On the WTO, Western Economic Imperialism and Predation

Read Amy Chua's book for a further understanding of how exportation of "free market democracy" has led to greater poverty and conflict in the developing world.

Thanks for the reference, hobitbob.

Interesting subject, and reading it on the quick I think I pretty much agree with your tack on it.

I was going to post a thread on this topic a while ago, after the UNDP published its new report, but I never got round to it. I'll go see if I can find back the print-out I was reading then.

Topic is also of interest to me because my father was in Cancun, as a delegate to the summit for the IATP (Oxfam etc). (He was also in Seattle etc, manages some international fair trade network).

He promised to send a newsletter out with his experiences, which I was planning to translate for A2K, but I think he sent it to an old address of mine, cause I havent gotten it yet. I'll ask my sister to fw: it if she's got it.

'S a tremendously important topic. But interest in it here is limited because of all the "noise" about it, I think. First, the summit always gets in the news mostly in the way of financial-economic numbers, which posters will rarely get excited about (not me, in any case). Second, the rest of the post-summit publicity goes to anti-globalising rioters, which just adds to this image of business fat-cats versus rebellious punk youths - which isnt what its about, at all. None of that contributes to poster interest ...

Book mark....

Below the translation of (part of) an e-mail my father sent us 4 days ago, after the WTO summit had finished. It's mostly personal/anecdotal of tone; he also wrote a more business-focused update for a website, and I might translate that one later.

---- Begin Included Message ----

While I am writing this e-mail to you I am listening to Martin Luther King, addressing the demonstrators in Washington, many years ago now. Location: the internetcafé in Antigua from where I regularly sent my e-mails two years ago as well, and that reminded me so much of internetcafé's in Berlin. Right now Martin Luther King is calling out through the speakers of the internetcafe, "I have a dream!". The American boy who runs this cafe is obviously not free of nostalgia.

But only just a few days ago I was at a press conference in Cancún where the Brazilian negotiator at the WTO, together with his allies from Argentine, Ecuador and Egypt, called out, interrupted by applause from journalists, delegation members and NGO representatives like me: "this is the beginning! They have learnt that they have to respect us. No, we will not try to find a scapegoat for the failure of this conference. This is the beginning, we have learnt to negotiate". The hall was bulging with people, optimistic, cheerful. The WTO will never again be the way it used to be.

In another corner of the press center Martin Khor from Malaysia, grand old man of the "differentglobalists", had proferred his view of the events a little before. "It is good that this didn't pass". A Kenyan delegation member: "They got what they deserved". Singing demonstrators in the press centre who celebrated the summit's failure as a victory. As usual I was kind of in the middle on it again. Not quite such a "different"-globalist as the people around Martin Khor after all. The Brazilian had spoken more to my heart. Clear, businesslike, without ever making a secret of his opinion that it was time that the EU and US learned to listen. A member of the Dutch delegation, who now works at the ministry of development co-operation, was, however, deeply dissapointed. Now the EU would take an even harsher line and there would be even less possibilities to do something for, for example, the West-African cotton farmers. She seemed to me a little 'out of touch' with what was happening around her.

[..] Cancún was a little surrealistic. At least the hotel zone was. ABout 200 expensive hotels on a narrow strip of land around a lagoon. From my room I saw the Caribean Sea, blue like you've never seen a sea, white rocks on the beach, palms to make the picture even more Caribean. But from the street you saw nothing anymore. [..] [There was] a very good little restaurant that was still affordable with a view to the sea. But as long as the conference lasted that view was a little strange. Well-armed ships of the coastal guard patrolled around to keep any possible demonstrators who might try to come over water at bay. It was whispered that the 'rainbow-warrier' was nearby - hence.

Cancun itself [..] was a relief after the hotel zone. I only got [into the town itself] when everything was already over, by the way. I didnt demonstrate, did have the inclination to go there, but facing the choice [between demonstrating and] following, through briefings, what was happening on the conference, and attending the fair trade conference as well as the very successful NEWS! (network of European third world shops) conference about the natural resources crisis, I knew what I preferred. The fairtrade conference was cheerful and instructive, as far as I attended it - you could go to meetings three days non-stop and that was a bit too much for me. One meeting [..] was with [Dutch minister of development co-operation] van Ardenne, a famous economist of the World Bank, an economist of the IDB (Interamerican Development Bank) and a radical Frenchman of the Artisans du Monde (Third World shops), who [..] gave a true revolutionary speech [..] An extremely curious combination of speakers, but it did provoke a lively debate about what trade should look like. A beautiful moment, I thought, came when a very neat, very beautiful and very sweet American girl in her early twenties stood up and adressed dthe World Bank economist. She said that she thought the statistics he had shown were very impressive, but could he tell her as well whether people's happiness could be found back in all those statistics? She didnt really get a reply. [..]

