In\n this first section we shall review the tendency towards increased world\n trade since World War II. We shall consider the economic forces that \nlay behind this trend and how far this trade can be termed \u2018free trade.\u2019<\/p>\n\n\n\n
<\/a><\/p>\n\n\n\n The\n term \u2018free trade\u2019 is the exchange of goods at their market price, in \nthe absence of \u2018distortions\u2019. Such distortions include tariffs (adding \nto the import price), import quotas (restrictions on the amount a state \nwill allow to be imported) and export subsidies (so exports can be sold \nat a deliberately lower price). These are examples of what are known as \n‘protectionist’ measures (so-called because they are put in place by \ngovernments to improve the terms of trade for their domestic \nindustries.) Protectionism often has an associated cost for the state \nthat adopts it, given that its trading partners will be likely to \nintroduce their own protectionist measures in retaliation. While \nprotectionism might favour the short term interests of a nation, it \nraises the possibility of retaliation and hence a trade war. Such a \ntrade war obviously reduces the amount of trade between states which can\n damage the interests of all the nations involved.<\/p>\n\n\n\n <\/a><\/p>\n\n\n\n The\n theory of the benefits of free trade was founded upon Ricardo’s theory \nof ‘comparative advantage’. He argued that a state can maximise its \nprofits by specialising in those industries in which it has the greatest\n advantage in efficiency (i.e. profitability) relative to other states. \nThis means that, even if State A is less profitable than State B in all \nsectors of the economy, the profits for both A and B will be maximised \nif each specialises in the areas in which it is best (or least bad) and \ntrades with the other.<\/p>\n\n\n\n Comparative\n advantage theory relies upon a set of unrealistic assumptions. One of \nthese is the assumption that all economies are already making the most \nefficient possible use of their resources (human labour, capital, \ntechnology etc.) If they are not, then, as has been pointed out by \ncritics of the Ricardian theory, a protectionist policy might be \njustifiable to allow fledgling industries to develop to a point where \nresources are being used to their full potential.<\/p>\n\n\n\n Still,\n the fundamental point made by Ricardo remains pertinent. This is that \nprofits will usually be maximised when production within a country \nconcentrates on areas where productivity and hence profits are highest. \nWith this point, Ricardo has provided an important reason why capitalism\n benefits from trade. Ricardo’s theory is supported by empirical \nevidence. For example, a recent study by J.Sachs and A.Warner took a \nsample of 111 countries which they classed as either ‘open’ or ‘closed’ \naccording to how far they had liberal terms of trade. They discovered \nmuch faster growth (i.e. more profits) – among the ‘open’ economies.(1)<\/p>\n\n\n\n The\n benefits of free trade for capitalism, to which Ricardo drew attention \nhas been an important factor in the huge post- Second World War push for\n ever greater, transnational profitability. International mobility of \ncapital, goods and services (i.e. free trade) has characterised this \nperiod of capitalist development. As we shall discover, though, this \ntrend was brought about forcefully by the world\u2019s largest economic \npowers who were only prepared to adhere to the Ricardian textbook in so \nfar as it suited their interests.<\/p>\n\n\n\n <\/a><\/p>\n\n\n\n The\n place to start a review of trade developments since the Second World \nWar is with the economic alliances formed in the aftermath of the Second\n World War. As Sklar argues, there was an especially concerted effort \namong the United States of America (U.S.A.), Europe and Japan to \nestablish worldwide economic hegemony. The liberalisation of capital and\n goods markets was an integral part of their strategy. The U.S.A. and \nBritain agreed to start cutting down on tariffs in 1944 as part of the \nfamous Bretton Woods agreements. Further measures were then taken, such \nas in 1949, when 30 per cent of European trade was freed from \nrestrictions.