Sunday, January 09, 2005

Trade not aid

Two newspapers today cover aspects of the scandal of the EU taxing Thai products. The first is the Scotsman and the second the Business.

Curiously though, neither feature the message from Thai prime minister Thaksin Shinawatra, who has told the international community that, rather than giving financial aid, it could help Thai tsunami victims directly by giving back tax and trade concessions for Thai exports, including shrimps.

Instead, both reports focus on the self-publicising NGO, Oxfam – which is clearly much more important that the prime minister of Thailand. It has condemned the EU over Thailand trade tax, particularly the "crippling duties of £2,430 a ton for exports of cumarin". This is a herb extract widely used in perfume, and duties were imposed on Thailand five days after the tsunami struck its shores.

The temptation here to indulge in "Frog-bashing" is inescapable, as the tax is designed to protect Rhodia, a French chemicals firm and the EU’s only cumarin producer. EU officials said they wished to shut down a flourishing trade in Phuket where traders are buying and reselling cumarin from China - which is already the target of a heavy EU export tariff. It has ruled that all cumarin sent from Thailand will be treated as bootlegged Chinese imports.

To give it its due, however, Oxfam has said the ruling illustrated the EU's inconsistent approach to developing countries: giving millions of euros after a disaster, but refusing them free trade to encourage recovery. "Their response to the tsunami should be to take down tariffs, not increase them," said Michael Bayley, Oxfam's senior policy adviser. "When countries are lying prostrate before us, it is criminal to continue to tax them on what they sell."

The Business takes the story a little further, pointing out that the cumarin tariff is the latest in a long line of penalties imposed on Thailand, "which was last month told by Brussels to buy six Airbus aircraft if it wanted to escape EU duties of 12 percent on its prawns."

It seems that Thailand, the world's largest prawn exporter, had reluctantly agreed to the deal - protesting that the prawn tariff it faced was three times the 4 percent imposed on neighbouring Malaysia. The tsunami has put the deal in doubt.

But just to be even-handed, it has to be said that the US does not escape criticism. The United States imposes similar penalties on Thailand and 96% tariffs on prawns from Vietnam. These are to remain, officials said on Friday, on the grounds that East Asia's fishing infrastructure has largely survived the tsunami.

There is also the issue of the lifting of quota controls on textiles, with the end of the "Multi-fibre Agreement", but the new dawn of free trade is quickly being circumvented which officially started on 1 January, is already being circumvented under "anti-dumping" legislation where western producers claim competitors are exporting below local retail cost.

According to the Business, charities argue the anti-dumping claim is too easily accepted by protectionist governments and provides an easy way for companies such as Rhodia to shield themselves from more efficient competitors.

Both the Scotsman and The Business are pointing up the essential truth, that the EU – and to a lesser extent the US – are doing more damage to developing countries that the (little) good they are doing with aid. In fact, as my colleague argues, the aid can do more damage than good.

That much is also picked up by the Sunday Times in its leading article, headed: "Africa’s aid enigma". After 25 years of aid, Africa’s share of world trade has dropped from 5 percent to less than two percent.

Africa, says the Sunday Times, is hugely dependent on agriculture and has been particularly vulnerable to protectionist farm policies. The appalling Common Agricultural Policy, which combines discrimination against poor countries’ exports with dumping of agricultural products in their markets, has wrought havoc. African farmers have seen their livelihoods destroyed.

But, says the Times, "there is a sense of helplessness in the West about what can be done". But the answer is not rocket science. Detest mantras as we do on this Blog, the answer is "trade not aid". Stop the aid and open up our markets. It really is as simple as that but then, as the Times does observe, there is the CAP – and indeed all the other leaden, destructive polices of the EU to deal with.

There, the answer is also simple. Get rid of the EU.

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