WTO Book Reviews by Jeremy Agar:
"Free Trade At Any Price?
The World Trade Organisation and the Doha Round"

Edited by Jane Kelsey, ARENA
(Action Research & Education Network of Aotearoa)
Box 2450, Christchurch. 2003. $10.

Doha is so little known to most of us that few probably know that it’s the name of a city in Qatar, which we might know to be a country if we’re interested in oil production. Otherwise even a well-informed Kiwi might never have got to know there was such a place as Doha in Qatar.

That’s why it was chosen to host the November 2001 World Trade Organisation [WTO] Summit. Besides being out of the way for much of the world, Qatar is ruled by an emir who’s never had trouble from protestors. The last big WTO conference, in 1999, had broken up in chaos in Seattle, the victim of too much escaped information and a mobilised international citizenry. The last thing the WTO wants is open public scrutiny.

(The authors of the next book under review say that the US did not want Qatar. The US was touting Chile because Qatar, an Islamic state, hosts the media outlet Al-Jazeera. Perhaps this was a last minute, post 9/11 backlash. Jawara and Kwa, "Behind The Scenes At The WTO", p66).

It didn’t work. The politicians and bureaucrats were untroubled from the outside all right. They held their meetings and they issued their statements and then they dispersed without once having to call out the riot police, and two years later, as scheduled, the WTO convened again, this time at a barricaded Mexican beach resort. That meeting, at Cancun in 2003, was another Seattle, in that it ended in protest, acrimony and a rejected agenda. This does not mean that the intervening gathering at Doha was a success. The delegates might have managed to talk behind closed doors, shielded from the outside world, but we know now that Doha was a failure.

ARENA’s monograph, published as Cancun collapsed, is brilliantly timely. "Free Trade At Any Price?" is an analysis of the issues that emerged from Qatar, where the questions unsuccessfully raised in Seattle were put once more. After reading ARENA’s account, you can see why the well-publicised meetings before Doha, in 1999, and after Doha, in 2003, did not work. We didn’t know much about the various machinations at the time, but the rejection of free trade was being formed at Doha where there were no activists on the streets to be blamed. Three rounds of talks over four intense years and the free traders have got their answer. The price was too high.

Any Resemblance To Democracy Is Purely Unintentional

It is the very undemocratic nature of the proceedings that most emphasises the nature of their collapse. The answer might have been expressed more obviously in front of the world’s news cameras in Cancun, but it had being given in the emirate. WTO’s agenda has not been tossed out because hippies in Seattle threw bombs or because anarchists blocked the doors in Mexico. None of the usual suspects can be rounded up. In the light of ARENA’s primer we can see that the rejection of 2003 can’t be attributed to anything other than the WTO itself. Not all the world’s governments want free trade at any price.

More than most, New Zealanders know that there’s nothing wrong with international trade, and critics of the WTO don’t want the country to give up on our exports. So what’s the fuss about? Without an understanding of what is really at stake, it’s not easy to see what the protests are about or why the bureaucrats can’t be left to their talks. So it’s welcome that ARENA prefaces its discussion with some context.

The WTO has been with us only since 1995, but the treaty under which it operates, the General Agreement on Tariffs and Trade (GATT), goes back to 1947. The world had weathered the Depression of the 1930s, when economies shrivelled behind tariff walls, and after the Second World War, peace, cooperation and development were attractive ideals. In the immediate postwar years, world trade expanded quickly. Many of the present members of the WTO did not yet exist, typically emerging to colonial independence in the 1960s and joining the original 23 countries, the founding members of GATT - basically the US, Western Europe and the industrialised West. It was the Cold War era, when the big players were aligned against each other in seemingly fixed formation. The consequences of competition for the allegiance of Africa, Asia and other countries outside the power centres of Europe and the US became a dominant theme of the daily news.

Already those days seem distant, yet, until Mikhail Gorbachev’s presidency of the former Soviet Union and the fall of the Berlin Wall, both recent, the postwar world had seemed immutable. ARENA explains the transition in the context of GATT. By 1994, when the Uruguay Round of negotiations ended, GATT had 128 members, the colonies were free, and the Soviet bloc was no more. Politically there was only one super-power.

