The year of the hype: Did pushing GATT through only profit the few?
Noted & noteworthy
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The year 1993 may go down in history as the annum of economic treaties which claimed to sow "new seeds of global trade on fertile ground" (as one of the more restrained of many overblown forecasts had it). In the final weeks of the year, economic cooperation agreements were hammered out by 12 Pacific Rim states (Asia Pacific Economic Cooperation - APEC), by Canada, Mexico and the United States of America (North American Free Trade Agreement on Tariffs and Trade - NAFTA), and by the latest, the Uruguay Round of negotiations under the General Agreement on Tariffs and Trade (GATT).
Among Pacific Rim states there is considerable debate as to how far and how soon APEC should move toward a full-fledged trade agreement, with Malaysia voicing fears that it wouldn't be in the interests of smaller countries. As for NAFTA, hot debate continues within the borders of all three signatories on the pros and cons of the new arrangements, in terms of investment and employment levels as well as the pact's human rights and environmental implications. Protest has sometimes been violent, such as the armed uprising among Indian communities in Chiapas, Mexico, on the very day the agreement came into force.
Curiously, the conclusion of the Uruguay Round, whose consequences for global production and trade will be far-reaching, failed - except in India and France - to provoke the kind of high-level national debate one might have expected. GATT ought to have been the centre of attention at public conferences, university seminars and in parliamentary debates. But no. Partly, this was because the voting public and politicians seem to have trouble coming to grips with trade issues, finding them complex and confusing. The press, however, dedicated much time and space to vaunting the virtues of the Uruguay Round proposals and painting dire pictures of the catastrophe that would befall the world if the 15 December deadline wasn't met.
Statistics were trotted out from studies aimed at winning hearts and minds to the cause, like the one commissioned by the Organization for Economic Cooperation and Development (OECD) and the World Bank, according to which a successful Uruguay Round would spark an annual increase in world trade of US$213 billion. Or, as Sir Leon Brittan, the European chief trade negotiator, put it, $1 billion a day would be lost if agreement wasn't reached. Largely ignored were the words of OECD Secretary-General Jean-Claude Paye, who admitted the exercise was "highly theoretical," that benefits could take 10 years to materialize and that several developing countries would suffer.
Superficial missionaries
The media's missionary zeal prompted a distressing amount of superficiality and simplification, fixing attention on one or two issues - agriculture or the audio-visual industry - and presenting them in near-caricature form. On one hand were the enlightened champions of the free circulation of products and services, admirably modern and concerned for the welfare of consumers (provided they had enough cash, of course). On the other, those who opposed or even questioned the proposals were castigated as stubborn, old-fashioned protectionists, clinging to archaic privileges and advocating agricultural exports subsidized by Europe, along with audio-visual quotas that prevented people from exercising their free choice to see Jurassic Park or Disney cartoons.
But the sun also rises. Other issues, too, were at stake, from civil aviation to steel. Two completely new areas were Trade-Related Investment Measures (TRIMs) and Trade-Related Intellectual Property Rights (TRIPS), which could have long-term significance for developing countries. Former Tanzanian president Julius Nyerere, now chairman of the South Commission, warned that for southern nations the agreement could mean "the closing off of vital development options and opportunities in the future - especially, but not only, in the increasingly important areas of science and technology." He emphasized the round's qualitative difference from its predecessors, in attempting to "restructure and refashion the rules of the international trading system to make this even more favorable than at present to the interests and concerns of the major trading nations - the industrialized countries of the economic North." Nyerere also stressed the role of transnational corporations (TNCs) in the bargaining, a fact too little highlighted in the western press, which facilely equates a country's interests with those of its TNCs.
Public awareness of the real issues may be greater in India, where there is widespread unhappiness over the seemingly eternal Multi-Fibre Arrangement - once more protracted - which maintains tariff barriers restricting textile imports from countries of the economic South. Indians fear new regulations on intellectual property rights could also affect the cost of drugs, and are rankled at the idea of their federal government signing away authority on such issues as farm policy and food distribution - normally under the jurisdiction of individual Indian states. Scores of thousands of Indian farmers have demonstrated against any weakening of existing national patent laws, which exclude patents on all life forms, and in favor of banning TNCs from entering the Indian seed sector. Like Mexico's peasants and French fishermen, desperation is driving India's small farmers to take the defence of their interests into their own hands, sometimes with dramatic effect.
