Contrasting perspectives focus on free trade - the US demands it but doesn't do it (item 1) and never did which is where its wealth came from (item 3). And to the extent it does... it brings suffering in its wake (item 2).
1.As Accusations Fly, Poor Nations Suffer
2.America's working poor will finally have their voices heard
3.Enslaved by Free Trade
As Accusations Fly, Poor Nations Suffer
Clyde Prestowitz , The Washington Post June 8, 2003
'Why do you see the speck in your brother's eye, but do not notice the log in your own eye? -- Matthew 7:3'
In the wake of Sept. 11 and the bitter international debate over the war in Iraq, Americans wondering why much of the world sees the United States as a kind of rogue nation have cited foreign envy of U.S. success and foreign hatred of American freedom. While these might be factors, what irks foreigners most is not our values or our achievements. Rather it is the fact that what we do is often at odds with what we preach.
Take President Bush's recent Coast Guard Academy commencement address. In it, he charged that the refusal of the European Union to certify imports of new U.S. strains of genetically modified crops had perpetuated famine in Africa. He alleged that the EU had a moratorium on such crops, thus discouraging African nations from adopting, and benefiting, from them. The speech followed the filing of a formal U.S. complaint on the matter with the World Trade Organization (WTO).
While there is no doubt that EU agriculture policies badly need reform, one of the main causes of hunger and poverty in Africa lies much closer to home -- U.S. subsidies for our own farmers.
Cotton is a prime example. In the West African countries of the Niger River's northern delta, cotton is the main cash crop, and cotton farming provides employment to more than 2 million people and sustenance to several times that number. But with world cotton prices down 10 percent from last year's 30-year low, people can barely survive. Extended families of 20 to 30 are trying to live on annual earnings of less than $2,000. Schooling and even minimal health care have become unaffordable luxuries. As a result, many families are leaving for the crowded Muslim quarters of Europe's large cities while fundamentalist Islamic clerics from the Middle East are coming to West Africa and finding more and more listeners. Fearing this trend, the United States has begun to promote aid and open trade. In Mali, for example, it now spends about $40 million a year on educational, health and development programs. But this doesn't come close to offsetting the two-thirds drop in cotton prices since 1995.
Meanwhile, half a world away in the Mississippi Delta, American growers are thriving. At first glance, the reason seems obvious. In Mali, farmers hitch their one-bladed plows to oxen and take two weeks to till 10- to 20-acre plots from which the cotton is eventually picked by hand. In contrast, the Mississippi Delta growers tend giant spreads of 10,000 acres or more in air-conditioned tractors using global positioning satellite systems to determine the proper amount of fertilizer to apply to sprouting seedlings. No wonder U.S. cotton growers have an average net household worth of nearly $1 million. Sad though it may be, it would seem that oxen and plows on tiny plots are just no match for tractors and satellite systems on huge spreads.
In fact, however, the U.S. growers are the higher-cost producers. All that high-tech equipment is expensive. Delta land is irrigated, and the seed is priced at a premium because it is genetically modified to resist pests. Then there are expensive fertilizers and defoliants. In all, it costs 82 cents to produce a pound of cotton in Mississippi versus only 23 cents a pound in Mali. So why are the Americans expanding their acreage while the Malians fight to survive? In a word: subsidies. A few days before the oxen were roped to plows in Mali last year, Bush signed into law a piece of legislation that greatly increased last year's $3.4 billion in subsidies to America's 25,000 cotton farmers. This year, some of these farm families can expect to receive nearly $1 million just in subsidies. Thus, the U.S. government is subsidizing American farmers to produce more and more cotton that will further depress world prices and further impoverish families in West Africa -- precisely what the president accused the Europeans of doing.
African cotton farmers aren't the only victims of U.S. agricultural policies. The North American Free Trade Agreement (NAFTA) was signed in an effort to stimulate Mexican economic growth and thereby stem illegal immigration. But exports for one of Mexico's main crops, sugar, are severely restricted by U.S. quotas that limit imports from Mexico to only 7,258 metric tons of raw sugar. Thus, while American consumers pay four times the world price for their sugar, Mexican sugar farmers, like West African cotton growers, face penury and hunger. At the same time, heavily subsidized U.S. corn exports threaten to drive Mexican campesinos off their land and into the dangerously hot trucks of the smugglers who ship illegal immigrants across the U.S. border.
