Hong Kong: Backlash against capitalist globalisation widens WTO divisions

December trade meeting has “fiasco” written all over it

The sixth ministerial conference of the World Trade Organisation (WTO), in Hong Kong, 13-18 December, has “fiasco” written all over it. Last minute talks in Geneva and London, in early November, to save the Hong Kong meeting broke down amid mutual recriminations. Trade ministers now speak of ”lowering expectations” to soften the impact of yet another WTO collapse as in Seattle 1999 and Cancun in 2003.

The Hong Kong meeting was supposed to agree a “blueprint” for completing the so-called Doha Round of trade talks (launched in the Qatari capital in 2001). The Doha Round covers areas such as farm trade, services and tariffs on industrial goods, and promises a ”development profile” as a sop to poor countries that have been fleeced by previous WTO agreements. But after four years of negotiations, the major trading powers are still miles apart, especially over farm trade. As yet, another missed deadline loomed, Brazil’s Foreign Minister, Celso Amorim, exclaimed, “We may need a Hong Kong II”.

A WTO deal must be reached by the end of 2006 if it is to be put to the US Congress before the President’s “fast-track” trade promotion authority expires in mid-2007. This procedure forces Washington’s increasingly protectionist politicians to either vote ‘yes’ or ‘no’ to the whole deal, instead of picking it apart, which usually dooms any agreement to failure.

Global tensions

The Hong Kong meeting takes place at a time growing strains between the main capitalist powers and economic blocs. Even if a face-saving deal is reached at the last minute, this is unlikely to prevent a slide towards greater protectionism and sharper inter-imperialist clashes, underlining the increasing instability of global capitalism. We are experiencing “a difficult moment for the market economy”, commented ‘The Economist’, and this despite the fact that global output grew by five percent last year, the fastest rate for 30 years.

A wave of mass protests against the effects of capitalist globalisation and neo-liberalism has limited each government’s room for manoeuvre at the WTO talks. It has thrown multinational capitalist bodies like the WTO into crisis, but also the European Union and other regional blocs. This was evident when 50,000 people participated in a demonstration to ”bury” the idea of a Free Trade Area of the Americas (FTAA), during President Bush’s recent ill-fated visit to Argentina.

For poor countries – who make up four-fifths of its membership – the WTO is a maze of unequal treaties. This led to the emergence at the Cancun meeting, two years ago, of a bloc of so-called ’developing’ countries called the ‘G20’ (including China, India, Brazil, Egypt and South Africa). This was to provide a counterweight to the main imperialist states of North America, Europe and Japan. The Cancun talks collapsed, partly because the latter refused to make big enough concessions on farm trade – an area where poor countries hope to recoup the losses incurred so far from WTO membership. Despite the fact that farm trade accounts for less than one-tenth of global trade, the discriminatory policies of rich countries have become the main barrier to a deal.

Most transnational companies favour radical cuts in farm support, as this would bring down the prices of the raw materials they need, which are produced predominantly in the ex-colonial (or ‘developing’) countries. Negotiators from the main imperialist countries also know they must offer concessions in order to save the round and win important trade-offs in areas like services, industrial tariffs and intellectual property, where they stand to make big profits. But this is easier said than done. With the EU’s internal cohesion shattered as a result of the voter rebellion in France and the Netherlands, this Spring, the French government is threatening to veto any deal if cuts bigger than those already agreed are made to the EU’s farm support. The French stand on this issue has won support from other EU states such as Ireland, Greece and Italy. This pressure forced EU trade negotiator, Peter Mandelson, to warn that the latest EU offer unveiled in October is “the limit of what is socially tolerable in Europe”.

Nicolas Sarkozy, the right-wing French minister, whose racist comments inflamed the riots that hit 300 French towns in early November, accused Washington of sucking Brussels into a “fool’s bargain” over agriculture. The Bush administration has announced a plan to cut its farm subsidies by up to 60%, on condition that the EU matches this offer. Yet, even as US trade representative, Rob Portman, presented this offer, the US Congress voted to extend US farm subsidies from 2007 until 2011. “The farming lobby in the United States is roughly as powerful as the one in France,” noted the International Herald Tribune.

