| A WTO protest march in Bangkok. (Reuters)
Cancun (Mexico), Sept. 9: Chew on a bar of chocolate — and you might just as well chew on some of the most intractable trade issues that are up for discussion here at the Cancun round.
Why chocolate' For starters, the story of chocolate began more than 1,500 years ago when the Mayan civilisation discovered cocoa right here in the Yucatan peninsula of Mexico.
The Mayans gave the world chocolate — but they have neither gained recognition for it nor have their descendants any control of the burgeoning world trade in chocolate.
In one sense, the bitter-sweet world of the chocolate trade is a sad metaphor for all that’s wrong with the world trade system that remains heavily skewed in favour of the developed western world.
The Mayans were the world’s first producers of cocoa which, when mixed with sugar, gave us chocolate. The Aztecs, who controlled the northern territories of today’s Mexico, bought the stuff from the Mayans and in turn sold it to the Spanish.
The Spanish had a huge monopoly in the chocolate business about a thousand years ago — but then got greedy. They slapped a host of punitive trade and tariff barriers on products they imported from their colonies. Result: chocolate was priced out of the reach of the average Spanish consumer.
Enter Britain and France which followed a free trade system that stoked demand all over Europe. They did something smart — they carted the cocoa beans to the territories they controlled in western Africa.
Exit Spain. Enter British and French multinationals which imported both cocoa and sugar from west Africa to make chocolate at home.
Then they widened the sources of sugar — obtaining it from Mexico, Brazil and Cuba in South America, Mauritius and South Africa in Africa, India and Australia in the East and Kazakhstan in the north.
What all this meant was that the poor farmers in Africa, South America and India did all the hard work — they grew sugar and cocoa and almost every other ingredient that goes into a bar of chocolate — but couldn’t add value and put together their own bar of Mars, Toblerone or Cadbury. Result: the western nations raked in the moolah even as the actual producers of cocoa and sugar forked out a fortune just to chomp on a luxury item.
A few heavy hitters for free trade in the world economy — notably the London-based International Policy Network (IPN) and its associates around the world, including Delhi-based Liberty Institute — have descended on Cancun to tell the world about the sordid story of chocolate and the trade-distorting effects of tariffs and subsidies that have held the world hostage to the shenanigans of the western multinationals.
“Chocolate trade was born free but everywhere it is in chains. It is time to free trade in chocolate and all other products,” says Bibek Debroy who has joined common cause with IPN to spread the virtues of free trade for the world — in chocolates and a host of other products.
Says Kendra Okonski, project director of IPN: “Western Africa produces two-thirds of the world’s cocoa production today. Yet the poor farmers in the region get next to nothing out of the hugely profitable world of chocolates.”
Ghana, Nigeria, Brazil and Colombia produce 90 per cent of the world’s cocoa but only 4 per cent of chocolate. Distortionary taxes on imports of processed chocolates play a role in perpetuating this situation: the EU tariff on cocoa imports is zero per cent; but the tariff on processed chocolate imports is 18 per cent. “With profit margins of 10 per cent or less, these tariffs block the development of higher value added chocolate production in poor countries,” says the IPN.
The trade distorting effects of cocoa business extends also to sugar and milk — two of the key ingredients in chocolates.
The direct cost of protecting the US sugar industry from competition is around $2 billion. Each of the industry’s 2,200 jobs cost nearly $1 million a year to protect.
Subsidies and protectionism to the US dairy industry protect 2,300 jobs at a cost of $500,000 per job per year, claims IPN.
Says IPN director Julian Morris: “The most sickening part of all this is that each dairy cow in Europe receives a subsidy of $2.50 per day. Meanwhile, over 2 billion people in developing countries subsist on less than $2 a day. You are better off being a cow in Europe than a person in the non-western world.”
Chew on that the next time you bite into a chocolate — and understand why the trade negotiations in the heart of what was once the Mayan civilisation is so important for a truly free world.