It is worth quoting at some length to see there had been a parallel shift in global economic relations:

‘The US, European Union (EU) and Japan were producing more industrial and agricultural goods than they could consume. They were also exploiting lucrative new opportunities created by brands, mass entertainment, information, biological and other technologies, which were all seen as valuable ‘intellectual property’ rights in themselves. Mega-transport (container ships and jumbo jets) changed how and where goods were produced and transported between countries. Services ranging from finance, telecommunications and tourism to health, education and entertainment were overtaking industrial products as the main economic activity and job creator in rich ‘Northern’ economies. Their foreign investors were seeking guaranteed rights of access and profitability and free movement of their capital. Expanding all these activities depended on firms being able to lever open new overseas markets, on their terms" (p6).

Comparative Advantage

Another helpful passage explains that the theory of free trade is based on the notion of "comparative advantage". David Ricardo, a founder of 18th Century classical economics, argued that for each country to try to be self-sufficient was wasteful. In an efficient world economy each country would produce only what it does best. Trade would help everyone. This nostrum, which underpins the current orthodoxy, is held to be a self-evident truth. For our efficient farmers, who can produce high quality food at relatively low costs, it seems a common sense cause.

European farmers, of course, still demand protective tariffs, as do Japanese rice farmers and American beef ranchers. And American timber growers. And steel producers... A lot of primary producers in the rich world can’t compete with lower costs of foreign producers and their domestic governments have backed them. The result has been grotesque. Huge amounts of public money have been paid to subsidise already rich people, including corporate agribusinesses, to grow - or not to grow - food for a domestic population which has itself been increasingly denied state assistance. In the EU the talk has long been of butter mountains and milk lakes, while the pool of unemployed workers laps ever larger and public services waste away.

In Ricardo’s day the situation was much the same. The British government looked after its landowning class to the detriment of all else and pumped up food prices. As a result the new industrial working class might not be able to afford bread, but no matter, if they stole, they could be deported to Botany Bay (Australia) to create a new army of labour. If they stayed home and starved, they could be replaced by farm labourers who had been made redundant by machines. The new towns needed lots of human labour.

It could be said that the selfish needs of these European landowners of two hundred years ago created the colonies. Scottish crofters (landless peasants) cleared from the Highlands, English labourers fleeing the Black Country, and Irish farmers taxed into penury did the authorities a favour by leaving. Not only did they diffuse domestic tension if they got lost. By establishing offshore "homelands" they provided an export market for British goods and a cheap source of raw materials. New Zealand produced butter; Australia wool; Canada wheat; and the theory of competitive advantage became the conventional wisdom.

But ARENA argues that, while classical economic theory and free trade once seemed a natural match (at least for the elites), Ricardo’s prescription does not look so good when applied to services "because of the existence of monopolies and near monopolies, and the unequal resources and economic development of different countries. It does not apply to other WTO areas of intellectual property rights (which restrict trade) or investment" (p7).

Ricardo and his contemporary, Adam Smith, had a simpler world to ponder. In 1790 there were only a handful of what they considered nation states. The basic idea of free trade was that Britain, say, would grow most of the turnips and France would produce most of the wine. Of course. But these days we’re talking the General Agreement on Trade in Services (GATS), which has to to do with the demand of giant corporations - US accountancy or software or biotech companies or European telecoms etc. - to make a buck for the shareholders back home. They want to muscle in on all the world’s governments so that public activities undertaken for the needs of the world’s societies, as defined by those societies, are privatised in the interests of foreigners’ profits. Poorer countries cannot compete with hi-tech transnationals and monopolies.

For more details on GATS, see Jeremy’s review of Jane Kelsey’s "Serving Whose Interests? A Guide To NZ Commitments Under The WTO General Agreement On Trade In Services", in Watchdog 102, May 2003. It can be read online at http://www.converge.org.nz/watchdog/02/03.htm Also, in this issue, see Jeremy’s review of "Behind The Scenes At The WTO", where they take up the point about the changed nature of production. "Behind The Scenes" discusses most of these themes. "Power Play", also reviewed in this issue by Jeremy, is a case study of one industry. These four books are inter-related. Ed.