Is a deal possible?

While unlikely, it is not excluded that a WTO deal can be reached in Hong Kong, at least on paper. One factor concentrating minds is the risk – with a new collapse – that the WTO will become discredited and increasingly sidelined in a scramble towards regional or bilateral (state-to-state) trade agreements. If poor countries are at a disadvantage inside the WTO, negotiating individually with giants, like the US or EU, is an even more one-sided process.

Governments in the imperialist states would prefer a WTO deal to unlock new areas, like services in poor countries to foreign exploitation. They see the prospect of a vast new ”market” in banking, healthcare, education, water, even prisons, falling under the control of transnationals based in the main imperialist states, which already control two-thirds of world trade in services. They want the Hong Kong meeting to adopt a ”negotiated minimum commitment” for all WTO members, regardless of economic strength, stipulating the number of sectors and level of access. If this is agreed it will represent a major new threat to ’developing’ countries, denying many the possibility to assemble basic services.

In Cancun, the G20 presented an image of being a ’united front’ of ‘developing’ countries. In reality, it is a fractious coalition that may shatter in Hong Kong. Governments in India, China, Brazil etc., which serve the interests of their own capitalists, are capable of siding with the main imperialist powers at the expense of the least developed countries in areas where they hope to secure gains. In India’s case, it is in relation to services, and in China’s case, it is to get reduced tariffs on industrial goods. These countries also compete with each other in key areas. Brazil, the world’s ninth biggest economy, has warned it may slap sanctions on Chinese made textiles, footwear, toys and auto parts that are threatening its own producers. This is despite the fact that China has become a major export market for Brazilian farm goods and minerals.

Trade wars?

An even bigger struggle is looming between the main trading powers of the US, EU, Japan and China. Bogged down in Iraq, and seeing its economic primacy challenged, US capitalism regards China as its greatest future rival. Despite being the only “hyper-power” in military terms, US capitalism is losing ground economically. Japan’s Toyota company is set to overtake General Motors as the world’s largest carmaker next year, and Boeing has lost its number one position in passenger aircraft to Europe’s Airbus. Europe is in an even less enviable position, squeezed between US capitalism and the rise of an increasingly China-led Asia.

Partly as a warning to others, the US capitalists have thrown down the gauntlet over China’s alleged “currency manipulation” (the renminbi is closely linked to the dollar), its attempts to ”lock up” oil reserves in Central Asia, Africa and Latin America, and its support for ”troublesome states” like Iran, Sudan and Venezuela (which also flows from Beijing’s ‘oil diplomacy’).

Congressmen Charles Schumer (Democrat) and Lindsey Graham (Republican) have tabled a motion to impose a 27.5% tariff on all Chinese imports, unless Beijing revalue its currency. The Bush administration has not supported the Schumer-Graham bill but is using it as a threat to extract concessions from China.

Since it joined the WTO in 2001, the value of China’s exports has tripled from $249.9 billion to an estimated $761 billion, this year. Never in history has so much new production hit world markets in so short a time span. At this rate of export growth – more than 30% a year – China will overtake Germany to become the world’s biggest exporter, perhaps next year.

But China’s export-driven growth model runs the risk of being “too successful”. The capitalist trading system cannot continue to absorb Chinese goods at the current rate. Under Bush, US capitalism’s role as the world’s main consumption motor has been financed by record levels of borrowing from China and other Asian countries that see this arrangement as a way to keep the US market open for their goods. But this cannot go on forever. If not in the form of a protectionist backlash, China’s export offensive could be stalled by falling demand, as the end of the US property bubble and higher oil prices finally take their toll on the country’s highly indebted consumers.

China’s “communist” leaders now talk about “rebalancing” economic growth towards greater domestic demand, away from exports. But here they run up against a barrier, which Karl Marx identified 150 year ago: the working class cannot afford to buy back what it produces, especially with sweatshop wages! In reality, it is much harder than it sounds for China to break its dangerous dependence on exports. The explosive growth of its industry, which has led to “massive, massive excess capacity”, in the words of Washington economist Nicholas Lardy, will inevitably translate into a glut on world markets.

