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| Latha Jishnu: Have a crisis? Export it | |
| Rich countries will shift the pain of financial meltdown to developing countries | | Latha Jishnu / New Delhi January 3, 2009, 0:31 IST | |
Rich countries will use the Doha Round to shift the pain of the financial meltdown to developing countries.
Nothing focuses the mind so well on multilateral trade talks as a major financial crisis. Developed countries, almost by instinct, remember unfinished agendas at the WTO whenever their economies are facing a disaster of some kind. It’s a strategy based on the conviction that exporting the problem — dispersing it as widely as possible — is the best way out of a difficult situation.
It was not surprising that in November last, the US and Europe, battered by the worst financial crisis in half a century if not the worst ever, were suddenly seeing merit in pushing the Doha Round of trade negotiations that has been in stasis for seven years. It’s another matter that trade diplomats from the world’s biggest trading nations have put paid to any hopes for a quick summit for the time being because of deep divisions on the issue of agricultural tariffs, special safeguard mechanisms and the cotton subsidies of the US. But it’s not likely that the industrialised world will give up its attempts to revive and conclude the talks.
Remember that the current trade negotiations did not get off the ground till after the September 11 terrorist attacks of 2001 in the US. For almost a year before the Doha talks were launched, there was not much progress on kicking off the kind of negotiations that the poor countries wanted: a genuine focus on livelihood and growth with equity. For most of 2001, the intransigence of developed countries had made any progress impossible. Even on September 1, 2001, a WTO mini-ministerial that was held in Mexico failed to resolve the impasse. But within weeks of the terrorist strike on the World Trade Centre in New York, the US and EU, then represented by Pascal Lamy, the current WTO chief, were pushing for a new round to revive the world economy from recession.
At that time, a sceptical African trade negotiator had pointed out that a majority of African economies had been in recession for about 10 to 20 years. “Do you think the current ‘recession’ affects us? The new round isn’t the answer to our recession.” He was voicing the view of some developing countries who felt the situation was being used to manipulate them into accepting a new round of trade liberalisation.
Similar concerns are being voiced now, too. New Zealand economist Jane Kelsey says there is a tendency for rich countries to disperse every financial crisis to the Third World. Kelsey, author of the just-published Serving Whose Interest? The Political Economy of Trade and Services Agreements, warns that every crisis of the rich world is turned around and dispersed to Third World nations. The focus this time is on prying open markets for services and capital and not so much for goods.
There is a simple logic to this. It is estimated that close to 80 per cent of world trade is locked-in under legally binding tariffs, with roughly 30 per cent under a zero-tariff regime through various European trade treaties. This leaves just about 20 per cent of trade vulnerable to tariff hikes. But in the growing nervousness about protectionist measures, it is important to see where the threats come from. According to trade analyst Joseph Francois, this would involve Asian importers (China and Taiwan have limited room for protectionist manoeuvres because of the commitments made when they joined the WTO), Africa, Latin America, OPEC members, and components of the former Soviet Union. Their average rates of protection are 15.1 per cent for food products and 6 per cent for NAMA or manufactured items.
So why exactly is the club of the rich, the OECD countries, keen on getting Doha restarted? The simple fact is that open markets, with maximum deregulation, are one of the pillars of economic fundamentalism. The short point is that the domestic policies in the Western world might have changed after the financial meltdown but the free market fundamentalism that is its religion will willy-nilly be imposed on the developing world despite what Nobel Prize-winning economist Joseph Stiglitz might say. The collapse of Lehman Brothers, the 158-year-old institution which had survived the Great Depression, “was in many ways to market fundamentalism what the fall of the Berlin Wall was to Communism,” according to Stiglitz, who has been writing paens to the triumphant return of Keynesian economics in the West. “We are all Keynesians now,” he declares.
All of which is unlikely to change the prescriptions of the US and other developed countries on what the poor countries need to do revitalise global trade. American writer Gore Vidal had this to say about the uniqueness of the US economic system: “We have free enterprise for the poor and socialism for the rich.” It is this policy, Keynesian economics for the rich countries and open markets and deregulated economies for the developing countries that will be pushed as the recession bites deeper.
Trade experts are forecasting excessive use of antidumping measures, countervailing duty, and safeguard protection, misguided subsidies and rising protectionism. How can the poor countries face such an onslaught in an unequal system where the US has refused to dismantle hugely distorting subsidies cotton subsidies that the WTO had found unacceptable more than four years ago? This is apart from the crushing agriculture subsidies that the US and EU persist in maintaining.
Only a collective firmness against the threats and blandishments that the rich countries will use at the WTO can save the poor nations from an impending catastrophe on the food front. There is a major flashpoint ahead. The UN special rapporteur on the right to food, Olivier de Schutter, has warned that the Doha Round will not prevent another food crisis in the world. In this first-ever report prepared by a UN independent expert on this highly contentious subject, de Schutter has examined whether the current path of trade liberalisation in agriculture complies with the WTO members’ obligations towards the human right to adequate food.
Mandated by the 47-member Human Rights Council, de Schutter will be making recommendations that insiders say can prove explosive at the WTO. Going beyond the technicalities of the Doha round, the UN expert has analysing agricultural trade issues from the perspective of the food crisis and the looming threats posed by climate change. De Schutter’s conclusions, says a preliminary report, should encourage countries “not to accept any undertakings under the WTO which would be incompatible with their obligations under international human rights law”.
Will the developed countries accept this much-need dimension to international trade?
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