Facts and debates about trade

Submitted by Anon on 6 December, 2004 - 9:31

Paul Hampton reviews Gary Buckman, Globalization: tame it or scrap it?, Zed Books, £9.99

This book brings together a huge amount of information on world trade and capital flows, in an accessible form.

Firstly, world trade has grown enormously over the last two hundred years.
• Between 1830 and 1850 world trade doubled and between 1850 and 1880 it trebled;
• World trade expanded by 40% between 1881 and 1913, but only grew by 14% between 1913 and 1937;
• From 1945 until the 1960s world trade was growing by 8% per year — nearly doubling every decade;
• During the 1970s trade grew at about half its previous rate and slowed further in the 1980s;
• By 2000 world trade was 20 times larger than it had been in 1950.

Secondly, what Buckman calls the “architecture of world trade” — its weight, composition and direction — have changed substantially.
• In 1800 world trade accounted for 3% of world output. By 1913 it was 33% — about the same as it is today;
• In the nineteenth century, Europe accounted for about two-thirds of world trade, but Europe accounted for about half by 1937;
• Before 1914 agriculture dominated the trade in raw materials but during the early 20th century minerals such as oil became more important;
• After World War Two the US dominance of world trade peaked, with a third of world exports;
• Japan’s importance grew during the long boom, producing 15% of world exports by 1987, compared with 3% in 1950;
• During this period the global trade in goods has shifted towards manufactured goods and away from raw materials.
• Today around three-quarters of world trade takes place between rich countries.

Finally, global capital flows have changed enormously over the past two hundred years:
• British foreign investment was “a steady trickle” in the first half of the 19th century, but by 1870 it was three times what it had been in 1850 and by 1900 it was eleven times its level of 1850;
• In 1914 Britain still accounted for about half of the world’s foreign investment;
• From the 1920s the US became not only the dominant trading power, but also the dominant financial power — by 1960 US foreign investment was three times what it had been in 1938;
• The US decision to go off the gold standard in 1971 and the subsequent relaxation of capital controls opened the doors to a “new world casino economy” — from US$20 billion exchanged every day in 1970 to over US$2,000 billion today;
• In the 1980s the US became the world’s largest debtor, with Japan the dominant capital supplier to the world;
• Up to 1960 about half of all foreign investment went to the “Third World” when most countries there were colonies — but this fell to 20% by 1990, before rising again to 30% by 2000. But most goes to China, Indonesia, Mexico, Argentina and to Eastern Europe. The poorest 45 countries get 0.5% of all foreign investment.

The agents of globalisation

The book also contains a good description of the new agents and institutions that have altered the structure of world trade since 1945.

According to the United Nations (UN), there were 7,000 transnational corporations (TNCs) in the world in the 1970s; now there are over 50,000 with 448,000 affiliates.

Today the top 500 TNCs control about 80% of foreign investment and about 30% of global output. They control 70% of world trade and a third of international trade takes place within them. TNCs employ between 17 and 26 million workers.

Seven TNCs control 85% of world trade in grain, eight control 60% of world coffee trade and seven account for 90% of the tea trade. Three TNCs account for 83% of the cocoa trade and three control 80% of the banana trade.

Transnational corporations have been responsible for destabilising governments (e.g. IT&T in Chile in 1973) and for promoting wars (e.g. Honeywell in the Vietnam war in the 1960s). They have also been major players in governments and world financial institutions such as the International Monetary Fund (IMF), World Bank and the World Trade Organisation (WTO).

Through the General Agreement on Tariffs and Trade (GATT) and since 1996 the WTO, TNCs have had great influence.

The WTO has promoted major changes on intellectual property, services and investment. New rules on patents, known as the Trade Related Aspects of Intellectual Property Rights (TRIPS), will outlaw technological transfer unless it is done at the price set by the patenting firm. The service trade rules enshrined in the General Agreement on Trade in Services (GATS) sanction the privatisation of health, education, water supply and other government services. And the Trade Related Investment Measures (TRIMS) prohibits investments laws that favour local business.

Buckman says the role of the IMF and the World Bank was relatively benign during the long boom. The IMF’s first loan in 1956 was to the UK and the World Bank’s first loans were to France, the Netherlands, Denmark and Luxembourg. But their lending increased significantly from the 1970s (World Bank lending quadrupled between 1968 and 1981). However he argues that it was the switch to long-term lending to poor countries with strings that marked the most significant change.

Today around 90 countries — 40% of all countries in the world — are subject to IMF or World Bank structural adjustment programmes. Buckman says the policies of the IMF and World Bank were complicit in some of the greatest disasters in recent history: the plague in India in 1994; the collapse of Somalia; the Rwandan civil war; the war in Bosnia and the East Asian meltdown in 1997. He quotes the New York Times, which called the IMF “a proxy for the United States” and points to the continuing dominance of the US (producing 21% of world output) as the driver of these policies.

Debates in the anti-globalisation movement

Buckman describes the approaches taken by two schools of thought — the fair trade school and the localisation school.

