By Peter Boyle
December 15 is the deadline set by the United States Congress for the Clinton administration to clinch a deal with the European Community on the prolonged Uruguay round of the General Agreement on Tariffs and Trade (GATT) talks. As that day draws nearer, the trade war in agricultural products is being stepped up. The latest shot by the US is to sell 100,000 tonnes of subsidised malted barley to China, Australia's biggest market for malted barley. This makes nonsense of Bill Clinton's September pledge that the US Export Enhancement Program would not be used to undermine Australian interests. That pledge followed an announcement that this year the US will dump 32 million tonnes of subsidised wheat on world markets.
These are only the opening shots in a trade war that will really flare in earnest should the GATT talks fail. But even a successful conclusion of the Uruguay round would not end the trade war. It would only negotiate limits to the subsidies on agricultural products.
The present draft agreement, the Blair House deal, would only reduce the volume of subsidised US wheat exports by 27% and subsidised EC grain exports by 37% by 1999, according to Australian government estimates.
Thus the Keating government's claim that Australian farmers' hopes lie with a successful conclusion of GATT is doubtful at best. The war in subsidised grain would still go on, as would the less publicised but equally heated war in manufactured goods between the US and Japan.
Just as the unsubsidised agricultural exporters — like Australia, Argentina and other members of the Cairns negotiating group, who do not have the economic power to join the war in subsidised grain — will be caught in the cross-fire, the manufacturing exporting economies of the so-called Newly Industrialising Countries (NICs) of Asia will suffer.
The establishment media in Australia suggest that the alternative to a successful new GATT deal will be for countries like Australia to join one of the major trading blocs. But it is now clear that trading blocs are being formed, regardless of the outcome of the Uruguay round.
Apart from the EC, the actual make-up of these blocs is still uncertain. In the Asia-Pacific region, the Keating government is in favour of developing the (so far) loose Asia Pacific Economic Cooperation (APEC) forum. Indeed, when APEC holds a summit meeting in Seattle on November 19-20, it will be presented with a proposal from its "eminent persons group" to become an actual trading bloc.
Officially, at present the Australian government supports APEC only as a non-preferential economic forum, i.e. one that would seek to liberalise trade with all countries and regions. But what are the real agendas in APEC? To find out, we have to examine the controversy in Asia about the role of APEC.
APEC vs EAEC
Noel Villalba has been monitoring the growing trade war and its impact on Asia from the Hong Kong-based Documentation for Action Groups in Asia (DAGA). He told Green Left Weekly that a starting point has to be an understanding that the drive towards the formation of new trading blocs is a response to two developments:
"First, the growing protectionism in certain countries, particularly the US. Secondly, it is a response to the desire of transnational corporations to achieve competitiveness by taking greater advantage of resources in the region. This is taking place against the broader framework of global economic restructuring.
"APEC was proposed by the Australian government as a way of bringing together the economies of the broader Asia-Pacific region. But it included countries like the US, which the Malaysian government is not very happy with. It thinks that it would be better if there was a caucus of East Asian economies, grouping together countries that have a special demand for trade, so it proposed the East Asian Economic Caucus."
In the context of an escalation in the global trade war, APEC can be seen as an attempt by Australia to lock the Asian economies into a US-dominated trading bloc. This is what Malaysian Prime Minister Mohamad Mahathir says he is wary of.
For the time being, says Villalba, "the EAEC, which would be very preferential to East Asian economies, has not been very well received by many Asian countries because it could threaten the access of Japan and Korea to the US market. This is very important to these countries, but not as important to Malaysia and some other Asian countries. The various responses are determined by each Asian country's degree of dependence on access to European or US markets."
AFTA
"In the end the Association of South-East Asian Nations (ASEAN) governments opted for a sort of middle road, which is ASEAN Free Trade Area (AFTA). Under AFTA, the South-East Asian countries come together to define preferential trade terms. They have started the process this year. As a start they have identified 15 products on which tariffs will be relaxed only for AFTA member countries.
"It is difficult to assess how far AFTA will advance", says Villalba. "To me it looks very much like a symbolic step. Hard economic realities may influence a change in the AFTA concept in the near future."
An indirect hint at the secret APEC agenda also came through in recent comments by Singapore Prime Minister Goh Chok Tong. He encouraged Australia to pursue a "robust role" for APEC, but he also warned that if the US sought to use the North American Free Trade Agreement (NAFTA) to exclude other nations from its markets, then it was likely that the EAEC would "spring into life very quickly".
Goh said he hoped APEC would provide the mechanism to extend NAFTA across the Pacific to link up with the 11 Asian nations plus Australia and Canada (Australian Business Asia, October 20).
As a major port for global trade, Singapore's interests may lie in achieving as liberal a global trading regime as possible, but others in South-East Asia have a different perspective. Villalba says that "the feeling that new kinds of colonialism are being promoted in the current international trade negotiations is still very strong in the ASEAN countries.
"Some hope that by consolidating a bloc of ASEAN economies they will be able to have shared development and to be in a stronger bargaining position with other regions.
"But ... Indonesia is wavering because it is more reliant on the US than other countries in South-East Asia. I don't know if there have been any threats conveyed to Indonesia that they might lose certain quotas they have with the US if they support the EAEC or AFTA, but the fact is they have back-pedalled on AFTA."
