A Closer Look at Trade Out of Poverty – The Aims:

The aims are based on experience of what works and what needs to be done. This is how they would change things for the better.

Aim One: Open up rich country markets unconditionally to all the poorest countries

By poorest we mean all Low Income Countries (i.e. those with GDP per head below about $1,000). Existing preferential arrangements like the EU's 'Everything But Arms' agreement apply only to a limited list of the smallest countries and leave out many of the world’s poorest nations.

Developed countries have only been willing to extend tariff and quota free entry beyond their very restricted existing list of countries to other Low Income Countries if they reciprocate by opening their markets to the developed world's exports.

Yet Low Income Countries absorb only 1.6% of the rest of the world’s exports. So whether poor countries open or close their markets scarcely matters to us. By contrast the developed world takes over 90% of Low Income countries' exports – so our reluctance to open to them is devastating.

Rich countries justify their refusal to open up unless poor countries reciprocate on the ground that it is in the poorest countries' own interests to liberalise their markets. In fact most rich countries themselves practised protection at an earlier stage of development – yet they ignore the case for letting poor countries support the growth of 'infant industries' if they want to. If the EU and other rich countries want to convince Low Income Countries of the merits of opening their markets we must practice what we preach. Above all we should not make the best the enemy of the good by refusing to liberalise our markets to the poor until they agree to reciprocate.

Aim Two: Simplify trade rules to let developing countries share in world trade

Preferential trading arrangements almost invariably involve Rules of Origin specifying that the exports must genuinely have been made to a significant extent in the country it is intended to help – to prevent more developed countries evading tariffs by routing their exports through a low income country.

But existing Rules of Origin are so complex that many exporters find it more costly to prove compliance than pay the full tariffs. These rules also make it difficult for poor countries to participate in the complex supply chains - with components and processes carried out in a series of countries - which increasingly characterise international trade. At present fruit grown in one country, processed in a neighbouring state and bottled in a third may fall foul of existing Rules of Origin even though it would comply if all operations were carried out in any one of these countries. So it is vital that future Rules of Origin recognise the cumulative value added in different Low Income Countries.

Nearly 40% of goods which should benefit from tariff free access to the EU under Everything but Arms actually bear tariffs. When the US waived similar Rules of Origin from its African Growth and Opportunities Act exports of African apparel increased 50%. So the impact of more generous rules could be substantial.

Aim Three: End rich country export and domestic subsidies which hit poor countries' trade

Developing countries are particularly vulnerable to dumping of subsidised exports by rich countries – for example, cotton which is a key export for several African countries; in addition trade distorting domestic subsidies – notably in agriculture – effectively keep out goods from poor countries. Notoriously, EU farm subsidies amount to $2 1/2 per cow per day (more than the daily income of the majority of people in Low Income Countries) which enables the EU to export dried milk artificially cheaply and makes it hard for poor countries to export meat products to the EU.

Aim Four: Help reduce tariffs between poor countries

Some of the highest tariffs facing poor countries' exports are those imposed by their neighbours. This is one reason that less than one tenth of African countries’ exports go to their African neighbours whereas nearly three quarters of European exports go to other European countries. This is madness, and a major reason is that excise duties are one of their main sources of easily collectible revenue.

So donors must help developing countries to reduce barriers against their neighbours through financial support until new revenue sources come on stream.

Aim Five: Support investment in roads, ports and commercial infrastructure on which trade depends

To take advantage of trade opportunities Low Income Countries need the physical capacity to get goods to market – roads, rail and ports. Equally essential are the professional skills and administrative structures – for example to guarantee quality standards and identify sourcing - to comply with end market requirements. Help establishing these is essential to make the other changes we seek work.