The World Trade Organisation – Part I

The World Trade Organisation – an imperialist carve-up threatening to disintegrate – Part I

The World Trade Organisation was set up at the conclusion of the Uruguay Round, on 15 December 1993, by a world trade treaty aimed at opening international markets, signed by the 115 countries, who had been struggling since 1986 to reach consensus on extension of the General Agreement on Tariffs and Trade (GATT).

At the end of 1990, however, the talks appeared to have reached an impasse:

“The future of international commerce”,

announced the

Financial Times

of 8-9 December 1990,

“was left in limbo yesterday after world trade ministers adjourned indefinitely their four-year effort to reform the trading system.”

The reason for the collapse of the talks was generally agreed to be the inability of European and Japanese imperialism to agree terms with US imperialism on terms for the ‘liberalisation’ of agriculture. Free trade in agriculture was bound to wipe out a large proportion of European and Japanese farming, but US imperialism would not allow the countries involved the time that they considered necessary to manage the destruction process without risking uncontrollable revolt.

In August of 1991, however, the Soviet Union collapsed, and this event renewed the pressure on the imperialists to agree terms for world trade. By 20 December 1991 a draft Final Act of the Round had been tabled by the Trade Negotiations Committee. On 20 November 1992 the US and the EC concluded an agriculture accord. On 14 July 1993, GATT negotiations resumed in Geneva, with a view to reaching agreement by Wednesday 15 December 1993 or not at all. Disagreements between the US and the EC in particular carried on to the very end (two days before agreement is finalised, GATT Director-General Peter Sutherland was warning these parties that

“brinkmanship is all very well, but the brink is finally reached on Wednesday”

), but finally on 14 December agreement was reached, and on 12-15 April 1994 a TNC Ministerial meeting at Marrakesh, Morocco, ratified the Final Act.

Imperialism needs GATT

The importance of the Uruguay Round for imperialism is not only that it extended ‘GATT discipline’ to a whole range of products which were previously excluded from free trade accords (services, intellectual property), and reduces permitted protection of others (agriculture, textiles), but also that it set up the World Trade Organisation (WTO). The WTO is a body with power to sanction action worldwide against any form of protectionism; and so long as its tentacles do reach every corner of the globe, it is in a position virtually to wipe out the export trade of any country failing to comply with its requirements. If, on the other hand, the talks had failed, the world would remain dominated by such trading blocs as the European Union, NAFTA, etc., none of which would have the sheer power that the WTO’s world monopoly confers on it. The ‘value’ of this monopoly was estimated by US trade representative, Carla Hills, at $17,000 payable over 10 years for every family of four in the world – except, of course, that nobody ever had any intention that this is how the extra profits would be shared – most families have been impoverished by the GATT discipline, it is the multinationals and billionaires of the world that have cornered the lion’s share of the extra loot. Had agreement not been reached, countries who found the terms imposed by one bloc unacceptable would stand some chance of being able to reach more advantageous agreement with another, thus seriously undermining the imperialist stranglehold – especially that of the US. In other words, the WTO reduces the scope for US, EU and Japanese imperialism to be played off against each other by less powerful countries.

The reason, however, why it took so long to reach agreement was not that the WTO was not advantageous to all the imperialist powers, but that acute contradictions exist between the various imperialist powers, all of which want to protect their own trade as much as possible, while denying every possible protection to the others. The

Economist

of 30 January 1999 illustrated how US President Clinton personifies this attitude:

“’I issue a call to the nations of the world to join the United States in a new round of global negotiations to expand exports … We must tear down barriers, open markets and expand trade’. Stirring stuff from a president on trial: Bill Clinton in his state-of-the-union address to Congress on January 19

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[1999]

. Thankfully, it seems, at a time when the world economy looks fragile, America is taking the lead in fighting to open the markets that many would like to shut. If only. Mr Clinton also promised to retaliate ‘when imports unlawfully flood our nation’. ‘I have already informed the government of Japan that if the nation’s sudden surge of steel imports into our country is not reversed, America will respond’, he said, to the loudest cheers of the night from assembled congressmen. A week later, the administration also won aclaim when it promised to revive ‘super-301’, a trade law authorising retaliation against countries that America deems to be unfairly blocking imports”.