The recent ’bra wars’ between China and the EU, with 80 million Chinese made garments impounded at European ports, was a sign of things to come. China’s textile exports to the US and Europe grew by around 50% in the first eight months of this year, before being limited by quotas agreed four years ago by China’s WTO negotiators. Steel is a more contentious issue than textiles, and China’s steelmaking capacity has doubled in less than three years, threatening to tip the balance in world markets. Instead of sucking in steel from around the world to feed its building boom, as has been the case until now, by 2007 China will be able to meet two-thirds of global demand from its own steel mills. The stage is being set for a rash of protectionist measures and rising tensions between China, the US, the EU and other capitalist states.

”WTO’s Stalingrad”

The Committee for Workers’ International (CWI) will be taking part in the December anti-WTO protests in Hong Kong, organised by the Hong Kong People’s Alliance (HKPA), a coalition of trade unions and non-government organisations (NGOs), which opposes the WTO’s corporate agenda.

As one campaign slogan puts it, the alliance is hoping that “Hong Kong will be the WTO’s Stalingrad,” referring to the battle that marked the turning point in the Second World War. As HKPA chairperson, Elizabeth Tang, explains, “The WTO, in its ten years of existence, has done more damage than good to people in both developed and developing countries.”

One theme of the Hong Kong government’s propaganda against the coming demonstrations is the risk of violent disorder. The government – handpicked by Beijing’s dictators – wants the territory’s pseudo-parliament to endorse sweeping police powers to stop protests, pointing to a possible “imminent threat to the interests of national security”. This would extend the maximum prison sentence from six months to five years, for participating in an ‘illegal’ protest.

Lee Cheuk-yan, from the Confederation of Trade Unions (HKCTU), denounced this as an attempt to “rip off human rights”, adding that the proposed law would treat anti-WTO protesters as terrorists! The HKCTU is the main independent trade union body in Hong Kong, while the rival Federation of Trade Unions (HKFTU), is pro-China and, therefore, generally tows the Hong Kong government line, including a positive view of the WTO.

The organisations demonstrating in Hong Kong broadly fall into two categories. Some seek ‘reform’ of the WTO or at least argue that an eventual deal can be influenced to protect the interests of poor countries. An example of this is the campaign by the charity, Oxfam, which has gathered over eight million signatures to ’Make Trade Fair’. Others reject this idea and oppose any WTO deal as an inevitable attack on the working class, poor farmers and the masses in the semi-colonial world.

The CWI adheres to the latter group. We reject the idea that trade can ever be ‘fair’ in a capitalist world, or that institutions like the WTO can be reformed in the interests of the mass of the population. The era of free trade was consigned to the history books, along with free competition, in the latter years of the 19th Century.

In the era of globalised capitalism, trade is manipulated by monopolies, cartels and powerful economic blocs to their own advantage. National economies are today inter-linked to an unprecedented degree. Around one-third of China’s exports, for example, are produced by US-owned transnationals – one reason why the Bush administration is not keen on the Schumer-Graham measures. But the capitalists are incapable of reconciling the contradictory interests between the various nation states upon which their power is based. Periodic agreements inevitably give way to new conflicts of an economic, political and sometimes military character.

The movement against the WTO, IMF, EU, and other multinational capitalist institutions, cannot succeed as some sort of national struggle for the rights of one capitalist class against another. It must be a socialist struggle to sweep away these undemocratic institutions and the brutal system of exploitation they rest upon. The transnational corporations, and banking conglomerates that dominate global trade, must be taken over and placed under the democratic control and management of their employees, democratic trade unions, and other representative organisations, through elected committees. Capitalist oppression and environmental hooliganism must be replaced on a world scale by a socialist system where production, distribution and exchange operate according to a democratic plan drawn up through cooperation between the working class of every country.

What is the WTO?

Rather than an impartial forum for trade talks, the WTO, set up in 1995, is an imperialist construction. Imperialism means the most powerful capitalist economies invading poorer countries – by economic or military means – to secure markets, raw materials and labour. Alongside the World Bank and the IMF, with whom it works closely, the WTO is a bludgeon in the hands of global speculators and transnational corporations. Under the flag of ”free trade”, WTO rules help extend the dominant position of these companies, which already control two-thirds of world trade, into new territories and economic sectors.

