SocialismToday           Socialist Party magazine

Socialism Today 78 - October 2003

World Take Over breaking down

THE BREAKDOWN OF the World Trade Organisation (WTO) Ministerial Conference, held in Cancún, Mexico (10-14 September), is a blow to the world’s two dominant capitalist trading blocs, the US and the EU. Their agenda was rejected by the majority of the under-developed countries present. In a period of stagnant economic growth, this is another symptom of the growing tensions in world economic relations. The set-back to the US, in particular, is also an expression of the difficulties arising for US imperialism from its costly entanglement in Iraq.

The ‘Big Two’ agenda

THERE WAS A rebellion of poor countries at Cancún, led by a group of 21 headed by Brazil and including India and China. The rebellion was provoked, however, by an ultimatum from the US and the EU. Represented by Robert Zoellick and Pascal Lamy respectively, the Big Two demanded: accept our package on agriculture and our agenda on international investment and competition, or there’s no deal.

There was no deal. The poor countries refused to buckle under. ‘We are leaving stronger than when we arrived’, said Brazil’s foreign minister, Celso Amarin, who coordinated the rebellion. It is now extremely unlikely that the so-called Doha Round of the WTO will be completed with a comprehensive agreement as scheduled by the end of 2004.

On agriculture, neither the US nor the EU would take serious steps to phase out their farm subsidies, currently about $80bn a year (estimated to cost US and EU taxpayers and consumers $300bn a year in taxes and higher prices). There are moves to ‘decouple’ subsidies, switching from price support for farm products to income support for farmers – but this makes very little difference in practice. Both the US and the EU continue to repeat their vague promises to abolish subsidies – ‘eventually’.

Bush, in particular, has no intention of compromising on farm subsidies in a pre-election period. He needs all the votes he can get in states like Missouri, Kansas, the Dakotas, Florida and from the South – which receive a big slice of federal farm subsidies. US agribusiness corporations, which profit hugely from subsidies, paid $53m in political contributions in 2002 – 72% going to the Republican Party.

The US, EU and Japanese farm subsidies, combined with agricultural tariffs and quotas, weight the balance heavily against farmers throughout the neo-colonial countries. They are largely excluded from the biggest, high-income markets in the advanced capitalist countries and cannot compete against subsided agricultural products on world markets.

Universal free trade in agriculture, however, even if it could be achieved, would not solve the problems of poor, third-world farmers. They are exploited by landlords, moneylenders, merchants, and many other layers of parasites. Moreover, relying largely on traditional methods, they could not compete even under a free trade regime with the industrial methods of the giant agribusiness corporations, which also have the financial power to manipulate world markets. The idea that a model WTO capable of ushering in universal free trade would spread plenty and prosperity around the world is a delusion.

The main item on the Cancún agenda, as far as Zoellick and Lamy were concerned, was international investment and competition agreements. In reality, these go far beyond the bounds of ‘trade’. Their priority is to impose a complex web of non-trade rules that would override the domestic authority of national states and enforce a regime on property rights and investment overwhelmingly favouring the big multinationals corporations, most of them, of course, based in the US, the EU and Japan.

The advanced capitalist countries want to impose their patent laws and ‘intellectual property’ rights on the rest of the world. In other words, their ownership of drugs, software, music and other high-tech products would be protected. Third-world producers and consumers would only be able to access these products at prices most of them could not afford. This is a negation of free trade. It is a regime that certainly did not apply to Britain, the US, Germany, and Japan when they were developing as capitalist economies.

Under the international investment regime proposed by the US and the EU, national governments would no longer be able to follow their own development policies. They could not exclude foreign firms from strategic sectors of the economy (such as oil and gas), and they would not be allowed to insist that foreign firms form joint ventures with home firms (the current policy in China). National government would be forced to privatise central and local government services, utilities, health services, education, etc and open these areas to 100% foreign ownership. This is a charter for the big multinationals, banks and finance houses.

Growing inter-capitalist tensions

THE US ECONOMIST Jagdish Bhagwati, formerly a supporter of the WTO, commented: "the process of trade liberalisation is becoming a sham, the ultimate objective being the capture, reshaping and distortion of the WTO in the image of American lobbying interests". (Jagdish Bhagwati and Arvind Panagariya, Bilateral trade treaties are a sham, Financial Times, 13 July)

This was the agenda the 21 poor countries rejected in Cancún, producing a breakdown of negotiations, with no agreement as yet on future talks. Zoellick and Lamy immediately proclaimed that the US and the EU would pursue bilateral trade and investment agreements country by country (the US has recently concluded agreements with Chile and Singapore). But the US and the EU are themselves locked into several long-running trade disputes (US steel tariffs, export subsidies, growth hormones in beef, etc) that have resulted in WTO-sanctioned retaliatory measures. Moreover, the resistance at Cancún from regional powers such as Brazil, India and China shows that the major powers will not have everything their own way in the future.

