WTO meeting: a raw deal for poor countries

The World Trade Organisation’s ministerial meeting in Hong Kong in December 2005 was considered a success by some and a disaster by others. Where you stand on this question necessarily depends on what hopes you had of what could be achieved.

As abstractly conceived, the WTO lays down rules for the conduct of international trade, regulating in particular the extent to which any country is allowed to protect its own producers from competition from abroad. Of course, it is the rich and powerful within each member state who dominate such an organisation, even if it could be assumed that the member states had equal bargaining power. The most powerful sections of the ruling class in each country happily sell out the interests of weaker sections and of the petty bourgeoisie in order to secure access to foreign markets. Occasionally, however, strong lobbies arise of weaker sections whose support the big bourgeoisie needs (in elections, for example), and these lobbies are therefore able to secure protection, be they medium-sized farmers in Europe or US textile manufacturers etc. If, however, the bargaining powers of the various parties were equal, then the resulting trade-offs would be more or less fair.

Member states of the WTO do not, however, have equal bargaining powers. Rather than acting as a neutral forum between equal members, the WTO in fact works in favour of the interests of powerful imperialist states and against those of oppressed countries. To the extent that the latter are no longer colonies, they are nominally free to erect trade barriers to protect their domestic industries. Because of imperialist exploitation of the countries in question, these countries are unable to invest very much to modernise their industries, which are as a result economically inefficient by comparison to those owned by the imperialist multinationals – but they do provide livelihoods for local people. What tends to happen is that these countries secure finances from imperialist banks (at hefty rates of interest, repayable in dollars) for modernisation of one or two areas of production – usually agricultural – in the hope of being able to sell their produce abroad at a healthy profit. Those who are able and willing to do these deals are typically comprador landowners who will be happy to allow foreign goods to flood their countries’ markets, even though the effect of this will be to bankrupt the country’s weaker producers, leading to mass unemployment and unparalleled poverty. Of course, this is the stuff of which revolutions are made, so that the comprador who wishes to continue to enjoy his ill-gotten gains is often forced to have regard to the interests of the national bourgeoisie and petty bourgeoisie. Indeed, he may even need continued electoral support from these sections to ensure his continued control of the country’s government.

In the case of some oppressed countries, imperialism has already taken over the most productive sections of their economies and effectively dictates their negotiating positions. For example, Latin American banana producers are actually US banana producers producing in Latin American countries, while Caribbean banana producers are in fact somewhat less ‘efficient’ European banana producers producing in the Caribbean.

The imperialist powers – the US, the EU and Japan – know that they can massively increase the profits of their multinationals if they can break down the resistance of the ‘inefficient’ to the entry of their goods, services and the capital investment that enables imperialism to take over an oppressed country’s economy completely in order to milk it for every penny. This is a prospect that does tend to unite quite a sizeable spectrum of national interests in opposition, however.

Outcome of Hong Kong meeting

At the Cancún and Seattle ministerial conferences, so great was third world opposition to imperialism’s expansionist plans that the conferences effectively collapsed. The Hong Kong meeting was intended to soothe the ruffled feathers of third world delegates who had previously felt ignored and get them back ‘negotiating’.

So long as they are prepared to ‘negotiate’, there is always the hope of being able to extract concessions from them – by tackling them one at a time rather than collectively.

From that point of view, although there was no mass surrender on the part of the oppressed countries, Hong Kong was nevertheless a ‘success’, as is pointed out by Jagdish Bhagwati in the Financial Times. There was, he says, “no commitment on the rest of trade distorting agricultural subsidies and on tariffs and quotas [but] no line has been drawn in sand against concessions in future negotiations”. Some concessions were extracted at the Hong Kong meeting itself – most notably, India broke ranks with other relatively powerful third world countries, such as Brazil, to express support for an opening up of the market in services. Dizzy with its own successes in the services sector, India was more concerned to promote what its leaders hope will be a lucrative expansion than to hold the line with other similarly placed countries who are trying to negotiate a better deal for themselves. Jagdish Bhagwati lists as a success of the Hong Kong meeting the fact that “India will play ball”.

Poor countries free to export things they don’t produce

More than that, “the 50 least developed countries have been bought off with duty free and quota free access on 97 percent of import lines by EU, Japan and the US by 2008” . In other words, for the purpose of future negotiations, imperialism has bought itself the support of the 50 least developed countries, a fact which augurs ill for the future of oppressed countries in general. In fact, even the countries that have been “bought off” have been sold a pup, because within the 3 percent of commodities that the imperialist countries will continue to protect themselves are all the ones that matter. (‘A blend of strong measures puts trade talks back together’, Financial Times, 20 December 2005)

“Although the least developed countries account for a tiny fraction of world trade, the US and Japan insisted that duty- and quota-free could not apply to all products. As Adriano Soares of Action Aid put it, this means that Bangla Desh will be able to export all its non existent nuclear subs to the US, but not the textiles that make up more than 80 percent of what it sells overseas.” (‘WTO summit no easy way out as an encore looms’ by Larry Elliott, The Guardian, 19 December 2005)

Farming and textile subsidies on the way out

In the meantime, the major imperialist powers have insisted on retaining very important bargaining chips. Although they agreed at Hong Kong that there is to be some reduction in the protection given to US and European farming and textile interests, this reduction is very minimal, a factor which gives each of these imperialist blocs maximum leeway for one-to-one ‘negotations’, in which they will promise to lift the tariffs for the benefit of each individual country that submits to full imperialist access to its economy.

