Year XLII, 2000, Number 1, Page 3
Europe and World Trade
The failure of the Seattle meeting of the World Tirade Organisation, that should have culminated in agreement on the launch of the WTO’s “Millennial Round” trade talks, has disclosed divisions in a number of areas. One of these, in which the United States and Europe are diametrically opposed, is that of agriculture and biotechnologies. On these particular issues, the United States styled itself as a champion of free trade, while Europe, anxious to safeguard the environment and the wholesomeness of foodstuffs, maintained that it could not abandon its common agricultural policy, even though the CAP constitutes, in many regards, a distortion of the rules of international competition. Europe also defended, in the name of biological diversity and the safeguarding of health, its restrictive stance on the importation of genetically modified organisms and related technologies.
A second split was that which emerged between the industrially developed world and the countries of the southern hemisphere. This time, however, the promoters of free trade were the governments of the poorest countries, while the rich nations insisted on the need to restrict imports of goods originating from these countries, in the hope that this will stop goods in the underdeveloped world from continuing to be produced at what is a very high cost in terms of environmental violation of human rights, unacceptable working conditions and child labour.
A third schism opened up as the many NGOs present at Seattle launched an attack on the profit-making philosophy of multinationals and the governments that, in the name of the defence and improvement of the quality of life, support them.
This does not mean, however, that the essential conflict emerging in Seattle was one of values (in particular the value of free trade, on the one hand, and values of a non economic nature on the other). In fact, what we witnessed in Seattle was a gross exploitation of all these values, while the real clashes that took place centred on clear-cut material interests. This is certainly true in the case of Europe, whose real concern was to defend the agricultural lobby (which enjoys very strong support in most of the Union’s member states), and to protect an agriculture and food industry that finds itself at a severe disadvantage vis-à-vis the American industry due to the backwardness of European scientific research in the field of biotechnologies. And it is even more true in the case of the industrialised world as a whole — from which, moreover, all the NGOs and unions which so violently opposed the meeting originated — whose true purpose was to defend its markets against the competition mounted by countries with the capacity to produce certain goods at very low cost. In truth, the various positions on the freedom of trade, or its limitation, adopted by the governments represented at Seattle were determined in each case by the nature of their own interests.
It is also worth remembering that it is thanks to the level of economic development they have achieved that the rich nations are today able, to varying degrees, to defend non economic values and speak out on issues to which public opinion in these countries is sensitive (such as working conditions, the environment and human rights). And it is also important to remember that this level of development has been achieved in the past thanks to an exploitation of the workforce and of natural resources every bit as bad, if not worse, than that which is now occurring in most Third World countries. Just think of the role slavery played in the economic development of the United States of America, of the inhuman conditions in which, until the end of the 19th century, men, women and children were obliged to work in Europe’s factories and industries, or of the sheer scale of the deforestation and the erosion of the soil provoked in Europe by the agricultural and industrial revolutions.
Remembering all this certainly does not indicate a failure to hold these values dear. On the contrary, if the quality of life is to be improved universally and, in the long term, if mankind is to survive, then they must be upheld, safeguarded and promoted.
Instead, what remembering all this really indicates is recognition of the fact that the best way to ensure the future survival of these values in today’s economically backward countries is to create the material and cultural conditions that will allow them to advance and emerge from their state of backwardness. To do this, they must be in a position to produce and to export; in other words, they must be allowed to enter the circuit of world trade on favourable terms — not excluded from it because, being poor, they do not have the capacity to affirm the same values as the rich. It cannot be denied that the cost, in human terms, of the economic development of these countries will be a high one. But it is a cost which must be weighed up against that of their failure to advance, remembering that the alternative to child labour is often delinquency, prostitution, or starvation, and that the only alternative to violation of human rights is sometimes a total collapse of civil cohabitation and the outbreak of clan warfare. In this regard, what the world’s developed countries could do is contribute, through the application of their own resources, to the reduction of this cost. In the light of these considerations, it is not easy to fault the argument of those who maintain that the real losers in Seattle were the poorest of the world’s poor.
In truth, Seattle provided the setting for what was, in fact, nothing other than a clash between the conflicting protectionist stances adopted by the rich nations of the world. And it can legitimately be held that the deep significance of the spectacular failure of the meeting lies in the fact that it marked the start of a phase of out-and-out crisis in world trade.
But what is the cause of this crisis? Before attempting to answer this question it is important to get a common misconception out of the way: the idea that freedom of trade is the same as deregulation. No idea could in fact be more false or more misleading. Free trade is based on the creation and maintenance of competitive conditions, conditions guaranteed by a series of rules that must not only be in place, but also enforced. Let us not forget that the birth (on January 1st, 1993) of the single market in Europe — an event preceded by over forty years of progressive harmonisation of the economies of the Community’s member states had necessitated the passing, by Community bodies, of almost 300 measures in order to make just a degree of freedom of trade possible (a degree which is still vastly insufficient, moreover). But there is more to it than this. The promotion of freedom of trade in a market characterised by major imbalances in terms of economic development also presupposes the application of compensatory policies which reduce the most dramatic gaps by transferring wealth from richer to poorer areas. It is thus impossible to consider deregulation as synonymous with a free market as all the former does is give rise to brutal power conflicts that have nothing whatsoever to do with freedom and that only allow the strong to get richer while the weak get poorer.
