Global Trade and the Common Good

In his encyclical on the Eucharist, Ecclesia de Eucharistia, published in 2003, Pope John Paul II repeated St. Paul’s admonition to the early church: “[I]t is ‘unworthy’ of a Christian community to partake of the Lord’s Supper amid division and indifference towards the poor.” In the year of the pope’s passing, there are positive signs that concern for the poor is alive and well. At the start of 2005, Americans donated $1.3 billion to help with relief efforts in areas hit by the tsunami in Asia—a record for an overseas disaster. The public gave $1.7 billion after hurricane Katrina hit the U.S. Gulf Coast on Aug. 29. At the same time, the United States continued to lead the global fight against H.I.V./AIDS. And the commitment of the Group of Eight leading economies to cancel debt of heavily indebted countries is evidence that the poor are not abandoned.

Despite these positive signs, the poor are getting poorer, and the gap between rich and poor is getting wider. The combined wealth of the 500 richest individuals in the world is greater than that of the 416 million poorest. Ten percent of the globe earns over 50 percent of the world’s income, while 40 percent earns just five percent.

Inequity, not prosperity, is what ails us, and no amount of public or private sharing of wealth, however necessary, can realistically overcome that fact. What is required is a reform of the rules of the global economy itself, starting with the global trading system. As 2005 ends, there will be a chance to make the global economy work for all.

This December, the 148 nations of the World Trade Organization will gather in Hong Kong to advance the latest round of trade negotiations with the goal of making trade promote development. Success will depend on two things. First, the W.T.O. will have to right the wrongs of the past by fixing unfair trade rules. Second, rich countries will need to go the extra mile and make sure poor countries are afforded generous trade terms.

So far, increased trade has worked well for a few, and it is easy to see why. While preaching open markets and free trade, rich countries have maintained a formidable range of protectionist measures that have skewed the benefits of globalization in their favor. Inequality is not the work of a hidden hand. Inequality has its causes. But it also has its solutions, though they may require patience and perseverance in a world that has little time for either.

Economic and Social Compacts

In a wide-ranging talk to members of the U.S. Congress and Catholic bishops from across the hemisphere recently, Cardinal Francis George of Chicago recognized the significance of global trade in battling inequality and promoting a culture of life. Cardinal George, vice president of the U.S. Bishops’ Conference, recalled the legacy of Pope John Paul II and his struggle against totalitarianism. False promises brought down Communism, the cardinal said; and though of a different order, false promises create problems for the social contract in the United States.

Under Communism, the cardinal noted, people were promised social justice in exchange for personal liberty, an internal contradiction that led to the demise of Communism. The free market, on the other hand, promises that if we accept inequality long enough, in the end there will be more wealth for everyone. While there is evidence that this promise brings increased prosperity, there is also evidence that it does not work for all and that the cost to the poor is too great.

Cardinal George has pointed to a fundamental flaw in current efforts to liberalize the global economy. It follows, therefore, that no system of laws can accept growing inequality as a means to an end. Justice cannot be traded for wealth. While economic globalization has its own logic, it does not have its own ethic. Without a moral framework, the logic of greater economic integration may increase wealth while failing to respond to the needs of all, especially the most vulnerable. And that, sooner or later, would be its undoing.

Behind the complicated economics, divergent opinions on free trade rage. Some see free trade as the solution to all problems; others see it as the source of all problems. For this reason, the cardinal’s insight comes at an important moment for global trade. Congress is still smarting from a bruising battle over the U.S.-Central American Free Trade Agreement that passed by a smaller margin than the North American Free Trade Agreement 10 years earlier. Clearly Nafta’s benefits are not obvious to everyone. Meanwhile, the United States and 147 other members of the World Trade Organization are locked in tense negotiations in the run-up to Hong Kong. Trade was supposed to unite people and nations. It is in danger of doing just the opposite.

Doha and the Post-Sept. 11 World

Two months after Sept. 11, 2001, W.T.O. members met in Doha, Qatar, and agreed to make trade an engine of development, echoing the plan of the Allied powers after World War II to link fair trade rules with global stability. The so-called Doha Declaration recognized that trade was not working for poor countries, and it placed their interests at the heart of the current trade round. For now, agriculture is both a keystone and stumbling block in the Doha negotiations. Some 1.3 billion people—about half the workforce in developing countries—are employed in agriculture, usually as small farmers. They face multiple disadvantages in converting their labor into economic growth. They are confronted not only by subsidies and tariff levels in developed countries, but are also beset by poor physical and financial infrastructures as well as environmental degradation and political insecurity.

The World Bank estimates that poor countries are losing $200 billion annually in agricultural trade alone because of current trade rules. Most of the world’s poor still live in the countryside. In the short term, unlocking their potential by building capacity and affording them access to markets—local or international—may offer a bridge between poverty and opportunity. By itself, trade is not a panacea; but a global agreement on agriculture at the W.T.O. offers the royal road to converting losers into winners. This is a complex process that needs to be finished before U.S. trade negotiating authority expires in 2007. For the moment, the W.T.O. needs to tackle the following three areas: market access and tariffs, subsidies and special and differential treatment.

