Second
Thoughts on Free Trade
By JONATHAN
POWER
March 1, 2000
LONDON - Three months after the failure of the
World Trade Organisation meeting in Seattle the dust is
finally settling. The press behaved as if it hadn't had a
good demo to report since the Vietnam war and the
diplomats and politicians became uncharacteristically
skittish after a march or two and the unerring capacity
of the American police to over do it.
Look no further than the statements produced by the UN
Trade and Development (Unctad) meeting in Bangkok two
weeks ago. This body which now exists as a sort of Third
World counterweight to the mighty World Trade
Organisation (WTO) enables developing countries both to
chew the cud and gain a modicum of diplomatic and media
attention for their own concerns without being drowned
out by the agenda of the industrialised countries.
Nevertheless, they used their only-once-in-four years
opportunity not to denounce the WTO and all its works but
to assert they still prize the value of global trade
talks. Jacob Zuma, South Africa's deputy president, was
forceful, "A delay in the WTO negotiations is a delay in
solving the problems of [our]economies". In its
final statement Unctad went on the record as "strongly
commending open trade and economic integrity as the path
for future development and ways of bridging the
north-south divide", reported the Financial Times. And
Mike Moore, the director-general of the WTO who was in
Bangkok for the meeting, observed after, "We know now
that in Seattle some countries wanted to shake the place
up, not destroy the next [trade round]".
Free trade is not, by any disinterested reckoning, in
retreat. The truth is tariffs are declining and trade is
expanding almost everywhere. Despite all the great public
rows last year about bananas, genetic modification of
seeds, mad cow disease, child labour and starvation wages
and the need to put the breaks on globalization, the
volume of world trade continues to expand at a quite
rapid rate. This year it could be at over 6%.
The last round of tariff cuts- the Uruguay Round- led
to tariffs being sliced across the board on 87% of all
merchandise trade. "Voluntary" export constraints - a
devilish system whereby low cost competition is
bludgeoned by the richer trading partners to cap their
exports - that over the years has severely hindered
exporters of goods from textiles to cars, have now almost
disappeared.
The U.S. used to be notorious for its double-speak,
sniping at countries for not cutting tariffs while
erecting all manner of restraints on items as diverse as
steel, autos, machine tools and motorcycles. Yet now the
U.S. is more honest and Europe too is following suit if
less fast. (Europe still penalizes the importing of
Russian steel, to give one awful example.) Both in North
America and Europe importers at last are becoming as an
effective lobby as exporters.
Of course, once the present economic boom starts to
pale, the pressure will be on western governments to be
more receptive to protectionist pressure. But this time
round the developed countries to a large extent have
locked themselves in with the new authority they have
bequeathed to the WTO. Only last week it flexed its
muscles with its ruling that billions of dollars of tax
breaks for U.S. corporations gained by channeling exports
through Caribbean off-shore subsidiaries were illegal.
The more you look at it the harder it is to pick holes in
the benefits of over 50 years of hard won freer trade.
Countries that have opened their economies have enjoyed
annual growth of several percentage points more than
those that have remained closed. And multilateral trade
liberalization schemes usually benefit poorer members
more than richer- as can be see with Portugal and Eire in
the European Union and with Mexico in the North Atlantic
Free Trade Area.
It is one of the peculiarities of the use of language
that, having re-named trade liberalization globalization,
a process that has been in fact gathering speed for two
centuries, it should now be seen in many quarters as a
threat. It is not. Nor should it become one, despite the
often legitimate concerns of the "new
protectionists".
There is in fact no reason to quarrel with those that
tell us to worry about consumer, labour and environmental
concerns. Rather than being regarded as some impediment
they should, as Bruce Stokes argued in a recent issue of
Foreign Policy, be seen "as a sign of the success of
globalization. If rich country environmentalists now
worry whether shrimp traps in less developed countries
inadvertently kill sea turtles it is not a sign of rising
protectionism. It simply reflects the emergence of a
global market for shrimps caught by less developed
countries."
If free traders can't realize that history is on their
side and cannot see that it is their very success that
throws up the complexities, they don't really deserve to
be winners. Diminishing the concerns of turtle lovers or
child labour protectors is to feed public frustration
without dealing with very real, but solvable issues. As
the Overseas Development Council, a Washington
think-tank, has observed, "poor labour standards distort
labour markets, weakening rather than promoting export
competitiveness".
Seattle was the scene of an exaggerated polarization.
It is time for the free traders, the globalizers, the
proved winners, to step down from their pedestal and stop
stereotyping every union or environmentalist group as out
to undermine open markets and economic growth. Otherwise
there is a grave danger that their own dire prophecies
will become self-fulfilling. With a more open mind they
could use their intellectual and financial capital to
answer and redress the complaints of the activists. Then
a U.S. president would probably find his "fast track"
negotiating authority on new trade deals restored and a
new round of tariff cuts could give the West's present
boom even longer life and countries as diverse as Russia,
India, Nigeria and Brazil the breaks they deserve. That
is the way to lift all boats.
I can be reached by phone on +44 385 351172 or by
e-mail: JonatPower@aol.com
Copyright © 2000 By JONATHAN POWER
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