---- End Included Message ----

Please post your translation of your father's business update, nimh. Your last post was interesting.

You're right about people being put off by the dryness of the numbers concerning world trade.

Maybe I should have titled this post by the title of the Center for the New Europe's recent report:

EU Trade Barriers Kill

The First World countries must decide what it is they value first and formost, true free trade among nations, or protection of their national business interests. They cannot have it both ways. May the Third World stand strong in this regard.

Untill then the idea of "free trade" is, at best, an abstraction with no meaning, and at worst, a term of predatory economic hypocrisy.

The European Union is attempting to revive stalled WTO trade negotiations by the elimination of agricultural export subsidies as proposed by the European Commission. "The commission proposed the elimination of agricultural export subsidies by the European Union provided its partners in the World Trade Organization -- notably the United States, Australia and Canada -- ended their own financial support for farm exports." (15 May 2004 AFP) France is opposed to the mandate because of the lack of guarantees by other G7 nations. "There must be parallelism in the actions and gestures by all sides," France PM spokeswoman Catherine Colonna said after a French-German ministerial meeting.

At a meeting at the Organisation for Economic Cooperation and development, French Foreign Trade Minister François Loos said, "today, Europe's new offer will only make sense if our main partners in America and the developed countries belonging to the Cairns group refrain from such practices." He then pointed specifically to American trade subsidies.

France drew support to their stance from other countries, Ireland, Hungary and Poland. "A key problem for these countries is the offer's timing, content and the fact that while the EU might commit to scrapping subsidies, there is no guarantee others will do the same," writes Jeremy Smith of Reuters. Several other countries, namely, Italy, Greece, Spain, Lithuania, Portugal, Slovakia and the Czech Republic, have reservations about the scope and certain details of the mandate.

Brazil with the backing of some African nations recently won a challenge at the WTO to US cotton subsidies, giving the developing countries more leverage in the most recent round of world trade talks known as the Doha Round.

Hope for Trade Fairness

French PM says EU commission must stick to mandate on farm export subsidies

France wins support from partners on EU farm offer

Cotton Update

Thank you for an informative thread, InfraBlue. I have nothing to add, but wanted you to know you were, and will continue to be read on this subject. This is far more important than anything I've seen on CNN lately.

On Friday the World Trade Organization upheld it's decision in an April interim ruling declaring the US' cotton subsidies illegal. The suit was brought against the US by Brazil and is supported by various developing world countries. The implications are important as other nations consider bringing suits against other US and European Union agriculture subsidies before the WTO.

"The WTO report, which was not made public, upheld a preliminary ruling in April that supported Brazil's claim that the more than US$3 billion in subsidies the US pays its cotton farmers distorts global prices and violates international trade rules," writes Todd Benson of the New York Times in his June 19, 04 article, WTO Rules Against U.S. Cotton Subsidies.

"In Washington, Bush administration officials criticized the decision, arguing that the best way to address distortions in world agriculture trade was through negotiations, not litigation. The officials also said the United States would appeal, a process that could drag on for months, and possibly more than a year," he writes.

Negotiations would be preferable if indeed negotiations had any bearing, but given the complete stalemate at the last WTO meeting in Cancun on precisely these issues on agricultural subsidies and barriers, Brazil and the other developing world nations were left no other options.

Richard Mills, a spokesman for the United States trade representative, Robert B. Zoellick, said in a telephone interview with Benson, "we will defend U.S. agricultural interests in every form we need to, and we have no intention of unilaterally disarming," he added, referring to the $19 billion in annual subsidies paid out to American farmers.

He referred to the US trade subsidies in terms of weaponry and armaments.

The WTO ruling will be made public in August, and that is when an arbitration panel will decide what damages are due and to what extent Brazil can retaliate if the US does not comply with the ruling. President Bush has already lifted subsidies on steel rather than face sanctions and penalties thereof.