And part of this picture is the objective of rendering the free circulation of goods compatible with the safeguarding of health, of the workers and of the soil and environment, as the extent to which these needs are met in different countries constitutes one of the factors determining their competitiveness. Also part of this picture is, in another way, the problem (not raised in Seattle) of safeguarding and spreading the model of the welfare state which, one of the greatest achievements of European political civilisation, is today threatened by the spread of the culture of deregulation. There is no doubt that in a setting characterised by a high level of interdependence, by rapid technological progress and by vast social inequalities, the maintenance of international competitiveness on the part of industrialised countries necessitates a series of transformations, as well as increasing flexibility on the part of both entrepreneurs and workers. But it is also clear that this need must be tempered by another, opposing one: the need for safety and for the gradual planning of change. If it is not, the lawless international competition that will ensue will have very unhappy consequences: the workforce will become more mobile (leading to the uprooting of sections of society), companies will be more liable to fail, the section of the population living in desperate conditions of poverty and abandonment will increase (prompting a spread of delinquency) and entire cities, and sometimes entire regions, will become industrial wastelands: in short, the fabric of society will disintegrate. The alternative to these scourges, which after all constitute the dark underside to America’s astounding economic growth, is a political course which regulates competition and guides technological progress, rendering both compatible with a high level of social stability.
If all this is true, the conclusion must be drawn that the free market that comes closest to the ideal model (where all operators act on an equal footing) emerges in a context in which more definite rules prevail and in which it is possible to achieve a sufficiently high level of social solidarity, in other words, within a state. But the same is also true of international trade relations, even though these cannot be governed by regulations of a legal nature, and even though the degree of solidarity that can be achieved in relations between states is immeasurably less than that which can be achieved within the confines of a state (the case of Europe’s single market is an intermediary one: while its laws do not yet have the character of state laws, it is the result of a sufficiently intense and enduring level of collaboration between a number of states involved in a process of unification). The international “market” functions satisfactorily, and favours the expansion of trade and the diffusion of wealth, when the role played by the state in the domestic market is assumed and carried out, albeit far less effectively, by one or more hegemonic powers which have the capacity to impose on the rest of the world (or at least on that part of the world which plays a role in international trade) relatively stable and uniform guidelines. Despite not constituting, as mentioned earlier, enforceable laws or binding policies, such guidelines nevertheless render reasonably predictable the behaviour of the economic actors on the world stage. Although these directions are, of course, imposed by the hegemonic power in its own interests, this does not alter the fact that a condition fundamental to the efficient functioning of a hegemony is acceptance of the same by the states which submit to it (also because, in the final analysis, it coincides with their own interests to do so).
In the past, expansions of world trade have occurred whenever a power has taken on this hegemonic role (as Portugal, Spain, the Netherlands and Great Britain did, in different periods, from the fifteenth century onwards); and the transition from one hegemony to another has always been marked by periods of crisis and unrest. The last, and most dramatic, of these crisis periods was the one prompted by the end of Great Britain’s dominion of world trade which coincided with the outbreak of the First World War. At the time, the United States had still to appreciate the new responsibilities that it would have to shoulder — full awareness of its new role was not to come until the start of World War II — and it cut itself off from the political, and to a certain extent, economic events unfolding in Europe. No reminders of what happened in that period are needed. It ended, at the close of the Second World War, with the United States assuming full responsibility towards the whole of the West, and thereby triggering half a century of expanding trade and increasing wealth in the industrialised world.
At the present time, it would appear reasonable to advance the following hypothesis regarding the real historical meaning of the collapse of the Seattle meeting: that it constitutes an indication that we have now reached another turning point, and that the US too, like others before it, is now about to lose its role as the driving force and regulator of world trade. This may seem a paradoxical affirmation in the light of the American economy’s high growth rate and lack of inflation, of the country’s low unemployment figures and unchallenged leadership in areas of advanced technology, and of the continuous boom of Wall Street. But alongside these positive signs, two negative ones must be considered, too. One is America’s huge trade deficit and the other is the escalation of trade disputes between the United States and the other economic areas of the world. Both are elements that point to the emergence, in the relations between the United States and the rest of the world, of opposite trends to those which characterised the first decades following the end of the Second World War. The latter was a period during which the United States’ showed (logically enough, given the dollar’s role as the currency of international trade) a structural trade surplus, and during it enjoyed easy trade relations with the rest of the world (which then was the Western world).