<\/p>\n\n\n\n The\n reduction of tariff barriers after the formation of the (European \nEconomic Community) E.E.C. in 1958 increased trade by the order of \n25-35%. Within E.F.T.A., (the free trade zone formed by seven of the \nnon-E.E.C. European countries, including at that time the United \nKingdom) lower barriers resulted in extra imports of around 10-15% for\n the countries concerned.(3; p31)<\/p>\n\n\n\n The\n U.S.A. was somewhat slower to lift trade restrictions given that there \nwas already a high demand for U.S. goods after the war. As is pointed \nout by Armstrong et al, it was Kennedy in the later sixties “whose round\n of cuts saw the average level of tariffs on manufactured goods falling \nby one third and by half on machinery and vehicles.”(3; p154)<\/p>\n\n\n\n Very\n high rates of tariff covering about 7% of goods in the United States \nand United Kingdom almost disappeared, and the proportion of trade \n(excluding agriculture and fuels) which attracted tariffs of 15 per \ncent or less rose from 54% to 85% in the USA, from 37% to 85% in the \nUnited Kingdom and from 71% to 97% for the EEC. (3; p154)<\/p>\n\n\n\n World\n trade grew by an average of 8.7% between 1963-72. This growth then \nslowed sharply from 1973 (it averaged 3.8% per year from 1973-88.) In \n1973 the Trilateral Commission was founded, to continue the work of \nbuilding what Sklar calls the ‘new economic order.’<\/p>\n\n\n\n As Sklar puts it:<\/p>\n\n\n\n the\n (Trilateral Commission) planned and encouraged an utter restructuring \n of the world’s political and economic agenda with much of its new power\n arrangements built to favour transnational corporate activity.(4)<\/p>\n\n\n\n As\n Sklar shows, the objectives of the Commission are evident in their \nvarious reports and policy documents. A call for the lifting of \nrestrictions on capital mobility is made in Towards a Regenerated Economic System<\/em>:-<\/p>\n\n\n\n countries that want economic development would be well-advised to welcome foreign firms on appropriate terms(5)<\/p>\n\n\n\n You\n do not need a degree in economics to work out what might have been \nmeant by ‘appropriate’ in this context. It is made clear in the \nfollowing statement by D.Rockefeller, one of the leading U.S. \npoliticians in the Trilateral Commission:<\/p>\n\n\n\n international\n bankers, corporations, and investors have little need for tariffs and\n other trade barriers. Their interest lies in finding the most \nefficient, profitable, productive, and convenient spot for their \ninvestment(4)<\/p>\n\n\n\n George\n Ball, undersecretary of state for Economic Affairs in the Kennedy \nAdministration and a director of Lehman brothers Kuhn Loeb, a large \ninvestment house, told the British National Committee of the \nInternational Chamber of Commerce in 1967:<\/p>\n\n\n\n In\n these twenty postwar years, we have come to recognise in action, though\n not always in words, that the political boundaries of nation-states \nare too narrow and constituted to define the scope and activities of \nmodern business… (4)<\/p>\n\n\n\n Although\n protectionism has re-emerged at certain times since the 1940s, as \noccurred in U.S.\/Japanese and U.S.\/ South Korea trade wars during the \n1980s, the overall trend has been towards a reduction in protectionist \nmeasures. Tariffs have been reduced and quotas are used less widely. An \nimportant factor in this has been the General Agreement on Tariffs and \nTrade. (the G.A.T.T.) that shall now be considered.<\/p>\n\n\n\n <\/a><\/p>\n\n\n\n The\n General Agreement on Tariffs and Trade (or G.A.T.T.) was established in\n 1947. G.A.T.T. \u2018rounds\u2019 of negotiation continued until the 1990s and \neach successive round sought to enshrine the principles of free trade in\n international laws, designed to be applicable worldwide. In the \nG.A.T.T. a one-country one-vote system was tried initially (until 1959) \nbut the big trading powers saw this as inimical to their interests. The \nsystem that finally emerged worked more by a consensus arrangement than \nby voting. The United States, Japan, European Union and Canada tended to\n hold the decisive influence. (20; p39)<\/p>\n\n\n\n The G.A.T.T. rounds have had an important role in the move towards trade liberalisation.