"This has a value as a precedent that goes very far and broad," said Gary Hufbauer, a trade specialist at the Institute for International Economics in Washington. "It opens the doors for countries who are affected by agricultural subsidies to challenge a lot of other subsidies: sugar, corn, almost any product."

"Without the subsidies, US cotton production would have shrunk by nearly 30 per cent and world prices jumped by more than 12 per cent, according to the research done on behalf of the Brazilian Government. Brazil estimates that its farmers have lost more than US$600 million in sales because of the American cotton aid." (Mark Drajem and Warren Giles, Bloomberg, $4.8b US subsidy illegal - WTO)

NPR recently reported on the state of US agriculture subsidies which were first introduced during the depression to help struggling farmers, but which now are largley used as corporate welfare for agribusiness companies and corporations.

http://www.npr.org/features/feature.php?wfId=1960385


http://www.nytimes.com/2004/06/19/business/worldbusiness/19trade.html

http://www.nzherald.co.nz/business/businessstorydisplay.cfm?storyID=3573683&thesection=business&thesubsection=trade&thesecondsubsection=general&thetickercode=

Cool, let's hope we abide by the decision and end the practice for good! Thanks IB

Yes, that story got a lot of play here too!

For example, (badly translated):

In a reversal on it's stand on trade litigation brought before the WTO, the US has vowed to file a suit against the EU over subsidies it describes as "unfair" paid to Airbus.

US trade representative, Robert Zoellick, said: "Since its creation 35 years ago, some Europeans have justified subsidies to Airbus as necessary to support an 'infant' industry. If that rationalisation were ever valid, its time has long passed."

The EU immediately filed a counter-suit over US support for Boeing. EU Trade Commissioner Pascal Lamy said the US complaint was "obviously an attempt to divert attention from Boeing's self-inflicted decline," adding "if this is the path the US has chosen, we accept the challenge, not least because it is high time to put an end to massive illegal US subsidies to Boeing which damage Airbus."

Back in June of this year Bush administration officials criticized Brazil's decision to bring an agricultural trade suit against the US, arguing that the best way to address distortions in world agriculture trade was through negotiations, not litigation.

http://business.timesonline.co.uk/article/0,,8209-1297871,00.html

http://www.voanews.com/article.cfm?objectID=93A6CEA7-01F5-4F1F-B0402DD26141C909&title=US%2C%20EU%20Take%20Jet%20Fight%20to%20WTO&catOID=45C9C785-88AD-11D4-A57200A0CC5EE46C&categoryname=Business

http://www.washingtonpost.com/wp-dyn/articles/A13181-2004Oct6.html

http://news.independent.co.uk/business/news/story.jsp?story=569603

The U.S is complaining about subsidies in transportation?... that's a hoot. Again, I hope we abide by whatever decision (like there's even a second side on this one) the WTO offers. Boeing is among that last companies we should subsidize. I believe this is a step in the right direction.

Bookmark

BM

Hobitbob recommended a devastatingly good book,"World On Fire" by Amy Chua, in which she argues that when Third World countries embrace democracy and free markets too quickly, or when it's foisted upon them, ethnic hatred and even genocide can result.

This book is portentous to the situation that the US is fomenting in Iraq.

Here's a review from Salon.com for anyone interested:

"World On Fire" by Amy Chua
A new book argues that when Third World countries embrace democracy and free markets too quickly, ethnic hatred and even genocide can result.

- - - - - - - - - - - -
By Michelle Goldberg



Jan. 13, 2003 | The case Amy Chua makes in "World On Fire: How Exporting Free Market Democracy Breeds Ethnic Hatred and Global Instability" is so clear and persuasive it almost seems as if it had been obvious all along. Yet her argument, that rapid switches to majoritarian rule and free-market democracy in many Third World countries benefit certain ethnic groups over others and lead to vicious sectarian strife, is quite new, if occasionally overstated. Writers such as Robert Kaplan have long argued that the Western obsession with exporting democracy to countries without the institutions to support it is naive and often dangerous, fostering demagogues and communal hatreds. Chua builds on this argument in an essential way, showing how expanding markets exacerbate the problem by enriching already-dominant minority groups even as democracy empowers angry majorities.