The case of Brazil provides further examples. The largest country in Latin America, Brazil has been struggling to achieve economic growth and to overcome the legacy of mismanagement left by authoritarian governments. It has democratized, liberalized, deregulated, and adopted prudent economic and monetary policies in accord with Washington's demands. The United States has a big stake in Brazil's eventual success and has been proposing to help by including Brazil in negotiations for a Free Trade Area of the Americas. At the same time, however, U.S. agricultural subsidies and quotas on imports of citrus fruits restrict trade in about two-thirds of the products Brazil might be able to sell in the U.S. market.
Then there is the issue of implementing international trade rules. In the formal complaint it just filed, the United States is asking the WTO to impose penalties on the EU for maintaining the alleged moratorium on import permits for genetically modified crops in violation of WTO rules. While the U.S. charges are legally correct and justified, Europeans marvel at the chutzpah that allows the United States to file WTO complaints while failing to implement WTO rulings against objectionable American practices.
For example, the United States has long had a program allowing special tax treatment on profits from certain kinds of exports. In response to EU complaints, the WTO has twice found this treatment in violation of WTO rules and directed the United States to alter the practice. Yet, to date, the practice has not been changed. Europeans find this particularly maddening because they are making efforts to fix their moratorium problem. Indeed, EU Trade Commissioner Pascal Lamy told me in a recent meeting that new import permits will probably be issued by year's end. Yet Europeans see little reciprocation on the U.S. side.
Mexicans also scratch their heads in response to U.S. complaints about the Europeans. Under NAFTA, Mexican truckers were supposed to be able to drive freely anywhere in the United States. But after 10 years, they still are prevented from doing so. The NAFTA dispute settlement panel has found the United States in breach of its obligations under the treaty and has urged it to come into compliance. Instead, fears (whether rational or not) in border states of unsafe or inadequately inspected Mexican vehicles have caused U.S. authorities to drag their feet in a European-like shuffle.
It is these sorts of American inconsistencies and double standards, far more than envy of our success or hatred of our freedoms, that cause alienation from America and that make the United States appear to many abroad as a rogue nation.
June 12: Live Webcast of the Congressional Briefing on Free Trade
9am - 11:30am EST
America's working poor will finally have their voices heard at the capitol, as they testify before Congress on the impact of free trade agreements on their lives and communities. Will the U.S. Trade Representative Robert Zoellick respond to the Congressional invitation asking him to join them? Found out for yourself by tuning in to the live webcast of the briefing at: www.foodfirst.org June 12, 9am to 11:30 am Eastern Standard Time For more information: http://www.foodfirst.org/progs/anhr/webcast.php
The Congressional Briefing will be broadcast live in streaming Real Media format
Enslaved by Free Trade
by George Monbiot
The West became rich by ignoring patent rules and protecting its industries. Poor countries should be allowed to do the same. By George Monbiot. Published in New Scientist 31st May 2003
The founding myth of the dominant nations is that they achieved their industrial and technological superiority through free trade. Nations which are poor today are told that if they want to follow our path to riches, they must open their economies to foreign competition. They are being conned.
Almost every rich nation has industrialised with the help of one of two mechanisms now prohibited by the global trade rules. The first is "infant industry protection": defending new industries from foreign competition until they are big enough to compete on equal terms. The second is the theft of intellectual property. History suggests that technological development may be impossible without one or both.
Britain's industrial revolution was founded upon the textile industry. This was nurtured and promoted by means of ruthless government intervention. As the development economist Ha Joon Chang at the University of Cambridge has documented, from the 14th Century onwards, the British state systematically cut out its competitors, by taxing or banning the import of foreign manufactures and banning the export of the raw materials (wool and unfinished cloth) to countries with competing industries.1 The state extended similar protections to the new manufactures we began to develop in the early 18th Century.
Only when Britain had established technological superiority in almost every aspect of manufacturing did it suddenly discover the virtues of free trade. It was not until the 1850s and 1860s that we opened most of our markets.