The WTO is not, despite its claims, a democratic organisation. Although they occupy no formal position inside the WTO, transnational companies exercise more influence over its decisions than most of its member states. Wal-Mart’s share of world trade is greater than that of Bulgaria or Bangladesh. These companies have billions of dollars to spend on lobbying and hundreds of top politicians on their payroll. At ministerial meetings, such as in Hong Kong, the votes of the poorer WTO members are bought by the major trading powers, sometimes in return for concessions, but more often as a result of threats – to cancel debt relief or cut aid, for example. In the run-up to the Doha meeting, Uganda was asked by the US to recall its WTO ambassador because he was not cooperative enough!

The WTO’s machinery for settling disputes is likewise biased in favour of the rich and powerful. This is shown by the fact that half the cases brought before a disputes panel have been initiated by the US or the EU. Due to the heavy legal costs involved, a poor country has to be very sure of its case before pursuing a grievance through the WTO.

How farm trade is rigged

While 96% of the world’s farmers live in ’developing’ countries, their share of global trade in agriculture is just 31%. These facts show the extent to which the rules of global trade are rigged against the poor.

Governments in rich countries dole out $300bn a year in farm support, mostly to wealthy landowners and agribusinesses. In the US, the lion’s share of this ’corporate welfare’ goes to large-scale rice, maize and cotton farmers, enabling them to ’dump’ these products on world markets at less than the cost of production.

By spending $18bn on cotton subsidies between 1999 and 2004, the US nearly doubled its share of world cotton exports from 24% to 39%, prompting Brazil to launch a WTO action against it for causing “The deepest crisis in world cotton markets since the Great Depression”. Brazil won the case, although the US has yet to change its policies. In 2003, for example, 28,000 US cotton farmers received $2.4bn in subsidies – more than the entire GDP of Burkina Faso, a country with 2 million cotton farmers.

Two-thirds of US farmers receive no subsidies at all, while $104bn of the $143bn paid out over the last decade went to the wealthiest ten percent of farmers. One such recipient is Riceland Foods, in Arkansas, the biggest rice mill in the world. Its Chief Executive Officer, Richard E. Bell, was Under-secretary of Agriculture, under former US President Ford.

However, as ‘Oxfam’ points out, even US farm support is “small change” compared with the EU’s €108bn-a-year Common Agricultural Policy (CAP). Here too, four-fifths of the budget goes to the richest one-fifth of farmers. The world’s fourteenth richest man, the Duke of Marlborough, is one of the biggest recipients of EU farm support – 1.4 million euros’ worth in 2004.

European sugar producers receive big subsidies enabling them to export sugar to Africa at 56% below cost. With WTO rules forcing more and more poor countries to open up their markets to ‘competition’, millions have been driven into destitution in the face of a flood of cheap imports. In 2003, Ghana raised its tariffs on imported rice from 20-25%, as a result of growing protests from its own rice farmers. But the move was subsequently reversed as a result of pressure from the IMF, which controls Ghana’s access to foreign funds. This policy coordination by the various imperialist agencies bear out the old adage that “there’s more than one way to skin a cat”!

To reach a WTO deal, the US, EU and other high-subsidising, imperialist countries will be forced to make concessions on agriculture. But the figures quoted in their competing offers are often wildly misleading. Talks on farm trade take place according to an esoteric system whereby different forms of support are categorised according to their “trade distorting” content, which places them in a variety of colour-coded “boxes” (whereby the “green box” is the most benign). But the legal geniuses employed by the main agricultural “distorters” are adept at hiding the real level of farm subsidies and inserting so many loopholes into an eventual agreement that the actual effects may be far less than the politicians claim. On this basis, governments in ’developing’ countries have been hood-winked, time after time, into surrendering control over large segments of their economy.

This article will appear in the forthcoming December/January (2005/2006) issue of Socialism Today, magazine of the Socialist Party (CWI in England and Wales)

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November 2005