Ghanaians are better off with free and open trade

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Next week, some civil society groups in Ghana will join hands with Oxfam and Christian Aid, the world?s most notorious advocates of foreign aid to celebrate the Global Week of Action on Trade. An advertiser?s announcement in the Ghanaian newspaper the Daily Graphic, predicts a ?big showdown with the current obnoxious world trade regime, which has contributed immensely to the worsening poverty levels in the developing world?.

Oxfam and Christian Aid can be powerful social advocates often to chaotic levels as witnessed in Seattle and Cancun? but in many cases, their economics are just plain wrong. In reaction to our extreme poverty, these bodies and their local counterparts conclude that Ghana?s farmers are suffering at the hands of the World Bank, the International Monetary Fund, and the World Trade Organization.

One of their solutions to our problems is eliminating farm subsidies in western countries, which would indeed be a good thing. But it saddens me these bodies including ISODEC, MAPRONET, SEND and the Third World Network have no principles. They ignore history, peddling the misguided belief that poverty, famine, global warming and corruption can be solved with more foreign aid and other policies that have already failed Africa.

Most people would agree though that dealing with the World Bank and IMF is like playing with loaded dice. They do advocate free trade measures ? but also push foreign aid and flawed development strategies onto us. Even the average Ghanaian knows that these ?reform? programmes have achieved nothing other than to enable our bureaucrats to procure gold-plated Mercedes for themselves and their cronies.

Unlike their counterparts in the real world, international aid agencies are allowed to contradict themselves. On one hand, they oppose subsidies in wealthy countries, which are indeed part of the problem. On the other hand, they promote subsidies to local farmers and businesses in poor countries, to shield them from the effects of free and open trade. In Ghana, the global week of action on trade will launch a campaign to protect local rice, tomatoes and poultry farmers from cheaply imported ones. The Country Programme Manager of Oxfam GB, Mr Sam Danse, has called on government to impose taxes on imported rice to establish a fund to boost the agricultural sector.

But this is exactly where the hypocrisy and misguided solutions to the problems of farmers lie. They know for a fact that Ghanaian farmers as well as other entrepreneurs are inundated with punitive tax regimes and high costs of capital not to mention the disarrayed land tenure systems that lead to low crop production. Mr. John Awuni, an agricultural scientist avers that the local tax build up on rice is about 38%, the highest in the West African sub-region.

Yet there are many mouths to feed in Ghana, as rice for instance, has become a major staple. Ghanaians are said to consume 500,000 tonnes of rice annually. Local production caters for only 150,000 tonnes with the rest imported. Ghana is said to have become the largest African importer of tomato concentrate from the EU importing over 10,000 tonnes annually.

If importation of rice and tomato concentrates are banned today, as these aid agencies advocate, just how will they feed us?

These aid organizations have failed to comprehend the bigger issues, which are prerequisites for eliminating poverty. In most African nations, subsidies are the first step towards more corruption and power for the politicians and vested interests, and fewer choices for consumers.

Often the World Bank?s structural adjustment programmes Ghana adopted in 1989 are easy targets for cases of ?flawed liberalization?. True, there has been many blind sides of these programmes but very often government?s acquiesce in shady liberalization deals has been our nemesis. Many criminal cases involving top brass members of the former administration are being heard in the law courts. It?s on record that successor supervisors of the divestiture implementation committee performed abysmally as international contracts rules were rigged in favour of their cohorts with fat percentage kickbacks. What happened to Ghana?s 100 tonnes per day tomato processing plant in Pwalugu would not be different.

However, people?s attitudes are important in this equation. Today?s average Ghanaian consumer has suffered because of shoddy and defective goods manufactured locally by protected industries that do not have to compete in an open market. Who can blame us for buying higher quality foreign goods? Some savvy businessmen have learned to successfully compete, for instance by providing locally produced rice in sophisticated packages, which ensure that the rice isn?t stale when it arrives to the consumer. Similarly, some smart Ghanaian entrepreneurs now collaborate with their Italian counterparts to produce tomato paste brands with Akan names, Ghana?s widely spoken language. One of these hotly pursued products is called ?Obaapa? which translates as ?great woman?.

Protection for local producers also means that African countries trade very little with each other ? as the World Trade Organisation?s 2001 statistics show, Africa?s share of intra and inter regional trade flows to western Europe alone was 51.8 %, while it was a paltry 7.8% within Africa.

All of this suggests that Africans, and especially our leaders, need to focus on improving the well being of average Africans through real reforms. The solution lies partly in encouraging intra- regional trade.

More broadly, the solution for African countries is to adopt institutions to encourage development. Decentralising ownership and control of natural resources and other assets would be an important first step. An effective, transparent and accountable legal system would be another.

When combined with respect for private property and the rule of law, these broad reforms would encourage entrepreneurship, innovation and even environmental protection amongst average people because they empower people ? rather than the politicians. As economies grow and develop, people will be able to afford better technologies, clean water, superior energy sources, better healthcare, and insurance.

You won?t hear this from ISODEC, MAPRONET, SEND and the Third World Network, though. The sad fact is that when they blame western countries for our poverty, they simply give politicians more excuses to delay these badly needed institutional reforms. Why are they silent on the very stark realities, which are the fundamental causes of poverty in Africa? Trade is a positive sum game. It is voluntary, gives us many choices and should not be controlled. Do us a favour: spare us your populist and flawed economics.