Free
trade is once again
a fit subject for discussion
By JONATHAN
POWER
February 20. 2001
LONDON - Sweden, which holds the rotating presidency
of the European Union, has launched a drive to speed up
liberalization of the EU's textiles and clothing trade
with the Third World. And there are increasing
indications that the new Administration in Washington is
likely soon to join with Europe and Japan and indicate
its willingness to enter a major new trade round, meant
to lower tariffs across the board. The trade ship, which
seemed to have hit the rocks just over a year ago at its
calamitous meeting in Seattle, has been prized free and
is once again sailing on the high seas with the wind
behind it.
And so it should. A year on it appears even more
nonsensical than it did at the time that the seasoned
diplomats and politicians gathered together for earnest
negotiations on freer trade should have allowed their
plans to be scuttled by the combination of exuberant
street protest and heavy handed policing. Moreover, the
journalistic reporting was shoddy in the extreme, making
it appear as if Third World delegates were of the same
wrecking spirit, when it has been obvious for years now
that the pacesetters in the Third World are the ones who
favour freer trade the most.
Thus it has taken the best part of a year for the
smoke to clear and now at last some sense is starting to
be spoken. As Mexico's new finance minister argued at
Davos last month, rapid wage growth among workers in
Mexico's export industries had proved that developing
countries have the most to gain from globalisation. "It
is the privileged who have lost because of globalisation,
and it is the poor who have better opportunities," he
said.
Third World countries have come to realize the last
thing they need to do is to emulate the cripplingly
expensive system of protectionism and subsidies that the
industrialized countries hand out, mainly now for
agriculture but, in the not so distant past, for a whole
range of industries. On agriculture alone the West is
spending $350 billion a year. As one wag has observed,
"That is enough to pay to fly every cow in the Western
countries around the world once each."
Nicholas Stern, the chief economist of the World Bank,
has said that as a start rich countries should
unilaterally open their markets to duty-free imports from
the 48 poorest countries. In too many cases the
industrialized countries discourage imports of precisely
those products that developing nations can produce most
competitively, costing these impoverished countries far
more in lost export opportunities than they receive in
aid. Fruit and vegetables face some of the highest
tariffs. Why should the U.S. have a tariff of 121% on
groundnuts, Europe a 130% tariff on above-quota bananas
and Japan a 171% tariff on raw sugar cane?
Cynics will say the World Bank and other liberal
observers have been making such points for decades and
what is new? What is new is that no one in power in the
industrialised countries is today seriously querying the
argument. As the Financial Times recently reported in an
article on the trade debate at Davos, " Representatives
of rich countries make no effort to defend themselves
against bitter complaints from developing countries that
trade barriers were an obstacle to lifting their
economies off the floor". The right is squared and ready
to go. It is the left of the industrialised world's
political spectrum that is holding things up. After
decades of making arguments like those above it has
switched (and this was the significance of Seattle) to
arguing that the impact of tariff removal will be to
encourage western multinationals to invest in Third World
countries and then will engage in savage cost-cutting in
their drive for profits.
Yet the evidence available suggests that the "race to
the bottom" in labour standards is something of a myth.
If there were less trade barriers and therefore fiercer
international competition then, as a new study of the
Organisation for European Cooperation and Development
argues, "pressure from other employers will ultimately
force a firm that has cut its wages to return the total
compensation package to the original level if the firm
expects to be able to hire workers."
This is not to say that serous problems such as child
labour will disappear overnight but subsidies to keep
children in school are more effective than trade
sanctions in eradicating such exploitation.
A further opening of the world economy will lift all
boats both in the industrialised and the developing
world. It is time overdue for making this point the
centrepiece of anti-poverty campaigns everywhere. If the
lobby groups of the western countries devoted the
emotional energy they pour into disaster, famine and war
relief into this cause it would within a decade change
the whole nature of poverty. Free trade must be their
clarion call too.
I can be reached by phone +44
7785 351172 and e-mail: JonatPower@aol.com
Copyright © 2001 By
JONATHAN POWER
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