THE most common relationship between countries is trade, mostly necessitated by the fact that no single country has absolute comparative advantage on the production of everything it needed.
To get all you want, there have to be a certain measure of dependency on “neighbour-country.” But for two countries to trade effectively, each must be able to produce commodities that the other will surely need, this will also smoothen other areas of bilateral pacts.
However, this has not paid off effectively with respect to developing and underdeveloped countries’ bargain. Beginning from Nigeria, which is endowed with rich agricultural produce and crude oil reserve, beside other mineral resources, to Benin, Mali and Cameroun that are endowed with arable land for cultivating cotton and abundant reserve of productive land for plantain plantation, the story is the same.
By the trade relations, Nigeria, Benin and Mali would supply agricultural produce like cotton, wheat, grain and oil to developed nations in exchange for their durable goods like cars, trucks, machines, electronics, among others. The imbalance has started.
First, with the value of each country’s product offerings and in this case, it is skewed against the underdeveloped countries. Yet, this is still not the crux of the matter. With utmost dismay, the developed nations have been shortchanging developing and underdeveloped with their “foreign trade magic.”
The tactics, whether wittingly or unwittingly are manifest in their agricultural policies; subsidy regime for certain agricultural produce; administrative policy; and activities through world financial institutions. Their agricultural policy ensures that base line prices are in force. From Europe to America, there is agricultural policy, which ensures that prices are set for farm produce.
For instance, a farmer has the guarantee to sell for a certain price and when unable to sell off the quantity produced, government will be ready to absorb the excess capacity. We read it in papers and watch it on the news about the American grain reserve, even though it is usually deployed as aides to starving nations in times of disaster.
With the coming into effect of this economic measure, nations that have comparative advantages in agricultural produce could not exploit this foreign trade window to earn hard currencies nor gainfully engaged their active labour force within the sector.
The enormous potential for expansion and engaging people has been hampered. The average cost of producing cotton in United States of America is beyond what cotton sells in the international market. But the American government has been heavily subsidising cotton farmers in the country, although the farmers in return, have a way of influencing their government through their association.
The excess produce from U.S. is sold in foreign countries – mostly developing nations, even at below cost price (dumping strategy).
The policy effect is that nations having comparative advantage in production of cotton like Mali and Benin, could not compete with the economic strategy. Those nations that have lost out – Benin and Mali are now centre for smuggling of foreign goods and more recently a terrorist haven.
Citizens of these nations earn their economic rent, interest or profit from smuggling, dealing on foreign goods that they can produce or serving a purpose in religious fundamentalism.
Thus, U.S. farmers are reaping off economic gains of the underdeveloped nations, whereas their counterpart wallows in abject poverty due to consequent dumping.
The trade policy, where a nation makes it difficult or almost impossible for foreign goods to cross its borders, is consistently pursued by the developed countries at the detriment of the underdeveloped ones.
Example of a nation principally using this policy is Japan. Any export to this country will be subjected to 100 per cent check. This means that if you have packaged your produce in a consumer ready container, the Japanese Customs would have to unwrap each container for check.
The effect of this policy is extra cost for repackaging, together with necessary duties and time wastage. Finally, the product price will become uncompetitive at the Japanese market.
Another challenge to beset the export is the tying-in arrangement that the Japanese goods distribution networks has with their indigenous firms and where the exporter cannot break into this channel, the goods will only reach few people.
Consequently, it is either one forgets Japanese market completely or enter through foreign direct investment to be producing goods right there in the country. Some of the world’s financial institutions are built to provide credit facility at a reasonable coupon rate for constructing infrastructure like the World Bank, International Monetary Fund, among others.
But to be at the helm of affairs of these global institutions, you have to be sponsored by the “god-father” nations – U.S. and Europe. If any developing nations must borrow from these bodies, the prime condition must be met – “maintain an open door trade policy with other nation.”
The implication has always been the exposure of the indigenous and fragile industries to unequal competition with existing, thriving large conglomerates from developed world and at the end, the indigenous firms would have wound-up with large workers churned out to the labour market again.
Also, at the end of the lending transactions, the little nation would be left with huge financial debt at a cut-throat interest rates.
Nigeria’s way forward, as one of the recipients of the developed nations’ dossiers, are to target and develop the local market, while holistically implementing its agricultural policy to empower farmers, thereby making the sector attractive to the teaming large active workforce.
There should be a deliberate implementation of efficient and effective anti-dumping measures to protect our industries and labour force.
Time to lament over parlous infrastructure should be substituted for sustainable investment to facelift prospects, raise electricity generation level and ensure effective transportation system to enable our goods get to the market at reasonable cost price.
It will also be a time for value re-orientation – changing the consumption pattern of average Nigerian, which seems to tend towards preference for foreign goods to home made goods. We would need to improve on our import contents from more of consumption assets to investment assets.
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