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Issue 43, November 1999


'Opening-up' the global market
Tensions within the Triad
Reviving MAI
Globalisation and inequality
Neither free trade nor protectionism

The World Trade Organisation (WTO) meeting in Seattle will be under siege from demonstrators protesting at the dire effects of globalisation on millions throughout the world. Favouring the powerful multi-national corporations, which daily strengthen their grip on the world economy, free trade has produced growing inequality, together with unemployment, poverty, degradation of the environment, and social breakdown, expressed in a growing number of armed conflicts. Now the US, EU and Japan - the 'Triad' powers - despite tensions between them, are seeking to intensify the global free-trade regime. What is their agenda for the Seattle round? What is the alternative? LYNN WALSH writes.

FIVE THOUSAND GOVERNMENT representatives from 134 countries will meet in Seattle, USA, on 29 November. This is the first general meeting of the WTO since it was established in 1995, taking over from the former world trade body, GATT (General Agreement on Tariffs and Trade).

The WTO claims to be laying down fair trading rules (a 'level playing field'), for all trading nations. In reality, it is dominated by the great capitalist powers of the 'Triad', the US, the European Union (EU), and Japan. Despite some serious tensions within the Triad, the advanced capitalist states have worked together through the WTO for five years to strengthen the international regime promoting globalisation of trade and investment. The definition of 'trade' has been enormously widened to cover all fields of investment, and to tackle all barriers to the free-ranging global operations of the multi-national corporations. Increasingly, the free-trade rules elaborated by the WTO have been used to undermine or sweep away the measures of national governments relating to social, employment and environmental protection. The overriding aim of the WTO, in short, is to create a world eminently fit for the multi-national corporations to live in. Not surprisingly, WTO has been renamed World Take Over by those campaigning against the adverse effects of globalisation on millions of people throughout the world, especially the majority of the world's population who live in the poorer countries.


At the Seattle meeting, however, WTO delegates will find themselves under siege. Many thousands will be demonstrating against the globalising activities of the corporations and their sponsoring governments. Over 700 organisations from 73 countries are expected to be involved, including unions, NGOs (non-governmental organisations), advocacy groups, etc. Many are grouped together in the coalition Jubilee 2000, which includes Oxfam, Friends of the Earth, and many other consumer and environmental protection groups. Their declaration opposes 'any effort to expand the powers of the WTO', saying that it has worked 'to prise open markets for the benefit of transnational corporations at the expense of national economies, workers, farmers, and other people'.

A more militant group, Ruckus, has threatened a campaign of civil disobedience. Capitalist leaders fear serious disruption of the WTO talks. Some have anxiously made comparisons with the Chicago 'siege of 1968', when the convention of the Democratic Party was picketed by thousands of demonstrators protesting against the Vietnam war - who were brutally attacked by mayor Daley's police. Beyond this, the Triad leaders fear that anti-globalisation protests in Seattle will evoke enormous sympathy from millions around the world who are suffering from the dire effects of the destruction of jobs, farming and the environment by the plundering activities of the multinationals.

top     'Opening-up' the global market


WTO TOOK OVER from GATT in 1995. GATT was primarily a trade regime, which during the long world economic upswing 1950-73 operated within a framework of fixed currency exchange rates and the tight control of capital flows by national governments. Under GATT, direct trade barriers, primarily tariffs (import duties), were progressively reduced, facilitating the rapid growth of world trade. At the same time, there was provision for less developed countries to protect crucial home industries, allowing a policy of 'import-substitution growth', which allowed countries to build up industries producing consumer goods, textiles, etc, for their home market.

This regime began to disintegrate after the world slump of 1974-75, which was triggered by the oil price rise shock of 1973. The fixed exchange rate system was replaced by floating rates, and international capital became much more mobile, especially after the 'de-regulation' measures of the 1980s. The governments of the advanced capitalist countries, representing the big multi-national corporations, were determined to take 'free trade' much further.

Through the final series of GATT negotiations, the so-called Uruguay Round of multilateral trade negotiations (launched by a meeting in Punta del Este, Uruguay, in 1986), they began to attack 'non-tariff barriers', such as restriction on foreign ownership of home industries and services, government procurement (purchasing) policies favouring home suppliers, health and safety and environmental regulation, and so on. GATT also began to attack restrictions on trade in services, particulary the highly profitable sectors like telecomms, banking and insurance, etc.