The United States, which now insists that no nation can develop without free trade, defended its markets just as aggressively during its key development phase. The first man systematically to set out the case for infant industry protection was Alexander Hamilton, the first Secretary of the US Treasury. In 1816 the tax on almost all imported manufactures was 35%, rising to 40% in 1820 and, for some goods, 50% in 1832.2 Combined with the cost of transporting goods to the US, this gave domestic manufacturers a formidable advantage within their home market.
Protectionism was arguably a more immediate cause of the American civil war than the abolition of slavery. High tariffs helped the northern states, which were industrialising rapidly, but hurt the southern states, which remained heavily dependant on imports. The Republicans' victory was the victory of the protectionists over the free traders: in 1864, before the war ended, Abraham Lincoln raised import taxes to the highest level they had ever reached. The US remained the most heavily protected nation on earth until 1913. Throughout this period, it was also the fastest-growing.3
The three nations which have developed most spectacularly over the past 60 years - Japan, Taiwan and South Korea - all did so not through free trade but through land reform, the protection and funding of key industries and the active promotion of exports by the state. All these nations imposed strict controls on foreign companies seeking to establish factories.4 Their governments invested massively in infrastructure, research and education. In South Korea and Taiwan, the state owned all the major commercial banks, which permitted it to make the major decisions about investment.5 In Japan, the Ministry of International Trade and Industry exercised the same control by legal means.6 They used tariffs and a number of clever legal ruses to shut out foreign products which threatened the development of their new industries.7 They granted major subsidies for exports. They did, in other words, everything that the World Trade Organisation, the World Bank and the IMF forbid or discourage today.
There are two striking exceptions to this route to development. Neither Switzerland nor the Netherlands used infant industry protection. Instead, as the economic historian Eric Schiff showed in Industrialisation without National Patents, published in 1971, they simply stole the technologies of other nations.8 During their key development phases (1850-1907 in Switzerland; 1869-1912 in the Netherlands), neither country recognised patents in most economic sectors.
Switzerland's industrialisation took off in 1859, when a small company based in Basel pilfered the aniline dying process which had been developed and patented in Britain two years before. The company was later named Ciba; more recently, after a series of mergers, it became Novartis and then Syngenta. In the Netherlands, in the early 1870s, two enterprising firms called Jurgens and Van Den Bergh nicked a patented French recipe and started producing something called margarine. They later merged to form a company named Unilever. In the 1890s, one Gerard Philips stole Thomas Edison's design for incandesent lamps, and founded Europe's most successful electronics company.9
The nations which are poor today are forbidden by the trade rules from following either route to development. New industries are immediately exposed to full competition with established companies overseas, which have capital, experience, intellectual property rights, established marketing networks and economies of scale on their side. "Technology transfer" is encouraged in theory, but forbidden in practice by an ever fiercer patents regime. Unable to develop competitive enterprises of their own, the poor nations are locked into their position as the suppliers of cheap labour and raw materials to the rich world's companies. They are, as a result, forbidden from advancing beyond a certain level of development. While there is no sound argument for permitting rich nations to protect their economies, there is a powerful case for permitting the poor ones to follow the only routes to development which appear to work.
George Monbiot's book The Age of Consent: a manifesto for a new world order is published on June 16th by Flamingo.
1. Ha-Joon Chang, 2002. Kicking Away the Ladder: Development Strategy in Historical Perspective. Anthem Press, London.
4. Mark Curtis, 2001. Trade for Life: Making Trade Work for Poor People. Christian Aid, London.
5. John Brohman, April 1996. Postwar Development in the Asian NICs: Does the Neoliberal Model Fit Reality? Economic Geography, Volume 72, Issue 2.
6. Takatoshi Ito, 1996. Japan and the Asian Economies: a "Miracle" in Transition. Brookings Papers on Economic Activity, Issue 2 (1996). The Brookings Institution, Washington DC.
7. Graham Dunkley, 2000. The Free Trade Adventure: The WTO, the Uruguay Round and Globalism. Zed Books, London. First published in 1997 by Melbourne University Press.
8. Eric Schiff, 1971. Industrialisation Without National Patents: The Netherlands, 1869-1912; Switzerland, 1850-1907. Princeton University Press.