- Posted by Dr. Fernando González-Rojas
- On September 13, 2016
- Brexit, discrimination, NAFTA, SMEs, WTO
In Latin American we grew up accustomed to listening to heated political debates about the social and economic inconveniences of opening our borders to free trade. To our surprise, recent months have seen a similar discourse spread rapidly around the globe, seemingly ignited by the growing distrust towards international trade and integration.
A troubling feature of this newly globalised political debate, however, is that the high political cost of promoting economic integration these days – as signaled by the triumph of the “leave” option during the Brexit referendum – may render holding the title of the free-trade defender completely undesirable. Many people are left questioning whether the role of the free-trade advocate will be reclaimed by the usual suspects, such as the G-7 members, once the political turmoil settles; or whether the traditional roles will soon be inverted, leaving the responsibility to the newly emerging economies such as China, India, South Africa or Chile.
According to renowned economists Joseph E. Stiglitz and Branko Milanovich, the “big winners” of international trade liberalisation in recent decades have been certain developing countries, such as Mexico. Interestingly, instead of helping to promote international trade, this conclusion has lent support to those who oppose free trade. For instance, during his visit to Mexico this August, Donald Trump restated that NAFTA is flawed and that it “has been a far greater benefit to Mexico, than it has been to the United States”. This poses an interesting question: if Mexico and other emerging economies have in relative terms obtained greater benefits from embracing trade liberalisation in recent decades – compared to those collected by several developed countries – should they now be expected to assume the role of free-trade custodians? Perhaps they should. However, it is undeniable that the real cause of people’s dissatisfaction with international trade around the world is not the size of their countries’ economic gains, but rather the distribution and inclusiveness of those benefits.
Trade Pacts to present Chicza’s story to WTO Public Forum, the world
This dissatisfaction probably explains why the World Trade Organization chose the topic of “Inclusive Trade” as the theme of this year’s Public Forum – an annual gathering of government representatives, private sector, NGOs and academia, to discuss the challenges facing our international trading system. During this year’s WTO Public Forum, to be held from 27 to 29 September in Geneva, Trade Pacts will present the inspiring case of Chicza – a Mexican exporter of biodegradable chewing gum that, in our view, constitutes an excellent example of how the rapidly growing distrust towards international trade may be overcome. Following some research, and time spent with the community, our experts in Mexico have watched this small business and a community blossom into a thriving enterprise.
Chicza is a Mexican company owned and operated by Mayan farmers. The farmers export chewing gum they produce from a natural resin, or ‘chicle’, extracted from the sapodilla tree. For centuries, these indigenous communities have harvested chicle – essentially the world’s first chewing gum – but have lived in very precarious conditions.
However, a few years ago, with local government intervention and expert guidance, several cooperatives were formed to produce and export this entirely natural and biodegradable product on a large scale. Today, more than 2000 local farmers, organized into 52 co-ops, export bio chewing gum to Europe and North America, where there is a higher consumer preference for natural and environment-friendly products. Chicza also recently reached the Australian and the Middle-East markets.
Apart from significantly improving the living conditions of many local farmers, the Chicza project has resulted in the reforestation of more than 4000 hectares of arable land from where Chicza farmers can obtain their raw materials. Furthermore, about a third of Chicza’s revenues are devoted to supporting other small local productive projects, such as a group of women who produce natural flour obtained from another rainforest tree called ramón. The business supports other social programs, such as university scholarships for local students, and health and retirement programs for local farmers.
The Chicza case proves that international trade can help bridge divides between SMEs and consumers in international markets. However, the international trading system represents only half of that bridge. The other half needs to be built domestically where infrastructure, financial and strategic support need to be available in order to transform international trade opportunities into a reality. Relatively small players like Chicza can benefit greatly from discovering international markets and learning how to effectively operate in those environments. Their success will depend on their level of awareness regarding the obligations imposed on governments about providing a fair and non-discriminatory environment to all business players alike.
Trade Pacts experts routinely provide this type of advice to companies of all sizes in matters relating to international trade, investment and intellectual property law and policies. Our team is committed to doing its part, assisting in similar projects across Latina-America, Asia and Africa to help repeat Chicza’s success story.
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