This weakening of the hegemonic role played by the American economy at world level is reflected in America’s growing inability to impose, through the WTO, its own rules on international trade. And since there is no one else with the capacity to do this, the result is growing deregulation, in other words, an increasingly acute crisis of the world “market”. And this explains the rebirth of protectionism, even though in most cases it is a protectionism which hides behind the respectable mask of moral stances on the defence of human rights, the struggle against exploitation of workers, and minors in particular, the safeguarding of the environment and of health, etc. And if this trend has not, so far, degenerated into chaos, then this is due to the fact that the United States uses its political and military power to make up for what its economic leadership lacks. The dollar and Wall Street continue to constitute resources whose reliability is guaranteed by the fact that the United States is today the only great power left in the world, a power to which there exists no realistic alternative: neither Europe (which is politically non existent and whose weakness, due to its division, was particularly in evidence in Seattle), nor Russia (on the verge of disintegration), nor China (battling with development and modernisation problems of gigantic proportions). And this is why, despite everything, Wall Street continues to attract foreign capital, and the rest of the world’s money continues to be channelled into sustaining America’s position of power, and paying off its debts.
But this situation cannot persist for long without giving rise to a crisis of major proportions. A way out of the present difficulties needs to be found — in other words, a new world order that will allow new international trade rules to be defined and imposed, as well as giving the most backward economies the decisive impulse that they need in order, finally, to start moving. One thing seems clear: the hegemony of the United States is not destined to be replaced by the hegemonic domination of another major power in the way that, in the first half of our century, British hegemony was replaced by American hegemony. The time has come to set in motion a process by which the conditions will be created for the exercising of a form of collective responsibility in which more and more countries will share until such time as the era of hegemonic powers has been consigned definitively to the past.
It is important to make it clear from the outset that the engine of this process will not be the World Trade Organisation, however important this body may become as a forum for the conducting of multilateral negotiations. Being an organisation led, albeit imperfectly, by the United States, and in which the other countries, or the most important ones, have enough weight to be able to contest the American order, but not enough to create an alternative one, the WTO in fact does little more than reflect the unstable and unbalanced power situation that currently exists in the world. What is more, given the indissoluble link between trade and many other aspects of life, a specialised body, being totally ill-equipped to react to the contradictory claims advanced, often as pretexts for something else, by the member states and by a whole galaxy of different non governmental organisations, can tackle the problem of how to manage interdependence only in a precarious and unsatisfactory way.
Before any serious thought can be given to how the current state of impasse might be overcome, the true nature of the problem with which we are faced must first be recognised: it is not, or not only, a problem of trade, but a more general one of how to achieve sustainable development at world level; thus, it is not a technical problem that can be tackled with the instruments of functionalism, but rather a political one that must be tackled with the instruments of government. A process needs to be devised which, as it advances, allows the governmental institutions to grow in accordance with the expansion of the ambits of interdependence.
Clearly, it is only through a world federal government that rational management of interdependence can ultimately be guaranteed and — going beyond conflicting national interests and incompatibility between positions adopted in pursuit of different values — the general interest of mankind pursued. If it is truly our intention to seek to define a historical course that will allow, on a realistic basis, a better future to be envisaged and planned, then this objective — however distant it seems — must never be allowed to slip from view. It is an objective that must be broken down into stages: stages that will mark the progressive increase in, and expansion of, regional federal unifications. By this, we mean areas covered by major democratic states which have the capacity to generate — within their confines and through effective political mediation of conflicting interests, aspirations and values — the right conditions for true competition, and thus to create vast internal markets. As these unifications emerge, the sphere of international relations will, as a result of the progressive reduction in the number of actors on the international stage and the consequent strengthening of the same, begin to be characterised by the emergence of the conditions that will allow — until the time and conditions are ripe for the birth of a federal government for the whole of mankind — a global governance, and thus a world “market” which are considerably more stable and balanced than the present ones.
If this is to be the route, then the starting point can be none other than Europe. But the European Union today is not ready to shoulder the responsibilities involved. Its stance on the lifting of trade barriers and on the political choices on which this depends (i.e., a readiness to invest, particularly in infrastructures and in basic and applied scientific research) is protectionist and hesitant. This is not to be wondered at, since the divisions within the EU, so evident in Seattle — and which, prior to Seattle, had already exploded to the surface in the sorry saga of British beef — preclude the birth of a single trade and budgetary policy oriented towards the achievement of great growth objectives. The Union’s governments thus find themselves obliged to embrace the philosophy of the Stability Pact, which is the inevitable consequence of division, and opt for the path of competitive deflation. In this way, Europe is reduced to little more than a weak protector of corporative interests, in spite of the fact that it is, given its production structure, naturally far more inclined, albeit in a framework compatible with environmental protection and with the maintenance of its social model, towards cooperation, development and innovation. Whether or not we needed one, Seattle has provided us with yet another, clear demonstration of just how crucial the political unification of Europe would be to the start of a new cycle — dynamic, fair and progressive — of world trade.