Buckman calls the fair trade school “the back to Bretton Woods” school, as many of its ideas hark back to the long boom (1950-73). He says the fair trade advocates such as Oxfam want rules-based trade as the answer to poverty and other Third World problems.

The main policy tools for fair traders are to end rich-country protectionism, in the form of subsidies and import restrictions, to allow poorer countries to export more, and to allow poorer countries to protect their infant industries.

Other policies include:
• Replacing IMF/World Bank with an International Clearing Union — a body like the one envisaged by Keynes in the 1940s. No more structural adjustment loans;
• Replacing the WTO with a Fair Trade Organisation. No TRIPS, GATS or TRIMS, no new issues in trade talks and for social and environmental clauses in trade agreements;
• International regulation of corporations – making them subject to binding fair trade rules, losing their licence to trade if they break them;
• Raw material export price support schemes;
• Capital controls;
• A “Tobin tax” on financial speculation; and
• Cancel the debt.

Buckman argues that because most trade (three-quarters) takes place between rich countries and most of the remaining 25% with middle-income countries, simply increasing trade will not significantly reduce poverty as fair traders like Oxfam suggest.

He also shows that the reasoning behind the regulation of TNCs is circular. Fair trade advocates want laws or rules to control TNCs — but these regulations would be made by the governments of powerful states that are controlled by TNCs. The same kind of objection applies to capital controls and the Tobin tax. And on voluntary codes of conduct — even the OECD club of rich countries says codes fail to adequately control TNCs.

On price support schemes, Buckman points out that these have been tried four times in the past and largely failed:
• In the 1920s (for wheat, rubber, sugar, copper, petroleum lead and zinc);
• In the 1930s for tin, sugar, tea wheat, rubber, tin and copper;
• After World War Two for sugar, tin, coffee and cocoa; and
• In the 1970s for bauxite, bananas, copper, tin, coffee and petroleum.

The only arrangement to enjoy long-term success has been for oil — and this has been organised by the OPEC oil cartel — hardly a model for social justice.

Similarly, side agreements in trade treaties don’t work. Probably the best example is NAFTA, where countless cases of trade union violations have been reported, but none resolved in favour of workers. He also criticises trade justice campaigners for lacking an answer to environmental issues.

Buckman, who is a member of the Australian Greens, has more sympathy with the localisation school. He says the localisation school “generally sees global trade as an inherently destructive economic force and believes that the only way poor nations will get any richer is through less trade, not more”.

The basic proposition of localisation is: “everything that can be produced locally should be produced locally” — with long distance trade very much a last resort. Leading localisation advocate Colin Hines argues that reducing the volume of international trade would give nations both economic and political autonomy and prevent the damage done to the environment.

Localisation policies include:
• Abolish the IMF/World Bank;
• Abolish the WTO and create a World Localisation Organisation;
• Local investment and local business ownership — “site-here-and-sell-here”;
• Capital market regulation;
• Regulation of TNCs.

Buckman is honest enough to acknowledge that localisation might lead to a situation where the world consists of lots of highly disconnected economies and also lots of highly disconnected, even despotic governments.

He questions what localisation would mean for technology transfer, and for poor countries that would be unable to develop export-orientated manufacturing industries.

I think we need to be much sharper about this. Localisation would freeze the poorest economies in their current subordinate relationship to the rest of the world and would require a whole new coercive apparatus to impose.

A critique

Although Buckman provides a good summary of the recent history of world trade, his account suffers from the lack of a clearly defined concept of capitalism. He misconstrues the root causes of trade injustice: At no point does he spell out what makes capitalism a peculiar form of exploitative class society that is so rapacious in pursuit of profit, and so prone to expand trade beyond the narrow confines of the nation state.

A second weakness is to treat the world as divided into rich and poor countries, not classes. He is largely silent on the working class — there is no sense in the book that workers are crucial to the fight against capitalist globalisation and central to alternatives to it.

Whilst some of the demands for trade justice are demands around which workers could and should be mobilised, I don’t think on their own they provide the answers to poverty and inequality, and certainly not to the exploitation faced by workers of all countries.

The political weaknesses of the book are illustrated by Buckman’s description of the UK Liberal Democrats as a radical party with policies consistent with the movement. Yet anyone who knows about their record in local government could puncture these pretensions.

The case of the Greens is not much better. In Leeds at the moment, together with the Liberal Democrats, they’ve helped the Tories get back control of the council.

The book fails to consider socialist alternatives to capitalist globalisation. The only real discussion of socialist ideas is a brief reference to Alex Callinicos’ Anti-Capitalist Manifesto, a largely utopian critique of globalisation disconnected from the actual struggles of workers.

Another World is Possible is a a “case study” of struggle and organisation. It describes the how Liverpool Dockers’ London Support Group began and how trade unionists and socialist activists forged alliances with anti-capitalist activists.
The Liverpool dockers’ strike ran from September 1995 to January 1998. With very little solidarity from the UK trade movement, but much more from the international dockers’ unions, the strikers were forced to reach out for broader support. Pauline Bradley and Chris Knight from the London Support Group document this important story.

£5. To order copies write to Pauline Bradley 15 Collingwood Road, London, N15 4LD.

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