It is significant that the Cancún rebels were led by Brazil. Although Lula’s recently elected Partido dos Trabalhadores (PT – the Workers Party) government has embraced neo-liberal policies, the PT leaders undoubtedly feel enormous pressure from the masses to stand up to US multinationals. The Brazilian government, moreover, is leading attempts to form a Latin American economic bloc to counter US domination of the region.

Another symptomatic development is the refusal of the Kirchner government in Argentina to accept the usual austerity policies of the IMF, despite recently defaulting on a $3bn repayment. In fact, the IMF quietly agreed to lend or guarantee Argentina $21bn over three years. "The deal was seen as a victory for the battered nation that wrung concessions from a lender famed in Latin America for forcing hated spending cuts on governments". (Argentina Clinches Aid After Default, Financial Times, 12 September) Argentina’s victory was at least partly the by-product of US imperialism’s entanglement in Iraq. "The United States and the G7 in general ultimately didn’t want to have to be bothered with another international crisis, albeit economic rather than military", commented Doug Smith of the Standard Chartered Bank. "I think the deal was done in a fairly unique set of circumstances". (Tony Smith, Region Weighs Argentina-IMF Deal, Financial Times, 13 September) Lula was quick to give notice, however, that Brazil wants a new deal on its own loans on more favourable conditions. Brazil’s finance minister, Antonio Palocci, told the IMF that Brazil should be allowed to increase spending on infrastructure and social needs.

The failure of neo-liberalism

THE ECONOMIST magazine denounced the Cancún rebels, warning that "the developing world will come to regret the consequences bitterly… without a doubt, those who will suffer worst are the world’s poor". (Cancún’s charming outcome [Editorial], 18 September) However, many millions of the poor throughout the neo-colonial world will ask: Where are the promised benefits of free trade over the last 20 years? In reality, the free trade policies of GATT (the General Agreement on Tariffs and Trade) and the WTO have been part of the process of globalisation – a systemisation and intensification of the exploitation of the underdeveloped world by the corporations and banks of the advanced capitalist countries.

Growth spurts during the finance-driven booms of the late 1980s and the 1990s led to accelerated growth in a tiny handful of countries (notably the Asian ‘tigers’) and brought wealth to their elites. But world economic growth slowed compared to the post-war upswing, with many countries slipping backwards. Everywhere, the gulf between the rich and the poor became even wider.

"Poverty today affected almost half the world’s population", reports the International Labour Organization. "The gap between the world’s poorest 20% and the richest 20% has more than doubled between 1960 and 1999". Poverty has surged, says the ILO, in Africa, Latin America, the Middle East, Eastern Europe and Central Asia. (International Herald Tribune, 7 July)

According to the UN Human Development Report 2003, 1.2 billion people now live on less than $1 a day and 2.8 billion live on less than $2 a day.

Compared to 1990, 54 countries are now poorer, as measured by per capita GDP. In Africa, 20 countries have experienced falling per capita GDP, 17 in Eastern Europe, 6 in Latin America, and 6 in East Asia and the Pacific region. During the 1990s, the Human Development Index (which combines economic, health and education criteria) declined in 21 countries, whereas in the 1980s it declined in only four. The proportion of the global population now living on under $1 a day is now 23% compared with 30% in 1990. But most of this improvement is the result of growth in China, which has drawn many more into the cash economy. (Jeff Madrick, Regardless of the progress of a few, many nations still face economic despair, New York Times, 7 August). Such statistics are hardly a recommendation for the neo-liberal, free trade policies of the last 10-15 years.

Inequality is not confined to the poor countries, however. In the US the gap between the rich and the poor more than doubled between 1979 to 2000. The gulf is such that the richest 1% (2.8 million) of Americans in 2000 had more money to spend after taxes ($950bn or $860,700 each) than the bottom 40% (110 million who had $21,118 each). (Lynnley Browning , US Income Gap Widening, New York Times, 25 September) This is a class chasm which will provoke social and political explosions in the heartland of imperialism in the next few years.

The international trends towards stagnation and increased inequality arise from the brutal logic of capitalism. Reform of the WTO or other international agencies, which are ultimately instruments of the US and the other major powers, will not fundamentally change the direction or the nature of world capitalism. Explosive events will pose the need for an alternative to the existing system. The anarchy of the market has to be replaced by democratic economic planning. International trade, too, has to be planned, as neither free trade nor protection can guarantee economic progress. Natural resources and productive forces should be developed on the basis of international co-operation and planning, with protection of the environment, to eliminate gross inequalities and maximise the benefits to the world’s toiling workers and small farmers. This is the socialist alternative, which requires a social transformation to be carried out by the working class and its numerous allies among the exploited peasantry and the dispossessed.


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