Trade On European Tomatoes And Chickens

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Trade On European Tomatoes And Chickens

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Discuss About The Trade On European Tomatoes And Chickens?

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Introduction

Ethics refer to the calculated use of reasoning to elucidate experience in order to valuable rules to govern behaviour; they are generally concerned with the nature and justification of right actions (Kline, 2010). Business ethics are the values, principles and norms originating from individuals, organisations or legal systems that govern behaviour within a business; they set boundaries and cultivate beliefs on acceptable behaviour within the particular business community (Ferrell, et al., 2016). All businesses, including international enterprises, require a foundation in ethical values in order to function effectively and efficiently. These values are evident in how an organisation concerns itself with human rights, environmental sustainability and justice in all its endeavours. International business practices are driven by trade liberalisation and globalisation. The main concern with trade liberalisation is market access; that is the exchange of market access to each country’s exports (Hillman, 2008).
However, trade liberalisation has proved detrimental for many developing economies, Ghana being one of them (Khor, 2010). As a member of the World Trade Organisation (WTO, 2017), the country is obligated to open up its borders to free trade (WTO, 2017); over the years this has led to a rise in imports as subsidies offered by some of its trading partner lead to the availability of cheaper goods. This in turn has led Ghana to consider raising tariffs in order to ensure the security of its local producers. The following essay aims to look specifically into the impact of EU subsidies on agricultural produce, particularly tomatoes and chicken, and the ethical issues arising from Ghana’s efforts to save its local trade by raising tariffs. The essay will provide background into the problem identifying the ethical and legal issues arising and subsequently provide an ethical analysis of these issues.

Background into Ghana’s raising of tariffs on European tomatoes and poultry
The International Monetary Fund (IMF) and the World Bank have been credited with the rising decline in agriculture in most developing countries (Ismi, 2004). In order to gain financing for development, countries are advised or required to; do away with marketing boards and guaranteed prices to farmers, eliminate subsidies such as those on fertilizer and reduce tariffs on imports (Khor, 2010). This has led to increased wealth for developed nations which can afford to offer subsidies to their farmers while developing countries wallow in poverty and unemployment as consumers opt for cheaper imported goods (Tion, 2014). Ghana’s agricultural sector, particularly poultry farming and tomato farming has been adversely affected by these financing requirements.
Prior to joining the band wagon on trade liberalisation, Ghana was recognised as a leading country on self-sufficiency in Africa. The government through marketing, and subsidies to farmers had embarked on a nationwide campaign to boost the agricultural sector. Liberalisation in the late 80s and early 90s saw a reversal of these policies; tariffs on agricultural products such as rice, poultry and tomatoes were reduced drastically (Issah, 2007). The elimination of the fertiliser subsidy and the phasing out of the marketing support saw an increase in production costs for local farmers. The EU on the other hand had, and still has, subsidies to its farmers; as such exports from Ghana to the EU would still be substantially more costly. Additionally, the subsidies allow for low production costs and as such European tomatoes and poultry parts can be imported and sold at cheaper prices in Ghana (Boonstra, 2007).
Between 1993 and 2003, imports in chicken parts were recorded to have risen by 144 percent; this was due to the aforementioned withdrawal of government support and the heavy subsidisation of poultry farming in Europe. Similarly, the privatisation campaign saw the shutdown of tomato-canning factories, in addition to the reduced tariffs a gap was created which allowed subsidised European tomato products to enter the Ghanaian market (Khor, 2010). For a country that relies heavily on agriculture, as with most developing countries, this effect was crippling on the Ghanaian economy. In an effort to revive its economy and support local trade, the Ghanaian parliament in 2003 sought to increase tariffs on poultry and other European products so as to encourage consumers to buy local goods. The poultry tariff was raised to 40 percent (Clapp & Cohen, 2009); the WTO allows for an increase of up to 99 percent. However, pressure from the IMF and the World Bank led to the suspension of the Act 641 imposing tariffs barely three months after it was introduced by parliament (FAO, 2014). The following discourse will analyse the EU’s subsidisation policies, the WTO requirements and the IMF and World Bank policies on tariffs against ethical theories to determine the ethical issues arising from Ghana’s imposition of tariffs on EU exports.

