FIXING
UP THE
WORLD?
GATT and the World Trade Organisation
by Allan Freeman (Links #10, July, 1998)
Inroduction
Think of the world economy, and two household words come to mind: the
International Monetary Fund and the World Bank, the two supranational
bodies created by the Bretton Woods Treaty of 1947 when the allied powers
constructed the postwar economic world order. It is less well-known that
these two have been joined by another. The World Trade Organisation (WTO),
formed in 1994 as a result of the 1986 "Uruguay Round" of negotiations
under the General Agreement on Tariffs and Trade (GATT), has emerged as
the third pillar of the post-war economic order. Although generally presented
as a simple continuation of GATT, it has in fact inaugurated a fundamental
change in the organisation of world trade.
The GATT has been transformed from an ineffectual chamber of commerce
into a powerful device for restructuring the world market in the commercial
and financial interests of the leading powers, the core requirement being
to maintain the supremacy of the US economy in the face of the largest
trade deficit in world history.
It is supposed to expand world trade, generally perceived as a positive
and harmless general benefit to all nations. But whatever the free-trade
rhetoric, its actual role is to integrate the non-aligned and former Eastern
bloc nations into an unrestricted market for the products of a select
club of advanced nations; to suppress national sovereignty in favour of
institutional guarantees for the systematic plunder of this market, and
to grant this same club immunity from every competitive threat which might
result.
The control of trade, alongside better-known devices like financial blackmail
and debt-slavery, has finally burst from the belly of the world market
to claim its place as a primary instrument of advanced-country domination.
The
new trade agenda
The WTO enshrines a radical new agenda in world trade. Its cornerstones
are:
Liberalising "services" through General Agreements on Trade
and Services (GATS) covering one-fifth of all world trade (US$1 trillion).
This is an institutional change masquerading as trade reform. Since financial
services are treated as a "commodity" it encapsulates a legal
obligation to free capital movement, overriding the legitimate right to
national economic sovereignty. Moreover, the definition of exports has
been extended in the case of services to include production by foreign-owned
subsidiaries in the host country. Trade regulation has thus been extended
for the first time to the internal market regimes of member states.
A decisive new trade category of Intellectual Property Rights (IPRS).
IPRS have as much to do with trade liberalisation as the free transport
of slaves. They outlaw trade in products embodying any technology less
than twenty years oldthat is, almost everythingexcept as specified by
the current owner of the technology. They are an absolute monopoly of
the advanced countries: 0.16 per cent of world patents are currently owned
by Third World residents. (1) They make the owner of a technical process
a separate legal entity distinct not only from the labourer but also the
factory or farm-owner and the original inventor. They transform the ownership
and control of technology into a marketable instrument of domination.
They set in concrete the principal market mechanism that impoverishes
the Third World, namely the transfer of technological superprofit through
trade.
Large-scale anti-dumping actions as the preferred protectionist device
of the USA, EEC and Australia-New Zealand, a practice baldly described
by the World Bank as "a packaging of protectionism to make it look
like something different. (2) Before 1986, anti-dumping actions were exceptional
events. By 1992 they were universal advanced-country practice. One thousand
and forty antidumping actions were initiated by the industrialised countries
from 1985-92, over half directed against either Eastern Europe (132),
the Third World (137) or the developing Asian countries (297). The non-industrialised
countriesthree-quarters of the world's peopleinitiated a grand total of
91.
The consolidation of a system of trading blocks, Free Trade Areas around
the dominant capitalist countries-the EC, NAFTA and APEC-with specific
exemption from the measures imposed on all other WTO members. Though Article
xxiv of the GATT proposes stringent conditions that a Free Trade Area
must satisfy, these are never applied. As of 1990, only four working parties
(of a total of over fifty) could agree that any regional agreement satisfied
Article xxiv, three of these before 1957. "The GATT's experience
in testing free trade areas and customs unions against Article xxiv has
not been very encouraging
It is not much of an exaggeration to say
that GATT rules [on regional agreements] were largely a dead letter."
(3) In short, the advanced countries do what the hell they like.
From
consensus to compulsion
This disparate series of changes is being cemented by converting a treaty
organisationthe old GATTinto a supranational enforcement organisation
that imposes and legislates not just trading relations but the internal
property, tax and subsidy regimes of its members.
GATT held protracted "rounds of multi-party negotiations aimed at
the mutual reduction of specific tariffs, subject to consensus. In effect,
it was a brokering organisation for extending the bilateral arrangements
which the big players would have made in any case to a slightly wider
circle of participants.
In instances where the choice was between risking serious conflict and
attempting to enforce the letter of GATT disciplines for example, on regional
integration or subsidies the contracting parties generally 'blinked'.
In large part this reflects the nature of the institution, which is basically
a club. The club has rules, but its members can decide to waive them,
or pretend not to see violations. (4)
Although historians see the GATT as the principal vehicle of trade liberalisation,
this was in large measure because the major powers, under US hegemony,
wanted to liberalise their own trade in any case to secure a share of
exported US capital during the period when it still enjoyed industrial
supremacy. GATT simply invited the others along for the ride.
