The world trading system is corrupt and unjust.
Old Sir John would be rolling in his grave. John Alexander Macdonald was Canada’s first prime minister, a bibulous, quick-witted Scots-born lawyer who is generally regarded as the cornerstone of Canadian Confederation.
Macdonald was a staunch Conservative but he was no free trader. The pitfalls of reciprocity, as free trade was then often called, were not lost on the leader of a youthful nation sharing a long border with the emerging colossus to the south. When Macdonald set out his ‘National Policy’ in 1878 he did so with the understanding that economic and political independence are interwoven. A threat to one is a threat to the other. For Canada to develop an independent economy he called for tariff barriers (customs duties) to restrict the northward flow of cheap, manufactured exports from the United States and the haemorrhage of labour south.
Macdonald’s National Policy dominated Canadian political life for the next 50 years and was not completely undone until 1989 – when, ironically, his Tory successor, Brian Mulroney, inked a Canada/US Free Trade Agreement with then US President Ronald Reagan. There was furious opposition to the deal by trade unionists, economic nationalists, environmentalists and social activists in both countries. But the tantalizing promise of progress and prosperity carried the day; Sir John A’s vision of an independent Canadian state was unceremoniously shunted aside.
Five years later, when Mexico joined its northern neighbours in the North American Free Trade Agreement, the rumble of opposition was growing louder. On New Year’s Day, 1994, the day NAFTA was launched, the Zapatista Army for National Liberation in Mexico’s southern state of Chiapas denounced the tripartite trade deal as ‘a death certificate for the indigenous peoples of Mexico’. In response they announced a campaign for self-determination and economic autonomy – a drive which continues today despite military harassment and relentless repression by the Mexican Government (see ‘
Industrial countries also spend a billion dollars a day on agricultural subsidies. The EU with its Common Agricultural Policy subsidizes sugar beet exports by 300 per cent. The US pays its 25,000 industrial-style cotton farmers a 100-per-cent subsidy which translates into a 40-per-cent share of the world cotton market. Meanwhile, Mali’s three million small-scale cotton farmers barely scrape by. In 2002 the West African country received $37 million in aid but lost $43 million as a result of lower export earnings due to US subsidies.^3^ In Burkino Faso, Chad, Mali and Benin, farmers can produce a kilo of cotton at half the cost of subsidized growers in Texas but they recoup only 60 per cent of their costs on the international market. Countries like the US and Britain also spread the myth that free trade was the recipe for their own prosperity. It’s a case of ‘do what we say, not what we do’. They conveniently forget that their economic success was built by protecting domestic industry. Wiping out Western trade barriers, and increasing ‘market access’ for Southern producers, would be an enormous step in the right direction. But it would not solve the problem of an unjust global trading system. Even if subsidies vanished tomorrow the dynamic of cut-throat competition plays into the hands of those with most power and greatest access to resources. This is what researcher Gerald Greenfield calls the ‘social violence of the market – the constantly escalating pressure on farmers and workers to produce more for less.’^4^ This is especially true in agriculture where small players are crushed by the implacable logic of ‘efficiency’. In Brazil, the amount of land devoted to large-scale soy production has jumped from 200,000 hectares to 12 million over the past 30 years. In the US and Canada, corporate agribusiness is expanding aggressively, eviscerating rural communities and poisoning the land with agrochemicals. In the United States, 500 small farmers go bankrupt every week.
Democracy and the rule of law are being challenged by the rule of the market
Corporate control of the food sector is a huge barrier to reforming the rules of global trade. Just two companies, Philip Morris (Altria) and Nestlé, control more than half the world market in roasted and instant coffee. Four companies, Cargill, Tyson, ConAgra and Farmland National, control 81 per cent of the global beef market. What sort of ‘competition’ is embodied in a free trade agreement that pits massive integrated corporations like Cargill and Nestlé against a Mexican _campesino_ with a few hectares of land, a mule and a sharp hoe?
A decade after the signing of NAFTA the answer is clear. The economies of Mexico, Canada and the US are more intertwined than ever. Yet corporate and government élites are pushing for ‘deeper integration’.
In Mexico, a decade of free trade has seen poverty increase, along with rural unemployment and overall inequality. Fifteen years ago Mexico was self-sufficient in maize. Now it’s the world’s third largest importer (see ‘
The same mechanism is included in the Free Trade Area of the Americas (FTAA) which may become law late next year. The continent-wide agreement is part of a broad process of trade liberalization being pursued by the US, its Western allies and those multilateral institutions under the sway of the US – the WTO, the World Bank and the IMF. This framework is now widely referred to as ‘neoliberalism’ or the Washington Consensus. The formula is familiar: privatization, unregulated foreign investment, unrestricted movement of capital and a reduced role for the state. The FTAA is an essential part of the move to construct an integrated global economy. But it is by no means a done deal. There is massive popular resistance across Latin America and growing opposition from governments in Brazil, Venezuela and Argentina. As a result, the US and other industrial nations (the EU, Canada and Australia) are looking to sew up bilateral and regional free trade agreements. US Trade Representative Robert Zoellick calls this alternative strategy ‘competitive liberalization’ – pitting one nation against another in an attempt to lock into place trade rules that are more stringent than either the FTAA or the WTO. Nor are the Americans shy about using bilateral agreements to bolster foreign policy goals – another reason independent-minded Southern nations are wary. Zoellick has said poor countries wanting access to US markets ‘must pass muster on more than trade and economic criteria... at a minimum these countries must co-operate with the US on its foreign policy and national security goals.’^6^ Like the FTAA these pacts include strict intellectual property rules that limit access to knowledge and technology, and benefit Western transnationals which control the bulk of patents, research and development. For example, under the proposed Central America free trade deal the price of basic medicines would skyrocket. It is estimated that Costa Rica’s social security budget would jump by $70 million. Recent bilateral agreements with Chile and Singapore go much farther than the WTO or NAFTA in restricting the use of capital controls – one of the few tools governments have to fend off destabilizing flows of speculative investment. The global economy is becoming more integrated under rules written by rich nations, mostly benefiting their own big corporations. Selling the gospel of free trade is a fundamental part of that process. But trade can never be an end in itself. The international system must be changed to benefit developing countries – and especially the poorest within those nations. Market access is critical but it is not enough. In a world of lopsided and unequal power there must be an implicit understanding that no country has the right to impose its ideology on others. Trade needs to allow for diversity – countries have the right to protect their own cultural and social institutions as well as their development priorities. With free trade that can’t happen. It’s time to change the rules.
- _For the Common Good_, Herman Daly and John Cobb, Beacon Press, Boston, MA, 1989.
- _The Least Developed Countries Report 2004_, UNCTAD, UN New York and Geneva, 2004.
- ‘Malian cotton farmers welcome WTO ruling on cotton subsidies’,
- ‘Free market freefall’ by Gerald Greenfield, _Focus on the Global South_,
- _Oxfam Connections_, ‘Fair Trade vs Free Trade’, September 2002,
- ‘Zoellick says FTA candidates must support US foreign policy’, _Inside US Trade_, 8 May 2003. Quoted in _Global Economic Justice Report_, Vol 2, No 4, 2003.