<\/p>\n\n\n\n Six\n rounds of General Agreements on Tariffs and Trade (G.A.T.T.) \nnegotiations, from 1947 to 1967, for example, brought tariffs on all \ndutiable U.S. imports down from their 1932 high of 59.0% to 9.9% in \n1970.(6)<\/p>\n\n\n\n Founded\n just after the Second World War, the first forty years of G.A.T.T. were\n primarily concerned with tariffs and related matters. As Lori Wallach \nhas shown, the original articles of G.A.T.T. when it was founded in 1947\n contain the basic principles that were gradually put into practice. \nMost notable are the following:<\/p>\n\n\n\n Article\n One establishes the rule of ‘Most Favoured Nation’ – one country cannot\n discriminate between domestic products and ‘like products’ imported \nfrom another G.A.T.T. country. ‘Like products’ were defined in 1971 to \nbe limited to consideration of product characteristics and does not \nallow consideration of how the product is produced or harvested.<\/p>\n\n\n\n Article Three contains the principle of ‘National Treatment’ which states that:<\/p>\n\n\n\n one\n G.A.T.T. country may not use tariffs, taxes or any regulations to \nprovide different treatment to imports than it would provide to \ndomestically produced goods.(6)<\/p>\n\n\n\n Environmentalists\n had hoped that Article 20 would allow for exceptions to the above \nprinciple in the case of environmental protection. It allows for \n“measures necessary to protect human, animal and plant health or life.” \nArticle 20(h) allows for waivers “undertaken in pursuance of obligations\n under any intergovernmental commodity agreement.”(14) Again, this had \nencouraged environmentalists who hoped it might be extended to \ninternational environmental agreements and protocols.<\/p>\n\n\n\n The\n well-publicised tuna-dolphin case, in which the Mexican government \nappealed against the U.S. Marine Mammal Protection Act of 1972, put the \nhopes of environmentalists to the test:<\/p>\n\n\n\n in\n August 1991, a three-person, secret G.A.T.T. dispute panel in Geneva \nruled that the (1972 act) was an illegal barrier to trade because it \nrestricts importing tuna into the United States that are caught using \ntechniques that kill large numbers of dolphins.(6)<\/p>\n\n\n\n As Ralph Nader puts it,<\/p>\n\n\n\n G.A.T.T.\n \u2026. set out rules limiting countries’ ability to exclude imports on \nthe basis of labour, human rights, or environmental conditions in the \ncountry of production.(6)<\/p>\n\n\n\n The\n judgement in the dolphin-tuna case was just one of many such examples. \nThe agreements allow another country to challenge as infringing upon the\n trade environmental, health or safety laws such as those of the U.S. \nThey therefore have the effect of ‘harmonising’ environmental and safety\n standards, a euphemism for bringing those nations with more stringent \nregulations down to the level of the least stringent.<\/p>\n\n\n\n The\n Uruguay Round of G.A.T.T., concluded in 1992, brought new economic \nsectors, most notably food, agriculture and services such as banking, \ninsurance and shipping, within the remit of the G.A.T.T. This agreement \nalso addressed the issue of liberalising international capital \nmovements, due to the demands of multinationals to be free to investment\n anywhere in the world. (This issue was to be taken up later by the \nproposed Multilateral Agreement on Investment which was never ratified- \nsee below.)<\/p>\n\n\n\n Introduce elements of non-free trade.