When we look back now at a dimly imagined past of child chimney sweeps and potato famines we congratulate ourselves for being so much more sensible these days. An obvious fact about poverty and injustice during the Industrial Revolution is that those who owned the big estates were the same people who made the laws. They didn’t have to care. In a democracy you can’t own slaves.

The Free Market Must Be Above All Else

The global elites touting the WTO, like the NZ Rogernauts, profess to believe that we should be governed by free markets, the source of growth. Governments, they say, hobble development in the interests of nurses, solo mums, pensioners, students. Business publications discover a love of the poor. Free markets, they like to say, are being reformed for their benefit.

The evidence of the last two centuries is that both claims are false. It is not the case that governments privilege ordinary citizens at the expense of the very rich. Neither is it true that societies grow best when the very rich are least accountable. An opposite claim would be more accurate.

At the core of the Cancun crisis was the intractable conflict between the needs of the protected farmers of the big rich countries and the impoverishment of food producers in the poorer parts of the world - who are themselves denied access to these rich markets even while they are being pressured to open their own markets to exports from the rich countries. The governments of the EU, the US and Japan are all complicit.

It might not be coincidental that the postwar period when GATT was beginning witnessed the emergence of the US as the world’s superpower. After 1945 America was wealthy in an absolute and comparative sense and its economy was booming, powered by the iconic late 20th Century growth sectors such as defence, space, aviation and computers. Corporate leaders in these businesses talked a good game of individualistic effort, but they prospered through the most massive government subsidies in global history. The same holds for French or British industry. So things haven’t really changed. The economic and governmental elites were the same people. They talked of their generosity to the masses; they backed each other.

(See the review of "Power Play", elsewhere in this issue, for a study of electricity as a leading example).

But when less gifted countries ask why they too can’t have a push start, when they ask why they can’t shield immature industries or pick whatever developmental pattern works for them, they are told such things cannot be. It is to be a matter of high principle that Africa, Asia, Latin America, the Caribbean and the Pacific forbid themselves such tools. Yet there, too, the evidence points the other way. The places which have lifted themselves most from pre-modern deprivation, like Japan, Taiwan and Korea, did so on a foundation of State assistance.

In the Europe of the Industrial Revolution free trade meant cheap food for the people. It would have been a good idea. Protectionism, then and now, catered to the rich. In 1800 British aristocrats ran their country; in 2003, US industrialists run theirs. The Vice President, Dick Cheney, (to take a typical example) was Secretary of Defense in the previous Bush Administration. Between Bushes he was at a corporation – Halliburton - that has been a front runner in jumping into post-Saddam Iraq. For full details, see "War Profiteers: Corporate Beneficiaries Of The US War On Iraq", by Bill Rosenberg, Watchdog 103, August 2003. It can be read online at http://www.converge.org.nz/watchdog/03/01.htm Ed.

What does this tell us? Nothing that is not obvious. The advocates of free trade don’t really believe in it as a pure theoretical success. Dick Cheney’s career has been to prosper from a direct linkage between occupying what is called public office and filling his pockets with private profits. But no-one expects Cheney to say that the State’s role is to subsidise the world’s biggest private corporations and to award contracts of millions of taxpayer money to his own company. We expect him to say that the State should never spend a cent more than it has to, and it would be better if it had to spend nothing on stuff like health and education. The State, the Cheneys of the world will tell us, should leave private business alone (after it declares wars on rogue states and channels money to the warriors for Free Trade ... make that Freedom ... so they can fight the rogues).

The very few NZ politicians who claim an interest in economics are true believers like Don Brash and Richard Prebble. Colleagues of Sir Roger Douglas, politically and ideologically, they have made the running on such matters for 20 years.

(Brash, the new Leader of the Opposition, has only recently arrived in the House as a National list Member of Parliament. He was previously Governor of the Reserve Bank, which, with Treasury, is the agency that directs economic policy. Post-1984 neo-liberalism, as defined and policed by the Reserve Bank and Treasury, is the descendant of Ricardo and Smith’s classicism).

