While capitalist economists and mainstream press finance writers may have fervently embraced "free trade" as a cure for all ills, the multinational corporations and Western governments are far more pragmatic and cunning: they write the rules of international trade then support whatever mix of "free trade" and protectionism most rapidly puts money in the bank.
Official pronouncements from the World Trade Organisation (WTO) portray trade as the great leveller, allowing rich and poor countries alike to determine their fortunes and futures. WTO agreements, the organisation claims, are about lowering the barriers to trade and ensuring that the WTO's 134 member-states don't discriminate in their trade dealings.
Rather than building a broad agricultural and industrial base which can substitute for imports, "free trade" doctrine requires countries to focus on their "comparative advantage" — those goods and services which they are best placed to sell on the world market — to generate the export earnings to fund imports.
However, as Uruguayan writer Eduardo Galeano put it, "The problem with the specialised division of labour between countries is that some countries specialise in winning and others in losing". The winners are prepared to do pretty much anything to keep it that way.
Winners and losers
Thanks to five centuries of colonial exploitation, imperialist intervention and International Monetary Fund-enforced structural adjustment, the poorest countries are disadvantaged to begin with when it comes to trade.
Colonialism has left the Third World with weak or non-existent industrial capacities and dependent on exports of a handful of agricultural and mineral commodities. In the 48 least developed countries (LDCs), the top three export commodities account for about three-quarters of the total exports of each country; 20 products account for almost three-quarters of the combined exports of all LDCs.
The Third World trades these commodities for the First World's finished manufactures, high-technology goods, industrial machinery, luxury commodities and services. The prices of these goods are all much higher. The long-term and irreversible trend in prices is in favour of the more highly value-added commodities and against primary commodities.
Making matters worse, IMF-enforced policies since the 1980s have caused more and more Third World countries to compete in the export market for the same small group of primary commodities, forcing prices down further. Prices for such commodities are extremely volatile: the prices for coffee and cocoa, for example, were 40% lower in 1999 than in 1997.
The 1999 United Nations Conference on Trade and Development (UNCTAD) Trade and Development Report reveals a considerable worsening of the Third World's terms of trade, even as trade liberalisation policies have taken hold. The balance of payments of the Third World countries have, since the 1970s, worsened on average by the equivalent of 3% of their gross domestic products, and the average annual growth rate is 2% lower.
This has been the case in those Third World countries, particularly in Asia, that have concentrated on manufacturing exports. Since the beginning of the 1980s, the terms of trade of Third World countries relying mainly on manufactured exports have fallen by 1% per annum on average, according to UNCTAD.
Greater dependence on exports has worsened the flow of trade-related wealth from poor countries to rich countries and further marginalised the poorest countries. The sub-Saharan African LDCs' share of world trade, for example, has fallen from 0.6% of world trade to 0.3% (compared to the 19% share commanded by the most advanced economies, the 29 members of the Organisation of Economic Cooperation and Development) in the past two decades, even though exports account for 30% of the region's gross domestic product.
Concessions
This unequal starting point is made far worse by ruthless negotiating by Western governments acting on behalf of their largest corporations, which seek to extract maximum trade openings from the Third World (and each other) for minimum concessions.
Analyses of the Uruguay Round of trade talks, which formed the WTO in 1995, estimate the dollar value of world trade opened by the agreements to be between US$200 and $500 billion between 1995-2004, a 1% increase in world income.
The benefits, however, will be very unevenly spread. The United Nations Development Program estimates that 70% will go to the major industrialised powers while the LDCs will be worse off by US$600 million.
Many of the trade agreements negotiated within the WTO have reduced Third World restrictions on imports from the West, thereby significantly improving Western corporations' access to Third World markets.
The General Agreement on Trade in Services (GATS), for example, opens markets in telecommunications, financial services and information technology to multinationals such as AT&T, Citibank and Microsoft, and prohibits governments from favouring local service providers. Without such support, providers in the Third World cannot compete with the size and might of Western corporations.
The agreement on trade-related investment measures (TRIMs) also favours the big players. It prohibits governments from specifying a percentage of local materials that have to be included in manufactured products and from specifying that companies have to export at least as much as they import. These are both measures commonly used by Third World governments to promote local industry.
Rulings by WTO trade dispute bodies have strengthened the trend by limiting the grounds under which countries can impose tariffs. A September ruling, for example, outlawed India's attempt to impose tariffs to protect itself from a balance of payments crisis caused by ballooning imports. A 1997 ruling, implemented in December, overruled European Union policies which gave preferential market access to mainly small banana exporters from the Caribbean; the case was brought by the US government on behalf of US multinational Chiquita (formerly the notorious United Fruit).
While WTO agreements force the Third World to adopt "free trade" policies, they allow First World governments to maintain considerable protectionism. Most of the tariffs and non-tariff barriers which have been lowered by Western governments are in classes of goods and services that Third World countries cannot access. They are reciprocal agreements between the big powers themselves.