<\/em><\/p>\n\n\n\n <\/a><\/p>\n\n\n\n Anderson\n and Norheim investigated the growth of intraregional and intetrade for \nthe world’s major economic regions since the 1930s (1993a: 1993b):. \nTheirresults show no strong move towards regionalization: trade has \ngrown vigorouslybetween regions as well as within them. While the \nintensity of intraregional trade rosein the postwar period (figures for \nEurope in the nineteenth century show virtually nointraregional bias), \nbetween 1979 and 1990 there was only a small rise in \nintraregionalintensity within the EU and actual falls in Asia and \nAmerica. Interestingly the intensityof intraregional trade is lower in \nWestern Europe than in America or Asia, so that theinstitutionalization \nof regional markets does not necessarily appear to lead to \nclosedregions. This is reinforced by other evidence, specifically \nindices for the propensity totrade extraregionally. These indices show \n,a rising propensity for extraregiondelin America and Asia, and a \nfluctuating propensity in Europe over the postwar period. These figures,\n consistent with other estimates, do not support the regionalization \nthesis(cf. Lioyd. 1992).168 <\/em><\/p>\n\n\n\n As\n well as the G.A.T.T., international trade liberalisation has also \noccurred on a regional level through, most notably, the European Union, \nthe North American Free Trade Agreement (N.A.F.T.A.) These regional \ntrading blocks reduce barriers in participant countries although can \nserve to discourage trade between regions. <\/p>\n\n\n\n Regional\n trading blocks were consolidated during the 1990s. Most member states \nof the European Union agreed to join a single currency. In 1994, Canada,\n the U.S. and Mexico, agreed to sign up to N.A.F.T.A. This agreement as \nNader puts it:<\/p>\n\n\n\n basically\n a mini-G.A.T.T., except that N.A.F.T.A. offers even greater \nprivileges to business and allows for fewer restrictions on corporate \noperations in the three countries.(6)<\/p>\n\n\n\n Some\n steps have also been taken towards establishing trading zones in South \nAmerica (M.E.R.C.O.S.U.R.) and South East Asia – the Association of \nSouth-East Asian Nations (A.S.E.A.N.) However, free trade agreements are\n far from being agreed in these areas. A M.E.R.C.O.S.U.R. agreement in \nSouth America would require compromise with U.S. interests which \ncurrently has strong trading links with the region.(25) In South East \nAsia, there is a tradition of protectionism in certain sectors and \nreconciling the various interests of different states will not be \nstraightforward.(26)<\/p>\n\n\n\n The\n development of these regional trading blocks should not be forgotten \namidst the talk of \u2018globalisation.\u2019 However, it has been shown by \nAnderson and Norheim that there has been no strong move towards \nregionalisation since the 1930s. Their results are summarised by Held et\n al:<\/p>\n\n\n\n While\n the intensity of intraregional trade rose in the postwar period \n(figures for Europe in the nineteenth century show virtually no \nintraregional bias), between 1979 and 1990 there was only a small rise \nin intraregional intensity within the EU and actual falls in Asia and \nAmerica. Interestingly the intensity of intraregional trade is lower in \nWestern Europe than in America or Asia, so that the institutionalization\n of regional markets does not necessarily appear to lead to closed \nregions.(27)<\/p>\n\n\n\n While\n G.A.T.T. has brought about greater trade liberalisation since the 1940s\n on a global level, this trend has by no means been universal. \nFurthermore, as explained below, it has been punctuated by reversions to\n protectionism by states, as and when it has suited their interests.<\/p>\n\n\n\n <\/a><\/p>\n\n\n\n The\n difficult global economic conditions of the 1970s caused the major \nindustrial nations to become more protectionist for a time. As Nossiter \nwrote in 1987: “Trade barriers had been coming down steadily through \nmuch of the postwar period, but once again, the 1973-74 oil shock and \nthe sharp slump it produced turned history back on itself. Ever since, \nobstacles to trade have been rising steadily.” (17; p159)<\/p>\n\n\n\n Many of the G.A.T.T. rules were ignored during the 1970s:<\/p>\n\n\n\n the\n economic malaise of the 1970s weakened the GATT system. The rule of \nconcerted agreement was ignored, and rich nations acted on their own to \nblock fabrics, clothes, consumer electronics, steel, autos, and other \nproducts that newly industrializing nations export.