(‘Throwing sand in the gears’).

What was agreed?

Despite the fact that the various imperialist powers, then as now, were all struggling to have their cake and eat it – as to which, see further below – finally agreement was reached. The main areas of trade covered by the Final Act were agriculture, textiles, services and intellectual property. The Act also attacked the question of barriers to free trade, measures tending to make a market hard for an outsider to penetrate: government subsidies to local producers, byzantine import licensing procedures, unjustifiable health measures or measures for protecting the environment, import restrictions. Unfair trading was also covered, e.g., export subsidies, counterfeiting and dumping.

Some time was given for the demolition of trade barriers – longer for poorer countries than rich ones – and this has now largely expired. Subject to that, the aim was to create a ‘level playing field’ for rich and poor alike. As is well known, however, when rich and poor are ‘equal’, the rich are always have the advantage.

Much still remained to be done, however, and in November 1999, the WTO called a Conference at Seattle for the purpose of inaugurating the ‘Millennium Round’ of negotiations, scheduled to carry on for at least another three years. The main aim of this Round is to push forward the imperialists’ agenda for the extension of free trade to a whole gamut of areas that were previously excluded from GATT, including transport, distribution, medical care, education, prisons, estate agency, banking, insurance, construction, tourism, entertainment, etc. As is well known, however, at Seattle no progress was made because the talks collapsed amidst chaos both inside and outside the Conference venue.

The collapse was due to the sharpness of the contradictions between:

The imperialist countries on the one hand and the third world on the other;

The various imperialist powers themselves; and

Different sectors within the imperialist countries.

These contradictions will be examined in more detail below.

Effect on poorer countries

Before turning to examine the continuing strife among the imperialist countries, let us look first at how the new-style GATT has affected the third world since it came into effect in 1996.

Let us take India as an example. In the years between 1992 and 1995, before the new-style GATT came into effect, India’s annual exports were to the tune of $22.3 billion on average, while its imports amounted to $24.6 billion (leaving an annual trade deficit of $2.3 billion). Between 1995 and 1998 average exports had increased by 50% to $33 billion. Unfortunately, however, imports increased 57% to $38.8 billion, thereby increasing the trade deficit to $5.8 billion per annum on average – more than double what it had been previously. So while it is undoubtedly advantageous in terms of exports for India to be in the World Trade Organisation – it is, for instance, doing extremely well in the export of computer software and services – the government is prevented from restricting imports in any way, as a result of which the trade gap cannot but widen as most of India’s production is, like that of all other third-world countries, extremely ‘inefficient’ (outdated technology due to relative under-investment) in world terms.

If India, which for a third-world country is relatively powerful, can already see the adverse effects of the new-style GATT, it can be imagined what effect it will have on other less powerful third-world countries. According to

People’s Democracy

(the organ of the Communist Party of India – Marxist) of 26 December, 1999,

“The WTO came into existence on 1 January 1995. In the four years that followed, the average rate of export growth of developing countries was actually lower than in the previous 4-year period … prices of the principal exports of developing countries … have … fallen very sharply.”

Continuing inter-imperialist contradictions

Despite all the tribute that is flowing from the third world to the imperialist countries, the imperialist countries themselves are at each other’s throats under the WTO regime. This is inevitable, for the impoverishment of the vast masses of the people means an ever-shrinking market for the ever more abundant products of capitalist enterprise. Capitalism is in terminal crisis – one which is aggravated still further with every attempt made by capitalism to get out of the crisis at the expense of the oppressed masses. For the shrinking market that remains there is more and more desperate competition. Hence, whatever the imperialist logic of ganging up together for the purpose of attempting to extend the market for capitalist produce, the agreements between capitalists are ever breaking down because of the rivalry between them to sell to those who still have purchasing power.

It is in this context that the intensified squabbling between the imperialist powers must be seen.

If the European imperialists are under attack from the US over bananas – a war which the EU would now appear to have lost – US imperialism is also engaging in protectionist manoeuvres, which are hotly denounced by the EU. The US, for instance, has been using ‘national security as an excuse to bar Japanese sales of ships to its MERCHANT marine, while resisting imports of steel from Brazil, Japan and Russia. At the same time it brought proceedings against India to drop the import quotas India had imposed to try to prevent its balance of payments deficit spiralling out of control.