Last month, Ahmad Ruslan, a representative of Indonesia's fledgling independent worker organisations, told Green Left Weekly that the Clinton administration's sudden discovery of human rights violations in Indonesia had much to do with the trade negotiations.
Until then, the US had been happy to turn a blind eye to the Suharto regime's brutality. It abetted the massacre of more than a million workers, peasants and students in 1965 and didn't object to the invasion of East Timor in 1975.
AFTA probably has a limited future, in Villalba's opinion. If APEC fails, as Singapore's Goh says, EAEC may come to the fore. "There is no way the ASEAN countries can form a real economic bloc", says Villalba. "To do so they would have to redirect a lot of their trade to within the region, but they cannot do so because they produce basically the same products. Their manufactures have to be sold in affluent consumer markets, which the South-East Asian countries have not yet developed."
The economic arguments in favour of the emerging trading alignments are starkly presented by trade statistics. Intra-ASEAN trade accounts for only about 15% of the region's total trade. Intra-NAFTA trade accounts for 23% of that region's trade. By comparison, intra-EC trade accounts for 66% of that region's total trade. In a serious trade war the US, which dominates NAFTA, needs APEC.
But these broad equations hide the nightmare scenario unfolding for most Asians (and most countries in the Third World — Africa, which exports 95% to outside that continent, is in even bigger trouble) as global capitalist competition forces greater market deregulation.
The forced lowering of protection for Asia's agricultural sectors will have a disastrous effect. Most major Asian cities are already straining from a massive population drift to the city. It shows up in the form of mass unemployment, pollution and sprawling shanty towns, as more and more peasants find it impossible to eke out a living on the land and so try their luck in the cities.
Environmental costs
East Asia's rapid growth has had serious environmental costs, a World Bank study released on October 15 was forced to concede. The study found that:
- The environmental costs of air and water pollution already exceed US$1 billion a year in Jakarta, US$2 billion in Bangkok and similar amounts in other large East Asian cities. Environmental pressures will intensify with increasing urbanisation.
- Five of the seven most air-polluted cities in the world are in Asia. These are Calcutta, Jakarta, New Delhi, Beijing and Shenyang.
- Limited availability of water constrains development in northern China, and surface and ground water quality is declining in many areas, including Jakarta, Bangkok and China's Jiangsu province.
- Toxic wastes dumped into rivers have contaminated important fisheries in China, Indochina and Thailand.
- Forests and marginal lands are being badly degraded by unchecked conversion to agricultural use, commercial logging and over-demand for firewood and fodder. In the 1980s, East Asia had the highest rate of tropical deforestation in the world (1.4% per year).
- If present trends continue, East Asia will account for a greater increase in the quantity of carbon dioxide and sulphur dioxide emissions in the 1990s than all the other regions of the world combined.
These environmental problems could derail the region's growth "miracle", admitted World Bank East Asian vice-president Gautam Kaji, but he still warned the region's governments not to copy "idealistic and unrealistic" environmental policies emerging in the developed countries!
Given these horrendous figures, isn't there a strong resistance to market deregulation in Asia? "The voices of the trade unions, peasants and other people's organisations in Asia have not been heard in the GATT negotiations, or in any of the other trade talks", Villalba regrets.
"Most don't even have the freedom to state their opinion. Many Asians share the sentiment of European governments in terms of the right to protect their agricultural sectors. In Korea, Taiwan and Japan the farmers have said that there must be some level of protection, but even they have very little bargaining power."
Australian business
The Australian government isn't fighting for the interests of Australian farmers — except for the biggest and increasingly corporate farms. More Australian farmers are doomed to be driven off the land — though the social consequences of this for Australia don't come near what will happen in Asia.
Keating's APEC policy aims at helping Australia's biggest corporations to deepen their penetration of Asian markets. Since Labor came to power, Australian investment in Asia has grown rapidly, although from a small base. Over the last 10 years, Australian investments abroad have risen from an insignificant percentage to 24% of gross domestic product.
Australia remains a medium imperial power with a traditional base in the South Pacific, though it has aspirations in Asia. Australian exports have a 50% market share in Papua New Guinea, a 30% share in the rest of the South Pacific islands and a 20% share in New Zealand. But it still has only about a 3% (3.7% in north Asia and 2.7% in ASEAN) share of Asia's imports — even though Asia is the destination for 60% of Australia's total exports.
By itself, Australia does not have the economic, political or military weight to dominate an Asian trade bloc — hence Canberra's policy has been to carry out its push into Asia in partnership with the US.
This partnership is grounded in long-term military collaboration under the auspices of the ANZUS treaty. It includes the stationing of important US spy and communications bases in Australia, intelligence-sharing, joint military training and joint interventions abroad (Korea, Vietnam, the Middle East and Somalia, to name a few).
Australia is used by many transnational corporations as a springboard to Asia. These include General Motors, Ford, IBM, Kodak, Du Pont, BP, Nestle, Unilever and, recently, Campbells. But large Australian corporations are also major players in Asia. BHP, for example, has 40 operations in Asia with combined sales of $4 billion (accounting for more than a quarter of BHP's total group sales).
Australian corporations expect to capitalise on the East Asian economies' need to develop energy, communications and transport infrastructure to keep up with their higher than average growth rates. With services accounting for 20% of Australian exports, Australian corporations stand to benefit in a big way from the forced deregulation of the Asian countries' service sectors under the proposed new GATT regime.