December 09, 2005

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Ravings of an Trade Xenophobe

As we all know we will soon experience a visit from the World Trade Organization. The detentions have already started, with two members of the International League of People's Struggle and one from the May First Movement, all from the Philippines, kept back for several hours before being allowed into Hong Kong. My view is that the fact that these professional protesters are being allowed in at all is a significant concession on the part of the local authorities.

I stumbled onto a website this morning called, and had an article from a planned protest attendee about the Hong Kong Ministerial. It was a fascinating insight into the flaccid arguments of these anti-globalization protesters, who appear, at base, to be against growth in countries like China or India.

I do not think a refutation of this particular trade xenophobe's thesis is necessary, but I will quote some of the highlights:

The WTO aims to consolidate a series of policy reforms that many countries have implemented over the last 25 years, following IMF and World Bank structural adjustment programs in developing countries, and Reagan-Thatcher prescriptions in the US and Europe. Referred to as “free trade,” “ the Washington Consensus” or what we call “corporate globalization,” the policies include privatizing public services, weakening labor laws, deregulating industry, opening up to foreign investment, shrinking the non-military government, lowering of tariffs and subsidies, and focusing on exports over production for national markets.

This time period has seen a sharp decline in economic growth worldwide.

The WTO has failed to produce economic growth because this entire model is actually geared to increase the power of corporations in the governance of the global economy. Rather than governing just trade, the WTO is better understood as a global corporate power-grab, aiming to impose a one-size-fits-all set of rules on national issues of public services, intellectual property, agriculture, industrial development, and more. Under this flawed model of corporate globalization, not only is economic growth sluggish, but economic inequality has vastly increased, diminishing prospects for development and the attainment of universal economic human rights.

It will be hard for her to find people here that buy into the idea that the last quarter century has seen a "sharp decline in economic growth worldwide."
Land reform, food subsidies for the poor, and sustainable production are core elements of a fair and healthy food system. But the WTO rules are based on an ideology of food for export, not for eating.
I rest my case. For a more balanced view of the upcoming round, the Economist has a thoughtful piece, and reminds everyone that European taxpayers are subsidizing their inefficient farmers to the tune of 40 billion Euros a year.

posted by HK Dave on 12.09.05 at 11:10 AM in the WTO category.


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The anti-globalization folks leave me cold too, but there's no doubt that companies arbitrage more than just wages when they move stuff offshore.

This American Life on NPR did a great piece about how Cambodia is getting sqeezed because of this. Go to
this site and listen to act 2 of "David and Goliath."

posted by: Derek Scruggs on 12.14.05 at 07:35 AM [permalink]

This American Life is a rather good show! I used to listen to it several years back...will have to download their podcasts.

Every time I hear about people losing their jobs due to globalization, though, I always think of the counterfactual - if you legislate tariff barriers to keep jobs from being lost - you are taking a job from someone else, somewhere (not to mention the chance for a business or entrepreneur in your own country to provide a better product or service). I often wonder, if considerations of job losses are by definition nationalistic (rather than global) how on earth do protesters from different countries manage to march together?

posted by: HK Dave on 12.14.05 at 08:51 AM [permalink]

In case it wasn't clear, the This American Life episode wasn'isn't about Americans losing jobs. Rather, it's about Cambodians losing their jobs to Vietnam, Thailand, China and other places.

Cambodia adopted a number of Western-style labor laws in the 80s and 90s - minimum wage, eight hour workdays, no child labor etc. They were able to do this because they were a preferred traing patner with the US under a special law adopted in the 90s. That law expired in 2003 (I think? can't remember the exact date) and now they're getting sqeezed big-time.

Re: this point:

> I often wonder, if considerations of
> job losses are by definition
> nationalistic (rather than global) how
> on earth do protesters from different
> countries manage to march together?

Well, I think you should make that "rich, democratic" countries. I doubt you'll see a lot of Egyptians or even Russians protesting there.

Not that I agree with them ideologically, but I think it's reasonable to ask whether democracy (or the lack thereof) should get you special consideration vis a vis global trade agreements.

Look at the Harbin benzene spill - would that happen in the (democratic) West? And, if so, what would be the political consequences?

posted by: Derek Scruggs on 12.15.05 at 01:14 PM [permalink]

Hi Derek, thanks for your thoughtful comments. I should point out though that not only are there Korean farmers here but also protesters from the Philippines and other Southeast Asian nations experiencing the structural 'squeeze' of not being able to offer competitive production (in terms of labor cost vs. skill sets vs. infrastructure) costs vis-a-vis China or India. I was marvelling at their mutual desire to protest together.

