On this spread you'll find out about attempts to reduce the development

The World Trade Organization (WTO)

gap by making trade fairer.
The WTO deals with the rules of global trade. It aims to make trade easier and get
Trade - fair or not? rid of anything hindering it. It negotiates new trade agreements and settles trade
Most trade is in the hands of the world's richer countries. They try to control it by disputes.
)
creating barriers to protect their own jobs and industries. They do this by using The WTO is focussing on helping poorer countries by reducing and removing farm
tariffs and quotas. subsidies - grants paid to farmers to encourage them to produce more.
• Tariffs are taxes or customs duties paid on imports. They're used to make In theory, the WTO should be against subsidies, because:
GHANA
imported goods more expensive and less attractive to buyers than home-
produced goods. • it believes in free trade

• Quotas are precise limits on the quantity of goods that can be imported. They're UGNEA
usually restricted to primary goods, so they work against poorer countries. ' to their farmers - poorer countries can't.
• helped me to pay for my daughter's school fees, which
• Free trade is when countries don't discourage, or restrict, the movement of
goods with tariffs and quotas. 0 800
Tariffs can hit poorer countries hard, as the example below from Ghana shows. km
Ghana's cocoa
Cocoa is seasonal, so we have long
Ghana exports raw cocoa beans. Most of the processing and
packaging of the cocoa is then done in Europe. periods of poverty. After paying
my debts, there's no money left to
EU import tariffs are much higher for processed cocoa than for send the children to school or pay
raw cocoa beans. For example, in 2007, the EU charged a 7.7%
for food. Allow the government to
import tariff on cocoa powder and 15% on chocolate containing
process the cocoa here, and not
cocoa butter - but no tariff at all on raw cocoa beans. So, Ghana
abroad - then there will be more
is forced to export the raw beans and lose out on any extra money
money in our pockets.
they might have made by processing them. As a result, people like
William Korampong stay poor.
Cocoa farmer,
William Korampong
Trading groups
These are countries that have grouped together to means that member countries can cut the tariffs in
increase the amount they trade between them, and place between them - making goods cheaper. But, as
the value of their trade. Two of the biggest trading trading groups like the EU try to increase trade within
groups are the European Union (EU - which the the group, poorer countries from outside lose out and
UK belongs to) and the North American Free Trade the development gap widens.
Agreement (NAFTA). Creating formal trading groups
Key The main trading groups
I I EU
I I NAFTA
I I MERCOSUR
11.1 ASEAN (AFTA)
Asian Free
Trade Area
• only richer countries can afford to give big subsidies
The money from the Fair Trade premium last year
But the WTO's Agreement on Agriculture still allows
the EU and the USA to spend massive amounts of are very expensive. I tell my children and neighbours
money on subsidies. As a result, large farmers in those to spend time producing good-quality coffee. Since
countries carry on producing huge volumes of food, the other farmers have seen us receive the Fair Trade
which the EU and US governments then buy and premium, they have tried to copy what we are doing
'dump' on poorer countries in the form of food aid. and the quality is getting better.
This then reduces the price of food actually produced
in those countries, and puts the livelihoods of local Mr Difasi Namisi, a Gumutindo farmer
farmers at risk.
Fair Trade
One way of making trade fairer is for producers in
poorer countries to join together to produce goods for
the Fair Trade market. Fair Trade in the UK started as
a way of helping farmers in poorer countries to improve
their lives. Goods produced through Fair Trade have
a logo that many people now recognise. Through Fair
Trade, producers are paid an agreed minimum price -
plus a premium to be invested in projects that benefit
them and their communities.
Gumutindo Coffee Co-operative,
Uganda
Uganda's biggest export crop is coffee. It was worth
US$350 million in 2007. Most of the coffee beans are
grown by small farmers, and an increasing number of YOUR QUESTIONS
them now grow coffee for the Fair Trade market. One 1 Explain these terms and add them to your dictionify of key terms
example is the Gumutindo Coffee Co-operative in
for this chapter: tariffs, quotas, free trade, trading groups, World
eastern Uganda. Here, 3000 farmers - 91% of whom Trade Organization, Fair Trade.
depend on coffee for their main income - produce 2 a In pairs, discuss the advantages for a country like the UK of
coffee beans, which undergo primary processing on
being a member of the EU.
the farms themselves. This involves processing the
b Are there any disadvantages?
ripe red coffee cherries by removing the skin and pulp
and drying the bean. Secondary processing (milling) 3 Still in your pairs:
is done at a nearby warehouse. The beans are then a Draw a spider diagram to show how trade helps to keep
packed for export, leaving the final roasting to be done countries poor.
at their destination. b Draw a second spider diagram to show how trade can be made -
fairer to allow countries to close the development gap. 46.11

240
241