Creating people's geographies
By David Moberg | In These Times | Wednesday 23 August 2006
The WTO model has collapsed. What’s next?
Elite editorialists and free-trade devotees gnashed their teeth in distress when the latest round of World Trade Organization (WTO) negotiations collapsed in late July. But amidst the hand-wringing, many advocates for the world’s poor cheered. Walden Bello, executive director of Focus on the Global South, said flatly, “The collapse of the Doha Round is good for the poor.”
How could that be? Frustrated with what they saw as original WTO rules skewed to benefit the rich, the world’s poor countries wanted to win a trade deal that would help them this time around. The rich countries had promised to make it easier for them to export their agricultural goods.
But in reality, the failed talks were never about helping the poor or about development. Even if the rich countries had cut tariffs, subsidies and other protection for their farmers – as everyone from free-trade fundamentalists to many developing nations urged them to do – the big winners still would have been corporations. Cargill, ADM and others that trade and process what farmers produce stood to profit, not the poor, urban or rural, who would have gained on average less than a penny a day in income over a decade.
The Doha collapse is good for the poor mainly because it thwarts an expansion of a global economy built around opening markets for multinational corporations and protecting their interests. As a result, the collapse also signals a turning point for regulation of the global economy, even if it provides no tangible gain for the poor.
Bits and pieces of an alternative that promotes a broader vision of social and economic development have emerged, but there is still no consensus (for example, over ways to protect workers’ rights), let alone enough powerful governments willing to push for it. Until governments – especially the United States – accept the need for a alternative, perhaps developed outside the confines of the WTO, the best that can be achieved is gridlock.
Although the comatose WTO talks may eventually be revived, in the meantime countries will accelerate negotiation of bilateral trade agreements, like the pending agreements between the United States and both Peru and Colombia. In most cases, developing countries and especially their poor will likely suffer more in such lopsided negotiations than they would in the multilateral WTO talks.
“I’m cheered by the collapse because I didn’t see anything good coming out of this round,” says Larry Weiss, executive director of the Citizens Trade Campaign, a fair trade coalition. “That doesn’t mean that the collapse presages anything better. One of the things it will lead to is a patchwork of bilateral and regional deals. The terms imposed on poorer countries may be even worse.”
The biggest multinational corporations, which wanted a new agreement, especially with expanded WTO rules over trade in services (from financial services to water systems), will not be slowed significantly by this failure. But they do face a rockier political road.
There’s overt rebellion against the “Washington Consensus” of free trade, privatization and minimal government from leaders in countries like Bolivia and Venezuela. There’s hard-nosed bargaining about the terms of trade in countries like Brazil. And despite lingering influence of big business money and ideology, there is growing, if tentative, resistance to the old model from Democratic politicians in the United States, who believe that trade deals have to protect labour and the environment and not give special legal privileges to multinational corporations (See “The Prairie Populist: Byron Dorgan” page 36).
Congress approved the Central American Free Trade Agreement (CAFTA) last year by just two votes (with 15 House Democrats supporting Bush), but Costa Rica has not yet ratified the treaty, and the Dominican Republic has not fully implemented it. The free trade agreement with Oman also narrowly passed in July, following exposés of Oman’s weak record on labor rights and of the widespread abuse of migrant garment workers in Jordan, whose 2001 free trade agreement had slightly improved labor rights language. If Democrats win a majority in either house of Congress this fall, President Bush will have a particularly tough time next year renewing the “fast track” trade negotiating authority that restricts opposition to trade deals.
National negotiators disagreed over many issues in the Doha talks, but the biggest stumbling block was agricultural trade. The United States and the European Union were supposed to reduce tariffs and subsidies to permit developing nations to sell their agricultural products without unfair competition or obstacles. But the developed countries retained loopholes that could have preserved most subsidies.
At the same time, the United States insisted on freer access to developing countries’ markets for industrial goods and services, undermining their efforts to protect infant industries. The final straw came when the United States, bowing to lobbies from the big domestic agricultural producers, insisted that developing countries give up nearly all powers to protect sensitive farm products, including such staple crops as rice that sustain vast numbers of poor peasants.
But even if the United States had played a completely honest, well-intentioned role in the talks, the Doha round would have been a failure for the poor. That’s simply because the dominant free trade model does not promote development in poor countries (just as it fails to promote equity in developed countries).
Over the past year, several different economists working for the United Nations and the Carnegie Endowment for International Peace have published projections of the likely outcome of any Doha scenarios. The results are striking: The gains from trade would be extremely modest, with the rich countries capturing roughly four-fifths of any benefits, and many of the world’s poorest countries actually losing ground. Even if rich countries eliminated all agricultural subsidies and tariffs, developing countries would enjoy a one-time gain of less than a penny per person per day.
But just a few countries, such as China, Vietnam, Argentina, Brazil and India, would capture most of the developing countries’ benefits. Many others – including most of sub-Saharan Africa – would be worse off.
If Doha talks had succeeded, the results might have reduced global poverty by only 0.3 percent, or 6 million people. And typically that would only involve moving incomes from a few pennies less than $2 a day to a few pennies more.
And even this dismal picture overstates the benefits: it does not take into account the losses that the Doha Agreement would have imposed – cuts in vital government revenue from tariffs, new constraints on government economic policies, new intellectual property rights requirements that would raise medical costs, and accelerate displacement of poor peasants into exploding slums of the urban unemployed, further depressing wage levels.
Critics from left and right heap blame for the plight of poor peasants on subsidies to rich countries’ farmers, whose exports lower world prices. But George Naylor, an Iowa farmer and president of the National Family Farm Coalition (NFFC), argues that American agricultural subsidies are designed primarily to maintain production of cheap commodities for corporations, not to help farmers.
Dumping farm products on the world market below the cost of production does harm competing farmers and should be prevented. But simply eliminating subsidies in the United States would bring “very little change in production and very little boost in prices,” according to Tim Wise, deputy director of the Global Development and Environment Institute at Tufts University.
Agribusiness multinationals want to expand trade and exploit low-cost commodities. But advocates for small farmers from both poor and rich countries, such as the NFFC, argue for “food sovereignty,” or the right of each nation to fashion its own food strategy to strike a balance between urban and rural incomes. Both at national and international levels, they want to allow governments to manage supply to prevent ruinous competition, to maintain incomes for the half of humanity still living in rural areas and to support an economy of independent producers.
In this view, development is at odds with an unregulated market. But domination of global agriculture by a few big corporations doesn’t fit free market utopias either. And the WTO’s narrow focus on trade and anarchic markets has a track record of failure. In a review of the leading research on trade and growth, economists Dani Rodrik of Harvard and Francisco Rodriguez of the University of Maryland concluded there is “little evidence that open trade policies … are significantly associated with economic growth.” It’s not that trade is bad, but in order to grow quickly and equitably countries need to employ a wide range of policies, including government regulation, that are tailored to their own distinctive needs.
The WTO model has failed. But its replacement as a framework for the global economy is not yet in sight.