Earl Bartley, Contributor
THE DEADLOCK in the international trade negotiations in Cancun, Mexico, has given a well-needed reality check to the exuberant hopes that have been swirling worldwide since the collapse of the Soviet bloc about creating a "one world economy".
From the end of World War II, the dreams of a "one world economy" has been particularly cherished by the United States (not least because she stood to gain the most from it), and was the foundation idea behind the multi-lateral trading and financial institutions that were created at Bretton Woods in 1944.
Before WWII a "one world economy" was difficult to realise because of the division of the world economy into colonial trading blocs. After the war, the emergence of the communist bloc again put the possibility out of reach.
The fall of the Berlin Wall in 1989, however, brought the 'dream deferred' back into the realm of possibility.
It was eagerly grasped by the Americans, and many of the developed countries, but especially by the multi-national corporations the main pillars of today's global economy.
The General Agreement on Tariff and Trade (GATT) which was the forum for international trade negotiations quickly transformed into the World Trade Organization (WTO) pushing a far more aggressive liberalisation agenda.
Countries were encouraged to just 'liberalise everything' and investment, growth, and employment would start occurring. Multinational corporations were demanding "national treatment" wherever they operated.
And among the issues the developed countries were hoping to press at Cancun was the very far-reaching idea of liberalisation of government procurement contracts so that companies from anywhere in the world can bid on local contracts.
Over the past 10 years, developing countries have gone along with this more rapid pace of international trade liberalisation persuaded by arguments that it would make their industries and economies stronger and more competitive, and that it would open a wider international market to them.
But, by the late 1990s after the first blush of steep tariff reductions and quota eliminations had run their course, many developing countries were faced with a denuded landscape with many of their industries and farms pushed to the edge or destroyed.
These farmers and other groups naturally started to protest to their governments, who, by the early 2000s, could no longer ignore the serious costs of liberalisation whatever benefits it was bringing in terms of lower consumer prices.
At Cancun, developing countries decided to stop the runaway train; if not to get off, at least to see where it was going, and try to better chart its course.
The fundamental contradiction underlying the present impasse in global trading relations is between profit maximisation and human welfare.
Among the classical economists, Karl Marx had the keenest insights into what he termed "the laws of motion of capitalism". Despite his general antagonism towards the system, Marx noted with awed admiration that "capitalism tended to revolutionize the means of production".
THE PRESENT CONUNDRUM
Driven by the intensity of competition, Marx observed, the capitalist was forced into constantly modernising the technology of production to increase output and be more efficient and to grab a greater share of the market.
By the end of the 1800s, many capitalist firms had consolidated in their national markets and began to push aggressively for markets and raw materials worldwide.
This greatly explains the subsequent division of Africa, and the two massive imperialist wars of the 20th century. The improvements in transportation and the technology of communication and the utilisation of robotics in the second half of the 20th century have increased output tremendously and intensified capitalist competition.
Large-scale and high efficiency, market share and profit maximisation are now the key requirements for survival in a global oligopolistic capitalism dominated by one or two hundred firms.
Most analysts concur that the constraints on the global economy are not on the supply side, but on the side of demand and growth, especially along the North-South divide.
But how can demand (meaning purchasing power, not simply wants or needs) be boosted when the technologies of production are requiring lesser numbers of workers even as the surfeit of output bankrupts and push those trying to be independent against the wall.
Liberalism and the multi-nationals are literally making the majority of humankind redundant.
At Cancun, underlying the talk about competition policy, subsidies and investments was the plaintive cry of the developing countries restrain the multi-nationals. Man has seemingly solved his output problems in many respects. The issues outstanding are distribution and human welfare.
Distribution is obviously highly skewed, since less than 20 per cent of the world's people consume 85 per cent of the world's output.
But the larger question is human welfare. Considering that human welfare is not simply about producing the means of sustenance, but also about the dignity of work in self-perception, what happens when the majority of humankind is made redundant?
It seems like in the eternal battle between man and machine, the machine has clearly gotten the upper hand.Tied in with this conundrum is another observed by Marx indeed his main reason for wanting to overthrow the capitalist system namely, while output is social, the appropriation of the surplus is private. This not only leads to inequity in the distribution of the social product, but quite often to non-optimising use of the social surplus.