The major trading powers — the EU, the US, Canada, Japan (together dubbed the "Quad") — maintain enormous tariffs on those goods in which the Third World supposedly has "comparative advantage" such as agricultural produce, textiles and clothing and light manufactures.
When the Uruguay Round agreements are fully implemented, the average tariff on imports from the LDCs into the industrialised countries will be 30% higher than the average tariffs on imports from other industrialised countries. For Third World countries as a whole, the average tariff will be 10% higher. UNCTAD estimates that Western protectionism costs the Third World US$700 billion each year in potential export earnings.
Agriculture
The WTO's Agreement on Agriculture allows the major powers, particularly the EU and the US, to simultaneously expand their exports while blocking imports. The agreement does specify that signatories have to convert all non-tariff assistance to producers into tariffs, making them more transparent, and to gradually reduce tariffs (by 36% over six years for industrialised countries; by 25% over 10 years for Third World). It also specifies a reduction in export subsidies by 20% for industrialised countries and 13.3% for Third World countries.
Western governments have found many ways to skirt their commitments — all legal under the agreement. For example, tariff reductions have been concentrated in areas where tariffs were already low, while "tariff peaks" remain in areas important to them, such as sugar, meat and milk. Many forms of domestic subsidy, such as those related to pest control, and research and development, are excluded from the agreement, as are export credit guarantees.
The sheer scale of Western assistance to their agriculture producers means that, by the time the tariff and subsidy reductions kick in, they will have crushed competitors in the Third World. In 1998, total agricultural support in the OECD countries totalled US$353 billion, equivalent to almost 60% of total world agricultural trade.
Under the EU's Common Agricultural Policy, for example, tomato farmers are paid a minimum price higher than world prices, stimulating production. The processors, in turn, are paid a subsidy to cover the difference between domestic and world prices, equivalent to US$300 million in 1997.
West Africa's liberalisation of import controls since 1994 has allowed EU-processed tomatoes to take over 80% of regional supply. EU export subsidies allow them to be dumped onto the market at cheaper prices than the local product. The local tomato industry, encouraged since the 1970s as a way to generate export earnings, has been crushed. Ghana, which had three export tomato-processing plants in the early 1980s, is now the region's largest importer of tomatoes.
The Agreement on Agriculture also allows OECD countries to maintain policies that discourage value-adding by imposing higher tariffs on more highly processed agricultural products. Oxfam International estimates that Third World countries' share in the cocoa stream — cocoa beans, cocoa liquor, cocoa butter, cocoa powder and chocolate — fell from 90% for the beans, to 44% at the liquor stage, to 38% of cocoa butter, 29% of cocoa powder and finally 4% for chocolate.
Expanding protectionism
There are other agreements that similarly legalise Western governments' protection of the interests of their largest corporations.
The Agreement on Textiles and Clothing (ATC), for example, commits Western countries to a phased lowering of the high tariffs and quotas allowed under the Multi-Fibre Agreement (MFA), signed in 1974. Access to Western countries' textiles and clothing markets could increase Third World export earnings by US$127 billion by 2005, UNCTAD estimates.
However, rich countries have largely reneged on their ATC commitments. Over a period which accounts for 70% of the timetable for the phase-out, the US has lifted quota restrictions on only 6% of imports, the EU less than 5%. The minimal tariff reductions already granted have been concentrated in areas with little impact on Third World exporters.
Even if the ATC commitments are fully implemented, the average tariff will have only fallen from 15% to 12%, and will be three times higher than the average tariff on manufactured goods.
The Agreement on Trade-Related Aspects of Intellectual Property (TRIPs) is an even larger exercise in Western protectionism, enforcing tight rules on patents and other forms of intellectual property and maintaining corporations' near-monopoly on high-tech goods and commercial research.
Under the agreement, companies have a right to hold patents, and demand royalties, for a minimum of 20 years; for copyright, the minimum is 50 years. Ninety-six per cent of patents are held in industrialised countries.
The agreement legalises Western companies' patenting of seeds, genes and medicines and allows tough penalties on countries which seek to develop their own generic brands to meet domestic needs by adapting technologies and patents.
There are even agreements which may allow the expansion of Western protectionism. The Anti-Dumping Agreement, for example, legalises the use, particularly by the US, of penalties against exporters deemed to be selling products at "unfairly" low prices.
One study of the US's anti-dumping law, conducted by the right-wing Cato Institute, found that, of 107 affirmative anti-dumping findings between 1995 and 1998, only two could be deemed to have been real cases of dumping. The others were simply exporters whose prices were too competitive.
If the Third World countries are to develop and end their dependence on the imperialist powers, they need positive trade discrimination. That means easier access to Western markets to allow an expansion of export earnings while being allowed to maintain measures to protect and help develop a broad-based industrial and agricultural base.
Through WTO agreements, the most powerful countries and corporations enforce the opposite: they rob Ghanaian peasants and Indonesian factory workers to pay European agribusiness executives and US investment bankers. How's that for freedom?
BY SEAN HEALY