The Uruguay Round, finalised in 1995, was in many ways transitional, reflecting a new agenda based on the demands of globalisation.

The notorious 'Dunkel Draft' (the proposed deal, named after GATT's general secretary at the time, which formed the basis of the final agreement) cancelled key concessions allowed by the advanced capitalist countries to the underdeveloped countries. The governments of developing countries were no longer allowed to protect home industries and agriculture for social reasons. Cartel agreements, like the Multi-Fibre Agreement, which at least allowed a number of Third World producers to sell quotas of textiles to Western markets, were abolished. At the same time, GATT imposed US patent law and intellectual property rights on the whole world. This meant, for example, that the Indian pharmaceutical industry could no longer produce drugs on which US companies held patents, paving the way for the US takeover of India's pharmaceutical industry. Moreover, the global grain companies like Cargil could now patent seed corn and charge poor Third World farmers a royalty on each season's planting. This measure by itself provoked massive demonstrations of small farmers throughout Asia.

The Uruguay Round marked a new stage in the opening up of underdeveloped countries to the multinationals, and the general economic subordination of these countries to the advanced capitalist countries. The new GATT rules meshed with several other developments. Most important, were the Structural Adjustment Programmes (SAPs) imposed on underdeveloped and semi-developed countries during the debt crisis of the 1980s. After 1973, huge quantities of oil money, recycled through Western banks, were loaned to Third World countries at relatively cheap interest rates. The sharp rise of interest rates as a result of the deflationary policy adopted by the US after the 1979 downturn, however, meant that Third World debts became a crippling burden. The price of 'rescue' by the IMF and the World Bank was 'structural adjustment', in other words, the opening up of these economies to the Western banks and corporations. Third World governments were forced to remove national capital controls, drastically cut protective tariffs, privatise state industries, and cut back subsidies for food and other necessities. In a number of Latin American countries, whole chunks of formerly state-owned industries were handed over to multi-national corporations in exchange for debt reduction. Debtor countries became even more dependent on the export of commodities, oil, minerals and agricultural products, to finance their debts.


As a result, despite rapid growth in a handful of 'tiger economies' before the Asian crisis of 1998, the gap between the advanced capitalist countries and the majority of underdeveloped or poor economies has grown enormously.

top     Tensions within the Triad

THE SEATTLE MEETING comes at a time not only of growing tension between the rich and poor members of WTO, but serious tensions between the Triad powers. There have been several serious trade disputes - especially over bananas and beef - between the US and the EU. There has also been a long and damaging quarrel over the appointment of a new general secretary for WTO. With regard to the agenda for Seattle, the US and EU appear to have quite divergent aims. The US's stance is mainly determined by the precarious political position of Clinton in the last phase of his presidency.

The wrangle over the secretary general has only recently been resolved with a rotten compromise. There was a powerful lobby outside the Triad states for the appointment of Supachai Panitchpakdi, from Thailand. Although completely wedded to neo-liberal policies, Panitchpakdi was prominent amongst the Asian leaders who criticised the policies put forward by the IMF at the time of the 1998 crisis, when the IMF demanded massive government spending cuts which, if fully implemented, would have enormously aggravated the downturn. The US, in particular appears to be strongly opposed to accepting a general secretary from an underdeveloped country. They backed Mike Moore from New Zealand. A former leftish trade union official, Moore is now an enthusiastic propagandist for globalisation. In the end, however, the US was forced to compromise, accepting a timeshare between Moore and Panitchpakdi, with both serving three-year terms, starting with Moore. This spat is perhaps a prelude to quarrels yet to come.


Two US-EU trade disputes this year have soured the atmosphere, to say the least. The US claimed that the EU had failed to comply with an earlier WTO ruling on bananas. The EU was continuing to give favourable treatment to Caribbean small farmers, from whom Europe buys less than a tenth of its banana supply. Complaints about this originated with the big US banana producers in Central America, including Chiquita (formerly United Fruit), which is a prominent backer of the Democratic Party (donating $500,000 recently). The WTO approved US sanctions (100% tariffs) on over $191 million of European exports to the US. Bananas form a tiny fraction of the EU's imports, but clearly the US sees this as an important precedent for other, much more valuable commodities, such as genetically modified soya, corn (wheat), etc.

