Civilisation for sale: Free trade sounds good, but who benefits? Not the poor, nor the environment, nor us, says David Nicholson-Lord

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The Independent Online
THE LATEST, longest-running and most ambitious attempt to expand the global marketplace faces a deadline this week and the world is holding its breath. Will free trade and liberal values triumph, ushering in a new era of prosperity? Or will vested interests, notably French vested interests, sabotage a deal, signalling a return to the bad old days of beggar-my-neighbour protectionism?

Melodrama has tended to characterise the reporting of the Uruguay Round of the General Agreement on Tariffs and Trade (Gatt). Peter Sutherland, Gatt's director-general, has warned that, if the 116 countries involved fail to sign a deal at Blair House in Washington on Wednesday, 'the law of the jungle' will rule. Loss of business confidence, a new twist to recession, even stock market collapses are threatened. Faced with extraordinarily complex issues, the media largely repeat what they are told. And what they are told is, eventually, what everyone comes to believe. How can anyone oppose trade if it is free?

Yet there is a world beyond Gatt. Contrary to the widespread impression that civilisation may founder if the talks fail, many people believe that the prospects for civilised life may be enhanced.

Shorn of its detail - multi-

fibre arrangements, intellectual property rights, Japanese rice imports and the like - Gatt represents an attempt to expand, enormously, the cash economy and the market imperative. This will allow goods and capital to flow more easily and quickly round the world, creating new markets and new jobs. The world's money economy, as measured by trade flows or national income, should grow. Good news all round, surely?

That depends on who gets the new jobs and what they cost - socially and environmentally. According to a study by the Organisation for Economic Co- operation and Development (OECD), representing the rich nations, and the World Bank, a successful Gatt would add dollars 270bn a year (about pounds 180bn) to world income by 2002. Even if this were true - and one of Gatt's senior economic advisers has admitted that such figures are 'almost astrological' - the benefits would not be uniform and comprehensive. In some projections, the European Union wins - thanks largely to the dismantling of farm protectionism - but much of northern and sub-Saharan Africa, Indonesia, and the Mediterranean countries lose. In others, Brazil, Mexico and Canada lose, too. China wins, and so, just, does the US.

THE justification for expanding world trade is that, though the rich may get richer, the poor will be better off, too. The extra money will 'trickle down' to needier countries and, within each country, to the neediest parts of society.

But we have already seen an elevenfold growth in world trade since 1945 and many Third World specialists believe that the 'trickle- down' theory has failed. World poverty, both relatively and absolutely, is growing, they argue. Per capita income in the Third World actually fell in the 1980s. According to Michael Barratt Brown, chairman of the Third World Network, economists who argue that the market acts as an escalator, carrying the poor up behind the rich, are wrong. In the last three decades, he says, development 'has intensified the inequality of incomes, with the poorest countries most adversely affected'.

The 1980s also saw a widening of income differentials within the rich countries. Deregulatory policies - the lifting of employee protection, the abolition of exchange controls - have made Britain as a whole richer. But the poor have become poorer. The poorest fifth are worse off now than in 1979 - the poorest 10 per cent, for example, are 14 per cent worse off. Income differentials have widened from 10 to one in the 1970s to 18 to one. In the US, another enthusiastic deregulator, real wages for shopfloor staff fell by 18 per cent during the late 1970s and 1980s, while the executive classes gained.

Many critics, such as Tim Lang, director of Parents for Safe Food and co-author with Colin Hines of The New Protectionism, believe the 1980s were a dress rehearsal for the post-Gatt world. The financial gains from a Gatt deal, applied to an unequal world, would simply exacerbate its inequalities, they argue. The result would be the creation of a vast underclass - a source of crime and social instability - increasingly vulnerable to the movements of international capital.

The British government, for example, is already promoting Britain as a low-wage economy. Last year our labour costs were 12th out of 16 EU and European Free Trade Association countries. Hence the charges of 'social dumping' levelled at the UK when Hoover decided earlier this year to transfer production from Dijon in France to Cambuslang near Glasgow. Such policies may make some sense in a European context - but how far can they be taken?