The WTO marked two decisive changes. Firstly it moved from "result-orientation
to "rule-orientation"; trade was now governed by laws and formulas
instead of targeted commodities. This extends to legal trade regulations
which the WTO obliges member governments to write into their own laws.
Most significantly, these rules are now policed.
Formerly the GATT was not an international organisation (that is, a legal
entity in its own right) but an inter-governmental treaty. As a result,
instead of "member states GATT had "contracting parties The
WTO is an international organisation that administers multilateral agreements
pertaining to trade in goods (GATT), trade in services (GATS), and trade-related
aspects of intellectual property rights. (5)
If a member country breaches a WTO regulation, an enforcement process
is triggered and consensus is required not to implement sanctions but
to prevent them. If a Third World country seeks exemption to protect its
industries or agricultural producers from competition from the technologically
more advanced Northern countries, it faces coordinated, punitive trade
sanctions from all WTO members.
The
reconstruction of the world market
What makes such threats effective is a systematic expansion of GATT and
the WTO which has culminated in the reestablishment of a global world
market previously sundered in two by the outcome of the Russian revolution,
two world wars and the Chinese revolution.
GATT was a minority club with a mere 23 signatories. The balance of forces
was so weak that it proved impossible to establish the international trade
organisation (ITO), called for in the Bretton Woods agreements. In the
1949 "Annecy" round of negotiations a mere 11 countries took
part. China withdrew in 1950 and the US, which had followed a fiercely
protectionist stance between the wars, abandoned the attempt to secure
congressional ratification of the ITO. Though the initial 1947 agreement
secured a 21 per cent reduction in tariffs, the next three rounds secured
only a further 8.4 per cent reduction.
The term "free trade" has never appeared on GATT's formal agenda.
The GATT-1947 preamble calls for "raising standards of living, ensuring
full employment and a large and steadily growing volume of real income
and effective demand, developing the full use of the resources of the
world and expanding the production and exchange of goods". The principal
mechanism was to reduce tariffs and eliminate discriminatory treatment.
No planned economy took part until 1967 when Poland joined, and the Third
World countries succeeded in neutralising or blocking the application
of the GATT trade agreements to themselves through the non-aligned movement
and the 1964 establishment of the United Nations Conference on Trade and
Development (UNCTAD) which was formed to press for trade measures to benefit
developing countries. The Kennedy Round of 1963 involved 74 countries
and spun out for four years. The practice of picking and choosing which
GATT regulations to implement was so widespread it was nicknamed "GATT
a la carte". The "Tokyo round" of 1973 involved 99 countries
but lasted six years and was obliged to legalise preferential tariff and
non-tariff treatment in favour of developing countries.
Thus though the developing countries were drawn into GATT's orbit, access
to a separate economic system in the USSR and Warsaw Pact countries offered
them an important degree of autonomy. Though governed (and impoverished)
by the world market they could veto many imperialist proposals, imposing
selective controls on trade to protect domestic producers, and limiting
the drain of capital brought on by unequal exchange, because they could
always resort to (or threaten) trade with the Soviet or Chinese blocs
instead. The Third World-a term coined by Mao Zedong-took part in trade
negotiations, but acted collectively to veto or water down measures that
damaged domestic producers, offsetting-though not overcoming-the impact
of the world market on domestic accumulation.
By the end of the Uruguay round, which began in 1986 and ended a gruelling
eight years later, the scene had changed utterly. There were now 128 member
countries including most former Eastern European countries. The former
USSR no longer presented an effective alternative outlet or supplier.
Aggressive "threat"-based US policies, the debt crisis and the
draconian intervention of the IMF with its structural adjustment, export-oriented
programmes, produced the "neoclassical counterrevolution". (6)
Keynesians were replaced on the leading world financial institutions,
and wave after wave of neo-liberal advisers and political regimes came
to the fore in development economics and in the Third World countries
themselves. Resistance gave way to capitulation; the new order had arrived.
Divergence,
big time
The most fundamental point to grasp is that free trade produces inequality.
The neoclassical doctrine of "convergence", for which the nearest
adequate term is "cretinous", is contrary to all known facts.
Characterising 120 years of the world market as "divergence, big
time, senior World Bank economist Lant Pritchett goes on to examine its
more recent phase:
From 1980-94, growth per capita GDP averaged 1.5 per cent in the advanced
countries and 0.34 per cent in the less developed countries. There has
been no acceleration of growth in most poor countries, either absolutely
or relatively, and there is no obvious reversal in divergencetaken together,
these findings imply that almost nothing that is true about the growth
rates of advanced countries is true of the developing countries, either
individually or on average. (7)
It is convenient to discover the errors of World Bank policies with the
WTO around to enforce them by threats and blackmail; it no longer matters
whether the hapless victims believe them or not. Like the nineteenth century
missionaries the economists have done their job; now the armies take over.
Technological change under capitalist conditions gives advanced industrial
producers, selling into the same market as a backward producer, an excess
or "super-profit". Given a free market in goods and capital,
this accumulates in the advanced nations, particularly if the state acts
as guarantor of the capital transfer. This provides further funds to increase
their technological lead, further increasing the gap. There is no end
to this process under capitalism. The process of accumulation and technical
change literally sucks the lifeblood from the poor nations.