I definitely think the benzene spill could happen in democratic third-world countries - one need look no further than Union Carbide in Bhopal, India in the 1980s. The company was excoriated, yes, but the amount of compensation they were required to pay to the victims was pitiful.

You raise an interesting point by suggesting that trade be directed to democracies. It is an intriguing notion, but it seems to me that a counter-example is in US relations vs. Burma, and relations vs. China over the last 20 years. Both have been ruled by repressive, autocratic regimes. Due to foreign policy dictates, the US pursued a policy of economic isolation against Burma, whereas it chose to engage in a policy of engagement with China. Which regime seems closer to having a middle class capable of bringing about gradual political liberalization? The answer is clearly China.

I am all for democracy - but at the appropriate time. The world's stage is sadly littered with examples of countries that attempted a democratic transition before it has the institutions, the resources, and the level of social and economic development to do so. As Fareed Zakaria pointed out in his book the Future of Freedom, there actually is something approaching a magic formula - democratic transitions that occur in countries that have a GDP per capita above US$8,000 or its inflation adjusted equivalent are far more likely to succeed in their endeavor than one well below that line (the only exception being resource-rich states which tend to be centralized and do not depend on a large middle class for their wealth, like Saudi Arabia).

To me, trade should not be used as a weapon, but as a means whereby one encourages the adoption of free enterprise, secure property ownership, and meritocratic growth. The East Asian experience very much suggests that to be a winning formula. It would align the broadest number of people in a truly 'developing' (meant descriptively, not as an euphemism for permanent poverty) country with the original spirit that infused the framers of the American Constitution - promoting life, individual liberty and the pursuit of property (I believe 'happiness' was used as a polite replacement in the final version).

In that sense, I would not in the final analysis agree with your policy to reward democratic regimes with better trade terms, as although I would see such a policy as well-intentioned, I would also see it having a negative overall effect on world trade or indeed on promoting democracy worldwide in the long run.

posted by: HK Dave on 12.15.05 at 02:45 PM [permalink]

Interesting to see that there *are* protestors from developing nations there. Hmmm...

Yes, I thought of the Bhopal disaster, and I think that's one more complication to throw in an otherwise brilliant point. ;) India is a democracy, but it's also amazingly corrupt (not to mention vastly more socialist back in the 80s). The sad reality is that "democracy" is hard to measure, so how do you tie trade to it? It would be an exercise every bit as political as anything else.

I also believe in constructive engagement with non-democratic states. Burma is a good example, Cuba is another. But these are also issues of national security, not just economics. In other words, trade is still about broader state-to-state relations, not just prices and jobs.

To be clear, I'm a free-trader. But the orthodoxy of free trade tends to gloss over the fact that there is an arbitrage game going on. "Specialization" and "comparative advantage" are clean-sounding words that mask, for example how much cheaper it is to bribe a plant inspector in Jilin than to abide by EPA regulations in the US.

As I say, I support free trade and think most of the WTO protestors are whackos, but the polarized political environment here in the US has escalated this issue into a near Holy war. Interesting that so many people here who hate the UN seem to love the WTO, even though the latter has much more of an effect on sovereignty.

posted by: Derek Scruggs on 12.16.05 at 02:37 AM [permalink]

Hi Derek, I do think that the WTO could do more to ensure environmental regulations are enforced in countries. But I think to democratize the institutions of the WTO and make all of its backroom neogtiations completely transparent would be a mistake that would prevent it from getting things done, and make it beholden to special interest groups that do not have the national interest of particular countries at stake.

What do you think?

posted by: HK Dave on 12.16.05 at 02:44 PM [permalink]

You're right. If the WTO were a legislative body, nothing would ever get done. But lack of transparency also feeds public cynicism and provides a wedge for ideological opponents. I don't know how you overcome that.

Ultimately, its ideology that screws things up. The lefties have their ideology and the righties have theirs. But nothing gets done unless you find a compromise, and the people who make it happen are "sellouts" and "traitors."

Did I mention I hate ideology? ;)

posted by: Derek Scruggs on 12.16.05 at 11:27 PM [permalink]

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