Market Access and Tariff Rates

People are familiar with a progressive tax policy: the more you earn, the more you pay. Trade policy is the reverse. The poorer you are, the higher the tariff (border tax) rate. High tariffs shut out poor-country exports. Rich countries erect tariff barriers against poor countries that are three to four times higher than those faced by other rich countries. Tariffs tend to be highest on the products that poor people and poor countries produce: agricultural commodities and garments, footwear and food products.

Thus Bangladesh, with a per capita income of $440, pays more in tariffs to the United States than does France, which has a per capita income of $24,000. France pays less, even though the United States actually imports 15 times more French goods than goods from Bangladesh. The American system is not the only offender, but generous tariff cuts on exports from poor countries could significantly increase their income.

In addition, the more “value” poor countries add to a product, the greater the barrier against them in developed country markets. So poor countries can sell peanuts, but heaven help them if they try to sell peanut butter. This amounts to a modern-day form of mercantilism. If the return of Hong Kong to China in 1999 helped erase the stain of political imperialism, it seems right that the W.T.O. meeting in Hong Kong should be the place to dismantle economic imperialism from the global trading system.

Agricultural Subsidies

The last trade round ended with the Uruguay Agreement in 1994. To secure the consent of developing countries, there was an understanding that rich countries would begin to reform their agricultural policies and cut the hundreds of billions of dollars they spend each year on their agricultural sectors. Alas, in 2005 rich countries will likely spend record amounts on these sectors.

Subsidies that are linked to production can depress world prices. The United States, for example, spends up to $4 billion per year to support 25,000 of its cotton farmers. Meanwhile, West African cotton farmers, who produce very high quality cotton, are unable to sell their goods on world markets because of cheaper (highly subsidized) U.S. cotton. Bishop álvaro Ramazzini of Guatemala said it well in testimony before Congress on the likely impact of Cafta on Central American farmers: “Guatemalan farmers can compete with farmers in the United States, but they cannot compete with the U.S. Treasury.”

Special and Differential Treatment

Different needs require different treatment. Developing countries have their own challenges in ensuring that increased trade actually benefits the poor in their countries. These include reducing their own tariffs, as well as implementing transparency and good-governance measures. There is a danger that fragile countries will not be afforded the flexibility they need to manage market integration evenly.

It is worth remembering that the economies of rich countries grew over a long period of time and enjoyed protective barriers. Poor countries will need to protect themselves, for example, against sudden surges in cheap imports that may pose serious threats to the domestic economy. W.T.O. rules should afford poor countries this protection so that they can manage the risks that come with increased openness to the global market.

Marvelous Exchange

The Hong Kong meeting offers a unique opportunity to set global trade on the path to sustainable development. Reforming global agriculture will entail a shake-up of some very entrenched special interests. This will require commitment not just from elected officials, but from the traders themselves, including multinational corporations. American citizens who wish to express their solidarity with the poor have powerful tools at their disposal: they vote, they consume and they invest.

As U.S. administration officials negotiate with other W.T.O. members, they are in constant contact with members of Congress. Given its responsibility for oversight and its role in ratifying any W.T.O. agreement, Congress can make sure that the United States fights for its interests in a way commensurate with the common good. Members of the administration and Congress are in the best position to answer the question: what impact will a W.T.O. agreement in Hong Kong have in the short-term on the poor of the world? Is anyone asking them this question?

Second, the retail stores millions of people will fill in preparation for Christmas are the gatekeepers to developed country markets. What do we ask our global suppliers to do to promote development? Are prices our only criteria? How can big-box retailers realign their business model if they never hear from their customers that the conditions of workers or the impact on the environment are important considerations when they go shopping?

Third, 70 million American households are connected in some way to the stock market. They are invested in mutual funds, 401(k)’s, pension plans and the like. Multinational corporations are also pushing their interests in Hong Kong. Investors can insist that the companies they invest in do good while doing well. Indeed, there is evidence that socially responsible investment matches or outperforms investments that have no social filter.

We may not all be able to travel to Africa. But our ballot power, buying power and banking power offer proximate ways to shape the global economy so that it serves people, and not vice versa. Meanwhile, we still need to share what we have with others.

As Pope John Paul II cautioned, indifference toward the poor taints our worthiness to partake in the Eucharist. The final message of the recent synod of bishops dedicated to the Eucharist reiterated this: “The poor of every generation and of today challenge us. They remind us of Christ’s agony, until the end of the world. These sufferings cannot remain extraneous to the celebration of the Eucharistic Mystery which summons all of us to work for justice and the transformation of the world in an active and conscious fashion.” When people of faith mobilize on behalf of the least among us, they can achieve a great deal.