House debates

Monday, 18 June 2007

Private Members’ Business

Free Trade

1:40 pm

Photo of Brendan O'ConnorBrendan O'Connor (Gorton, Australian Labor Party, Shadow Parliamentary Secretary for Industrial Relations) Share this | Hansard source

I congratulate the member for Ryan on placing this motion on the Notice Paper. It is an important debate to be had. I think it is fair to say that it is unlikely that the Millennium Development Goals will be met by 2015. The types of solutions necessary to tackle poverty need to be reassessed. This is particularly the case with the so-called Geldof-Bono solutions to world poverty. Although the Geldof-Bono campaign for alleviating poverty has engendered much-needed public attention to the issue, encouraged tremendous acts of generosity from private citizens and impelled citizens of wealthy nations to apply pressure on their governments to implement more vigorous measures to address world poverty, the economic prescriptions advocated by them are not sufficiently effective.

Living standards in sub-Saharan Africa have failed to improve. Food insecurity is high, universal primary education is the exception and not the rule and health care is poor, especially for birthing mothers and young children. This parlous state is brought about not by a want of aid; rather, a large slice of the explanation lies in the poor economic performance of those countries. In the 1990s the region experienced a decline in GDP per capita of 0.6 per cent per year. It is patently obvious that, with the current economic performance of these countries, no amount of foreign aid can seriously address poverty. Improving the economies of these countries is the only sure way of raising their populations out of poverty.

There is no evidence to suggest that aid improves the economies of recipient nations, and there are several reasons for this. For example, aid can fail because of corruption, and I think people are well aware that that can be the case. Aid can also fail because it is the wrong type—for instance, of course we need emergency humanitarian aid but that will not necessarily spur economic growth. However, the Geldof-Bono argument holds that aid has failed because it has not been tried and that the reason for the failure of aid is that its magnitude has been grossly insufficient. I do not consider that argument to be entirely sustainable. As an example, Bangladesh has been a beneficiary of massive and sustained aid, yet its development has been negligible. Aid can also fail because it is fungible. That is a quaint economic term which effectively means that it is interchangeable with similar items. For example, imagine that a recipient government intends to build a school and the aid donor bears the cost of that. That frees government resources to buy, for instance, tanks and guns. So, in effect, the aid finances the purchase of the tanks and guns. More generally—and this remark applies particularly to program aid—aid might leak into tax cuts or a lower tax effort or into non-developmental programs and objectives.

The Millennium Development Goals are well intended but some are flawed. The supposition that the goal is not growth but poverty reduction is nonsense. The only way that you will get substantial numbers of people out of poverty is by growth. Many countries affected by poverty lack the domestic capital necessary to engender growth. They require foreign investment to build industries and the infrastructure necessary to exploit the natural resources of the country, and they require open markets in the developed world in which to sell their wares. As a logical corollary of this interaction, jobs and growth are generated and people can rise out of poverty.

Global trade is the obvious—and, as far as I am concerned, the only—effective method for the reduction of poverty. In view of the fact that most poverty stricken nations are predominantly agricultural, agricultural trade liberalisation should be given a priority position on the alleviation of poverty agenda. This raises the obvious question of the stubborn European and American persistence with unfair agricultural protectionism. In my view, it is this bar to world trade—more than many other things—that has kept millions in poverty. World trade, especially fair trade, is central to the alleviation of world poverty. Any remedies to poverty that ignore the importance of world trade are not serious remedies at all.


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