(17; p18) <\/p>\n\n\n\n Nossiter\n cites a study by Sheila Page which estimated that “about 34 percent of \nall imports to the industrial world had to thread their way through non \ntariff barriers in 1974. Five years later,” Nossiter explains, “this had\n climbed to 41 percent. In 1984, Jan Tumlir, GATT’s chief economist, \ncalculated that as much as 45 percent of all international trade was \nsubject to cost-increasing barriers, not counting tariffs. This is a \nremarkable level for a world whose industrial rich profess the virtues \nof unimpeded trade.” (17; p18) This wave of protectionism even led to \ndoubts about whether G.A.T.T. could survive. For example, Jan Tumlir, in\n an interview with Bernard Nossiter in Geneva in the 1980s said “GATT is\n becoming extinct. That’s how it looks. Deals on universal negotiations.\n That’s played out.” (17; p173 – interview with author.)<\/p>\n\n\n\n Looking\n back on the strengthening of G.A.T.T. that took place with the Uruguay \nround in the 1990s we can now see that this move back towards \nprotectionism during the 1970s was not to be as long lasting as Tumlir \nexpected. The subsequent establishment of the W.T.O. has taken further \nthe move towards reducing protectionist measures.<\/p>\n\n\n\n <\/a><\/p>\n\n\n\n the\n WTO is a much more powerful institution in so far as its dispute panels\n have the authority-tomake binding judgements in cases where trade rules\n are subject to dispute or transgressed.In this respect the WTO is a \nsign;ficant ;nst;tutionatforce for trade liberalization (Hoekman and \nKostecki. i995; Qureshi. 1996).p165<\/em><\/p>\n\n\n\n Further\n deregulation of trade followed after 1995 when the World Trade \nOrganisation (W.T.O.) was set up by the Uruguay round of G.A.T.T. The \nW.T.O. was, as The Ecologist puts it, the result of the<\/p>\n\n\n\n U.S.’s\n assessment that the interest of its corporations were no longer served \nby a loose and flexible G.A.T.T. but needed an all-powerful and \nwide-ranging W.T.O.(20; p37)<\/p>\n\n\n\n Held\n explains the greater institutional power of the W.T.O., as compared to \nG.A.T.T., given that “its dispute panels have the authority-to make \nbinding judgements in cases where trade rules are subject to dispute or \ntransgressed”(28) What was known within G.A.T.T. as “special treatment” \nfor developing nations, which enabled them to negotiate at least some \nspecial tariffs for industries they needed to protect, was eroded by the\n W.T.O. accord. Furthermore, the jurisdiction of the W.T.O. was extended\n to the Trade-Related Investment Measures (T.R.I.M.s) and Trade Related \nIntellectual Property Rights (T.R.I.P.s), measures which are explained \nbelow.<\/p>\n\n\n\n <\/a><\/p>\n\n\n\n T.R.I.M.s\n outlawed certain forms of protectionism. One such outlawed practice was\n the regulation of exports to ensure that a certain percentage of the \ncomponents used in the manufacturing of a product was locally produced.<\/p>\n\n\n\n As The Ecologist <\/em>explains:<\/p>\n\n\n\n These\n rules were successfully employed by the Newly Industrialised Countries \n(NIC’s) to raise income from capital intensive exports, develop support \nindustries, and bring in technology, while still protecting local \nentrepreneurs’ preferential access to the domestic market. In Malaysia, \nfor instance, the strategic use of local content policy enabled the \nMalaysians to build a ‘national car’, in co-operation with Mitsubishi, \nthat has now achieved about 80 per cent local content and controls 70 \nper cent of the Malaysian market. Thanks to the T.R.I.M.S. accord, these\n mechanisms are now illegal.(20)<\/p>\n\n\n\n <\/a><\/p>\n\n\n\n This\n accord was designed to enforce an international system of \u2018intellectual\n property rights.\u2019 Intellectual property can be defined as follows:<\/p>\n\n\n\n Intellectual\n property confers on individuals, enterprises or other entities the \nright to exclude others from the use of specific intangible creations.