Ethical issues arising
One of the principles of fair trade is the creation of opportunities for disadvantaged producers (McDonald, 2015); in order to achieve this and other goals, international trade is guided by various ethical theories. The utilitarian principle is that “actions are right in proportion as they tend to promote happiness, wrong as they tend to produce the reverse of happiness” (Mill, 2017). The happiness concerned in this case is of all parties; as such utilitarianism is a theory that aims to promote the maximum good and happiness of all parties involved. In the business context, if a policy or contract promotes the greater good of parties over any other alternative then it is good (Fernando, 2010). From a utilitarian standing, the policies governing trade liberalisation, with particular reference to this case study, have been more disadvantageous than good to the majority of developing countries. The EU subsidy policies have made it difficult for developing countries to compete both internationally and on their own turf. Additionally, the trade restrictions on tariffs which are requirements imposed by the IMF and World Bank only serve to put Ghana at a worse of position. As such the efforts by Ghana to increase tariffs would be for the greater good of its citizens and its economy at large. The IMF and World Bank requirements, with regard to the utilitarian theory are unethical as they do not serve the greater good on Ghana; Ghana’s efforts through increased tariffs will be ethically appropriate as they are within the bounds of international trade and additionally are an effort to give local produce an equal footing.
Deontology provides another ethical approach from which to analyse international trade practices. Deontology concerns itself with the preservation of rights (Ferrell, et al., 2016); an action is ethically and morally right in the deontologist’s view where it fulfils a duty, and preserves or observes the theories of justice, equity and fairness (McDonald, 2015). In the context of international trade, the deontologist school of thought would encompass the consideration of the rights of all parties involved and the observation of equity and fairness in the performance of one’s contractual duties. A deontologist in international trade would observe their duties to refrain from causing harm to distant less privileged strangers (Brock & Moellendorf, 2006). The deontological view point is guided by duties; it is a duty-based approach and the gist is that duties are a moral guide and people should not be treated as a means to an end.
Looking at the situation leading up to Ghana’s attempt to raise tariffs, it was evident that only European countries where benefiting from the current trade agreements on tomatoes and poultry trade. This in essence could be argued as using Ghana as a means to an ends where developed countries got wealthier while the less advantaged developing country suffered economic decline. As such, the existing conditions leading up to Ghana’s tariff raise in 2003 were unethical. The Ghanaian government has a duty, imposed by its social contract with its citizens to protect their interests and secure their economic future, it can be said that from a deontological perspective, the Ghanaian government is morally obligated to do anything in its power for the good of its people. Therefore, by raising tariffs on European tomatoes and poultry so as to protect local trade, the Ghanaian government was exercising its duty which by deontological standards is ethical.

Legal issues arising
In considering the ethical issues arising in this particular case study, it is prudent to consider and analyse the legal issues arising as well. The first issue to consider it the legal consequences of Ghana’s decision as a member of the WTO; that is, what are the legal implications of raising tariffs on imports of European tomatoes and chicken. On joining the WTO, members make commitments to keep their tariffs; the customs they charge on imports from other members states, beneath a certain level. The maximum amount set is known as the bound rate, however the tariffs they apply, applied rates, can be far below this value (WTO, 2014). For Ghana, the bound rate under the WTO agreement is 99 per cent on poultry; as such, the 2003 Act to increase this tariff to 40 per cent fell well within the countries obligations as a member of the WTO. Therefore, on both ethical grounds, guided by deontological philosophy and utilitarianism, Ghana acted legally and ethically in this respect.
In the 1980s, the debt crisis saw developing countries unable to repay their loans; rising oil prices had seen banks coffers filled up with petro-dollars which in turn led to a lending spree in the 1970s (Palaganas, 2014). The World Bank and the IMF developed structural adjustment programmes which it imposed on developing countries in need of loans; these SAPs saw the privatisation of various industries, cuts in government spending, increased interest rates and trade liberalisation (Tion, 2014). It is these programmes imposed on Ghana by the IMF and the World Bank that led to the decline in its local poultry and tomato trade. Trade finance is “the lifeblood of international trade” (Baker & Riddick, 2013). Countries require adequate financing to engage in international trade so as to expand their revenue. For most developing countries, the IMF and the World Bank are a major source of this financing. However, in order to gain this funding they must comply with certain requirements such as trade liberalisation. They are therefore legally bound to ensure their activities promote trade liberalisation and globalisation. This poses a legal issues especially as it is evident that trade liberalisation has had some detrimental effects on African economies. Essentially, Ghana, in attempting to carry out its obligations to its people by raising tariffs to protect its farmers, is faced with the legal challenge of upholding its contractual duty to the IMF and the World Bank; increasing tariffs went against the promotion of trade liberalisation and as such the IMF exerted pressure on the Ghanaian parliament to suspend the Act.
However, the IMF and World Bank policies in Africa have been criticised as promoting the violation of the human right to development and creating an environment that infringes on the right to food (Kingston, et al., 2011). For instance, in the case study in question, restrictions on tariffs leave Ghana without a defence against trade practices that are detrimental to its farmers and local producers. This takes away their right to earn a living and fend for themselves and their family and ultimately their right to develop which in turn leads to a poverty stricken nation.