The

Financial Times

of 19 November 1999 revealed that the US

“continues to protect its own market. Washington is planning $8.7 billion in emergency farm aid this year to compnsate for drought and low prices …

“As well as farm support, the US deploys a battery of anti-dumping measures and safeguard laws to limit imports. Its recent curbs on lamb from New Zealand and Australia have called Washington’s commitment to farm liberalisation into question.” (Michael Smith, Mark Suzman and Guy de Jonquières, ‘Anything but agriculture’). Britain has also just announced millions of pounds of aid to farmers, and Europe in any even spends an average of $17,000 per farmer per year on supporting its farming industry.

Another measure which the US has been hugging close to itself and refusing to abandon is the support it gives to US-based exporters by allowing them to operate tax free if they use certain off-shore tax havens. Quite correctly this practice is regarded as an export subsidy that violates the rules of global free trade and which, on might add, the US would not tolerate for a minute if it were practised by any other country. The WTO has ruled against the US on this point, but it is likely to take some time before the US government is able to drive through the necessary corrective legislation. In the meantime the US is countering that the VAT rebates given to European exporters must therefore also be impermissible.

Another bone of contention between the imperialist powers lies in the question of ‘hush kits’. The European aircraft industry is building new aircraft which have very low noise levels, and which it would like to sell in large numbers. The US, who manufactured the vast majority of the noisy aircraft now being used by the world’s airliners, produced a ‘hush kit’ to attach to them, which just about keeps their noise within agreed international standards. The EU, however, is proposing unilaterally to introduce a higher standard of noise control – in response, of course (!), to the pleas of those who have the misfortune to live or work under the flight paths. It is interesting to note that even if the purpose of introducing noise control was genuinely to improve the environment and reduce noise pollution, such a measure would still run the risk of having to be abandoned as a measure affecting equality of trading rights.

Discrimination against the third world

If the imperialist countries are taking protectionist measures against each other, they are also slamming the door, as far as they think they can get away with it, against non-imperialist third-world produce. The US routinely outlaws third-world produce on the basis that its low price is indicative of illegal ‘dumping’, as the

Economist

of 30 January 1999 (

op. cit.

) explains:

“The [US]

steel industry, which is currently seeking relief from Japanese, Russian and Brazilian imports, is threatening a slew of new cases, notably against South Korea. Duties have been slapped on South Korean memory chips; those from Taiwan are now being targeted. Cases are pending in machine tools, textiles and clothing, and even apple juice. The threat of anti-dumping duties is spurring some foreigners to cut their exports. Japanese steel producers have unofficially agreed to reduce their exports to American to their level before the Asian crisis. The volume of Japanese steel exports to America fell by 14% in December, the first monthly decline in 33 months. Mr Clinton says America plans to monitor steel imports monthly to make sure Japan continues to comply. South Korean steel makers say they will curb their exports unilaterally in a bid to avoid a clash with America. Such ‘voluntary export restrains’ are likely to proliferate. Though they are illegal under world trade law, it would be hard – and in any case take a long time – to strike them down at the WTO without evidence of a formal agreement between governments. The steel industry is also pursuing another path to protection. Through huge rallies in steel-belt states and advertisements urging Americans to ‘Stand up for Steel’, it is lobbying Congress to change the law to make it easier to get protection from imports. Their many demands include closer import monitoring, tighter anti-dumping laws and easier provisions for temporary safeguards against import surges. The administration has already made concessions. It is speeding up anti-dumping applications and promising retroactive penalties on imports. On January 7

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the White House offered steel makers a subsidy package that includes $300 million of tax breaks…

“America is not alone in its reluctance to allow ailing firms to go to the wall: European and other producers want help too. The EU, for instance, is pursuing 13 steel anti-dumping cases; many more are in the pipeline.”

Agriculture

One of the main focuses of the squabbling has been agriculture – bananas, GM foods, hormone-treated beef. The Europeans and Japanese claim to be entitled under GATT to place restrictions on imports in relation to public health and environmental concerns. US imperialism. US imperialism, on the other hand, claims that this is nothing but surreptitious protectionism.

