Why GATT doesn't mean 'free trade'

Issue 

By Peter Boyle

Paul Keating's visit to the US put a crack in the myth that the uncompleted Uruguay Round of the General Agreement on Tariffs and Trade talks was really about bringing in a new era of global "free trade". His discussions with US President Bill Clinton revealed that embryonic new regional trade blocs like the North American Free Trade Agreement (NAFTA) and the Asian Pacific Economic Cooperation forum (APEC) are not alternatives to a successful completion of the GATT talks — rather they will "overlay" any new GATT regime.

Keating's plea was for the integration of the APEC with NAFTA to form a great trans-Pacific trading alliance which could confront the EC.

An impression has arisen that the main point of the new GATT treaty was to end the trade war in agricultural exports between Europe and the US. This is because all that holds back the conclusion of the Uruguay Round is the French government's refusal to accept a November 20 deal (Blair House Accord) between the US and the European Community on farm subsidies. Indeed, the GATT negotiations would probably have been completed on schedule in 1990 if not for this disagreement between the US and the EC, which has resulted in a ruthless trade war in subsidised wheat exports.

The impression that the Uruguay Round of GATT has a lot to do with freeing the trade in agricultural products has been deliberately fostered by the media monopolies in order to sell it as a "win-win" outcome for the countries of the North and the South.

Under the new GATT deal, the conservative British Economist magazine claims, the rich world would agree that trade in farm products, making up one-tenth of world exports, and trade in textiles (a mere one-twentieth) should be gradually freed from protection. In return, poorer parts of the world would open their markets to imported services (the fastest growing trade sector) and recognise the intellectual property rights (mainly held by Western and transnational corporations).

This is a very one-sided trade-off.

If the Blair House Accord is ratified by France, it will barely free world trade in agricultural products. In any case, over the 1980s most Third World countries became net importers of food as they restructured their economies under International Monetary Fund (IMF) supervision. They will be hit in the first instance by a rise in their bill for food imports.

According to Solon Barraclough, the author of An End To Hunger? The Social Origins of Food Strategies, research into the likely effects of agricultural trade liberalisation is sobering for the world's hungry.

If only the developed countries liberalised their agricultural trade "this would have no significant impact on poverty and hunger, and if anything the effect is adverse". If only the developing countries removed their agricultural trade barriers, the number of people in hunger around the world would increase by 5%. If all countries removed their trade barriers, there would still be a slight increase in world hunger, although a few countries of the South, such as India and Kenya, might gain.

The countries of the South are also unlikely to gain much more guaranteed access to the markets of the wealthy countries for their manufacturing goods from a successful outcome of the GATT talks. Powerful countries have reserved the right to retaliate with trade restrictions in the case of alleged "dumping" in their markets. In addition, they have also developed a series of bilateral "voluntary" agreements with their main trading partners to control trade in manufactures.

At the beginning of this year, the US had 47 such arrangements covering steel imports, car and semiconductor imports from Japan, imports of machine tools from Brazil, Germany, South Korea and other countries.

Finally, the US and Western Europe are putting in place regional trade blocs, like NAFTA and the EC, to further control trade with their main partners.

These regional trade blocs cement in place the relations of power between the participating nations. Under the draft NAFTA agreement, for instance, while capital, goods and services are free to cross borders, Mexicans will not be allowed to enter the US so freely. The agreement will also maintain the existing labour and environmental codes in each country. Thus Mexican workers will continue to enjoy poorer working conditions, wages and rights to organise, and factories in Mexico City will continue to give it the world's worst air pollution.

The development gap between the US and Canada is far from that between either of these countries and Mexico yet the narrower version of NAFTA (between the US and Canada), which has been in operation for three years, is unpopular with the great majority of Canadians.

The Economist estimates that a successful completion of the Uruguay Round would mean an extra $100 billion a year in wealth created, but does not add that most of this will be appropriated by the world's biggest corporations, and at the expense of the South. Author Raghavan Chakravarthi argues that the new GATT treaty will advance the process of recolonisation of the South begun in the 1980s via IMF-dictated programs to address the debt crisis.

"While there may be some conflicts between the US, Europe and Japan", says Chakravarthi, "they have a shared interest in achieving changes to the trading system to stem rising competition from the Third World". The real point of the new GATT deal is to extend the control of transnational corporations over the global economy. This will be done by:

  • Guaranteeing "equal treatment" for multinational companies.

  • Limiting the right of governments to impose health and environmental regulations that may affect trade. In general, no GATT signatory will be allowed to set standards higher than other signatories. (This is a source of major criticism of GATT by environmentalists.)

  • Opening the market for services (e.g. financial, communications and transport) to multinationals.

  • Forcing the recognition of "intellectual property rights", including the patenting of plant and animal species.

Supporters of the new GATT deal claim that these measures are fair because, theoretically, they apply to rich and poor countries alike. But the poor countries are in no position to bargain after their economies have been restructured, supposedly to export their way out of debt. Further, most multinationals are based in the wealthy North, and this combines with the overwhelmingly superior bargaining power of the world's richest states to make a joke of this formal equality.

The only real enforcement of GATT codes is the threat of trade retaliation, which richer and bigger countries alone can wield effectively. If necessary, US military superiority can also be brought in as a powerful bargaining chip, in the form of protection, the withdrawal of protection or, in the last resort, direct intervention.

Earlier rounds of GATT negotiations introduced limited liberalisation of trade, which did not help developing countries. At the US insistence, agriculture was excluded from all previous GATT deals, and protectionism was kept in place for the trade in textiles through the Multi-Fibre Arrangement. These arrangements prejudiced exports from the developing countries.

Since the formation of GATT in 1948, the US has not hesitated to flout GATT codes when it suited its interests. In fact it has a special trade law, "Section 301", which allows it to identify "unfair trade" practices and retaliate. As a December 15 deadline for US Congressional approval for the new draft treaty approaches, pressure is building in the US Congress for this power to be strengthened.