"World On Fire" is about a phenomenon Chua calls "market-dominant minorities," groups like the Chinese in Southeast Asia, Jews in Russia, whites in Zimbabwe and Indians in East Africa and Fiji. Market-dominant minorities control hugely disproportionate percentages of their countries' resources. Filipino Chinese comprise just 1 to 2 percent of the Philippines' population, but control all of the country's major supermarkets, fast-food restaurants and large department stores, and all but one of the nation's banks. A similar situation obtains in Indonesia. Jews make up a similarly tiny proportion of Russia's population, but of the seven "oligarchs" who control virtually all of the country's business, six are Jewish. Lebanese dominate the economies in Sierra Leone and Gambia, while Indians dominate the economy in Kenya, along with a smaller, indigenous minority tribe called the Kikuyu. Similar examples abound worldwide.

It's enormously touchy to talk about the economic element of communal violence, especially regarding Jews, since rhetoric about one ethnic group exploiting another is so often a precursor to atrocity. But that's exactly why Chua's book feels so urgent. No matter how politically incorrect it is to talk about, her book makes clear that minority market domination is a reality in much of the world, one that's tied up in many ways with smoldering group hatreds and explosions of mass slaughter, and one that's made worse by Western policies.

Chua, a professor at Yale Law School, is a careful, precise writer, and she makes it very clear that she's not blaming prosperous ethnic groups for violence directed against them, or blaming capitalism alone for fomenting genocide. It's a point she makes over and over again. (Her lawyerly penchant for summing up and reiterating her main arguments far too many times is the book's greatest flaw.)

"The point, rather, is this," she writes. "In the numerous countries around the world that have pervasive poverty and a market-dominant minority, democracy and markets -- at least in the form in which they are currently being promoted -- can proceed only in deep tension with each other. In such conditions, the combined pursuit of free markets and democratization has repeatedly catalyzed ethnic conflict in highly predictable ways. This has been the sobering lesson of globalization in the last twenty years."

Nevertheless, "World On Fire" is not an anti-globalization screed. Chua is a former Wall Street lawyer who worked to help developing countries privatize their resources, and she continues to believe that, in the long term, markets offer the best hope for developing countries. Her scathing assessment of the way the West has foisted liberalization on the rest of the world is driven not by ideology, but by a careful examination of globalization's unintended consequences.

"Back in the early nineties," she writes, "I believed that the proceeds of privatization, as a World Bank official put it, would go to roads, 'potable water, sewerage, hospitals, and education to the poor.' Like many in the 1990s, however, I was viewing emerging market privatization through a rose-colored lens." Later, she adds, "Even assuming that free market democracy is the optimal end point for most non-Western countries, in the short run markets and democracy are themselves part of the problem."

Explaining why market-dominant minorities exist would probably require another volume, and Chua makes only a cursory attempt to do so. In some cases, of course, it's obvious -- the white minority in South Africa and Zimbabwe accumulated capital and expertise at the expense of the grotesquely exploited majority, who cannot now catch up without massive government help. Elsewhere group prosperity is attributable to superior business networks. Cameroon's Bamileke, for example, "operate an informal capital market so efficient it constantly threatens to put government-owned banks out of business," Chua writes. The reasons for Jewish economic success are more mysterious -- especially in Russia, where they've been repeatedly subjected to vicious pogroms -- and "World On Fire" does little to illuminate them. Chua is less interested in how minority groups come to dominate than what happens when they do.

She argues that when economic liberalization and democracy are rapidly introduced to countries with market-dominant minorities, the two forces necessarily come into conflict. "Markets concentrate enormous wealth in the hands of an 'outsider' minority, fomenting ethnic envy and hatred among often chronically poor majorities," she writes. "Introducing democracy in these circumstances does not transform voters into open-minded cocitizens in a national community. Rather, the competition for votes fosters the emergence of demagogues who scapegoat the resented minority and foment active ethnonationalist movements demanding that the country's wealth and identity be reclaimed by the 'true owners of the nation.'"

In Indonesia, for example, free-market policies undertaken under Gen. Suharto, the U.S.-backed dictator, vastly enriched the country's tiny Chinese minority, who in turn supported the strongman. By 1998, Chua writes, Chinese made up 3 percent of the population but controlled 70 percent of the private economy. That was the year democracy protests and riots forced Suharto to resign. His fall was accompanied by orgies of anti-Chinese violence -- Chinese women began wearing "anti-rape corsets," locked steel chastity belts. "[T]he prevailing view among the pribumi majority was that it was 'worthwhile to lose 10 years of growth to get rid of the Chinese problem once and for all,'" she writes. "Meanwhile, the U.S. State Department called resoundingly for free markets and democratic elections."