Those who feel the thrust of recent trade pacts is in the interest of the few and against that of the many are handicapped, however, in articulating their concern. No one likes to be cast in the role of Old-Hat Protectionist Spoilsport, advocating policies still widely blamed (though without conclusive proof) for launching the Great Depression of the 1930s. Too often the poor and underprivileged are outgunned by the high-powered experts, who trot out endless statistics and quote glibly from the 18th-century classical economists in favor of expanding trade.
Reflected assumptions
However, the OECD study's awesome 77 000 equations are a little less impressive when one realizes that the conclusions of the rather inelegantly-named RUNS (Rural-Urban-North-South) model on which it is based only reflect "the assumptions and choices made by the authors of the model" (their own words). Prof. René Passet, of the Université de Paris, criticizing the study, notes that "the advantages of free trade are considered as given, by definition, at the beginning - only to be discovered all the better at the end."
As for Adam Smith and David Ricardo, who elaborated the first theories about the need for countries to specialize in products in which they have a "comparative advantage," thus bringing down costs so that all may share the benefits, they could not have foreseen today's situation, in which finance capital has become so mobile that investment is now governed more by absolute profitability than comparative advantage. Economist Will Hutton has noted the significance of the gigantic expansion in foreign exchange turnover and the scale of foreign borrowing, compared with the world's merchandise trade. While the latter, in 1993, represented two-thirds of U.S. Gross Domestic Product (GDP), he calculated it would take the turnover in foreign exchange markets less than two weeks to reach this figure - quite apart from the cross-border derivative, bond and equity markets.
This should be the stuff of serious public discussion, to raise awareness of the impact these issues will have on our societies. Yet such discussion remains conspicuously absent in most of the media which, once the 15 December deadline was safely met, seem to have lost all interest in the subject.
Fortunately, there are some sources available to those with longer attention-spans. In The new protectionism, Tim Lang and Colin Hines mount useful and telling arguments that question the sanctity of free trade doctrine. Well aware that their ideas run counter to the conventional wisdom of establishments that dislike being contested, they wryly note: "It is ironic that free trade theory, which emphasizes choice and freedom, brooks no opposition to itself."
Advocating a "new protectionism," the authors caution that their brand shouldn't be confused with the old variety, used by powerful vested interests to pursue private goals. On the contrary, its aim is to protect such public goods as the environment, safety standards and poverty reduction, against potential damage from ungoverned trade.
In the authors' view, neither free trade nor old-style protectionism can meet the challenges of the 21st century, which they group under the "three E's" of "economy, environment and equity." They note that national economies - even the juggernauts of Germany and Japan - are in trouble across the globe, reeling from the effects of recession and unemployment. Politicians exhort workers to work still harder and seek more training, while companies continue laying them off in five-figure batches and replacing them with computers, in order to become "leaner and meaner." No one seems to realize that, as the founder of the United Auto Workers' Union, Walter Reuther, once observed, "robots don't buy cars." Countries all follow the same beg-gar-my-neighbor policies, while the toll of joblessness climbs.
Global inequity
Meanwhile, global inequity worsens. According to the United Nations Development Programme (UNDP), I the richest fifth of the world's population, by nation, today earns 60 times more than the poorest fifth. The developing countries' share of; global wealth fell from 22 per cent to 18 per cent during the 1980s, and only in Asia did per capita income outpace the drop. For sub-Saharan Africa, income from primary commodities declined 50 per cent in real terms. Conditions in Brazil, where the top 20 per cent of the population receives 26 times the income of the bottom 20 per cent, are typical.
As for the environment, its deterioration has dramatically increased in the past 20 years, which have witnessed the destruction of the ozone layer, devastation of rain forests, contamination of seas and rivers, pollution of the air, and global warming. True, Lang and Hines admit, there is more public awareness and concern about this. But little is being done about it.
Today's market crisis, they insist, is at least partly due to the failure of free market mechanisms to factor in the costs of environmental damage, or consider the needs of the vast slice of humanity which hasn't enough purchasing power to Constitute an "effective demand." Free trade economics have meant the pursuit of wealth only for the world's richest 1.1 billion inhabitants, who consume a disproportionate share of global resources.
