Market Structures are Posing Problems for Poor Countries’ Economies and Poor Peasants

While trade policy’s significance gains importance in the regulation of global economy, its impacts on impoverishment increase. Let us think about import duties, domestic farming subsidies, mobility of labour, basic services or cutting down rainforests – all the issues related to commercial exchange have to do with development policy. As a matter of fact, development issues cross subjects of negotiation so extensively that all trade policy, except bilateral agreements of industrial countries, is development policy – a bad or a good one. In trade policy, it is essential to be able to see the whole picture from the point of view of the poor countries because a decision in one negotiation field often affects other economy sectors too. Unlike other politics related to the external relations of the EU Member States, trade policy is implemented centrally through the European Commission. Transparency of trade policy has been exceptionally unsatisfactory because the Commission has tried to keep the Member States apart from its hard core. The Member States should be able to oversee the implementation of trade policy inside the EU more directly. However, Member States’ own officials have protective attitudes towards their own sphere of responsibility. They do not see its significance from the point of view of stopping the impoverishment and the fact that it should become open for direct civil discussion.

The freeing of commerce has, at its best, only a marginal effect on the lack of capital from which the poorest countries suffer. Concentrating on increasing the commerce too early is not rational politics in these countries; their chronic shortage of resources should be helped with internal economic growth or foreign financing before it is possible to benefit from the commerce. In addition, market structure’s effects on income distribution should be taken into consideration: If the local elite use their financial income on purchasing foreign luxury products, only a fraction of the production value benefits the local market. The outcome would be different if these incomes were invested in local products.

International economy and trade policy affect rural poverty through limiting the countries’ possibility to plan and realise their own agricultural policy and in general control their rural development according to their own needs. Both the credit granting criteria of financial institutions and the development and trade agreements reduce the opportunities for governments to function in sectors that are relevant to agriculture. Protecting the domestic market from importation and providing farmers with farming subsidies, funding and other services become difficult. This kind of reduction of political freedom of action also diminishes the possibilities to such democratic processes that enable different groups of people to express their opinions and influence policy line and contents.

The poor rural population also suffers directly from trade structures that cause the prices of products to be unreasonably low and, besides to vary unexpectedly. The low prices of agricultural products and basic commodities result partially from oversupply and partially from the concentration of the world market’s products into the hands of few enterprises. The dissolution of international agreements controlling the market of basic commodities has further accelerated the decrease of prices at the end of 1980s. The causes of oversupply originate from both the colonial period and the current model of the economy’s development according to which the developing countries have concentrated on such sphere of production that they hope would enable them to fast gain financial income and to pay their foreign debts. Industrial countries’ protective duties and subsidies for their own agriculture and industry have prevented developing countries from diversifying their production and increasing the degree of processing of their products.

The structure of agricultural products’ world market could be characterised as oligopolistic: few large enterprises dominate the market of most products. In addition, the same enterprises usually rule the whole chain from the trade of seeds and fertilizers to the processing of products and even to the retail sale. These enterprises can greatly decide on the prices of the product so that they benefit the most. Especially, in a developing country’s own market, dumping or supported importation from industrial countries (and from other developing countries) also lowers the prices. The problem is that because of the World Trade Organization’s agreements, the countries cannot sufficiently protect their own market from importation even if it harms their own poor producers.