Tuesday, July 25, 2006

The problems of "free" trade.... 2

Well, I was living in hope but...

Probably the best, most a propos comment in the Herald article comes not from Lamy, or any of the G8 members on the G6, but from the Indian trade minister Kamal Nath, when asked how long the suspension could last, said:
"Anywhere from months to years."

"The round is not dead. I would say that it is definitely between intensive care and the crematorium," he said.

OK, so what are the problems -

1. US will not move on agricultural subsidies until EU moves on its ag. subsidies and India reduces protections on its industrial sector.

2. EU wants US to cut protections on a wide range of goods, including ag. products.

3. Both US and EU want less restricted access to Brazil and India markets for technology products.

4. The US accused the other participants of "being more interested in creating loopholes for themselves than opening their own markets."

I want to put to you an alternative. It is in part the line of thinking that I followed in my previous post. It is in part this editorial as well, which will give perspective to the issue.

First to pick up here -
When it comes to agricultural products in particular, there are very large manufacturers who are capable of producing a superior product far cheaper than those originating from Europe, or the US.
The consequences of that producer's skill are;

> Being able to land better product than the local, in Europe cheaper than the local industry can make it.
> Being able to compete with the same product on all international markets at governing commodity prices.
> Most importantly, there is no government assistance or subsidy on the NZ product. Here in NZ, I pay the same price for butter (plus mark-ups) as the European bound product leaves port.

What this whole raruraru does is give a picture of the kind of machinations that cloud the diplomacy of international trade, and especially the likes of the Doha round.

RadioNZ this morning had Phil Goff on interview. As usual, he was forthright and blunt.

New Zealand Trade Minister Phil Goff says it may take months to restart trade talks after a last ditch effort in Geneva to agree on cutting farm subsidies ended in collapse.

Mr Goff told Morning Report that Europe needed to give more in terms of market access, and the United States had to give something more on cutting domestic subsidies.

He said India and Brazil had to show some flexibility in terms of cutting tariffs on industrial goods.

But he said; no one made a move to put a compromise on the table - so the talks are unlikely to conclude this year

Not quoted there, he also pointed out that there was another, in my mind far more pertinant factor, behind the intransigence. That, you will have to read on for...

Goff mentions the Indian and Brazilian inflexibility as an additive inertia to the mix.

An Indian perspective from this editorial...
The last-ditch efforts to save the Doha Round of negotiations collapsed when the US refused to reduce its farm subsidies even as it asked the developing countries to open their markets to its heavily subsidised goods.

"We can't accept the opening of our markets for subsidised agricultural products," said Kamal Nath. He said the developed countries should break the deadlock and blamed the US for refusing to make cuts in farm subsidies.

Both the EU and the US spend over $440 billion annually as subsidies for their farmers, which makes it financially unviable for developing countries to export goods to their markets. While the EU softened its stand on subsidies, the US decided not to slash its domestic support.

The emphasis in there reflects exactly the experience of the Aussies in their "Free Trade Agreement" - the Iraq reward - which gives US immediate access to Australian markets, but then phases Australian access to the US market over a period of some ten years without, in some cases, any guarantee of truly "free" access.

The following paragraph shows also the real root of the problem. Every country has its own interests at heart. Who can blame them?

The EU raruraru over NZ dairy product access is in the same vein. Anything that the power nations agree to is subject to "their rules", irrespective of accepted meanings to the terminology involved.

But this is where I want to return to the African editorial I referred to earlier -
What Africa needs is not aid but fair trade. And the rich West has made it virtually impossible for Africa to receive a fair recompense for her vast resources. Nothing illustrates this monstrosity more than the abrupt collapse on July 1 of the ministerial conference of the Doha round of talks on global free trade in Geneva, just in time for the G8 summit in St. Petersburg.


Against the terrorist backdrop in which the birth of Doha was midwifed by the United States in November 2001 as an immediate aftermath of the terrorist attacks on New York and Washington DC, it is in the interest of all that the G8 should strive for economic equity, which to us constitutes the core of global peace, prosperity and stability. Anything short of this is tokenism which, in the final analysis, is only a measure to postpone the evil day.

I think it unfair to lay the entire blame, as this editorial does, at the feet of the Americans. It is an unreasonable conclusion drawn by the writer, given the content of the six or seven paragraphs I have excised from that beginning and the conclusion.
As usual, the latest round of Doha talks foundered on the refusal of the United States and Europe to agree to substantial reductions in farm subsidies and tariffs on industrial goods. This year's Doha talks merely followed the pattern of earlier ones in 2003 and last year when poor countries scuttled both ministerial conferences, simply because they offered, for the first time, comprehensive plans for freeing farm trade. The argument of the poor nations as then and now is that the West is demanding too much liberalisation from them while offering too little itself by way of retaining the farm subsidies it gives to its farmers.


Since the founding of the group of rich nations [G8] in 1975, it has never managed to get an extra cent of investment flowing South, neither has it been able to persuade the protectionist lobbies in The North to dismantle barriers to open farm trade. This year's summit has proved to be no different from previous ones. No EU-U.S.-Japan consensus has emerged to cut down barriers to agricultural trade and increase north-south investment.

With the attitude of the G8, it is easy to see why Doha has failed in nearly five years to get to the root of Africa's economic woes, namely, the lack of free trade on the farm produce which forms the economic mainstay of a prepoderance of its countries.

On the long range, this is a short-sighted policy capable of undermining the rich nations themselves. The consequence of resource-rich, but impoverished Africa is the deluge of economic migrants and political refugees from the continent now assailing the United States of America and Europe. The effect of globalisation is to turn the world into a kennel in which there can be no peace where there are only four bones to six dogs -- especially when one dog alone has access to two of the bones.

It is unfair, given that "the birth of Doha was midwifed by the United States in November 2001 as an immediate aftermath of the terrorist attacks on New York and Washington DC, it is in the interest of all that the G8 should strive for economic equity, which to us constitutes the core of global peace, prosperity and stability."

That piece of natal care was, largely in a moment of self-interest and fear rather than generosity and friendship, a large slice of hope for "the poor world". I am going to retain that in place of "Third World". It is more honest. It is more accurate.

The rationale behind the process was clear and concise.

If we are to counter terrorism, we the rich nations have to give cognisance to the rights of poor nations to trade and to exist in a viable economic climate. To achieve that, we the rich nations must provide opportunities for trade.

The Poor World was shown the plate. The plate had on it a goodly slice of the cake.

What they see now is that the other side of the piece of cake had been scooped out and eaten by the bigger kids. The remains have gone stale.

Now, where can it all have gone so wrong?

It is very simple.

Every one of the G6 nations, every one of the G8 nations, all of the rich nations are democracy.

That one attribute leads to one very important consequence. It is the point that Goff made on the radio this morning.


What we are seeing, from every one of the G6 and the G8, is fear of the ballot box.

It truly is that simple.

1 comment:

T. F. Stern said...

"Free" and "Trade", an oxymoron if ever there was one. You want something screwed up let government(s) get involved.