The Religious Cult Of Neo-Liberalism

NZ governments, Labour and National, have pushed neo-liberal policies with an almost religious fervour. The political and bureaucratic elites murmur the magic phrases like a catechism; the rest of us have to assume that the hierarchy are right when they tell us that the wages of unorthodoxy is economic death. In a political culture that values neither economic knowledge nor independent thought, no backbench Government MP has indicated doubt. In Wellington there might not be many zealots but neither are there agnostics, let alone atheists.

Trade Minister Jim Sutton, with an agricultural bias, seems to be unquestioning in his allegiance. Before Doha he feared the talks would collapse, but not because he was a doubter. ARENA thinks that Sutton publicly worried in order to put pressure on the developing countries to accept a deal. NZ is in an unusual position in matters of trade. As a small primary producer it is a "South". As an Organisation for Economic Cooperation and Development (OECD) member with a modern, developed economy, it is a "North". Ideologically it’s North Pole.

(See the review of "Behind The Scenes" to put Sutton into a context. His attitude is consistent with the bias that typifies WTO autocracy).

The Cairns Group, an informal pressure group to which NZ belongs, is pushing for free trade in agriculture, an outcome which would benefit us and the undeveloped South. Yet we align ourselves with the policies of the rich Northern "Quad" - US, EU, Japan and Canada - who won’t let it happen. Supposedly we do so because we hope thereby to encourage the big lads to cut their subsidies in response.

They can’t be serious. By removing government supports more rapidly than pretty well anyone else, we have signalled our willingness not just to accept the full WTO agenda, but to play escort fish to the US-EU shark. We do more even than we’re asked, while bigger rivals often do nothing at all. In October 2003 the Government announced a resumption in a programme of reducing some of the few remaining tariffs, in the already enfeebled textile industry. Other Asia Pacific Economic Cooperation (APEC) governments aren’t following suit.

Farm subsidies were the first to go in the Rogernomic reforms. At the time farmers assumed this was Labour farmerbashing. Though this wasn’t its motivation, for the ideologues in the Beehive, farmers were the pretext for the launching of a crusade. Why else would successive governments toss away any negotiating room?

The Poor Are Too Stupid To Know What’s Good For Them

Since Cancun, Sutton has confirmed ARENA’s suspicions. The talks failed, he has said, because of the South, whose delegates were too unsophisticated to get the hang of the issues *. Condescension of this kind has become the norm. The Economist, for instance, the Bible of the free traders, in reckoning that the poor countries wanted everything their way, used almost identical language to Sutton: "They forgot that trade talks require compromise. Egged on by a bevy of activists, too many Third World politicians got carried away by the thrill of saying no" (20/9/03. See the review of "Behind The Scenes At The WTO" for a discussion from just such a perspective). *On Radio NZ’s Checkpoint, as quoted by Gordon Campbell, Listener, 4/10/03, p 27. "I think you come to a negotiation to negotiate. You can’t come with non-negotiable positions. it doesn’t take a rocket scientist to work that out. There was no rational explanation other than sort of an overload of many nations’ capacity to cope with a number of complex issues". As Campbell notes, this is a "breathtaking" interpretation of what happened.

Sutton’s view is disquieting. His two public statements, that the talks might break down because there was so much on the agenda and so little time (before), and then that, oh dear, the talks broke down because the South couldn’t handle them (after), suggest that the WTO should have taken more time and been more flexible. This had always been ruled out. So Sutton’s remarks can be reconciled by concluding that he wanted to stampede the developing countries into signing on to a deal that they thought to be against their own interests.

When the strong want something that the weak don’t want, they create panic and crisis by inventing deadlines. Chief Executive Officers do this, as do bank robbers. When the weak want something that the strong don’t want, but that logic or natural justice might recommend, the strong stall.

(See the review of "Behind The Scenes At The WTO" for examples).

The WTO operates by consensus, and talk of flexibility can move things along when disagreement threatens. Ambiguity comes in handy when all 146 member states have to agree. Some vagueness might help maintain civilty.