The South Center reports that, in 1992, world GDP was US$64 billion per day, exports were US$10 billion per day, but global foreign exchange transactions were US$900 billion per day much of it representing speculative financial flows.
Clearly, the means of production are being fettered by the global relations of production and, in the elegant expression of Professor Rex Nettleford in Inward Stretch Outward Reach, what is required are "new designs for social living".
Given the triumph of capitalism worldwide, which is accepted resignedly by nearly everyone as the best of the imperfect social systems created by man, the 'new designs' will have to include a lot of the old and the existing.
NEW DESIGNS FOR SOCIAL LIVING
At Cancun, the developing countries were hoping to go forward with certain developmental issues carried over from the November 2001 Doha trade negotiations.
These issues included reduction of barriers in developed countries to their agricultural exports, the exports of textiles and clothing, anti-dumping measures, and the General Agreement on Trade in Services (GATS), among other matters.
Using an ambivalently worded resolution the developed countries, led by the European Union, tried to include four issues on the agenda calling for greater liberalisation in government procurement, investment policy, competition or anti-trust policy, and tariff reductions.
The developing countries balked at the inclusion of these so-called "Singapore issues" arguing that there were no prior agreement for these issues to be negotiated and that they were not technically prepared for them.
The meeting deadlocked. But the Singapore issues seem destined to become part of the agenda in international trade negotiations between developing and developed countries. The best course for developing countries therefore, is to prepare to trade-off greater liberalization of their economies for the concessions they are demanding from the developed countries.
Among the approaches they may have to consider:
The developed countries have urged the developing countries to liberalise their economies and foreign investments will flow in. That approach has not worked generally and unregulated foreign investment inflows that are not export promoting could lead to a worsening of the balance of payments from later profit repatriation. Developing countries should therefore continue to regulate foreign investments, especially for the provision of domestic services.
For Government contracts developing countries should yield on the transparency issue, since their own public could benefit from the anti-corruption aspects. But developing countries should insist on certain local content in terms of material and labour in the performance of externally funded contracts. In addition, they should seek to retain maximum flexibility in the awarding of locally funded contracts.
Considering they are supported by powerful domestic constituencies or serve vital security interests, developed countries are unlikely to abandon their textiles quotas or agricultural subsidies anytime soon. Using the existence of these practices as justification, developing countries should continue to protect their infant industries and agriculture but in a strategic way (favouring their linkage industries for instance) while being mindful of consumer interests in lower prices.
Caribbean countries will also have to carefully weigh whether they are likely to gain more from bilateral deals with particular developed countries or focus more on multilateral negotiations. In bilateral deals with the U.S., for instance, the latter is likely to try to draft unsavoury political demands on trade agreements.
In multilateral deals on the other hand, the bottom line is often what is agreed between the developed countries and the larger developing countries.
In their bilateral dealings with the U.S., Caribbean nations should be mindful that they are neither supplicants nor mendicants.
U.S. Assistant Secretary of State for Western Hemispheric Affairs, Roger Noriega, notes that the two- way trade between the U.S. and the Central American Free Trade Area (CAFTA) which includes Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua is approximately US$12 billion which is about the same for CARICOM.
Noreiga further notes, that CAFTA trade (and, by extension, CARICOM trade) with the U.S. is more than U.S. trade with Hong Kong or India, and more than their trade with Russia and Hungary combined.
So the two-way trade between CARICOM and the U.S. is mutually beneficial.
An open embrace of the neo-liberal agenda being pushed by the developed countries would result in increased redundancies for the peoples of many Caribbean countries, especially larger ones like Jamaica, who require a more broad-based economy to meet their peoples' needs.
Like Taiwan and South Korea who industrialized during 1970-1990 and Japan during the period 1950-1970, Jamaica should pursue a more 'strategic' integration with the international economy protecting our infant industries as necessary.
The stalemate at Cancun gives us a little more time to contemplate and develop such strategies.
Earl M. Bartley is an economist and businessman. You can e-mail him at adapapa@cwjamaica.com