There is no question that the US and European farmers and textile producers cannot expect to be protected much longer, but are being kept in hand as a bargaining chip. Their contribution to the internal economies of imperialist countries is minimal, as Jacques Berthelot points out in the Monde Diplomatique:

“Agriculture generates less than 2 percent of GDP in the US and the EU; services make up around 75 percent and the rest is accounted for by industry (including processed food products).” It is obvious that for the benefit of the 75 percent, the 2 percent are expendable. (‘The WTO – food for thought’, Monde Diplomatique, December 2005)

As Joseph Stilgitz and Andrew Charlton point out in The Telegraph of 12 December, the EC is paying 40 percent of its budget propping up inefficient industries that employ just 2 percent of the workforce. And, incidentally, this money goes overwhelmingly to the rich: “The very term ‘farm subsidies’ conjures up images of sweet, ruddy-cheeked residents of Ambridge. In reality the British subsidies … are overwhelmingly paid to people like Tate & Lyle (£120m of your taxes each year), Elizabeth Windsor [The Queen] (£1.2m) and that well-known pauper the Duke of Westminster (£300,000).” The distribution is similar in other European countries and in the United States, with the rich receiving far more than the poor: “The EU subsidies are highly skewed in favour of large farmers. In 2003 the richest 1.6 percent of EU farmers received 27 percent of all subsidies. The poorest 54 percent received only 4 percent …” (‘How French farmers make themselves rich through EU’ by Anthony Browne and Nicola Smith, The Times, 14 December 2005)

Effect of subsidies in Africa

Charities such as Oxfam and Action Aid have been disappointed by the outcome of Hong Kong precisely because the imperialist powers have given up precious few of their bargaining chips, and much is made of the plight of African farmers who are being cheated as a result. For instance, Johann Hari in The Independent of 15 December 2005 tells of the plight of Hassan from Uganda, a rice producer producing 27 sacks of rice per year worth £5 each: “When he goes to his local market, Hassan sees bags of rice grown in Kansas, frozen chickens bred in Denmark, and dairy products made in Devon. All of these products are being sold for far less than it actually costs to produce them – the joy of subsidy! – so Hassan can hardly compete. Most African businesses die at this stage.

“Agricultural subsidies – and in particular the Common Agricultural Policy – hit Hassan from three directions. They depress global prices, so his bag of rice sells for at least £3 less than it would in an undistorted market. They subject him to unfair competition within his own local market, because he can hardly compete against dumped goods. And – a final kick – they make it almost impossible for him to sell for export, because they erect an iron wall of tariffs around the rich world.”

The implication of these words is that, if Europe and America were to lift their trade barriers, Hassan would be better off. The trade-off demanded, however, for the lifting of these barriers will be that the Ugandan economy, which is already awash with imperialist-produced goods, will be further opened up to imperialist competition. This essentially means privatisation and sell-off of essential service providers such as water and electricity companies and the takeover of local industries by imperialist multinationals. Experience shows that this leads to huge price increases for local people. Hassan may well find himself driven out of business altogether by far more ‘efficient’ imperialist-owned rice production in Uganda itself.

Jacques Bertholet notes that “countries’ wealth is inversely proportional to their integration in world trade.

“The greater the share of agricultural produce in a developing country’s total exports, the greater that country’s malnutrition rate is likely to be … From 1995 to 2003 West Africa’s food exports grew by 50 percent from $4bn to $6.1bn. But the trade deficit for the agricultural sector grew even faster: it went up by 55 percent, from $2.9bn to $4.3bn.” (Op cit)

Unite and fight

Of course, surrender to imperialist ambition will mean imperialist investment in countries of the third world, modernisation of their industries and agriculture, and there are those who suggest that therefore one should not resist the process. One might as well say that the people of India should not have struggled against British imperialism because it modernised India! Such modernisation is brought at the cost of the impoverishment and misery of millions upon millions of people and must therefore be resisted. The basis for genuine modernisation is the overthrow of imperialism.

In the meantime, third world countries need to club together to form their own areas of mutual trade, from which the imperialist powers are excluded. The willingness of various groups to do this, with China providing a mass market for those who wish to be independent of imperialism, is actually the greatest hope for the downfall of the World Trade Organisation and the imperialist interests that it represents.