The squabbling intensified as a result of the economic crisis which engulfed the Far East, Russia and, to some extent, parts of Latin America, in 1997. On 7 January 1999 the

Financial Times

noted:

“

In central China, grain farmers complain that wheat prices are so low they might as well be selling chaff. On the other side of the world, UK farmers are selling sheep for next to nothing. And in the US, some agricultural prices are so depressed that the administration threw a £6 bn lifebuoy at farmers late last year. Three or four years ago, farm prices were riding high. With Asia booming and an increasingly affluent China demanding more and more meat, it seemed that the world could never grow enough food. But just as farmers were expanding output to feed Asia’s growing appetite, the calamitous financial crisis hit emerging markets. Demand collapsed, resulting in heavy price cuts for products ranging from meat to cereals and sugar. Some farmers have managed to escape relatively unscathed … But there is no doubt that, as a whole, the downturn in the current farming cycle has been particularly acute. Benchmark wheat futures in the US in September fell to about half the level of 18 months earlier, while in London white sugar prices are around two-thirds of their mid-1997 levels. Live hogs in the US are trading for less than a third of their value in 1997 and beef prices remain depressed worldwide … Thailand, the world’s largest rice exporter, estimates farm income will fall 16 per cent in the coming agricultural year. The US, in September, predicted a similar fall for its farmers in 1998. In the UK, farm incomes are at their lowest level since the 1930s because of poor weather and the strong pound. Danish farmers say their incomes in 1998 fell by half, with the pig sector’s profits reduced to nil.

“

But while farmers should have expected some price falls, they could not have forecast the severity of the Asian and Russian financial crises. The Organisation for Economic Co-operation and Development estimates half of the world price declines are due to normal supply and demand fluctuations, while 35 to 40 per cent can be blamed on the Asian and Russian crises. Demand from Russia, which normally takes a third of the EU’s meat exports, has slowed to a trickle. The severity of Asia’s problems, meanwhile, is reflected in the 30 per cent drop in wheat imports last year, according to International Grain Council figure.”

(Ted Bardacke, John Barham, James Harding, Mike Smith, Paul Solman, Nikki Tait and Stephen Wyatt, ‘Down on the farm’).

The inevitable result of this crisis was a surge of protectionism:

“… In November [1998]

the UK provided farmers with a £120 million aid package, while France is negotiating aid for pig farmers. The EU has also increased export subsidies throughout the 15-nation bloc. The country with the deepest pockets has been the US. In a congressional election year, farmers last summer secured early release of about $5.5bn of ‘transitional payments’ under the 1996 freedom-to-farm act that liberalised the country’s farming regime. And, in October, Congress and President Bill Clinton agreed a $6bn package of direct payments and disaster relief for farmers. Richard Rominger, agriculture department deputy secretary, makes no apologies. ‘Every government has the sovereign right to help its farmers, but in the way that is least disruptive to trade’, he says.”

Well, perhaps not EVERY government!

At Seattle the Europeans were resisting the demands of the Cairns Group (a trading group made up of Australia, New Zealand, Thailand and others) to do away with all farm export subsidies and for the reduction of agricultural import tariffs and domestic support payments. They raised the issue of the ‘multifunctionality’ of agriculture, claiming it was not just a trade issue but also a social and environmental one and that, therefore, governments should be entitled to intervene, notwithstanding adverse effects on free trade, to protect their countries from social and environmental catastrophe. To this

New Democracy,

the organ of the Central Committee of the Communist Party of India (Marxist-Leninist), commented:

“This is obviously an attempt to protect their agriculture from total ruin following outside competition with its attendant economic and social delocation.” “However”, it adds, “

the same imperialist countries of Europe have scant regard for the concerns of third-world countries on the industries fulfilling the function of providing employment to a large number which they do not mind ruining. They do not see how the ‘de-industrialisation’ of the vast areas of third world and destruction of productive forces of these countries are playing havoc with the lives of tens and hundreds of crores of people inhabiting these countries.”

To be concluded in the next issue