Trade,
Development, and Poverty: Perspective from China
June, 2006
By Dr.He Yin
The Chinese government initiated trade liberalization
and domestic economic reform in the late 1970s, when China’s
economy performed far behind its potential and more than thirty
percent (two hundred and fifty million) of its rural population
lived in absolute poverty. Economic reform in China has been systematic
over all areas and economic sectors, while its trade liberalization
has been relatively limited to the manufacturing sector and urban
areas.
Isolation from the international market prevented
the agricultural sector from enjoying the advanced technology,
specialization in production, and economies of scale. Fortunately,
the domestic economic reform in the agricultural sector inspired
farmers. The total output of agricultural products grew by more
than six times from 1978 to 2005 without corresponding improvement
in the technology. Though the per capita income increased dramatically
for rural residents, the income gap between rural and urban residents
has almost tripled during the past twenty-five years, which has
led to an upsurge of labour migration from the rural to the urban
areas. This migration reduced the unemployment rate in the rural
areas and brought an opportunity for the rural residents to enjoy
the gains from trade liberalization in the manufacturing sector
and urban areas. However, because most of the migrants were young
males and the advanced technology and high quality education were
difficult to obtain, the agricultural sector and the rural areas
may lose the ability of sustainable growth in the long run.
Fortunately, the trade liberalization in China
focused on export-oriented labor-intensive products in the manufacturing
sector, which provided the opportunity to absorb the rural surplus
workers, reduce the urban unemployment pressure, and accelerate
the income and living standards of the Chinese residents. In addition,
the trade liberalization also introduced intense competition into
the domestic market, as well as more advanced technology, more
international experience, mature management skills, and a broader
market. Moreover, during this period a large number of the urban
population exited the manufacturing sector and entered the service
sector. Although the service sector has also been relatively isolated,
the gigantic improvement of the living standards helped the sector
enjoy great progress and promised its employees a significant
enhancement of their income. However, the segmentation of the
financial sector in China from the international financial market
impeded its corresponding development within the national economy.
The inefficiency of the financial system has progressively been
becoming one of the biggest obstacles to further development.
In summary, trade liberalization not only opened
the market to China but it has also brought large improvement
in technology and management skills. Workers in the manufacturing
sector directly benefited from trade liberalization with a huge
increase in their income. In comparison, the agricultural and
service sectors stayed relatively closed and less productive.
Luckily, the flourishing manufacturing industry not only directly
contributed to the GDP but also helped in the construction and
development of other sectors. Higher income and better living
standards also spilled over from employees in the manufacturing
sector and urban areas to those in other sectors and rural areas.
As a result, China ascended from the 32nd to be the 3rd largest
country in international trade. Its GDP increased by more than
five times, per capita income increased by about four times, and
more than 200 million people have been relieved from absolute
poverty in the past twenty-five years. China’s fast economic
growth, largely driven by its trade liberalization, became, and
will be, sustainable due to better infrastructure, more transparent
institutions, and improvement of all types of human capital accumulation.
However, trade liberalization in China might need to be expanded
in a broader scope in order to benefit all economic sectors and
geographic regions more evenly and efficiently.
MORE
POLITICAL WILL IN COTTON SECTOR
June 09, 2006, Lusaka
The Organisation Development and Community Management
Trust (ODCMT) would like to thank and support the Ministry of
Agriculture and Corporatives in the fight against exploitation
in the cotton sector. The organization has since 2003 been campaigning
against the low prices offered to small-scale cotton farmers by
multinational companies. It is encouraging that the ministry has
finally come to the long awaited aid of a small-scale cotton farmer.
This is a clear manifestation of political will and a representation
of the importance that government attaches to the agriculture
sector and its citizens.
The ODCMT is hereby appealing to members of parliament
and other political leaders to take advantage of the suspension
of cotton trading to finally show their support and concern for
the people who voted them into power. Cotton farmers have been
complaining of foul play in the sector for so long that one would
wonder why their leaders have given them a deaf ear. For a district
that depends on cotton, developing in that area should be based
around the crop and must be a priority in the manifesto of a political
leader and if this is the case, what happens to these leaders
the moment they are sworn into power. Leaders need to show their
passion, interest and dedication to protect the people they represent
by ensuring that the people are not exploited by investors aiming
the make a profit at their expense. The will then show the relevance
of the leaders to their people.
The cotton farmers have complained of exploitation
by multinational companies who have been using them (small-scale
farmers) as cheap labour. Farmers have complained about among
other issues; the lack of adequate farmer representation, low
producer prices, unclear grading and weighing systems, unclear
and biased contract terms which are set by one party (ginners),
non provision of protective clothing and the high costs of inputs.
The immediate suspension of buying and selling
of cotton announced by the minister of Agriculture is a positive
move by government and will facilitate a platform for dialogue
between ginners and the cotton farmers. This initiative should
be supported not only by our political leaders but by all well-meaning
Zambians.
The ODCMT would like to appeal to government
to extend such measures to other sectors of the economy and ensure
that similar cases are brought to light and sorted out. There
is a lot of exploitation of citizens by foreign investors who
want to make profits at the expense of poor people’s sweat.
The ODCMT believe that investment should be a way to lift people
out of poverty by creating jobs, development of infrastructure
and social services but the common practice in today’s investment
setup is that the majority of the poor are dragged deeper into
poverty through exploitative practices.
Therefore, it is important that people’s
rights are respected, protected and provided for. Instead of reducing
poverty, investment in Zambia has shown little meaning to the
economy of the country because of the ruthless monopoly in some
sectors by foreign investors. The cotton sector has potential
to lift millions of people, particularly small scale farmers and
their families out of poverty but this potential is being hampered
by unfair trade practices and exploitation through offering of
low prices by multinational companies. It is sad that the companies
have in the shortest period of time grown bug but small-scale
cotton farmers have continued to wallow in poverty.
The ODCMT supports the stance by government to
find alternative market for this year’s cotton if the ginners
will not agree to buy the cotton at a fair price. Zambia needs
investment, but not at the expense of the people.
Irene Banda
Acting Executive Director
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