Causes of Poverty in Panama
To understand poverty in Panama, the economic dichotomy between the country’s urban and rural regions must be brought to attention. Many residents of Panama’s larger cities currently experience the monetary benefits of one of the world’s fastest-growing economies. This is largely due to international trade being introduced through the newly expanded Panama Canal. However, many Panamanians living away from these cities experience a vastly different economic reality. Poor infrastructure and little opportunity for agricultural growth constitute the primary reasons for the causes of poverty in Panama.

The country’s poor infrastructure is one of its main causes of poverty. Per a New York University report, roads “remain poor in rural parts of the country.” The report goes on to state that, “in total, only about 34 percent of the roads are paved”.

Roads that are unpaved and dangerous to use make it difficult for rural farmers to transport their goods to market. In turn, this means that many of these families have a much more difficult time selling goods and services to a broader market than people who have access to proper infrastructure. This has led to a crisis in Panamanian agricultural output, which is now a little over two percent of the country’s GDP, a low number for a country that has heavily relied on this form of trade in the past. This is one of the causes of poverty in Panama and is found mainly in the country’s rural areas in which agriculture is the primary source of livelihood.

Drought is another one of the main causes of poverty in Panama. Much of the time, growing food in rural Panama is a matter of life or death and a necessity to feed one’s family. Rural Panamanians not only sell agricultural goods, they often sustain themselves from what they grow. This is a practice called subsistence farming — feeding oneself entirely from the food one produces personally. Unfortunately, much of Central America has been experiencing a drought since 2014, leading to a decrease in food production.

“The lack of rain since the middle of 2014 has resulted in the loss of staple grain crops and death of thousands of cattle in El Salvador, Guatemala, Honduras and, to a lesser extent, in areas of Nicaragua, Costa Rica and Panama,” states a report by the U.N.‘s Office for the Coordination of Humanitarian Affairs.

The World Bank has cited that a proper educational system installed in rural Panama could diminish much of its poverty. The World Bank report states that families led by a member who has received some level of education are less likely to be poor than families that are not. Educational systems brought to rural Panama have the potential to increase social mobility for the uneducated. Perhaps programs such as this could not only decrease the financial gap between urban and rural Panama but also reduce poverty in Panama in general.

Michael Carmack

Between Saudi Arabia and Iraq lies the country of Kuwait. Kuwait has the sixth highest GDP per capita in the world and has a thriving industrial economy. With the country being in such a great position to help, what is it doing to tackle global poverty in emerging markets?

On July 1, Kuwait reaffirmed its support for the United Nations Industrial Development Organization (UNIDO), which encourages globalization, cooperation among nations and environmental sustainability. Acting director-general of Kuwait’s Public Authority for Industry (PAI) Abdulkarim Taqui addressed the 45th session of the UNIDO’s Industrial Development Board (IDB).

According to the Arab Times, Taqui’s address included asking UNIDO to do more in stopping the negative outcomes resulting from liberating the international trade and “dumping.” Dumping in international trade is when a country’s businesses lower the sales price of its exports to gain an unfair market share in the consuming country. Taqui proposes to create systems that can make sure pricing stays fair in both the exported country and country of origin to combat dumping in international trade.

Dumping seems to be a severe problem according to Taqui, as he goes on to say “The UNIDO must set a host of projects and programs that are likely to develop practical and realistic solutions to remedy such practices that have been causing colossal damage to the industrial sector in many countries.”

This instance isn’t the first time that Kuwait and the UNIDO have teamed up together. The Public Authority for Industry and the UNIDO have started a project that will increase the export competitiveness of small Kuwaiti companies (SMEs) from the chemicals, rubber and plastic sectors. This project will hopefully counter dumping in international trade.

Taqui stresses that Kuwait will continue to cooperate with the United Nations and encourages other nations to not pull out of the UNIDO. He says that organizations like the UNIDO are necessary in maintaining a balanced world economy, and social stability.

When it comes to solving complex issues related to lifting people out of squalor, Kuwait seems to be on top of its game, without even taking center stage in the fight against global poverty.

Vicente Vera

Photo: Flickr

The Trans-Pacific Trade Partnership, Patents, and the Price of Medicine
The Office of the United States Trade Representative hails the prospective Trans-Pacific Trade Partnership as a way to “[level] the playing field for American workers & American businesses” through a set of trade agreements between 12 different countries. The deal has been drafted, but not yet ratified.

At least six of the participant countries — including the United States and Japan, in order for the group to meet economic output requirements — must agree to the deal by February 2018 for the TPP to become a reality. Other potential participants include Malaysia, Vietnam, Singapore, Brunei, Australia, New Zealand, Canada, Mexico, Peru and Chile.