The authors argue that the new GATT arrangements will expand the very policies that are causing such damage, and call instead for another vision in which our common future would be guarded by a rational restriction of international trade. Western anxieties over slowing growth, they claim, are a diversion from the basic political challenge of creating policies that are more than tokenist toward the far-off poor, that make environment a priority and that distribute work and rewards more fairly within and between nations. Economies, they write, should be oriented toward maximizing national production - and self-reliance - then looking to surrounding regions, and only as a last resort to international trade.
Only Utopians expect the rich and partly-rich to give up present patterns of consumption, and this, the authors agree, is the biggest quandary of the Green Movement: how to build widespread support in the North for policies that threaten current life-styles. Mass media pundits are of little help, shouting, as did one economic weekly, "Don't green GATT!" and warning darkly that "green campaigners pose a new threat to trade liberalization." In such an atmosphere, fears are far from groundless that hard-won gains in environmental and health regulations may be swept aside in the name of removing "barriers to free trade." The sustainable development objectives of the Brundtland Report, subscribed to by most parties to GATT, aren't mentioned in the final Uruguay Round agreement.
GATT pronouncements have sparked opposition from an international network of public interest and consumer groups. In 1992, some 160 NGOs from 60 countries protested the Uruguay Round proposal to create a Multilateral Trade Organization, with extraordinary powers of intervention and arbitration in trade disputes. The association would be uncommitted to sustainability and without a process for adequate democratic consultation. Negotiations on this aspect of the round were shrouded in secrecy, and weeks after the agreement was signed it was still difficult to discover exactly what was decided.
Lang and Hines devote considerable text to the increasing concentration of wealth in the hands of fewer and fewer transnational corporations - a trend they see as profoundly unhealthy, escaping the control of individual countries as well as international agencies like the UN, whose code of conduct is purely voluntary. The TNCs are free to range the world, seeking areas where environmental restrictions are fewest and labor costs lowest. They cause environmental damage and worker exploitation abroad, while simultaneously tearing at the social and economic tissues of their supposedly "home" countries.
Hidden interests
These are the hidden interests behind the new GATT and similar trade agreements, argue the authors, and they do not advance the welfare of the millions of poor around the world, who risk becoming still poorer, or of future generations who risk inheriting a devastated planet. GATT, they insist, should be replaced by GAST (Breton speakers please ignore the double entendre) - a General Agreement on Sustainable Trade. Such an approach, similar in some ways to the "bioregional" ideas advanced by Stewart Brand and others in the U.S., would make regions, both within and between countries, the focus of economic activity, increasing local and regional self-reliance. It would make improving the processes of production as important as improving products. Local and regional diversity, cultural as well as biological, would be at a premium, as would social mechanisms to permit greater human welfare and a more humane pace of life. Democratic control of economic decision-making - especially that of TNCs - would be a main goal.
Such proposals can indeed be dismissed as "Utopian." Yet as Alice observed in Wonderland "you can make words mean so many different things." At least one Oxford academician has labelled the GATT agreement itself a mere "fantasy of economic rationalism." The failure of conventional economics to solve global problems is both real and undeniable.
Maybe Humpty Dumpty, of Mother Goose fame, had it right. "The question," he said, "is which is to be master, that's all."
Julia Rossetti
Also worth reading: GATT and India: the politics of agriculture, by Devinder Sharma, Konark Publishers PVT Ltd., A-149 Main Vikas Marg, New Delhi 110092, India, 1994, 198 pp., Rs 225.
Aimed at a broad audience of planners, policy-makers, donors, extensionists and ordinary farmers, this study by a Nepalese extensionist and agricultural officer presents a useful and concise history of development efforts - failures and successes alike - in mountainous Nepal. New, more sustainable strategy options for agriculture are proposed. A good source of comparison for planners who must deal with similar environments.
A thorough, detailed defence of food irradiation as a food preservation technology, written with the layperson in mind. Comparing controversy over irradiation with earlier debates over pasteurization, the author first explains how the irradiation process works, then where and how it can be applied, and finally responds in point-by-point fashion to the fears and legitimate queries of critics and opponents of the technology.
A clear, practically oriented outline of the principles and methods of land-use planning, aimed at providing a step-by-step framework within which national, regional and local planners can develop their own, detailed strategies. Illustrated with extensive tables and detailed examples.
From torrent bed stabilization to gabion structures, small dams and reservoirs, this manual provides a complete discussion of the principles and recommended methods of vertical and horizontal control of water torrents. Required reading for anyone interested in water erosion and problems of flooding. Illustrated, with tables and basic formulae.
