Morals of the brothel
Larry Elliott
Monday April 15, 2002
The Guardian
George Bush did us all a favour when he slapped tariffs on
imported steel. Unintentionally perhaps, he shed light on the
west's dirty little secret: free trade is a myth, a confidence trick,
a grand illusion. The duties were evidence that the United
States, like the European Union, Japan and Canada, are avid
supporters of the ideas of Adam Smith and David Ricardo, but
only when it means liberalising the markets of smaller and
weaker countries, not their own.
Bush's kow-towing to the lobbying power of the steel-producing
states has led to the strangest alliance since Hitler and Stalin
hopped into bed together in 1939, with the anti-globalisation
movement hailing the president as a born-again protectionist. As
with the Nazi-Soviet pact, this marriage is unlikely to last long.
The idea that America will stop trying to prise open foreign
markets for US goods is absurd. There is no more chance of
that happening now than there was of Britain recanting in the
first age of globalisation at the end of the 19th century.
Frozen out
Why? Because the way the world's trading system works has
little to do with ideology and everything to do with power. The
strong are only interested in free trade when it suits themselves.
No question, Europe has a strong case over steel. European
producers have accepted the pain of restructuring, but will now
be frozen out of the US market by the decision to subsidise
inefficient plants. But hang on: isn't this the same EU that
operates the grand-pappy of all protectionism, the common
agricultural policy, which uses colossal subsidies to keep
lower-cost producers out of the European market? And, just in
case you are tempted to think that the extra £15 a week we pay
on our food bills is worth it to keep those Greek olive groves
tended and to ensure that the goats cheese appears on those
market stalls in Gascony, think again. The bulk of the subsidies
are swallowed up not by small farmers but by Europe's giant
agri-businesses. Moreover, it was these special interest groups -
every bit as powerful as the US steel lobby - which ensured that
even when Europe's trade commissioner, Pascal Lamy, took the
step of proposing duty free access to the EU for all goods
except arms from the world's poorest nations, full and immediate
implementation was blocked by the rice, sugar and banana
barons.
For all that, Lamy's initiative was at least a step in the right
direction. It recognised that trade is a vital tool in spreading
prosperity to poor countries, but will only be effective in doing so
if the rules are changed. At the moment, the rich countries act
just like the patriarchs of Victorian London, demanding the
highest moral standards of their servants but slipping out after
dark to debauch themselves in brothels.
The prime example of this was the Uruguay round of
liberalisation, which took seven painful years to negotiate from
1986 to 1993. Those badgering poor countries to open up their
markets conjured up all sorts of imaginary numbers for the
benefits the global economy could expect. At first it was
$200bn, then $300bn, then $500bn. Had the Uruguay round
gone on for a couple more years, the numbers would surely have
escalated to those children use in playground games.
"Sign up to the Uruguay round and the world will be a zillion
dollars better off." Whatever the real benefits have been, one
thing is for sure: few of them have been seen in Zambia or Haiti.
It was ever thus. When Britain was top dog in the 19th century,
free-trade rhetoric was exploited for national advantage, only with
an even greater disregard for the human consequences. The
self-serving and complacent view in Britain that globalisation in
the glory days of empire was benign and tolerant is exposed as
a self-serving sham by Mike Davis in his masterly exposé of the
famines that killed 50m people in India, China and Africa during
the last quarter of the 19th century (Late Victorian Holocausts;
Verso).
There was no satellite TV to capture the consequences of Lord
Lytton's famine-relief scheme designed to cope with an earlier
incidence of severe El Niño climatic shocks, which involved
herding peasants into labour camps and working them to death
on rations even more meagre than provided by the Nazis in
Buchenwald.
Davis's book provides a terrible warning of what can happen if
rich and powerful countries use an adulterated form of
free-market ideology to suit their own ends. What then is to be
done? Western governments would argue that they have
benefited from trade, and they are right. Countries that have
been integrated into the global economy over the past 50 years
have performed considerably better than those that have followed
an autarkic route.
The alternative to an economic system that involves trade is not
bucolic simplicity and hardy self-sufficiency, but extreme
poverty. South Korea has plenty of problems, but not nearly so
many as its neighbour to the north.
Where the west is wrong is in its insistence that poor countries
open themselves up immediately to the full blast of global
competition. The World Bank and the IMF have made opening
up markets in poor countries a condition for loans, confident in
the belief that this will lead to greater efficiency, higher growth
and less poverty. They say that those countries which have
given up on protectionism and become more export-driven have
grown much faster than those nations that have maintained
barriers to trade. But this argument needs to be stood on its
head.
Tariff barriers
Successful countries develop industrial strength before they fully
open up their markets. This is what America did. As Oxfam
noted in its report last week*, if the founding fathers had listened
to Adam Smith they would still be tilling the fields, leaving
manufacturing to Britain. Instead, the US industrialised in the
19th century behind hefty tariff barriers. "I don't know much
about the tariff," said Abraham Lincoln, "but I do know if I buy a
coat in America, I have a coat and America has the money."
America's route was followed by Germany, Japan and the Asian
tigers. "Most economies in east Asia did not start to liberalise
imports until export growth was well established," Oxfam says.
"In China, domestic marketing reforms generated the initial wave
of economic growth, which exports helped to accelerate. Earlier,
Taiwan and Korea developed behind import barriers. 'Free trade'
was not a major feature of east Asia's success, but exports
played a critical role in sustaining economic growth."
The Oxfam report has been condemned as an unconditional
surrender to neo-liberalism. It is no such thing. Rather, it is an
attempt, squarely in the Keynesian tradition, to show that trade
can be made to work for the poor.
Not on its own, of course. East Asia's economic miracle was
also based on high levels of saving and crash programmes of
mass education. In many cases, poor countries need to purge
themselves of corruption, and recognise the difference between
helpful and unhelpful protectionism. It makes little sense, as
Oxfam notes, for countries suffering from epidemics of malaria to
put tariffs on imported mosquito nets.
That said, western protectionism is a bigger problem. At the
moment, when developing countries try to export into the world's
richest markets, they face tariff barriers four times as high as
those encountered by other rich countries.
Trade restrictions cost poor nations $100bn a year - twice as
much as they receive in aid. A 1% increase in export share for
each developing region would reduce poverty by 12%, with the
biggest reductions in sub-Saharan Africa. Oxfam says that as a
global community, "we sink or swim together".
We ignore the scandalous unfairness of world trade at our peril.
" Rigged rules and double standards; Oxfam
guardian.co.uk |