Conclusion
In considering the Ghana and EU case study, the discourse has identified various ethical and legal issues arising from the scenario. Ethically, the issues to consider were whether the decision was for the ultimate good of all parties and in exercise of a moral duty as imposed by utilitarian and deontological schools of thought. This was considered against Ghana’s legal obligations as a member of the WTO and a debtor to the IMF and World Bank. In essence, Ghana was well within its legal obligations to the WTO as the raised tariff rate was still below the bound rates. However, the decision went against the requirements of the IMF and WTO on trade liberalisation to keep tariffs low. Ethically, however, Ghana’s decision was morally correct, it aimed to promote the happiness of its citizens; which is the primary duty of the state as per the social contract.

Reference list

Baker, K. H. & Riddick, L. A., 2013. International finance: A survey. Oxford: Oxford University Press.
Boonstra, E., 2007. EU tomato exports to Ghana. [Online] Available at: https://www.cmo.nl/epa-uk/pdf/source_2_eu_tomatoes_compete_with_ghanian_tomatoes.pdf [Accessed 22 May 2017].
Brock, G. & Moellendorf, D., 2006. Current debates in global justice. 1st ed. Netherlands: Springer.
Clapp, J. & Cohen, M. J., 2009. The Global Food Crisis: Governance Challenges and Opportunities. s.l.:Wilfrid Laurier University Press.
FAO, 2014. Poultry sector Ghana, Rome: FAO Animal Productions and Health Livestock Country Reviews.
Fernando, A., 2010. Business Ethics and Coporate Governance. s.l.:Pearson Education.
Ferrell, O., Fraendrich, J. & Ferrell, L., 2016. Business Ethics: Ethical Decison Making and Cases. 11th ed. s.l.:Cengage Learning.
Hillman, A., 2008. Trade liberalisation and globalisation. In: C. K. Rowley & F. G. Schneider, eds. Readings in public choice and constitutional political economy. s.l.:Springer, pp. 497-510.
Ismi, A., 2004. Impoverishing a Continent: The World Bank and the IMF in Africa, s.l.: Halifax Initiative Coalition.
Issah, M., 2007. Right to food of tomato and poultry farmers: Report of an investgative mission to Ghana, s.l.: German Watch.
Khor, M., 2010. Trade policy implications for Africa’s Agriculture. Food and Agriculture Organization of the United Nations, pp. 99-107.
Kingston, K. G., Kingston, C. S., Irikana, G. & Dienye, V., 2011. The impacts of the World Bank and IMF Structural Adjustment Programmes on Africa: The case study of Cote D’Ivoire, Senegal, Uganda and Zimbabwe. Sacha Journal of Policy ans Strategic Studies, 1(2), pp. 110-130.
Kline, J. M., 2010. Ethics for international business: Decision making in a global political economy. 2nd ed. New York: Routledge.
McDonald, G., 2015. Business Ethics: A Contemporary Approach. s.l.:Cambridge University Press.
Mill, J. S., 2017. Utilitarianism. s.l.:Coventry House Publishing.
News Rescue, 2009. How IMF-World Bank Structural Adjustment Program (SAP) Destroyed Africa. [Online] Available at: https://newsrescue.com/how-the-imf-world-bank-and-structural-adjustment-programsap-destroyed-africa/#axzz4iV3PNdaC [Accessed 29 May 2017].
Palaganas, E. C., 2014. Health Services or Debt Servicing?: SAPs in the Philippines and the Healthcare Delivery System, Hong Kong: International Nersing Research Congress.
Tion, P. A., 2014. The International Monetary Fund (IMF) and World Bank: An assesment of the role of Africa’s Integration into global economic system. Journal of Humanities and Social Science, 19(II), pp. 09-17.
WTO, 2014. Trade and tariffs: Trade grows as tariffs decline, s.l.: World Trade Orgamisation .
WTO, 2017. Ghana and the WTO. [Online] Available at: https://www.wto.org/english/thewto_e/countries_e/ghana_e.htm [Accessed 29 May 2017].
WTO, 2017. Understanding the WTO: Principles of the trading system. [Online] Available at: https://www.wto.org/english/thewto_e/whatis_e/tif_e/fact2_e.htm [Accessed 29 May 2017].

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