Bill Rosenberg: WTO (Hong Kong) Wrap Up - Part Two

WTO (Hong Kong) Wrap Up: Part Two

If you believe that the WTO is mainly about agriculture, you’re in good company, but wrong. For New Zealand and a relative handful of other big agricultural exporters, access to rich countries’ agricultural markets is important. But only about 15% of our employment is generated by agriculture.

For our struggling manufacturers and the 70% of our economy which provides the services essential to a developed country, there’s a lot more to the WTO’s rules.

That 85% of our economy has much in common with many developing countries which are struggling to reduce their reliance on agriculture. For them, agricultural market access is at best a stopgap. For many it is a threat to the security of their food supply, and for most a diversion from their real economic development needs.

Even some agricultural exporters such as Pacific nations are likely to suffer, because they will lose their preferential access to the European market.

Impoverished countries which are net food importers will suffer if, as New Zealand is counting on, food prices rise in the short run.

For many third world farmers, opening their own markets to the rest of the world leads to falling incomes. It causes enormous social upheaval, malnutrition and added poverty as peasant farmers are dislodged from their land. It is far more than a commercial issue.

For example, the previous world trade round which began taking effect in 1995 turned the Philippines from net food exporter to importer, with distressing effects on rural communities, including 440,000 jobs lost between 1994 and 2001.

Similarly, Indian commentator Afsar Jafri states: “India is facing a deep agrarian crisis, where more than half its farmers are indebted and more than 25,000 have committed suicide since 1995.” He considers that the crisis is due to a move to corporate agribusiness and export-oriented agriculture, plus removal of import barriers. These have led to a steep fall in prices at the farm gate.

This is due only partly, as often pictured, to markets being swamped by subsidised produce from the industrialised world. It is also due to cutthroat competition in agricultural commodities.

Latest predictions are that agricultural market opening will bring global benefits measured in only cents per person per day, and then much greater benefits to consumers in the industrialised world than peasant farmers in the developing world. At best, it will have negligible effects in rescuing people from poverty, but for millions will add to their misery.

Moving to large scale export production (like New Zealand) is not a satisfactory answer in these countries either. While it may reduce costs, it severely disrupts rural communities, further depresses prices, and can employ only a minority of the workforce. Half of the Philippine’s workforce is employed in agriculture – but only about 7% of New Zealand’s (and a similar number again in related processing and services). Export-oriented agriculture only increases the need for other employment to be created in order to provide jobs and raise incomes.

So developing countries want to create industrial capacity and services which are essential for development. Valued-added, higher productivity industries where there are economies of scale provide the usual path to higher incomes.

The now industrialised countries grew their industrial and infrastructural strength over the last two centuries under conditions of tariff and quota protection, government assistance in numerous forms, and many other advantages.

Yet the price being demanded by the industrialised countries such as the EU and US for even small increases in agricultural market access will jeopardise industrialisation and infrastructural programmes developing countries are counting on to lift their living standards.

The big economic powers are demanding large reductions in tariffs on imported non-agricultural goods. For example, many of South Africa’s tariffs would have to be halved under the proposals being pushed by the EU and US in the WTO. Large numbers of workers would lose their jobs in a country already experiencing unemployment levels of around 40%. Their industrialisation programme would be hamstrung.

Similar rules from the WTO and other free trade agreements have New Zealand manufacturers struggling. They rule out even small scale government measures such as giving preference to local producers in government purchasing, and country of origin labelling.

The economic powers also want their large corporations to be allowed to take ownership of services in all countries, and to restrict a country’s right to regulate them. This includes many public services such as post, broadcasting, transport, energy and education.

Developing countries baulked at increased commercialisation and overseas ownership of their infrastructure and public services, fearing it would threaten local suppliers and cramp their ability to regulate and to reverse mistaken privatisations.

As a result, services were a major issue at the Hong Kong WTO Ministerial conference. Despite their almost universal opposition, developing countries were forced to accept a major acceleration of services negotiations.

The arm twisting, buying and threatening of developing countries in the WTO has been well documented by non-governmental observers. As one New Zealand negotiator put it from his own experience, after a particularly brutal tangle with the United States some years ago, “this is just a game about power finally”. It is an atmosphere in which developing countries have been forced to accept what the power brokers tell them is good for them. It rarely is.

There are alternatives to this brutal and corrupted system – an international law-making body without the safeguards of democratic process. The WTO did not exist 10 years ago, yet the world was not about to descend into everlasting darkness.

Prominent economists Dani Rodrik of Harvard University and Robert Wade of the London School of Economics have recently written that failure of the current WTO negotiating round would not be a catastrophe.

World growth – and particularly the growth of most developing countries – has not been enhanced by the WTO’s existence. The majority of developing countries continue to suffer from crises and stagnating economies. The least developed countries have fallen further behind.

Those that have done best – India, China and the “tigers” of East Asia – did so by breaking the rules now being forced upon them. They grew rapidly under policies variously including state ownership and intervention, government assistance to industry, restrictions on imports and regulated foreign investment. When accompanied by those policies, trade provided a potent fuel to their growth.

It is now clear that the developing world is becoming increasingly strategic in its actions in the WTO. Hong Kong brought many indications of this, the most symbolic being a meeting of all the developing country groupings to form a G110.

They will not tolerate imposed trade rules and WTO processes for much longer. The alternatives will involve trade, but not free trade. In the likely event that they cannot be accommodated within the WTO, it will be left paralysed or disbanded.

New Zealand’s natural resource based exports, while still hugely important, cannot provide well paid jobs for 85% of our labour force. In this, we are more like the developing world than the industrialised countries. New Zealand needs to wake up and take advantage of the changes in the balance of power in the world economy.

Bill Rosenberg was reporting from the Hong Kong ministerial meeting which he attended as an observer. Bill Rosenberg lives in Christchurch, New Zealand and regularly contributes articles to CAFCA (Campaign Against Foreign Control Of Aotearoa)

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