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December 27, 2005 13:19 | by Jerry
Jones Jerry Jones argues that talks on trade are about corporate greed and not global logic, and that what we need instead is a new trade and development agenda based on economic realities and past experience, one which would represent the first steps towards a truly democratic system of world trade. Last week's WTO meeting in Hong Kong - part of the current "Doha round" of trade talks named after the capital of Qatar, where negotiations for a new trade agreement first began in September 2001 - was largely a waste of time. There is a desperate need for a new international trade agreement, but there needs to be a different agenda - one based on economic reality instead of pseudo-scientific theories dreamt up to satisfy particular vested interests. Even with the best will in the world, international trade negotiations would be tortuous. Every country wants to be able to export whatever it can so that it can import the things that it needs but cannot produce economically itself. However, countries also need to restrict imports to a greater or lesser extent at different times either to protect domestic industries - this is more so the less developed a country's economy is - or so that earnings from exports can be directed towards imports that most benefit the economy overall. We are always being told how much economic development depends on trade and that placing restrictions on trade holds back development. In fact, no country in the world has been able to develop its economy without imposing some kind of import restrictions at some time. Britain imposed 75 per cent tariffs on imports of textiles from India and sometimes banned imports altogether when it was in the early stages of developing its industrial economy in the 18th century. Without that, it would not have been possible for the textile industry to get established nor, subsequently, other industries. All of today's developed countries - the United States, Germany, Japan, South Korea and so on - followed a similar route. Unfortunately, because India was under colonial rule, it was not in a position to do so. This meant that its once thriving textile industry, among others, was all but destroyed. This is a major cause of the country's underdevelopment. In the 1930s, the main country sustaining world trade was the country with the greatest restrictions on imports - the Soviet Union. The imports were restricted mainly to industrial equipment and the like - items that would develop and diversify its backward economy and raise productivity. Meanwhile, trade among other countries at that time was restricted by the economic depression and mass unemployment due to the failure of the economic policies that were then being followed. In short, it is economic development that tends to stimulate trade more than the other way round. Restrictions on particular imports aid economic development and allow more trade later than would be the case if no such restrictions had been imposed. However, too much restriction will leave countries unable to earn enough revenue from their exports to be able to import the goods and services that they need in order to develop their economies. A balance needs to be struck. That is what international trade negotiations should be about. This was achieved to a considerable extent in the 1950s through to the early 1970s, when all countries restricted imports to a greater or lesser extent subject to the General Agreement on Tariffs and Trade established in 1948. This was when economic growth was the fastest the world had ever known. It peaked at 6.7 per cent in 1973. The turning point came at the beginning of the 1980s, when the world's transnational corporations started getting the upper hand over governments. They want unfettered access to every country and the freedom to move at will the capital that they accumulate - at the expense of the workers that they employ - around the world to wherever it is most profitable to them. That is what is behind today's neoliberal free trade agenda now being pushed by the WTO, the IMF and the World Bank, as well as the US government and the EU. But this agenda is against all historical experience and the facts on the ground. If you think that it has been bad for Britain's economy and industry - which it has - spare a thought for some of the world's poorest countries. They desperately need to establish industries, raise productivity and diversify if they are ever going to develop, but what progress they made previously in that direction is now being utterly destroyed. Take Zambia, for example, one of the world's poorest countries. When it achieved independence from Britain in 1964, it was almost wholly dependent on copper for its export earnings. It still is. But steps had been taken to diversify. For example, the town of Livingston once had a flourishing textile industry with 40 factories employing 10,000 workers. Now, they are all closed and the whole industrial area is derelict and overgrown. The industry was destroyed by cheap imports, mainly from China. This was a direct result of Zambia being forced to cut tariffs on imports in exchange for debt relief. The Zambian government also lost out because, as in many nderdeveloped countries, import tariffs were an important source of revenue. So reducing tariffs is a double whammy. In Nigeria, for similar reasons, 20 textile factories have closed over the last few years with the loss of 16,000 jobs and a further 18 factories are under threat. And the textile industry in Nepal, which once employed 30,000 people and accounted for over half its exports has, according to a recent report, entered "a death spiral," going from 1,067 registered companies in 1995 to just 25 today. Since January this year, Nepal's textiles exports to the US, which accounted for over 80 per cent of the total, have crashed by 42 per cent. This was caused by the end of the Multi-Fibre Arrangement (MFA). This had allowed all countries to export to the advanced countries subject to quota restrictions. But the MFA was abolished because it did not fit with the prevailing neoliberal free trade agenda. Buyers, such as Gap and Wal-Mart, now no longer need to seek countries without quota constraints and have rationalised their global supplies. This has principally benefited China and India. Since January, imports from China to the EU have jumped 40 per cent, all at the expense of other countries in Asia and Africa. Other industries in the least developed countries have suffered similar fates. Meanwhile, the Chinese economy - though not necessarily Chinese people - has benefited from transnational corporations relocating industries from other countries to take advantage of China's cheap labour, using transfer pricing to extract profits from the country. Wages in China are depressed by the large number of agricultural and former state enterprise workers chasing work in cities which, according to a report published by the International Confederation of Free Trade Unions earlier this month, has got worse since China joined the WTO such that China is becoming the sweatshop of the world. "The people who provide everything from T-shirts to DVD players to the world's consumers often have 60-70 hour working weeks, live in dormitories with eight to 16 people in each room, earn less than the minimum wage, going as low as $44 (£25) a month, and have unemployment as the only prospect if they should get injured in the factories." This cannot be the way forward. It is time that the governments of the world broke loose from the diktats of the transnational corporations and set a new trade and development agenda based on economic realities and past experience. It would be the first steps towards a truly democratic system of world trade. Jerry Jones is economics correspondent for the Morning Star, Britain's socialist newspaper. |
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