Hannah Njeri may not know much about the intricacies of global trade, but she does know the power of "free marketing," as she calls it. Njeri, 45, sells vegetables outside the gas station on the Nairobi street where I live. Every morning she collects a few tomatoes, onions or beans from her tiny plot and spends the rest of the day selling what she can to passers-by and people who stop for petrol. Margins are small: Hannah makes just a few dollars a day, which she uses to help put her children through school. She would like to own her own greengrocery, but capital is a problem.
"Competition is tough. Everything depends on the market," she says, sitting next to her friend Margaret Wajeru, who is shelling peas. "Sometimes you can't get tomatoes, so we are going to sell them for more. Or everyone has potatoes, so you have to cut your price a lot. Prices go up and down just like that." Farmers hate price fluctuations. It makes it hard to plan ahead. But most farmers in the developing world have little choice: like Njeri, they sell at the price the market sets. Farmers in Europe, the U.S. and Japan are luckier: they receive massive government subsidies in the form of guaranteed prices or direct handouts. Two weeks ago President Bush signed a new farm bill that gives American farmers $190 billion over the next 10 years, or $83 billion more than they had been scheduled to get, and pushes U.S. agricultural support close to crazy European levels. Bush said the step was necessary to "promote farmer independence and preserve the farm way of life for generations." It is also designed to help the Republican Party win control of the Senate in November's mid-term elections. One person it won't help is Hannah.
Agricultural production in most poor countries accounts for up to 50% of GDP, compared to only 3% in rich countries. But most farmers in poor countries grow just enough for themselves and their families. Those who try exporting to the West find their goods whacked with huge tariffs or competing against cheaper subsidized goods. The World Bank calculates that the annual cost to poor countries of industrial-country trade barriers is six times the amount developed countries spend on aid. In 1999 the United Nations Conference on Trade and Development concluded that for each dollar developing countries receive in aid they lose up to $14 just because of trade barriers imposed on the export of their manufactured goods. It's not as if the developing world wants any favors, says Gerald Ssendawula, Uganda's Minister of Finance. "What we want is for the rich countries to let us compete."
Agriculture is one of the few areas in which the Third World can compete. Land and labor are cheap, and as farming methods develop, new technologies should improve output. This is no pie-in-the-sky speculation. The biggest success in Kenya's economy over the past decade has been the boom in exports of cut flowers and vegetables to Europe. Kenya is now the biggest source of cut flowers for the E.U., and the horticulture industry, which employs 70,000 people, last year became the country's second-biggest foreign-exchange earner after tea. But that may all change in 2008, when Kenya will be slightly too rich to qualify for the "least-developed country" status that allows African producers to avoid paying stiff European import duties on selected agricultural products. With trade barriers in place, the industry in Kenya will shrivel as quickly as a discarded rose. And while agriculture exports remain the great hope for poor countries, reducing trade barriers in other sectors also works: America's African Growth and Opportunity Act, which cuts duties on exports of everything from handicrafts to shoes, has proved a boon to Africa's manufacturers.
The lesson: the Third World can prosper if the rich world gives it a fair go. This is what makes Bush's decision to increase farm subsidies two weeks ago all the more depressing. Poor countries have long suspected that the rich world urges trade liberalization only so it can wangle its way into new markets. Such suspicions caused the Seattle trade talks to break down three years ago. But last November members of the World Trade Organization, meeting in Doha, Qatar, finally agreed to a new round of talks designed to open up global trade in agriculture and textiles. Rich countries assured poor countries, who felt they had been ripped off under the previous Uruguay trade round that finished in 1994, that their concerns were finally being addressed. Bush's handout two weeks ago makes a lie of America's commitment to those talks and his personal devotion to free trade. Or as Hannah puts it, "Getting money from the government is cheating."