Negotiations regarding the TPP have been in progress for more than 10 years, and the goal of the TPP is to lower trade barriers and synchronize trade regulations between participant countries. The deal would affect 18,000 tariffs, most notably eliminating all textile and clothing tariffs and lowering tariffs on agricultural and industrial products. However, not all of the changes in tariffs would take place immediately following ratification.

The USTR advertises that the TPP would protect workers’ rights and the environment, set food safety standards, and maintain the openness of the Internet. However, there is much controversy surrounding the agreement, particularly as it relates to the price of medicine in Pacific Rim countries.

Doctors Without Borders, for one, calls the Trans-Pacific Trade Partnership “a bad deal for medicine,” because less-expensive generic drugs would be held off the market for a longer period of time. Drug patents would be extended, and the generic drug approval process would become more difficult for biologic drugs, in particular.

Pharmaceutical companies like Gilead and Bristol-Myers Squibb have voluntarily made agreements with generic drug manufacturers, to allow their currently patent-protected hepatitis C medications to be produced and sold more cheaply in low-income countries.

However, middle-income countries are excluded from these company-led initiatives, even though three-quarters of hepatitis C patients live in middle-income countries like the TPP participant, Malaysia. The extension of drug patents through the TPP could thus prevent patients in countries already excluded from such agreements with pharmaceutical companies, from accessing affordable medications for a longer period of time.

The USTR website maintains that the TPP would lower the cost of medications by eliminating tariffs. However, it does not address patents on pharmaceutical products or the effect that these patents have on the price of medicine in Pacific Rim countries.

The U.S. Congress can only ratify or reject the deal, in its current state, because the deal has been “fast-tracked.” Even so, the Trans-Pacific Trade Partnership has not yet been ratified, so its specifications can be re-negotiated with participant countries. Doctors Without Borders encourages constituents to contact Congress members and the president to request that the deal is not ratified until its patent and intellectual property rules for pharmaceuticals are revised.

Madeline Reding

Photo: Flickr

The end of 2015 has proven to be the time to shift focus. Worldwide, countries have shifted from the Millenium Development Goals (MDGs) to the Sustainable Development Goals (SDGs). On a smaller scale, Australia is shifting focus in its aid programs.

Aid for Trade was launched in 2014 with a two-year budget of $823 million. Its main agenda is based on the idea that “no country has achieved high and lasting growth without participating in international trade.”

According to the Australian Government’s Department of Foreign Affairs and Trade (DFAT), “aid for trade supports the aid program’s key objectives of reducing poverty and lifting living standards through sustainable economic growth.”

The Aid for Trade investment from 2014-15 was used to build productive capacity in agriculture, economic infrastructure and trade policy and regulations.

According to the EUROPA, through continued innovations in how aid is tackled, various governments and organizations have found that trade is able to:

  • Boost development and reduce poverty
  • Enhance competition
  • Open access to new markets and new materials
  • Encourage innovation
  • Expand business opportunities and removes barriers to new markets
  • Expand choice and lowers prices for consumers
  • Cut government spending
  • Strengthen ties between nations
  • Create new jobs

As 2015 comes to an end, Australia’s Aid for Trade program moves into a new year of helping developing countries boost their economies through trade. DFAT estimates its budget to be $698 million for 2016.

When considering what to expect from the new year, one must look to the past. Over the few years of the aid for trade program, more women have been empowered, trade has been increased, infrastructure and finances have been improved, along with health and agriculture.

One example of an Australia Aid for Trade success story from DFAT states that, “Australia worked with the World Bank and other donors to help Lao PDR undertake the necessary trade reforms to join and benefit from WTO membership. As part of the reforms, Laos reduced the clearance times for goods by non-customs agencies by 42 percent.”

According to DFAT, “Aid for Trade supports developing countries’ efforts to better integrate into and benefit from the global rules-based trading system, implement domestic reform, and make a real economic impact on the lives of their citizens.”

Katherine Martin

Sources: 1, Europa, 2
Photo: Wikimedia

In the interest of ending poverty, much attention has been focused on trade. Trade is supposed to make everyone better off and allow people to utilize their comparative advantage, selling goods to others and buying better goods for cheaper. What this abstraction looks like in real life is a messy bundle of tariffs, quotas, free trade zones and heaps of rules and regulations. This begs the question, how is an international trade regime a public good and what should it really look like?

Borrowing a page from game theory will help us answer this question. Imagine the government of country A imposing barriers to trade on country B. Country A may do this for a number of reasons, including pressure from their domestic private sector. Their action will impose costs on exporters and manufacturers in country B, which country A has little reason to take into account. Their decision to under-value the cost of their trade barriers takes the form of an externality and results in an inefficient international trade regime.

