In a recent Blog posting SM is Dead: Mulroney's Trial Balloon, or Loose Cannon?, I raised the question about Mulroney's meaning and purpose on his suggestion to end Supply Management in Canada. In the news media reporting on Mulroney's speech, it also said,
"...those in favour of reaching a deal [ie. reducing agricultural subsidies and import barriers through free trade treaties] say it would be worth many times as much as all of the foreign aid to the world’s developing nations."
Not being an expert in international trade (who is?), I didn't understand what this meant. Today, after re-reading the mainstream media reporting on Mulroney's speech, I noticed all of them included this cryptic comment, but nobody explained what it meant. As I dug deeper and deeper, I finally developed a child-like understanding of this issue. Perhaps I need to research this much more, but I will share what I have discovered so far. If I am all wet, perhaps those in the know will see my obvious error, take pity, and guide me in the right direction.
It appears that this statement refers to a study done and book published in 2004 by William R. Cline (a US economist and a Senior Fellow at the Peterson Institute for International Economics) who wrote Trade Policy and Global Poverty
Mr. Cline seems to propose that the fastest and easiest way to reduce poverty on a world-wide basis is to allow free trade for agricultural products. Of course, agriculture is the global-wide bastion of the most pernicious protectionism.
In support of Mr. Cline's theory, he presents the following evidence:
- World-wide poverty (ie. the "Poor") is generally defined as someone earning less that US$ 2.00 per day ($730/yr).
- There are 3 billion Poor in the world. 75% of these Poor live in a rural setting. [I assume that means people living in a rural setting of a developing nation have the means to grow food, and might be able to sell some of that food as an exportable product.]
- In developing countries, data from the 1980's and 1990's suggest that as their exports grow, local GDP grows also. See Figure 1.
- That boost to the economies of developing nations via free trade could be as much as $200 Billion per year. Half of that boost would be from free trade for agricultural commodities. The other major sectors for boosting their economies would be from exporting textiles and apparel.
- Global free trade would raise the GDP by 1.5% to 2% directly. The dynamic (ie. spin-off) effects would more than double the direct effect, so the total effect (ie. both direct and indirect) would be more than 4%.
- While the average effect on people would be 4%, the poorest of the poor are estimated to receive the biggest impact of free trade, estimated by Mr. Cline to be double of the average effect (ie. 8% for the Poor vs. 4% on average for all citizens in a developing country).
- In Mr. Cline's 2007 paper to a USDA conference, he states: "...the broad empirical relationship between poverty and income shows that the “poverty elasticity” – the percent by which the number of poor declines for a 1 percent rise in their income– is about 2. So multiply once again by 2 and you get a total of 16 percent reduction in the number of poor. Apply that to 300 million [sic, appear he meant 3 Billion] in poverty and you get about 500 million reduction in global poverty." Therefore, Mr. Cline concludes that free trade would raise the income of Poor people sufficiently to remove 500 million people from the poorest category (ie. earn $2.00/day or less).
- Free trade for agriculture is essential to achieving these positive effects for the world's poor. See Figure 2. WTO defines ag. subsidies as colour-coded boxes, similar to traffic light colours (red= prohibited, amber= caution or subsidies that are to be reduced, green= OK in unlimited quantities, plus blue=amber with conditions that limit the quantities that farmers can produce. The protectionism of Japan's farmers is legendary, estimated to be equivalent to an 82.1% import tariff when you count true tariffs (76.4%) and domestic subsidies (3.2%). Canada is the 2nd worst villain in ag. tariffs and subsidies at 52.3%. The EU is 46.4%, and the US is just 19.9%. The weighted average for all industrialized nations is 36%. No wonder Canada is in such huge trouble in trade talks with the US, EU, TPP, and WTO; we're 45% higher in ag. trade barriers than the world average for industrialized nations.
|Figure 1: Mr. Cline's datapoints showing the correlation|
between a developing country's GDP vs. the growth in
their exports. The lines were added by me.
In 2012, Canada spent $5.67 Billion on foreign aid according to CIDA's data, which is stingy when compared to our relative wealth and the aid by other OECD nations. About 69% of Canada’s aid in 2012 was channeled through the Canadian International Development Agency (CIDA), 9% through Finance Canada, and 8.2% through the Department of Foreign Affairs and International Trade, while the International Development Research Center (IDRC) accounts for 3.5%. About 33.4% of that aid went to Least Developed (or poorest) Countries, another 2.5% went to other Low Income Countries, and 16.8% went to Lower Middle Income countries (41% is not coded by income group). Africa received the highest share at almost 42%, followed by Asia (22%), and the Americas (17%). Following nearly a decade of sustained increases, Canada's aid spending has stalled and is set to decline in the coming years.
As a Small Flocker in Canada, there are a few issues of which I am concerned.
First, I have seen the jars of pickles on my local grocery store shelves that have been imported from India. I have eaten some of those pickles, as they are significantly cheaper than N. American pickles and seem to have reasonable quality. I also fret about "what is this world coming to" when Canadian pickle producers have permanently shut their doors, and we are now forced to import from elsewhere. I assume I would feel equally conflicted about SM products of dairy, chicken, and eggs being imported into Canada at the expense of domestic production.
Secondly, the quality of N. American chicken is a disaster, with bacterial contamination (including superbugs), bad Omega-3 to Omega-6 fatty acid ratios, bad bird welfare habitats, etc. I assume that 2nd and 3rd world imports might be significantly worse; witness the recent news reports of falsified species in fish imported from South-East Asia, melamine tainted milk in China, and many similar events. As an example of a disaster going someplace to happen, live US chicken was proposed to be exported to China, slaughtered in China, processed and further processed in China to create boxed chicken, then import those packaged chicken products back into the US with no review whatsoever of that entire international supply chain by USDA inspectors (see Blog posting COOL Blowback ). Canadians need higher quality products, not lower. Can we be assured of this quality if we are importing SM replacement products from the developing world?
Thirdly, I am cautious of Free Traders and others who pretend to be helping the poor, when in reality they are propaganda shills for Big Ag., the PTB ("Powers That Be"), the NWO ("New World Order"), and the 0.01%'ers. Exactly who is this Mr. Cline? CIC (Canadian International Council) seems to support Mr. Cline's research. Is Mr. Cline a master manipulator, or a straight arrow? For me, it's too soon to tell, but I am wary about trusting too quickly.
Fourthly, if SM will not yield any ground to domestic Small Flockers, I assume that international small flockers don't have a chance. I would assume that the poorest of the poor would be small flockers in chicken, and small market gardeners in fruits and vegetables.
Fifthly, if WTO, TPP, and EU trade talks achieve agricultural free trade by some miracle, how long before Big Ag. moves in to their third world countries where they create a monopoly for themselves via unfair or predatory trade practices so as to steal the free trade opportunities away from those who need them most.
By slowly and carefully reducing Canada's import tariffs and subsidies to Canada's #ChickenMafia, I believe that would be beneficial to Canada's consumers and small flockers alike, and would eventually force Canada's #ChickenMafia to dramatically improve, or die. However, is there a tariff level below which no Canadian chicken farmer can compete, and dropping import tariffs below this threshold will surely kill all the #ChickenMafia, and possibly even Canada's small flockers? If yes, what is that critical tariff level?
A lot of questions, conflicts, and inconsistencies currently exist inside of me on these SM trade issues. I assume each of you has a similar list. These are complex issues, and we need to get them right the first time. That is exactly why those acting against the best interests of the majority purposefully cloud the issues so as to protect their special interests.
Hopefully with additional study by myself and other, the mud will settle and we can see clearly on the best path to take.