By Shipra Prakash
20 July 2008 [MEDIAGLOBAL]: An organization that provides opportunities to the poor through providing small business loans and other financial services relates the inspiring story of Helen Otieno, a woman in Kenya. Otieno was able to set up a business, where she rakes in profit and uses it to feed her family. But once upon a time, Otieno used to sell grain, and so she was dependent on low prices of the food from the wholesale market. Wisely she decided to seek her fortune elsewhere: sewing. So she took two loans from Opportunity International, which enabled her to buy three sewing machines as well as rent a store and run a rewarding business.
Otieno’s success story means that she is able to feed her seven children and let them go to school throughout the year instead of only during the busy season.
So when Syed
Kamall, a conservative member of the European Parliament for London, wrote in the Wall Street Journal this week that wealth creation in poor countries depends on the support for skills and institutions that give businesses the chance to trade and grow, Otieno’s story comes to mind: Otieno built a skill and was able to operate a business through the support of Opportunity International Kenya.
But had Otieno not strayed from selling grains, soaring food prices would have more likely than not crippled her sustenance on the cheap supply of grains. Because of high food and energy prices, others who are living in the tight grip of poverty and aspiring to mirror Otieno’s success will have a harder time of it. In such a climate, the need for fewer restrictions on trade is paramount.
Loosening trade barriers can stimulate growth and consequently give people like Otieno the chance to succeed.
“Trade should be used to alleviate poverty reduction,” Carmen K. Iezzi, the Fair Trade Federation’s Executive Director, told MediaGlobal.
Take China, for instance: the country opened its barriers unilaterally and has hence grown at a fast rate in recent years. Today, China can taste some of the sweet flavor of success — hundreds of its citizens have been lifted out of poverty.
It would be difficult for Africa to mirror China’s success, according to recent World Bank figures. In June, the World Bank reported that Africa’s share of world exports was down by about two-thirds in three decades. Yet if Africa’s exports kept at the level it stood at in the 1970’s, its export revenue would have been 10 times larger. This extra revenue could have been used to lift people out of poverty.
“In Africa tariff barriers remain high against agricultural products and manufactured goods such as clothes and shoes. These barriers remain not only in rich countries, but in African countries as well,” Dan Griswold, Director of the Center for Trade Policy Studies at the Cato Institute, said in an interview with MediaGlobal.
With such high tariff barriers, it is no wonder that African exports have not grown. Of equal concern is that petroleum continues to dominate African exports. Why has Africa not been able to diversify its exports?
To that, Griswold answered, “Terrible infrastructure, corruption and bias against domestic produce.”
Ten Thousand Villages has no such bias against African produce. The organization purchases handcrafted products made by artisans from more than 100 artisan groups in more than 30 countries (including countries in Africa) and sells them in 160 outlets across North America.
“We offer a fair price, and give a 50 percent cash advance when we make an order. We then give full payment once we are told the order has been shipped, so we pay in full before we get the shipment,” Kristen M. Jenkins, spokesperson for Ten Thousand Villages, told MediaGlobal.
But the momentum towards easing trade barriers is being undermined by the emergence of biofuels – transport fuels made from crops. Robert Zoellick, President of the World Bank, blamed the production of corn and rapeseed oil in the US and European Union, saying it has contributed to soaring food prices and left the poor in dire straits.
“The US and Europe also need to take action to reduce mandates, subsidies and tariffs benefiting grain and oil seed biofuels that take food off the table for millions,” Zoellick said at the G8 summit this week, where soaring food and fuel prices were the top issues on the agenda.
Zoellick was not the only one bringing the biofuel question forward this week. Ruth Kelly, the United Kingdom’s Transport Minister, said that the country would slow its use of biofuels due to concerns on its impact on food prices and rainforest.
Kelly was reacting to a report commissioned by the UK government. Ed Gallagher, Chairman of the UK’s Renewable Fuels Agency, authored the recently published Gallagher Review of Biofuels, which reveals that yes, while biofuels can ensure energy security, the fuel’s impact on food prices and climate change means there should be a slowing down on the use of them.
But for the less fortunate living alongside Otieno, Kelly’s announcement may not amount to much. According to Oxfam Britain, biofuels can do more harm than good – they have pushed food prices by 75 percent. The relief agency is calling for the UK government to dispose completely of its target for biofuels.