The other major dispute was over the EU prohibition on the importation of US beef produced with hormone supplements (that is 90% of US-reared beef). These products are banned by the EU, but perfectly 'legal' according to the Codex Alimentarius Commission, the World Health Organisation/UN Food and Agriculture Organisation committee which, as far as the WTO is concerned, has the last word on global food safety. The US and Canada even object to voluntary labelling schemes denoting that hormones have been used, on the grounds that it is 'discriminatory' as far as trade is concerned (ie consumers are less likely to buy it if they are informed of hormone use).

With the backing of the WTO, the US imposed sanctions at the end of July, imposing 100% tariff on over $1 million of gourmet foods. These sanctions, moreover, have been directed at Denmark, France, Italy and Germany, which opposed the use of hormones, but not Britain which supports the US policy.


There have, it is true, been a couple of ruling against the US, but these have been relatively minor and obscure. A US ban on the importation of shrimps harvested by methods which could have a damaging effect on sea turtles has been overruled by the WTO. At the same time, the use of Foreign Sales Corporations (FSCs) by US multinationals to avoid tax on their exports has also been ruled out of order.

Nevertheless, US victories on bananas and beef have strengthened Clinton's hand against his critics in Congress, where there are growing protectionist and isolationist pressures. The continuously rising US trade deficits with Japan, China and other South-East Asian producers (particularly in the areas of steel, cars, textiles, electronic consumer goods, etc) has led to mounting pressure for the protection of US industry and jobs. There is growing hostility from right-wing, pro-protectionist members of Congress against participation by the US in international organisations like the United Nations and the WTO which formally have the power to make rulings with which the US has to comply.

In both 1997 and 1998 Clinton failed to get Congress to renew his 'fast-track authority' on trade deals. This means he no longer has the power to negotiate complex deals with Congress having only the right to ultimate ratification. Now deals are subject to section-by-section approval by Congress. This represents a serious erosion of the executive power of the president as far as trade negotiations are concerned.


Both Clinton and Gore will be at the opening of the talks in Seattle. It is even rumoured that the US president has been trying to insist that the negotiations should be known as the 'Clinton Round' rather than the 'Millennium Round'. Clinton is seeking a 'early harvest', a number of high-profile deals favouring the US, which would help Gore's presidential campaign next year. They are seeking to outlaw government procurement (purchasing) policies which favour home producers. They want a ban on any duties on electronic transactions and no tariffs on information technology products. They want an end to any restrictions on US penetration of national film and video industries, such as the French restrictions that, despite US protests, remained in place at the end of the Uruguay Round.

This approach allows the US to avoid sensitive issues which might provoke a reaction from various US business interests. "The US isn't trying to develop a balanced package", comments Jeffrey Schott of the Institute for International Economics, a Washington think-tank: "It's sitting back and saying to other countries 'What are you going to do for us?' But it is unwilling to offer anything that would get them to accept its demands". (Financial Times, 23 July 1999)

The EU negotiators are opposed to this, they want a 'single undertaking', a comprehensive package (of the kind adopted at the end of previous GATT rounds) which would be negotiated and then adopted as a single package. The retiring EU trade commissioner, Leon Brittan, and his replacement, Pascal Lamy of France, want a package which would include agriculture and services, investment policy, competition policy, environmental regulation, and government procurement, as well as new reductions in industrial tariffs. Behind this is the EU aim of breaking down protective areas still maintained by the US, for instance protection of its maritime industry from foreign competition, huge subsidies to farmers (despite US complaints about the EU agricultural policy), and restrictive procurement policies operated by state and local government in the US.


There is likely to be quite a tussle over the agenda, then, even before the substantive issues are reached.

top     Reviving MAI

THE US AND most EU leaders, however, are agreed on one thing. They intend to revive the substance of MAI, the Multilateral Agreement on Investment, and place it on the WTO agenda as a priority item. MAI was conceived in 1995 and discussed for three years in the forum of the OECD (Organisation of Economic Cooperation and Development), largely in complete secrecy until the details began to be leaked in 1998. MAI was conceived as a weapon to break down all remaining obstacles to the free-ranging operations of the multi-national corporations. Had it been agreed, it would have allowed corporations, with the legal backing of a MAI treaty, to override all kinds of national legislation, relating to social protection, health services, health and safety, environmental protection, and so on. The dominant global legal regime would be the 'legality' of the world market, dominated by the big corporations and banks.

