricultural policies and subsidies, and how this distorts global food prices. This makes it difficult for African farmers and this needs to be addressed.

In terms of South African domestic policies, to give just one example, the land tenure issue needs to be resolved. If commercial agriculture is the way to go, land tenure needs to be addressed, because farmers will need larger plots and more security of tenure to get finance to boost food production.

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