Round and round
AROUND this time of year every year since 1990, the international negotiations — known as the "Uruguay Round" - of the General
Agreement on Tariffs and Trade (GATT) on the liberalisation of world trade are front page news. Time and time again, the media discuss the vexing question, "will the accords be signed or won't they?"!
International Viewpoint #250 November 1993 result of this theory is the specialisation of each country in the areas where it has a comparative advantage, or rather where it is "competitive".
Development of under-development
NICOLAS BENIES — Rouen, 14 October 1993
N a study released at the General Assembly of the International Monetary Fund (IMF) and the World Bank, held at the end of September and the beginning of October, the Organisation for Economic Cooperation and Development (OECD) claims that the signing of the accords will lead to a growth in world trade. This kind of study is highly respected in certain quarters. For example, the French Finance Minister Edmond Alphandéry didn't even feel the need to make any comments about it — greeting it, according to the French daily Le Monde, with a broad smile. At least, we can remark that this growth in world trade would primarily profit the big developed capitalist countries.
Last year, too, a similar catastropheforecasting study was produced by supposedly serious institutes infected by a liberal theory which obliges them to hide the truth about the world economy and promote free trade as the ultimate virtue.
Nevertheless, as we indicated last year, the accords were not signed and there was no catastrophe. The United States has come out of recession and will on its own rack up a 2.4% growth rate this year. Signed accords or not, the economic situation would have remained the same.
These studies are based on one simple idea: that is, by lowering tariffs and quotas and by developing common standards all countries will experience a growth in wealth.2 In other words, the common interest is equal to the sum of specific
The Ricardian theory of "comparative costs" illustrates this basic liberal notion. Ricardo himself took the examples of 19th century Portugal and England: England, a major industrial power, and Portugal, an exporter of primary goods, including port. According to Ricardo (the greatest "classical" economist), if Portugal wanted to build a textile industry it would have to spend great amounts. And it would have to close its borders in order to protect itself from English competition, which would destroy its nascent industry.
On the other hand, England cannot produce port, or can only produce a bad product. Thus, the two countries should exchange their respective merchandise for the mutual good: the English can drink port and the Portuguese can inexpensively clothe themselves. Both countries gain and world trade makes it possible for both countries to develop themselves. The
WILL
DIET
FOR
The reality of the world economy does not match this vision. It does not function following this rule, but rather that of the "combined and uneven development" described by the Russian revolutionary Leon Trotsky. In other words, all countries experience development but some develop more than others, and the gap that separates developed countries from the others does not cease to grow. To cite a famous title of a book by Andre Gunder Frank, it is the "development of under-development", in particular for producers of primary goods.
Currently, the biggest defenders of liberalism are the governments of Third World countries, particularly Mexico, Brazil and Argentina, recently joined with great enthusiasm by Eastern European leaders, Boris Yeltsin above all. They believe they can develop through world trade.?
But experience proves that this is impossible. A country that specialises in the production of primary goods is held back by the game of unequal exchange. A manufactured product is sold at a relatively higher price than a primary good - thus leading to a transfer of value from the Third World to the industrialised countries, just as there was a transfer of value from the countryside to the town, to industry.
Unequal exchange is aggravated by the overproduction that has characterised the market for primary goods. The price of cocoa went up slightly at the beginning of October, but as the proverb goes, "one swallow does not make a summer." Even the Organisation of Petroleum Exporting Countries (OPEC) is going through rough
1. See our article "GATT: a battle in the trade war", writ-
FOOD ten last year around the same time which examined the negotiations up until that point. Very little has changed since then; the background remains the recession and the crisis of European construction. International Viewpoint No 240. 7 December 1992.
2. In France, for example, the number of Japanese cars entering the country cannot surpass 2.5% of the total number of registered cars. Standards are a kind of disguised protectionism; a State need only create different standards in order to prevent foreign products from entering its territory.
3. "Les destins du tiers-monde", collection Circa, Nathan 1993. 33
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ECONOMY
GATTastrophe
IF GATT negotiations are concluded, in the year 2002 there would be an additiona
$213 billion in annual world trade. If the liberalisation of world trade is complete, the increase would be in the order of $450 billion! These are the conclusions drawn by a team composed of representatives of the Organisation for Economic Cooperation and
International Viewpoint #250 November 1993 times; the price of oil is very much on a downward swing on the so-called free market of Rotterdam and could go as low as ten dollars per barrel, while it cost $18 per barrel during the Gulf War in January 1991. During the last OPEC meeting, a policy of quotas was discussed and
Development (OECD) and the World Bank.