The MAI talks broke down in the summer of 1999, when the Jospin government in France, which came under massive pressure of opposition to the MAI proposals, pulled out of the talks, thus effectively terminating the negotiations. However, the US trade representative, Charlene Barshefsky, and the former EU trade commissioner, Leon Brittan, who is still acting as an ambassador for the European corporations, have both made it clear that they consider the main provisions of MAI should be on the table in Seattle. Two important elements, in their view, are GATS (General Agreement on Trade in Services), and TRIPS (Trade-Related Aspects of Intellectual Property Rights). GATS aims to break down all domestic regulatory barriers across 160 different areas of services, including wholesale and retail trade, construction, financial services, the food industry, sport and entertainment, libraries and museums, and many other things. TRIPS would allow corporations to sell their 'intellectual property' (especially computer software, digitalised entertainment products, etc) across national boundaries without being subject to any tariffs and maintaining complete financial control over their products with regard to patents, royalties, etc.


Negotiations on GATS and TRIPS may well lead to bitter wrangling between the advanced capitalist countries, with France notably attempting to protect its cultural industries such as film and television. But such proposals will mainly be a threat to the semi-developed and underdeveloped countries, opening them up to complete economic domination by the world's most powerful corporations.

top     Globalisation and inequality

HOW LEVEL IS the WTO playing field? Formally, the rules are the same for all members of the club. But some players, a small minority, are much more powerful than the rest. The big corporations based in the Triad countries, have enormous resources, financially and technologically, and can manoeuvre on a global basis. They have the backing of powerful governments. On the other side, a majority of WTO members are economically dominated by the advanced capitalist countries. In many cases, their biggest companies are either subsidiaries or agents of the Western-based multinationals. The poorer countries have enormous debts which bind them to the wealthy economies, leading to a constant transfer of wealth to the West.

Everybody has to keep to the rules, but the rules themselves are framed according to the interests of the big players. They follow the neo-liberal logic of globalisation, and inevitably facilitate the operations of the big banks and corporations.

In theory, the WTO acts as an impartial referee, settling disputes strictly according to the rules. But the WTO is clearly subject to enormous pressure from the big players, particularly the US. This was reflected in the determination of the US to try to block the Thai candidate for general secretary and install Mike Moore. Moreover, it remainst to be seen what the reaction will be from the US if the WTO rules against it in major cases. Bananas and beef, so far, have been settled in the US's favour. But if similar cases in the future go against the US, it certainly cannot be ruled out that Congress will revert to its old practice of insisting (under Section 301 of the Trade Act) on unilateral retaliation against countries whose exports are perceived as threatening US interests. It should not be forgotten that the US is currently implementing economic sanctions against 26 countries, in the majority of cases unilaterally, on account of infringements of US foreign policy objectives.


However 'fair' the rules, a multi-lateral free-trade regime does not ensure fair outcomes as far as the real economy is concerned. It is absolutely undeniable that the globalising trends which have accelerated under the Uruguay Round deal and the first five years of the WTO have led to a grotesque increase in inequality, both internationally and within national states. It is now well known that the wealth of the world's 15 richest people exceeds the total GDP of sub-Saharan Africa. The 225 biggest fortunes in the world, mostly concentrated in the US, total more than $1,000 billion, the equivalent of the annual income of 47% of the poorest of the world's population, or 2.5 billion people. These are obscene inequalities and they are becoming worse every day.

The world's 100 biggest companies now control 70% of the world's trade. Any one of them sells more than any of the poorest 120 countries in the world export, while 23 of the most powerful sell more than even semi-developed countries such as India, Brazil, Indonesia or Mexico.

On the basis of globalisation, it is true, a tiny elite in the poorer countries has become much richer. The majority of people, however, have become poorer, and much more threatened by calamities such as floods, famine and especially war, with over 60 separate armed conflicts during the 1990s, claiming hundreds of thousands dead and creating more than 17 million refugees.

We should not forget, moreover, that globalisation has also led to a polarisation within the advanced capitalist countries, especially within the US, the most powerful. A huge section of the population, especially immigrants and people of colour, live and work under Third World conditions. Forty-five million people in the US live below the poverty line, while over 40% have no medical cover. Despite all the advanced technology and wealth available to the US, over 32 million people have a life expectancy of less than 60 years. In the European Union, 50 million people are living in poverty, while there are 18 million people officially unemployed.


The wave of worldwide anger at the brutal results of neo-liberalism will be reflected in the demonstrations in Seattle against the WTO. But what is the alternative to free trade? Some are quite rightly calling for curbs on the ruthless activities of the multi-national corporations, and defending the right of people to protect their health and safety, the natural environment, working conditions, and democratic rights. More and more voices, however, are raising the need for protective measures, to roll back the free-trade juggernaut which gained enormous momentum in the 1980s and 1990s.