(http:\/\/www.southcentre.org.sg<\/a>.) <\/p>\n\n\n\n \u2018Intangible\u2019\n here means an idea or piece of information that can be incorporated \ninto a tangible object rather than simply the object itself. The \nT.R.I.P.s accord applied, for example, to industrial designs such as \nsemi-conductors and computer chips. It granted a ‘generalised minimum \npatent’ protection of twenty years.<\/p>\n\n\n\n Transnational\n corporations in particular stood to benefit from the accord as it was \nin the main, their goods that this accord enabled them to patent. As The Ecologist<\/em>\n observes, “the T.R.I.P.s accord is a victory for the U.S. high-tech \nindustry, which has long been lobbying for stronger controls over the \ndiffusion of innovations.” (20; p37) The United Nations Conference on \nTrade and Development (U.N.C.T.A.D.) describes the accord as a \n“premature strengthening of the international intellectual property \nsystem . . . that favors monopolistically controlled innovation over \nbroad-based diffusion.”<\/p>\n\n\n\n It\n has therefore been argued by critics that T.R.I.P.s is not actually \n\u2018free trade\u2019 legislation at all but is instead a licence enabling large \nmultinational companies to appropriate \u2018intellectual property\u2019 that \noriginated in the countries of the South. That it is a reflection of the\n interests of multinational companies of the North rather than an \nimpartial set of rules is pointed out by the website Southcentre.org \nT.R.I.P.s legislation was not applied to certain types of rights (namely\n “utility models” (mechanical designs) and “breeders’ rights” (e.g. for \nnew plant varieties). SouthCentre.org states:<\/p>\n\n\n\n The\n absence of these two categories may be explained by the relative lack \nof interest on the part of the major industrialized countries (and the \nindustrial lobbies that actively promoted the TRIPs negotiations) in \nthese categories.(29)<\/p>\n\n\n\n It\n is pointed out that T.R.I.P.s make illegal the exact practice that was \nkey to the industrial development of countries such as the U.S.A. and \nGernmany. As the Ecologist explains:<\/p>\n\n\n\n A\n key factor in their industrial take-off was their relatively easy \naccess to cutting edge technology. The U.S. industrialised, to a great \nextent by using but paying very little for British manufacturing \ninnovations, as did the Germans. Japan industrialised by liberally \nborrowing U.S. technological innovations, but barely compensating the \nAmericans for this. And the Koreans industrialised by copying quite \nliberally and with little payment U.S. and Japanese produce and process \ntechnologies.(20; p37)<\/p>\n\n\n\n <\/a><\/p>\n\n\n\n The\n Anti-Dumping agreement is another treaty that is said to be used by the\n North (and the U.S.A. in particular) as a means of protecting their \nindustries against those of the South. It allows governments to prohibit\n exports with a price that is said to be \u2018unfairly low.\u2019 This provides a\n convenient level of ambiguity for the U.S.A. to shut out very \ncompetitive exports from countries where labour costs are far cheaper \nand it has been argued that U.S. use of the anti-dumping law has \npredominantly been for this reason:<\/p>\n\n\n\n One\n study of the U.S.\u2019s anti-dumping law, conducted by the right-wing Cato \nInstitute, found that, of 107 affirmative anti-dumping findings between \n1995 and 1998, only two could be deemed to have been real causes of \ndumping. The others were simply exporters whose prices were too \ncompetitive.(19; p9)<\/p>\n\n\n\n The\n evidence of the T.R.I.P.s and Anti-Dumping agreements being skewed \ntowards the interests of multinational companies, as well as the history\n of states reverting back to protectionism when it suits their \ninterests both show that the implementation of international trade \nagreements reflects the powerful sets of interests that determine them.\n As is shown below, transnational companies are central to this set of \ninterests.<\/p>\n\n\n\n <\/a><\/p>\n\n\n\n A\n reduction in protectionist policies has tended to suit the hugely \npowerful transnational corporations (or T.N.C.s). By 1994, T.N.C.s \naccounted for one third of global output and their global annual sales \nhad reached 4.8 trillion dollars (which is, incidentally greater than \nthe total level of international trade.)