Flexibility is more often a handy concept for the Quad and its allies. In 2002, between Doha and Cancun, when a group of 15 "Like Minded Countries" from the developing world asked the WTO for more accountable procedures, NZ supported an Australian call for "flexibility". Clarity, they argued, wouldn’t help, as "prescriptive and detailed approaches to the preparatory process are inappropriate and will not create the best circumstances for consensus to emerge in the Cancun meeting". This may be translated as "Get lost" (pp13). ARENA points out that what the free traders are pleased to designate a "flexible process" is not a helpful suggestion to help everyone relax. It’s more like a tactic to avoid recorded minutes so you don’t have to account for yourself.

In doctrinaire NZ, flexibility applies to working stiffs. When the Rogernauts of the world want to advance the cause of free trade by deepening that pool of the unemployed, by cutting wages and union bashing, they always talk about creating "flexible labour markets". A flexible labour market is one ripe for transnationals. In linking the 1990s vintage Employment Contracts Act (ECA) to their analysis, ARENA makes the case for seeing NZ’s neo-liberal experiments as part of the WTO antics.

In NZ the post-ECA period has been one marked by increased poverty and social dislocation. In the week that Doha convened, a single paragraph in the daily paper noted that in the last 20 years NZ workers had seen their wages fall by 6.5%. Of all 16 (developed) countries surveyed, this was the worst performance. Then some economists commissioned by AMP confirmed the slide. "There’s a price to pay for consistently using other people’s money for investment, AMP have concluded, ‘and that price is lower incomes for New Zealanders relative to the rest of the world".

Some of the prices that were printed out from the national register that month: our rates of cancer are high. As is our incidence of child abuse. Perhaps there’s an explanation that links the flood of bad stats. Which Ministry is on to the case? (Press, 23/9/01, from a speech by Council of Trade Unions president Ross Wilson, citing the Canadian Centre for the Study of Living Standards. In the same paper, a few days earlier, we could have read that, according to a study by the NZ Institute of Economic Research, males’ earnings in Canterbury have fallen over the last 40 years from the equivalent of $28,966 in 1961 to $24,300 in 2001. You can’t conclude too much except that, at best, Rogernomics hasn’t slowed a slide that had good reason to begin in the early days of the European Community. Press, 10/9/03).

By and large the difference between modern, developed economies and the dependent, poorer ones is that in the former you’re more likely to know where you stand. You have a job with some security that might be fulfilling so you can plan a future for the family. In most of Africa and Asia you’re not sure at all.

True Believers Don’t Get Distracted By Facts

To the true believer the dismal news means nothing. When you’re chasing the Holy Grail, you can’t allow tedious facts to block the way. But even though you can brush aside mundane statistics about a current reality, you take quite a different approach when it comes to looking ahead. The predictions about what will happen once you deregulate and privatise haven’t been flexible at all. Talking targets, the Rogernauts are about as inflexible as a Politburo planner in the former Soviet Union eyeing the yield from a Ukrainian wheat field. Douglas himself reckoned that his playings with the economy would lead to permanently high growth rates of growth. He even wrote down a series of skyhigh percentages. They could not have been less accurate.

The World Bank sets the example. A successful Doha chat would have raised global income by $US500 billion by 2015, it tells us. 144 million people living in the poorer country would be lifted out of poverty (Economist, 20/9/03). Numbers so bursting with exuberant precision must be the result of some deep calculation in a Batcave of expertise, we might suppose. Who are we to deny that our ideas are impoverishing 144 million souls. How do we do so?

Again in September 2003 a gungho Treasury told us that relaxing the genetic modification (GM) moratorium (as desired by the US and its allies) would see gross domestic product (GDP) up by 6% a year. The numbers are meaningless inventions - and hopelessly implausible. But they might sound good to some at the time.