But is a return to protectionism a viable alternative to neo-liberal free trade? A general return to protection of national economies, which in reality means national capitalist interests, would not provide economic and social protection for the working class and poor farmers. When they are faced with economic extinction, many national capitalists will revert to the idea of protected national enclaves in which they have a free hand to exploit their 'own' working class and toiling people. Far from reducing the inequalities between the wealthy advanced capitalist countries, on the one hand, and the poor, less developed, on the other, protectionism would reinforce the economic and technological backwardness of the poorer countries.

In any case, given the current character of the world economy, dominated by a handful of advanced economies and the overwhelming influence of free-flowing capital, most governments do not have a free choice as far as free trade or protectionism are concerned. While the great powers follow a policy of free trade, reinforced by all the international agencies - WTO, IMF, World Bank, and even the UN and Nato - it is virtually impossible for even semi-developed economies to go against the stream. This is shown by the enormous pressure on China to open up its economy, with the US still blocking China's membership of the WTO unless it complies with US demands. Even the quite limited controls on the movement of capital imposed by Mohamad Mahathir of Malaysia after the 1998 Asian crisis, which are probably far from completely effective, has led to massive pressure from the Western powers to revert to an open economy.


top     Neither free trade nor protectionism

IN EFFECT, WORLD finance capital constitutes a kind of virtual government, in effect a dictatorship, which can, through the rapid transfer of funds, break national regimes if they try to go against the norm. This was demonstrated even in the case of France, when in 1981 the socialist president Mitterrand was forced to drop his policy of reforms under pressure from international financial markets.

While free trade continues to be the dominant global policy, reflecting the character of the world economy, it is virtually impossible for any government, including that of a major capitalist power, to go against the grain. Nevertheless, when the economic conjuncture changes, as it is likely to in the next period, the major powers will themselves switch their policy. In a major downturn, the big powers, including the US, the EU powers, and Japan, will revert to protection of their national economic interests. In a severe crisis, fierce international competition (besides cutting capitalist profits) will undermine home industries and jobs, provoking a social and political crisis. Under such conditions, capitalist governments will inevitably be forced to try to defend the basis of their power.

In the first place, defence of their interests will be primarily through the major trading blocs, Nafta, the EU, and the looser Japan-dominated Asian bloc. Even so, under extreme conditions, the different national capitalist states will move to defend themselves against their rivals, reverting to a new version of a begger-thy-neighbour policy.


It is unlikely, of course, that they will renounce free trade and come out openly in favour of a general policy of protectionism. Rather, they will proclaim their undying support for free trade, while attempting to impose 'exceptional' and 'temporary' protectionist measures to defend this or that industry or service. The weaker, poorer semi-developed and poor countries will, of course, be the first victims of such a change. The calamity they have faced under neo-liberal policies even in a period of world growth will be as nothing compared to the catastrophe they will face in a period of world downturn.

The neo-liberal free-trade policies espoused by the WTO, in other words, reflect the underlying logic of global capitalism. Many organisations and campaigns oppose this or that effect of neo-liberalism, and are worthy of support. Socialists, however, recognise the need to oppose the capitalist system, which cannot provide social progress for the world's people either through free trade or protectionism. To the profit-hungry domination of the corporations and the destructive anarchy of the market we counterpose the need for planned economies on a national and international basis.

The alternative to capitalism is to place productive facilities, technology, key services, infrastructure and natural resources under the democratic control of the majority of working people. They have to be run in a planned way: meeting the needs of society rather than providing profits for the minority has to be the main planning priority. For some, this alternative may conjure up the ghost of the former Soviet Union and its clones in Eastern Europe. In reality, those societies were a grotesque distortion of socialism. They were controlled by a ruling bureaucracy, which relied on dictatorial means, lacking any of the elements of democracy essential for running a genuinely socialist society.


For a time, the collapse of the former Soviet Union and the other Stalinist states of Eastern Europe reinforced the illusion that capitalism was a globally successful system, capable of securing continuous progress. The trends of the last decade, however, when capitalism has had a free hand on the world arena, have exposed the false promises of the capitalist triumphalists. The opposition to the WTO, just one of the symptoms of globalisation, are just one indication of the steadily strengthening movement against capitalism as a global system - and a sign that there is a growing search for a radical alternative.

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