Kuwait was asked to lower its production.
An extraordinary prophecy? No! This is the product of a grinding bit of labour that, while
The African continent finds itself requiring gifted minds, tries to make our world fit into a econometric model. It took four almost pushed off the economic map. The years of work and the use of 77,000 equations. A prodigious bit of work, yes, but prodidemand for primary goods is on a downturn. For Africa, this means a lowering of
The OECD and the World Bank dole out fortunes to "experts" in the area of forecasts.
export earnings, leading to the deepening
Having been wrong in their short-term analyses, the hope is that they might do better in of poverty for the majority.
relation to the medium and long term. In any event, this kind of enterprise reeks of a
The traditional example bandied about dogmatic defense of free trade and the virtue of the market. The report's conclusions before Third World countries is that of are already laid out in the contract signed by the "researchers" before their work even
South Korea. But as Thomas Coutrot and
Michel Husson have demonstrated, the
One can imagine what could have been done in a "Third World" country with the industrialisation of this country was due money thrown around for these studies. But this is not the end of the story; there are first and foremost to the massive Amerithe figures, and then there are the conclusions. Our researcher friends have clearly can aid it received to outstrip North Korea, indicated that the large part of these gains will go to OECD countries while the poorest and also to protectionism and the role countries, especially those of sub-Saharan Africa, will have to suffer an annual loss of played by the State which was the main force for capital accumulation and in the
As International Viewpoint readers know all too well, a good critique of the world capitaspreading of capitalist relations of produclist market, of its unequal exchange, of its hierarchy and dependence, leads to the tion. This is the inverse, from start to finisame conclusions, without a need for 77,000 equations.
sh, of what liberal theory preaches.
This is why more and more voices are being raised against the real reasons for the confrontation between the United States, Europe and Japan over GATT and free trade.
A reversal of roles
Each bloc hopes to broaden its commercial domination, in the process strangling the most dependent economies. So we can have a good laugh, and relegate this new
Liberal theory is losing ground in study to the anthology of tributes to the glory of economic liberalism. - Claude developed capitalist countries, which are looking for a new ideology adapted to the conditions of recession. State intervention is once again in vogue, for example.4 This turn has not yet been taken in other countries. Thus we have a reversal of roles:
developed countries are the most reluctant to open their borders and want to protect their industry and agriculture; Third World and Eastern European countries are the most enthusiastic supporters of liberalisation. The ground is prepared for a round of painful disappointment, all the more so since nationalism and chauvinism are waiting in the wings the world over.
This is actually a false debate, for the simple reason that these agreements don't have the objective of liberalising world trade, but of establishing new rules. The best proof of this is the issues that are being negotiated: agriculture, services
(with a new dimension, cultural services such as television programming), industry, and the transformation of GATT into an organisation that really plays the role of settling disputes between its 108 member
States.
This last point is also an area of conflict. Many developed countries do not want an additional organisation. True enough, it is difficult to see exactly what role it would play, insofar as even the already existing organisations cannot manage to define common policy. The
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begins.
$7 billion. inability of the Group of Seven most industrialised countries (G7) - USA, Japan, Germany, France, Great Britain, Italy, Canada — to propose a common revival, necessary from the point of view of the interests of the capitalist mode of production, does not bode well for other negotiation fora.
In the best of cases, the "Uruguay Round" will be put off for prolonged for another year; in the worst, it will simply be buried. The little games of the major powers - relayed by competing media — consist of finding a scapegoat for the eventual failure. The French government — due to its interminable hesitation and the internal struggles of the French rightwing - seems like a good candidate. This explains the declarations of French Foreign Minister Alain Juppé at the beginning of October. He let it be understood that the French government would soften its opposition to the "Blair House" compromise on agriculture signed between the European Economic Community (EEC) and the United States.
This compromise is revealing with respect to the approach of the United States. It signs bilateral accords with its most direct competitors, without any discussion with the 108 member countries of GATT.
These partial agreements are multiplying in number, for example in the field of textiles. The "multifibre agreement" — signed between the USA and the EEC to create nothing less than a free trade zone between them — is clearly directed against Southeast Asian producers. This agreement is now the object of a flurry of negotiations between the USA and their former Southeast Asian partners.
Logically, however, a "round" presupposes that all countries come to an agreement together — and do not sign separate agreements. But the USA is pursuing another line of march; it wants to increase its market share in agriculture and cultural services. Cable News Network (CNN) head Ted Turner has already declared his intention to conquer the "Old World",
4. In the USA, the so-called "theory of endogenous growth" has rehabilitated the idea of State intervention. On this basis, Clinton has committed himself to undertake a radical reform of the healthcare system, to provide minimum health services for every American.
