Subsidies, Trade Agreements and Layoffs: When Chickens Come Home To Roost

chickens_roost_blog-1170x510Venerable Democratic lawmakers from Minnesota, my state, recently met with top Obama administration officials – U.S. Commerce Secretary Penny Pritzker, U.S. Trade Representative Michael Froman and National Economic Council Director Jeffrey Zients – to seek the administration’s support in halting the import of cheap steel into the U.S. The steel, which is significantly cheaper than what it takes to produce the product in America, has harmed our nation’s economy. In addition, it has virtually sucked the economic vitality of my fellow Minnesotans whose means of livelihoods are derived from the iron industry.

I commend the actions of these august officials from because they have displayed the epitome of representative democracy by responding to the plight of their constituents who have been negatively impacted by the demonic importation of cheap iron. I doff my hat to their timely invention to prevent further layoffs for Minnesota workers and United States steel workers at large. Already an estimated 4,000 workers nationwide has been laid off in about half a dozen states, and in Keewatin, Minnesota alone 412 employees will be out of work by May. It is an absolutely dreadful experience to not be able to provide for oneself and loved ones!

I can only imagine what might be running through the minds of workers who have been laid off due to no fault of their own. As one who has been in their shoes a time or two, I understand the anxiety one feels in losing their livelihood. As a person of faith, I pray that those who have been affected are speedily blessed with other profitable alternatives that will provide them a livable wage and restore their human dignity. But as someone who studies politics and the economy, I know how unlikely this is since Keewatin’s entire economy is built around the iron industry. With a population of 1,068 people, there simply aren’t many other options.

However, as someone who also has an international perspective, I am not only deeply concerned about the plight of my immediate neighbors in Minnesota. But I am equally sensitive and awake to the insufferable pain that has been heaped upon farmers in Africa and Latin America as a result of the same distortion of the global economy perpetrated by the West, including the U.S.

The premise of the international trade agreement between the developing and developed nations was to grant international access to less privileged countries. This access was provided by enabling less privileged countries to export their products where they have a proven comparative advantage. Manufacturing advantage was also given to the rich and powerful nations because they had the technological capacity to transform raw products from the developing countries into finished products, and then those finished products would be sold back to the developing nations. This agreement was reached so that both sides could benefit from one another economically.

Unfortunately the international trade agreement that was meant to benefit the economies of both parties has long been breached and replaced with a zero sum game where winner takes all! This has left Africa and Latin America economically and politically vulnerable, its people wasting away in abject poverty, frustration, helplessness, and hopelessness.

Africa has a proven comparative advantage in its agriculture. It’s the mainstay of millions of people in Africa and is also central to African economies. According to Oxfam “An estimated 96% of the world’s farmers live in developing countries, with 2.5 billion people on agriculture for their livelihood.” And had the trade agreement not been breached, the agricultural sector would have granted Africans the ticket to economic self-reliance and economic growth. Yet this promise of economic vitality has been cut short by the rich nations’ agricultural subsidies. According to Dambisa Moyo, in her book “Dead Aid,” these subsidies are virtually killing Africa’s local economies. “These subsidies rob farmers from developing countries access to the global market simply because they can’t compete price wise, estimates suggests that Africa loses around $500 billion a year (Moyo, 2009: 115).”

Just as four Minnesota elected officials sought recourse with the Obama administration, four cotton producing African countries namely Burkina Faso, Benin, Chad, and Mali, wrote a proposal to World Trade Organization agriculture negotiation committee requesting the total elimination of domestic support that distorts trade and terminate all export subsidies for cotton. In the proposal, they wrote: “Frankly speaking, we are starting to doubt whether rich countries really want to reduce poverty in developing countries, because the agricultural subsidies work directly against efforts by donor nations. Producers’ Federations: Mali, Benin, & Burkina Faso

To many in the West, Africa has almost become synonymous with poverty and hunger. They are equally aware of the publicized economic aid given to Africa by the West, but unbeknownst to them that the foreign aid was given with one hand and taken away with the other hand. For instance, Mali received $37.7 million in United States aid in 2001, but incurred losses of $43 million due to U.S. subsidies.

The current framework for international trade created by United States and the European Union is inequitable for the poor farmers in Africa and other developing nations. It is important to know that the current unfair trade practices displacing workers in the U.S. might be alien to us, but it has been the existential realities of many in the developing countries.

As my honorable lawmakers are working tirelessly on behalf my fellows Minnesotans to alleviate their situation as a result of the influx of subsidized foreign steel, I bring to their radar the international consequences of the United States domestic policies that are creating social misery, and bottomless poverty for people abroad. It is time that we take action to also relieve the suffering of our neighbors from afar.

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4 thoughts on “Subsidies, Trade Agreements and Layoffs: When Chickens Come Home To Roost

  1. Michael Dahl

    Excellent post, Babatope! A deeper dive into the conversation we had a couple weeks ago. Do you think I’d find “Dead Aid” a helpful book considering my interest in sustainable agriculture practices? I have social media friends from across the globe. This book may help me understand their plight / perspective.

    Reply
    1. babatopeadedayo Post author

      Hello Michael,

      Thanks for your message! I read “Dead Aid” by Dambisa Moyo about 5 years ago. The premise of her argument is that the economic aid given to African countries by the West defeats the purpose for which it was supposedly intended. She argues that it’s a curse rather than a blessing. She talks about a variety of issues to buttress her point, one of which was the negative effects of the agricultural subsidies Western countries give to their farmers. I highly recommend it because it will give you insights into the fact that economic aid benefits donor countries more than the recipient countries. But the book is not entirely on agricultural practices!

      Reply
      1. Michael Dahl

        Looks like it’s well-reviewed and would expand my horizons. I’ll put it on my reading list. I’m also going to share the blog post you wrote.

  2. babatopeadedayo Post author

    Awesome! I am pretty sure you will like it. I still have my copy of Dead Aid, I could borrow it to you if you want. Kindly let me know and I will get it to you. And thanks for wanting to share my blog post!

    Reply

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