Bi-polar disorder – part two

“If there is one thing I admire about the United States, it is that the first thing they think about is themselves, the second thing is themselves and the third thing themselves. And then, if there is time, they think about themselves again.”

So said Lula (the Brazilian President Luiz Inacio Lula da Silva), cutting through the verbiage at an international meeting on progressive government in London last month where fashionable anti-Americanism was the order of the day.

Globolog only wishes Lula’s observation were true. Instead, on major issues the Americans – and the Europeans – go against their own best interests. There’s a dysfunction at the heart of globalisation – a double-think and denial that, in some lights, is analogous to a mania or mental disorder described in this column last week. All the talk about the supposedly benign intervention of western powers in poor countries needs to be set in the context of their trade policies, on which they spend far more money and which have vastly greater impact on the lives of the poor.

One of the places the dysfunction is likely to be most evident is at the next big meeting of the World Trade Organisation (WTO) in Cancún, Mexico in September 2003.

Trading disgraces

Kevin Watkins, the head of research at Oxfam UK, puts this well in recent articles for Prospect, Countdown to Cancun (subscription only) and the Financial Times (The Rich Wreckers). Watkins says that the WTO Cancún ministerial is likely to be a defining moment in the development of globalisation. There are two questions: “will the rules-based trading system survive at all, and if so, will the rules be used to strengthen the links between trade and poverty reduction”?

openDemocracy has explored the context for the current situation before, including in the summer of 2002 in World trade, poverty and the environment in the age of global governance, at the turn of the year in Trade hypocrisy: the problem with Robert Zoellick and more recently in the 20 May 2003 Globolog Trade, aid and Iraqi debt.

Some key points of these discussions remain highly relevant. One of the greatest areas of inequity is agriculture. Over three-quarters of the people living on less than $1 a day (around 900 million people) are small farmers. The tariffs (taxes) placed on exports from poor developing countries by the rich industrialised ones are four times higher on average than those the rich countries place on each other. Rich countries place higher taxes on processed goods than on raw materials, handicapping attempts by developing countries to diversify their industries and so work their way out of poverty.

The rich countries allocate $331 billion a year to agricultural support, and dump much of the resulting surplus on the poorest countries (by contrast, total rich country aid to Africa where many of the poorest people live is worth about twelve days of farm subsidies).

At the last WTO ministerial in Doha in November 2001, the European Union (EU) and the US promised a ban on export dumping.

But in agriculture, textiles and other areas that matter most to poor countries the two trade superpowers have reneged on their commitment. Take farming again. The 2002 US Farm Act will increase subsidies by $8bn a year for the next decade, and substantially reinforce support for over-production. (In 2002, America’s 25,000 cotton farmers received over $3bn in subsidies – undermining the livelihoods of 11m more efficient but vastly poorer cotton producers in Africa).

The EU’s contribution to the agricultural trade negotiations has been so-called reform that maintains current levels of spending, leaves export subsidies intact, and sectors such as sugar and dairy farming in chronic surplus. And all this at a cost of $48bn a year (adjusted for inflation) until 2013. Meanwhile, the countries to the east and south of the EU’s planned expansion that desperately need its help and support are starved of assistance even though their stability is in Europe’s direct and immediate interest.

Robin Hood in reverse

It is not even as if these generous subsidies help those in the rich countries that most need them. The US has the world’s most unequal system of subsidy distribution. Fewer than 10% of farmers get over 75% of government payments. In France, subsidies from the Common Agricultural Policy are distributed more unequally than income in Brazil (the ostensible aim – to slow or reverse rural depopulation – has clearly not been met: the rural population has declined by a third in a decade).

In France, subsidies from the Common Agricultural Policy are distributed more unequally than income in Brazil.

Meanwhile, like all regressive taxes, it is the poor in the rich countries who pay most. In Britain, for example, a family of four pays around £500 ($800, E700) a year towards these subsidies, the overwhelming majority of which go to already very rich farmers.

The fact that people are not more seriously angry about this is a tribute to…what, exactly? Meeting the challenge must include winning a battle for public opinion In recent weeks the trade battle has been picked up by the New York Times, in a series of extended, exceptionally powerful and passionate editorials.

The Rigged Trade Game, for example, shows with precision how nations like the Philippines have been deceived and abused by the rhetoric of free trade, a wholly dishonourable and stupid course of action that immiserates some of America’s friends and plays directly into the hands of Islamic and communist radicals. “The US and its wealthy allies”, concludes the NYT, “will not eradicate poverty – or defeat terrorism – by conspiring to deprive the word’s poor farmers of even the most modest opportunities”.

Another editorial The Long Reach of King Cotton highlights the issues even more starkly:

“If it weren’t killing them, people in Burkina Faso might get a good laugh at America’s unprofitable cotton-growing obsession. Burkinabe, after all, are known for their sense of humor. And what could be more absurd than the sight of the world’s richest nation – a fiery preacher of free-trade and free-market values at that – spending $3 billion or $4 billion a year in taxpayer money to grow cotton worth less than that and selling its mounting surpluses at an ever greater loss?”

Why does this go on? As Kevin Watkins points out, the subsidies are economically irrational in their welfare effects for the vast majority of consumers and taxpayers in the rich world as well as for millions of farmers in the south. The reason is that small but powerful and highly efficient lobby groups are able to subvert democracy.

An agenda for change? The preconditions are: cut the subsidies that sustain export dumping, curtail the power of financial conglomerates, overcome protectionist interests and overturn patent laws guarded by the pharmaceutical industry. At Cancún the rich countries need to agree to duty-free and quota-free access for all low-income countries, zero tariffs on labour-intensive exports from all developing countries and the elimination of tariff escalation.

The prospects for change? Many of the battles that need to be fought for real change at the WTO are being lost or are not even being engaged.  It doesn’t help that many of those who call themselves ‘global justice activists’ are confused. Some ‘radical’, ‘no global’ activists who call for the abolition of the WTO play into the hands of the most regressive vested interests. The reason is that the alternatives are worse. This can be seen by looking at the content of regional and bilateral trade pacts, which further enforce unequal balance and, for example, prevent capital controls which even the IMF now accepts are a good idea (see Bilateral Trade Treaties are a Sham).

Such is the political economy of reform that just because something is in the overwhelming interest of the vast majority of people in a given society and accords with their sense of natural justice for themselves, for others and for future generations does not mean it will happen.

Write to globolog@opendemocracy.net