5. This margin has gone from a range of 2.25% above or below (that is, a total margin of 4.5%) to a range of 15% above or below (that is, a total margin of 30%).
6. The OFCE feels that "the secret for growth has been lost" due to the inability of the major powers to coordinate their policies. Observations et Diagnostics Economiques, July 1993.
International Viewpoint #250 November 1993
Europe. This has provoked a broad campaign from the French cultural world demanding that culture be excluded from the GATT agreement — either with no trade-off in other sectors or with negotiations on a point by point basis.
The US administration played its cards well and divided Germany and France without too much effort. The Franco-German couple is on the verge of a divorce.
Europe has been in an open crisis since August 2. On that date, the European Monetary System (EMS) was transformed, losing all its usefulness through the broadening of the margin of fluctuation between European currencies. European currencies can now fluctuate like the dollar and the yen. The European exception in the monetary sphere is finished. It also signals the end of the Maastricht Accord on European Union and the common cur-
The crisis continued on September 20. Officially, the question was whether or not the governments of the 12 countries of the EEC would ratify the Blair House compromise. The French Prime Minister Edouard Balladur had made grandiose pronouncements beforehand to the effect that he would use his right to veto — another obstacle to European unity — to protect his farmers, the government's new social base and a noisy lobby.
Unofficially, though, the French government was testing the Germans to see how far they were prepared to go along the path of European unity with France. The debate showed that the German government reasons in terms of defending its own interests, and does not take into account the French stance. The Franco-German basis of European construction has breathed its last.
But the debate is not over. The ruling class now has to determine its strategy and decide if it still needs Europe what kind - to replace the United States as the world leader. Already the European Currency Unit (ECU) has disappeared even before it got a chance to live as anything more than an account book currency. This debate is going on in Germany, France and the other countries of Europe.
This crisis explains the absence of the EEC from the international negotiations. The EEC no longer speaks with one voice.
A failure foretold
The new deadline for the Uruguay Round is set for 15 December. Clearly, even if only for technical reasons, it is impossible to meet this deadline. But as usual the technical reasons are not the most important.
There are two explanations — one economic, the other political - for the probable failure of these negotiations. The current recession, the worst since the beginning of the crisis in 1974 for all the Western countries and Japan, has created a situation in which the global motto is "everyone for themselves".
Protectionist trends have returned with a vengeance. In France, this is personified by the rightwing deputy Philippe Séguin who has called for a mix of protectionist measures, a fiscal policy of revival, a monetary policy of lowered short-term interest rates and the depreciation of the French franc to win foreign market shares. This is a policy which favours French capitalists but which would lead to the disappearance of European construction, and pose the problem of France's participation in the international negotiations.
This debate on what economic policy to adopt in a time of recession is taking place within the ranks of all the ruling classes in the developed capitalist coun tries. They have yet to find an answer. Liberalism has failed; and keynesianism (the revival of economic growth through state expenditure) has been rendered ineffective by globalisation and the interdependence of economies.
The solution could reside, as proposed by the economists of the French Observatory of Economic Conjuctures (OFCE — an economic thinktank linked of the French State), in a series of "Marshall Plans" for the countries of the Third World and Eastern Europe. In this scheme, the G7 countries would transfer wealth to these countries, leading to an increase in global demand, a way-out of the crisis, and the revival of durable growth.
This proposal comes up against two obstacles. First, the amounts put forward would have nothing to do with the first Marshall Plan of 1948, the American donations for European construction. Second, the common enemy of all the capitalist countries, the USSR, has vanished from the scene; this incentive for the defense of common capitalist interests no longer exists. As a result, the dominant feature of the period is the various differences between capitalists, the exacerbation of international competition.
The struggle for a new division of the world, based on the relative decline of American imperialism, is now underway. Thanks to unification and the building of its zone of influence in Eastern Europe, Germany, like Japan, is becoming one of the big political and economic powers and wants to take its place as a world leader. For this, it no longer needs France's support; like Japan, it is a candidate for the UN Security Council. If this bid is successful, it would signal the end of the political period opened up at the end of the Second World War; the vanquished would have become major political powers.
The failure of the Uruguay Round, like the G7's failure to define a common policy of economic revival, demonstrates the deep crisis of imperialism. A new dominant economic model has yet to see the light of day.*
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