This is the context for intellectual property rights enforcement. This
world market in knowledge is a major and profoundly anti-democratic new
stage of capitalist development. The transformation of knowledge into
property necessarily implies secrecy: common knowledge is no longer private.
In this new and chilling stage, communication itself violates property
rights. The WTO is transforming what was previously a universal resource
of the human race its collectively, historically and freely-developed
knowledge of itself and natureinto a private and marketable force of production.
As well as laying the foundation of hi-tech, software and genetic engineering
fortunes the new category is transforming the whole nature of agriculture.
Small agricultural producers the world over are now being forced, in effect,
to abandon natural production from their own seed and pay premium prices
for genetically engineered seeds. The consequence is no less than an end
to the self-sufficiency of world agricultural production.
The
WTO as institutional policeman
The second consequence is that the re-consolidation of a universal world
market is, simply, the surest guarantee of the impetuous descent into
mass starvation and poverty of the mass of the world's peoples. The only
escape for any nation except the small club of leaders is to except itself,
in one way or another, from the general functioning of the market. This
is why the old GATT could not be an enforcement agency and why the new
WTO has to be an enforcement agency.
The WTO is now the third arm of the IMF and the World Bank, who work in
consort to impose a complete institutional policy framework on the world.
The banks impose open markets and free trade as a condition of credit
and debt relief. But free trade is defined to mean a definite institutional
regime which overrides the economic sovereignty of all but the largest
players. This includes not just full capitalist property rights and the
free movement of capital but extends to taxes, subsidies or any measure
that can be construed as "unfair" competition, that is, any
element of state provision.
The original GATT agenda sought to avert a repeat of the interwar break-up
into hostile trading blocks, and prioritised "nondiscrimination and
"reciprocity". Nondiscrimination states that members must make
the same trade concessions to all others as to their "most-favoured
nations. Reciprocity states that there should be, in some (usually poorly-defined)
sense, an equality of loss, which implies an exchange of reductions in
barriers. These principles could apply in a small club where they extended
essentially bilateral agreements to a wider circle. But in any wider reduction
the losses and gains for all partners cannot possibly be the same; there
are losers and winners. This is why GATT functioned as it did, as a negotiating
forum whose decisions were quite easy to avoid or bypass.
With enforcement and "rule-based tariff reductions it becomes impossible
to ensure that all parties benefit. Therefore, everyone seeks exceptions
to the rules. The industrial powers have established two systematic procedures
for imposing their exceptions. This is the recourse to anti-dumping legislation,
coupled with the GATT provision that exempts "trading blocs"
from most GATT regulations. The Third World and transition countries have
in contrast lost almost all exceptions they could previously resort to.
Moreover, the application of reciprocity is by nature asymmetrical between
large and "small nations" where "small", it should
be remembered, has to be translated into the language of money-in which
India is one-fifth the size of the USA. As Hoekman and Kostecki note:
Fundamentally, it is a fact of life that small economies (that is, most
developing countries) have little to bring to the negotiating table. (8)
This is the background to two further principles which have risen to prominence
with the WTO: "fair competition" and "market access".
Under fair competition any non-market productionor indeed, any element
of subsidyof any good for export is immediately in violation of WTO principles.
But the market access rule involves the most far-reaching consequences
of institutional enforcement because of the role played by services, which
characterise the new stage of capital exports. Fifty per cent of the global
stock of foreign direct investment is now in services.
Most service activities can only be provided locally, so to reach foreign
markets a service provider must locate in the host country. On US insistence,
the WTO now provides that services provided by a foreign-owned subsidiary
constitute exports and must be able to compete on a "level playing
field" with domestic producers. If generalised, this principle would
mean, for example, that a US health company in the UK could initiate a
GATT action against the UK for unfair competition by the National Health
Service.
This position is not yet settled. The g-10 group of larger developing
countries opposed it vigorously, supported by unctad which proposed to
define trade in services as occurring only when the majority of value
added is produced by non-residents; a labour-, in fact human-based criterion.
It embodies the simple principle that a nation's residents should determine
what happens in their own economy. The US proposal, a property-based principle,
asserts that the economic right of the owner overrules the political rights
of the people.
In 1990 Martin Khor Kok Peng accurately predicted that:
The Uruguay round is an attempt by transnational companies to establish
sets of international laws that would grant them unprecedented unfettered
freedoms and rights to operate at will and without fear of new competitors
almost anywhere in the world.
Endnotes
1 Mihevic, M., The Market Tells Them So, Zed, London, 1995.
2 Hoekman, B. and Kostecki, M., The Political Economy of the World Trading
System: from GATT to WTO, Oxford University Press, Oxford, 1995, p. 8.
3 ibid., p. 219.
4 ibid., p. 3.
5 ibid., p. 23.
6 Todaro, M.P., Economic Development, New York, 1994, p. 85.
7 Pritchett, L., "Divergence, Big Time", Journal of Economic
Perspectives, Summer 1997, p. 14.
8 Hoekman and Kostecki, op. cit., p.163.
http://www.dsp.org.au/links/back/issue10/freeman.htm
|