Therefore a case can be made for an international institution aimed at easing the flow of trade between countries to make everyone better off. This would be achieved by lowering tariff barriers, increasing the predictability of tariff rates, which give exporters a clearer view of how their products can compete in the international market, and providing a platform for member countries to discuss trade-related issues and negotiate agreements. Making trade easier would make people better off.

Being a member of this institution would offer network externalities, where one user can make the good more valuable for others, whose benefits would grow with the number of members, making it desirable to have all countries participate in the trade regime.

The most prominent figure in international trade is the World Trade Organization (WTO), which is responsible for correcting the externalities and making the benefits of trade available to all.

The level of trade has dramatically increased since the introduction of the WTO, but problems have arisen as well.

The way that many of these agreements have played out have not necessarily benefited the poorest countries. One reason is that “institutional adjustments related to trade are costly.” Member nations must be compliant with WTO rules and regulations, and because these regulations are generally the norm for developed countries, the costs of implementation are borne by the countries that are less able to afford them.

For example, the United Nations uses an estimate of $150 million for a typical developing country to meet requirements in just three of several WTO agreements, “customs valuation, health and phytosanitary measures and intellectual property rights.” $150 million can be equivalent to an entire year’s development budget for some of the least developed countries. Meeting the WTO requirements implies reforming the tax structure and social safety nets to comply with the rules for intellectual property, health measures and subsidies, among others.

Should developing nations opt out of the WTO, foregoing the expensive compliance costs but also the benefits of belonging to a market-opening, trade-facilitating institution? Before answering, a look at how the WTO can fix these problems is in order.

First, a broader evaluation of the fairness of the trade regime is required. Three aspects, identified by the United Nations Industrial Development Organization, include neutrality, the net benefit for all and the maximin rule. These aspects translate to ensuring that “each country should be at least as well off with the trade regime as without it”, all members need to see a benefit from the regime and developing countries need to experience increasing benefits from the system. Retooling the WTO according to these fairness aspects would benefit developing nations and boost the effectiveness of the international trade regime overall.

In addition, financial and technical support to help developing countries meet the exacting WTO requirements is needed. The WTO has recognized its failure and is dedicating more energy to building capacity and helping developing nations meet these requirements with little cost. Recently, Germany donated a little more than $1 million dollars to a fund dedicated to this purpose.

With a number of global trade deals on the table, including the massive Trans-Pacific Partnership and Transatlantic Trade Investment Partnership, a deeper look into the workings of the international trade regime and what efforts can be levied to make it work better can have a large effect on global poverty rates.

John Wachter

Sources: Dartmouth University, United Nations Industrial Development Organization, World Trade Organization 1, World Trade Organization 2
Photo: Georgetown Law

The U.S. Agency for International Development operates a program in Pakistan focused on increasing the participation of women in international trade. The program recently celebrated its second crop of graduates.

According to the agency, the Women in Trade (WIT) program is part of USAID’s PakistanTrade Project, which represents a commitment to Pakistan to help boost economic growth, education and other areas to help ensure a future of stability and prosperity for the country. WIT is a mentorship and management training program that launched in 2011.

Through WIT women trainees (both graduates and post graduates) have access to three months of management training experience in the private sector with companies that are involved in importing and exporting goods to and from Pakistan. WIT gives the women trainees a monthly stipend for the training.

According to USAID research released in March 2011, women represented just 10 percent of the staff hired by private sector, international trade focused firms in Pakistan. Women’s participation rates in Pakistan’s formal economy are low in general. An estimated fewer than one third of the 31 million women in Pakistan who are of working age are considered economically active. And more than half of the women who are part of the workforce are either unpaid family helpers or low-skilled workers.

Through WIT trainee participants have worked with large international firms, including Target and Li $ Fung (a major apparel supplier). One of WIT’s goals is to help more women explore careers in international trade sourcing, marketing, product design, product development and supply chain management.

WIT launched as a one year program in 2011 with 17 graduates. For the second round of the program WIT placed 57 trainees, 48 of whom completed the full three months of their training by the end of 2012. Thirty-three percent of the WIT trainees in the 2012 cohort have also been fully employed as a result of their participation in the program.

– Liza Casabona

Source: USAID Business Recorder
Photo: Gender Concerns

Does Globalization Help or Hurt Women?