(2) These corporations are \nresponsible for a large proportion of world trade today. By 1997, \nT.N.C.s as a whole carried on two-thirds of world trade (12; p112)<\/p>\n\n\n\n These\n corporations often divide up their productive operations across the \nglobe, choosing different locations according to factors such as the \ndifferent skills, labour costs, taxation regimes and environmental \nregulations. For this reason, nearly half of the trade of T.N.C.s takes \nplace within<\/em> their company networks. (12; p112) Both the \ninternal and external trade of T.N.C.s has profited greatly from the \nliberalisation of trade.<\/p>\n\n\n\n More detail from Global Transformations<\/em><\/p>\n\n\n\n T.N.C.s\n have also profited from the removal of many restrictions on foreign \ninvestment. By 1997, the largest 100 multinational corporations alone \ncontrolled about one third of all foreign direct investment. \nIncreasingly, the corporations are able to ‘shop around’ for the most \nfavourable country for them to set up their operations. Typical of the \n‘globalised’ outlook is the comment by Volkswagen boss Ferdinand Pisch \nwho in 1994 calmly blocked wage demands presented by his Czech \nworkforce. Skoda, he warned, must not lose its comparative local \nadvantage, otherwise “we would certainly have to consider whether \nproduction in somewhere like Mexico would not be more profitable” (12; \np131 )<\/p>\n\n\n\n <\/a><\/p>\n\n\n\n In\n spite of the free trade rhetoric used by the United States and the \nE.U., these nations and the companies whose interests they so often \nrepresent have shown themselves quite capable of reverting to \nprotectionist strategies when it suits their interests. As Bello points \nout, certain trading activities of T.N.C.s are themselves \n‘distortionary’ in that the price involved is not the true market value \nof a good. This occurs, for example, in the ‘internal’ trade of TNCs \nwhen goods are sold at artificially depressed prices to a subsidiary \ncompany. (10; p85) This might be done, for example, to avoid payable \nduties on such trade.<\/p>\n\n\n\n Bello provides another clear example of the pro-T.N.C. bias in the G.A.T.T. legislation:<\/p>\n\n\n\n While\n the areas of great interest to Northern transnationals have been \nlargely resolved in their favour in the G.A.T.T., there has been little \nmovement in textiles, where change toward freer markets would benefit \nthe South.(10; p85)<\/p>\n\n\n\n Thus,\n the U.S. have shown themselves capable of reverting to protectionism \nwhen it suits the interests of U.S. multinationals. Another case in \npoint was the stance of the U.S. government in a trade dispute with the \nE.U. on the export of Chiquita bananas. Chiquita, a U.S. multinational \ncompany exporting bananas grown in Central America, used their political\n muscle to combat the European Union’s (E.U.) favourable trade terms for\n rival Caribbean firms. They persuaded the U.S. government to slap 100 \npercent duties on such products as sheep’s cheese from the E.U. to the \nU.S. The American Financial Group, who own Chiquita, have gave $1 \nmillion to Democratic and Republican politicians to fight the Caribbean \npreference which the they claim has lost Chiquita $1,000 million in \nearnings since the E.C. ruling of 1983 in favour of Caribbean bananas.<\/p>\n\n\n\n Behind\n the threats and counter-threats of this trade war the U.S. and the E.U.\n are playing for higher stakes than are represented by bananas and \nsheep’s cheese:<\/p>\n\n\n\n Andrew\n Hughes Hallett, professor of economics at Strathclyde University, \nbelieves we need to peel back the skin on this row to understand it. ‘I \nsuspect it isn’t about bananas at all and it isn’t about protecting poor\n farmers either in St. Lucia or Honduras. It’s about political pressure \nin Washington and Brussels . . . In the EU this dispute is tied up with \nthe power of the agricultural lobby. It’s like a bargaining chip. France\n is prepared to support Britain which is keen to get a favourable deal \nfor its former colonies, so Britain will be more supportive of France on\n other issues affecting French farmers.