Many other countries share elements of this dynamic, though Chua sometimes seems to be stretching her thesis in order to fit in as many places as possible. She's overreaching somewhat when she says, early on, "markets and democracy were among the causes of both the Rwandan and Yugoslavian genocides." Clearly democracy was a factor in both, but the economic factors are much trickier. The gap in status between minority Tutsis and majority Hutus is indeed attributable to globalization, but of the old-fashioned, colonial kind -- Belgian colonizers favored minority Tutsis over majority Hutus because of what was seen as their Caucasian-like features. And while Serbian hatred of the Croats was fanned by Croatian economic dominance, the Bosnians they butchered were as poor as they were. Chua makes these caveats herself in the relevant chapters, but they dilute some of the grand claims she lays out in her introduction.

Still, her larger point, that the policies seen as panaceas by the West can actually make things worse, holds true. Electoral democracy is often touted as an antidote to the tyranny and tribalism ravaging much of the globe. "For globalization's enthusiasts, the cure for group hatred and ethnic violence around the world is straightforward: more markets and more democracy," Chua writes. She notes that after Sept. 11, Thomas Friedman wrote of the Middle East, "Hello? Hello? There's a message here. It's democracy, stupid! Multi-ethnic, pluralistic, free-market democracy."

This one-size-fits-all prescription for curing the world's ills is implicated in the Rwandan genocide of 1994. As Chua writes, Hutu dictator Juvénal Habyarimana, who ruled from 1973 until the early 1990s, may have been corrupt and totalitarian, but he did protect the Tutsi population. Once he responded to Western -- particularly French -- calls to adopt multiparty democracy, though, Hutu supremacy became a potent weapon for Habyarimana's political enemies. The genocidal Hutu Power movement was buoyed on a groundswell of popular support. Meanwhile, Chua points out, the "freedom of the press" encouraged by the West stopped the government from shutting down the hugely influential, rabidly anti-Tutsi newspaper Kangura.

"Sudden political liberalization in the 1990s unleashed long-suppressed ethnic resentments, directly spawning Hutu Power as a potent political force," Chua writes.

The idea that democracy, America's most cherished value, has exacerbated the last century's bloodletting is terrible to contemplate. Yet Chua's book ultimately supplies a tiny measure of hope. Unlike Kaplan, Chua doesn't believe that enlightened autocracy is the answer for the developing world. For her, the problem isn't democracy itself but the speed at which it's implemented. Rushing it, especially without protections for individual rights or institutions for upholding the law, can be dangerous.

Kaplan believes that the right kind of despots can sustain a stable environment for capitalism to flourish, creating the middle-class institutions necessary to sustain democracy. One of his models is prosperous, undemocratic Singapore. Chua's analysis, though, shows us that no amount of economic growth will turn countries that have market-dominant minorities, like Indonesia, into countries like Singapore, that don't. Prosperity and stability won't come to those countries until they find a way to narrow the chasm between rich minorities and poor majorities.

To that end, Chua argues for sweeping reforms that would give disenfranchised populations a stake in their nation's resources, as well as massive affirmative-action policies of the kind being undertaken in South Africa and, with notable success, in Malaysia. Such a policy is a huge departure from the free-market evangelism of people like Thomas Friedman, but one more likely to lead to prosperous societies that can, eventually, turn into real democracies.

Of course, it's not terribly likely that her recommendations are going to be implemented in most places anytime soon. In the end, "World On Fire" is valuable less for its prescriptions than for the perspective it offers on the seemingly incomprehensible violence shaking the world. With the fall of communism and the emergence of al-Qaida, it's no longer fashionable to see ethnic conflict in materialist terms -- the new battles are framed as a clash of civilizations rather than a scramble for resources. It's a scarier opposition, because it's so intractably defiant of reason. "World on Fire" suggests these conflicts might not be so primordial and irrational after all. It might be cold comfort to realize how atavistic enmities abroad have been inflamed by our own government's policies, but at least these policies can, ultimately, still be changed.


- - - - - - - - - - - -

About the writer
Michelle Goldberg is a staff writer for Salon based in New York.

Bookmark.