In 1999 at Seattle anti-globalists began to proclaim imminent counter-revolution as the World Trade Organisation trade liberalisation talks collapsed.
In 2003 at Cancun their triumphalism waxed when the G20 (“group of 20”) less-developed nations stymied cynical big-economy manoeuvrings.
Books were written, by John Ralston Saul among others, pronouncing globalisation dead and nationalism resurgent.
Add in rising oil prices and American and European fears of China and maybe the post-1945 trade liberalisation wave was reaching high tide.
Not so fast.
New Zealand negotiating officials, not the sort to count chickens prematurely, are looking a little less gloomy than after the mark-time WTO talks in Hong Kong in December.
Time is running out, as Brian Fallow noted in yesterday’s Business Herald, to finalise the “modalities”, to put hard numbers on soft proposals. The United States’ congressional trade promotion authority expires next year and that will take out the pivotal player if deadlines are not met this year.
And there remain, as Fallow also noted, serious challenges for the G3, — Europe, the United States and the G20, now spoken for by Brazil. Not least, developing countries fear China (a G20 member) will swamp their industries.
That looks unpromising. But there is a counterfactual cost of not reaching a deal.
While United States can offset piecemeal much of the direct cost to it of a failed WTO round through bilateral deals, for which it has a long list of suitors, and while Europe would be relieved of painful pressure to cut agricultural protection, both still stand to lose from failure, not least through rigidities in services and protection of intellectual property.
The G20 countries would face the present barriers to access to rich countries’ consumers. Asian cubs fattened into tigers on exports to the United States.
For this economy a failed TWO round would mean lost opportunity which would not be made up in bilateral deals, not least because it is the bigger and more strategically positioned economies (including Australia) that get on negotiating lists, not a small, already open economy at the bottom of the world. China is the standout exception and there now appears to be a possible way through the difficult behind-the-border issues noted by visiting Premier Wen Jiabao: to settle for less than Singapore-style state-of-the-art arrangements but write in a commitment that New Zealand gets any improvement a subsequent negotiator gets.
Opponents of free trade advance many arguments (apart from ideological opposition to capitalism).
One is that lower-cost or exploitative or more sophisticated foreign competitors destroy local jobs. This applies alike in rich economies, even the United States, where critics fear a “race to the bottom” and lower living standards for the non-elites, and in poor economies with fledgling industries not yet on their feet, where, critics say, the poor would stay poor.
A second argument is the damage huge multinational companies have done to vulnerable third-world economies — rape of resources, exploitation of cheap labour and so on. Even in a developed economy like this one, multinationals are suspected of gouging.
A third is the limits free trade deals impose on national regulatory authorities’ capacity to set standards for food safety, cultural protection and so on.
A fourth is a belief that unrestrained capitalism is squandering raw materials: better a more modest and locally self-sustaining lifestyle, with local economies to match.
There is also something in the point that national governments do the negotiating and they put national interests first (as they see them) — that is nationalism greatly (and malignly) distorts global trade.
Moreover, the path from a poor economy to a rich one often passes through some nasty ravines. Britain had its satanic mills, the United States is gangster capitalists, Japan its cabals of company bosses, bureaucrats and politicians, South Korea and Taiwan unlovely dictatorships.
There is evidence of all of the above and it sullies the globalists’ case. A benign world government could ensure all boats rose on a steady tide. Instead, in Brazil, China, Russia and countless other places many boats are holed and the tide, at least initially, enriches lucky or ruthless elites.
Our own modest version after deregulation spawned a new rich elite and (even though many necessities became cheaper, including cars) left most people no better off and many worse off for more than a decade as incomes stretched and wages were held.
But to focus on the now excludes the future. Critics of free trade give a static snapshot of a dynamic process.
Moreover, trying to insulate an economy from world economic developments is counterproductive longer term. This economy showed that in the 1970s. Maori also could not have kept clear of nineteenth-century imperialism, which was largely driven by economic motives.
China and India locked themselves away and stayed poor. Now both have rising middle classes. In 50 years the poor there will be much better off. Restore agricultural product prices in poor Africa, allow real access to the rich countries’ overcharged consumers and give Africa’s own consumers a break with cheap world goods and Africans might at last climb off the floor. Development economics hasn’t worked. (Corrupt governments haven’t helped.)
Enrichment might conceivably happen through proliferating bilateral and regional deals. But it will more assuredly happen with multilateral trade liberalisation. Those who side with the world’s poor might better battle for better liberalisation instead of making triumph out of no liberalisation.