(21)<\/p>\n\n\n\n This\n Chiquita bananas example illustrates the huge influence of \ntransnationals in the U.S. political system. Occasions such as these, \nwhere the North reverts to protectionism when it suits its interests, \nnot to mention periods such as the 1970s when the U.S.A. reverted to a \nprotectionism on a larger scale, reveal a strategy that is not one to \nsatisfy Ricardian purists. They reveal that ‘free trade’ in itself is \nnot the primary goal of the developed nations under capitalism. The \nprimary goal is, of course, profitability.<\/p>\n\n\n\n The\n European Union have also shown that they are capable of reverting to \nprotectionism. Since the founding of the W.T.O., the E.U. have imposed \nduties on a range of imports, such as those from Asia, which contradicts\n the \u2018free trade\u2019 principles that they often espouse.(12; p149)<\/p>\n\n\n\n Due\n to the size of the transnational companies in relation to the global \neconomy as a whole, it is their profitability that has been such a major\n factor both in the decisions of national governments, as well as in the\n development of international frameworks such as the G.A.T.T. and more \nrecently the W.T.O.<\/p>\n\n\n\n The goal of profit cannot be anything other than the key determinant of economic decisions within capitalism (Why Profits Get Priority<\/a>) which explains why a combination of both free trade and protectionism have been embraced by nations since capitalism arose, the post-war period being no exception.<\/p>\n\n\n\n However,\n there has, as has been shown, a general trend towards trade \nliberalisation since the war, as this has been seen to create a climate \nconducive to profitability for capital, or at least for capital based in\n the rich north. In terms of economic growth, industry based in the \nSouth also grew as a result of the increase in trade. Developing \ncountries’ share in world exports of manufactured goods rose from 10% in\n 1980 to 22% in 1994. (From Third World to World Class – Emerging \nMarkets, P. Marber p94)<\/p>\n\n\n\n Higher\n growth rates (which mean higher profits under capitalism) were, for \nexample, expected to follow the Uruguay Round of G.A.T.T., as shown by a\n study published by the Organisation for Economic Co-Operation and \nDevelopment (O.E.C.D.) This predicted that world Gross National Product \n(G.N.P.) would rise $213 billion in 10 years as a result of the Uruguay \nRound of G.A.T.T. – an increase of 0.7%.(8) As Phillipe Legrain, special\n advisor to Mike Moore, director-general of the W.T.O. writes:<\/p>\n\n\n\n a\n new W.T.O. round could bring even bigger benefits. The Tinbergen \nInstitute estimates developing countries would gain $155 billion a year \nfrom further trade liberalisation – over three times the $43 billion in \naverage annual overseas aid.(22)<\/p>\n\n\n\n Yet\n critics of globalisation argue that the benefits of this increase in \nworld output disproportionately favoured the North. It is also pointed \nout that the profits generated by the growth of exports from the South \nwere often not sustainable. The work of the international agencies that \nhave been set up with an aim (or at least a purported aim) of spreading \nthe ‘benefits’ of growth to the South therefore need to be examined.<\/p>\n\n\n\n Author: DG<\/p>\n\n\n\n Next: The IMF, World Bank and structural adjustment<\/a> <\/p>\n\n\n\n1. What does ‘free trade’ mean?<\/a><\/h3>\n\n\n\n
2. The ‘benefits’ of free trade<\/a><\/h3>\n\n\n\n
3. Start of the post-war shift<\/a><\/h3>\n\n\n\n
4. G.A.T.T. and the liberalisation of trade<\/a><\/h3>\n\n\n\n
5. Trading Regions<\/a><\/h3>\n\n\n\n
6. The 1970s: Retreat to protectionism<\/a><\/h3>\n\n\n\n
7. W.T.O. from 1995<\/a><\/h3>\n\n\n\n
8. Agreement on -Trade-Related Investment Measures (T.R.I.M.s)<\/a><\/h3>\n\n\n\n
9. Trade Related Intellectual Property Rights (T.R.I.P.s)<\/a><\/h3>\n\n\n\n
10. Anti-Dumping<\/a><\/h3>\n\n\n\n
11. Transnational Corporations<\/a><\/h3>\n\n\n\n
12. Is it really so ‘free’?<\/a><\/h3>\n\n\n\n
\n\n\n\n
\n\n\n\n