Some say globalization has excluded or even impoverished women due to disproportionate job loss from an influx of foreign goods into domestic markets. Others say that living standards have improved for women due to the creation of new jobs and economic growth in second and third-world nations. The discussion is nuanced, and there are both improvements and impediments to women’s equality:

Pro-trade Research

  • The World Bank’s 2012 World Development Report (WDR 2012) finds an increase in international trade has tended to increase women’s employment.
  • The value of trade growth goes beyond just job creation. Employment allows greater autonomy for women working outside the home, empowering them with greater decision-making authority – a key shift in development for the woman, and for the next generation.
  • The arrival of garment jobs in Bangladesh increased the probability of a five-year-old girl attending school. Either due to parental awareness to prepare their daughter for skilled work later, or simply because they had additional income.
  • Greater trade has increased job opportunities for women in many countries. This is especially true for manufacturing and service exports, characterized by labor-intensive production.
  • In Korea, the number of women employed in manufacturing grew from 6% in 1970 to around 30% by the early 1990s.
  • In Delhi and Mumbai, call centers now employ more than 1 million people, mostly women (WDR 2012).
  • In Bangladesh, female garment workers have higher self-esteem than other female workers in non-export industries; some even take employment against their family’s wishes.
  • In one study, female garment workers in Bangladesh marry and give birth at a later age.

Trade-inequality Research

  • There is still a wide disparity in the women-to-men wage gap for the same job.
  • In Korea, even with high labor demands, the women-men wage gap narrowed only marginally between 1975 and 1990 (Seguino, 1997).
  • Women are subject to more job insecurity. In Turkey, gross job reallocation is larger for women than men, showing women are subject to more volatile employment status. In Chile the gross job reallocation rates are more than twice as high for women than men.
  • A systemic issue is that greater employment segregation emerges as new industries and companies expand and increase in value. In East Asia, as countries have moved to more skill-intensive manufacturing, there has been a decline in the female manufacturing workforce. Between 1980 and 2008, women’s share of manufacturing employment has declined from 50% to 37% in Chinese Taipei, and from 39% to 32% in the Republic of Korea (Berik, 2008; ILO, 2011).
  • In agriculture, women’s weaker land rights and limited access to productive inputs can limit their opportunities to benefit from greater agricultural trade.
  • While gender gaps in schooling have largely closed, association in different fields of study, and thus different career opportunities, continues to be an issue. In higher education, women are more likely to choose fields related to education and health, but not science, engineering, or construction (WDR 2012).
  • In severely disadvantaged populations, such as remote rural areas, girls still tend to drop out of school more often than boys.
  • Companies under-invest in training female employees, reflecting the view that men are less likely to leave paid work to fulfill domestic responsibilities (Seguino and Growth 2006).
  • In Afghanistan, as one example, women’s mobility is severely limited because they are not allowed to interact with men outside the family, or work outside the home without permission from a male family member, or to own their own land.
Does globalization help or hurt women? It seems the expansion of global markets and trade is quantitatively lifting more women out of poverty and providing new access to opportunities. The impediments for women are indicative of historic sexism, and potentially greater globalization will help eradicate antiquated traditions. Read the full article for a discussion on how to turn the trend toward greater equality – all the time.
– Mary Purcell

Source: ITC
Photo: UFA.lookmart

Can Aid For Trade Reduce Poverty?In 2005, the World Trade Organization (WTO) launched its Aid for Trade initiative, which works to reduce poverty in developing countries through trade. In most developing countries, supply-side and trade-related infrastructure problems hinder the ability to participate in international trade. The Aid for Trade initiative works to educate governments on the potential for trade to work towards development.

The World Trade Organization has managed to raise $200 billion worth of funding for the initiative that will go towards resource mobilization, the mainstreaming of trade into development plans and programs, regional trade integration, private-sector development, and the monitoring and evaluation of Aid for Trade. Emphasis is placed on gathering support and resources to counter constraints that deter trade in developing countries. Aid for Trade works on the assumption that “a rising tide floats all boats,” meaning that as national wealth increases, the poor will profit as well.

Some NGOs, however, question the viability of this method in reducing poverty. A study was commissioned by Traidcraft and the Catholic Agency for Overseas Development to look into the real impacts of these projects on the poor. Saana Consulting reported that most of the funding had gone to middle-income rather than low-income countries. They had also found that the program had little impact on the poor, calling the assumption that it will have an effect “a leap of faith.”

Donors have admitted that impacts are indeed difficult to track. Adaeze Igboemeka, head of Aid for Trade at the UK Department for International Development, concedes that there is indeed a lack of information, as the programs impacts on poverty are seemingly indirect.“The assumption,” Igboemeka said, “is – and there is a lot of evidence to support it – that if a country is able to trade more, it will grow, and that will create jobs and increase incomes and lead to poverty reduction.”

The consensus seems to be that, generally, trade is good. However, for now, there is not enough information and time to accurately project its impact on poverty reduction.

– Rafael Panlilio

Sources: The GuardianWTO