Treasury reckons it’s doing the farmers a favour by pushing open markets, but when it comes to farming, we’re used to thinking in terms of honest toiling cockies. We all agree our exporters need access to foreign consumers. Yet consider the case of Mexico. Mexico was the first developing country to join a free trade deal with the US (NAFTA, the North American Free Trade Agreement, which links the US, Canada and Mexico). It did so to much fanfare about the approaching El Dorado. They’ve been reeling ever since because free markets are what they haven’t got.

One reason is that "real control of global agriculture rests with a handful of agribusinesses. Two transnationals ... control about 2/3 of the world’s grain production". America is the home not just of financial and technological supremacy, but of extensive prairies. Farm supports, ARENA writes, enable the US to export corn at 25% below the cost of production and wheat at 46% below cost. "This corn was dumped on the Mexican market in 2001 at 25% below cost. Between 1985, when Mexico signed the GATT and 1999, Mexico’s earnings from corn plummeted 64%. At the same time there has been an increase in poverty and malnutrition and 1,750,000 people have been displaced from rural areas" (p17).

Scotland once was cleared because foreign landlords could make more money from sheep. Its people went to Glasgow’s factories or to Nova Scotia, Canada. Mexico’s people now go to sweatshops on the US border.

It’s a global pattern, and in many places the dislocation is worse than it is in Mexico. In the "banana republics" on the Central American isthmus south of Mexico it has long been the norm for peasants, thrown off their own land, to scrounge for scraps over the fence so that their old farms can be given over to a single export crop grown by a foreign agribusiness.

Comparative advantage? Mutual advantage? Free markets? Free trade? Individual enterprise? Diversity? If only.

ARENA’s conclusion about agribusiness might be harsh but, on the evidence of all the news, it’s hard to deny: "Ultimately these companies aim to control the entire food chain and every persons‘s access to the food and water that are essential for life"’ (p17).

China Is The New Mexico In The Race To The Bottom

As they say, it’s a race to the bottom. Having driven down its living standards, Mexico might not be able to compete. "Last year", ARENA notes, "200 transnationals moved to exploit even cheaper labour in China (US$40c an hour as against $1.20 an hour in Tijuana, Mexico) and China is about to displace Mexico as the second biggest exporter to the US (p66).

ARENA argues that China will be a key to the future of WTO negotiations. This could be bad news (China offers a huge potential to drag down global standards) or good news (China "may be the only country with the economic and strategic clout to counter the aggressive self-interest of the North, but its own interests and preferred aliances are still being revealed").

You’d never know it from the reaction in the media but the WTO talks did not break down because the developing world was stupid or ungrateful. Neither were the talks about food. The reason for the public intransigence was to do with what were called "the new issues" or the "Singapore issues" * The points at stake are made to sound boring and inscrutable so that we, the publics of the world, are invited to shrug. * So named because they date from a 1996 meeting of WTO Trade Ministers in Singapore. For details, see "WTO ‘New Issues’ = Old MAI", by Bill Rosenberg, Watchdog 101, December 2002. It can be read online at http://www.converge.org.nz/watchdog/01/01.htm Ed.

Governments from the North want to stampede the South into opening their societies to any and all investment. The "new issues" is the GATS agenda, which ARENA discusssed in its last publication. * The US once talked of "creeping communism". Now it dubs any attempt to impose regulations on its corporations as "creeping expropriation". * For more details on GATS, see Jeremy’s review of Jane Kelsey’s "Serving Whose Interests? A Guide To NZ Commitments Under The WTO General Agreement On Trade In Services", in Watchdog 102, May 2003. It can be read online at http://www.converge.org.nz/watchdog/02/03.htm Ed.

We are always being reminded that so much of the WTO agenda is business as usual; other aspects are so new that we’ve not yet heard of them. It’s in untangling the permanent and the emerging, and showing how they connect, that ARENA has done a great job. Another virtue is the writers’ way of illustrating the big picture with sharp details. The booklet interprets the mess of jargon without using it. In asking now if the world should opt for "Free Trade At Any Price?" ARENA has done us a favour. Its analysis of what’s at stake is excellent: clear, crisp and scholarly. If only our trade officials were to read it.

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Foreign Control Watchdog, P O Box 2258, Christchurch, New Zealand/Aotearoa. August 2003.

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