Britain undercuts France and America in labour costs by 15 to 20 per cent. Compared with the Norwegians, whose labour costs are 76 per cent higher, we are an investor's dream. But set us against the Third World and we are priced out of the market. Mexico's labour costs are less than 15 per cent of ours.

And if Britain in the 1980s was a rehearsal for Gatt - rising crime, diminishing neighbourliness, longer working hours and increased unemployment - then in Mexico, critics argue, you can see the real thing. Along the Rio Grande border with the United States, multinational companies have taken advantage of rock-bottom wages (the equivalent of 35p an hour in one television plant) and almost non-existent environmental, social and employment protection standards to set up nearly 1,800 export-only factories - so-called maquiladoras -

employing half a million workers.

The result, according to Susan George, a director of the Transnational Institute, a development think-tank, is 'an ecological disaster zone'. Border towns have been turned into toxic dumps, rivers flow with hazardous waste, sewage routinely contaminates drinking water. In some border areas, the rate of anencephaly - babies born with no, or with partial brains - is four times the national average. 'For ordinary people,' Ms George says, 'crowded and unsanitary living conditions, social degradation and rampant environmental destruction have combined to make the maquiladora zone a reasonable facsimile of hell on earth.'

Throughout the world, governments are emulating Britain and Mexico in a Dutch auction of their labour costs aimed at luring multinational investment. Hence the rise of the so-called export processing zones - bits of national territory using cheap labour to produce consumer goods for the industrialised countries. There are now an estimated 260 such zones in 67 countries: safety is often minimal and trade unions unwelcome.

The zones set in revealing context the benefits to Western consumers that Gatt is supposed to deliver. Gatt's Mr Sutherland argues that consumers 'might be shocked' if they knew how much of their household budget outgoings were affected by trade protection. But might they not be equally shocked to discover how much the promised post-Gatt era of cheap prices owes to daily life in a Third World sweatshop? In May, for example, 210 people, mainly women, died in a factory near Bangkok in Thailand. Last month 81 died in a factory in China's 'special economic zone' of Shenzhen. Both factories were making toys for export, mainly to the West. In both cases, basic safety standards were lacking: doors were locked to prevent theft and absence. Such incidents lend a radically different meaning to the term 'protection'.

But the zones have something else to tell us about the post-Gatt world which citizens of Western democracies may find more difficult to ignore. Many of the jobs in Mexico's maquiladoras were once American. If trade barriers come down, more Western jobs will go to such places. According to a new study by Tim Lang and Colin Hines, published this month, Gatt will produce job losses rather than gains, at least in Europe.

Indeed, these job losses are already happening. In the year from March 1992, the top 1,000 British companies shed 1.5 million jobs, about a sixth of their workforce. In Germany, a survey this autumn of 10,000 large and medium-sized companies found one in three planned to transfer production to Eastern Europe or Asia in the next three years because of lower wages and laxer environmental standards. A special commission of the French assembly concluded recently that much of France's unemployment results from companies siting factories in the Third World: it estimated that unemployment in France would rise by 3 to 5 million in the next 10 years. Yet, according to the EU, 25 million new jobs will be needed by 2010 just to cope with a 15 per cent growth in the labour force.

No British government department has estimated the effect of Gatt on the economy or jobs. Nor has the Confederation of British Industry. When asked, all point to the rosy prospects outlined by the OECD, the World Bank and Gatt itself. If they know anything to the contrary, they are not saying.

A POST-GATT world could thus be bad news all round - huge job losses in the rich countries, eco- disasters and sweatshop zones in the Third World. So why do so many governments seem to favour a Gatt deal? The answer partly is that the beneficiaries tend to have political power while the losers do not. In the West, governments can get enough votes from what Professor J K Galbraith has called 'the contented' without worrying about the unemployed. Many Third World leaders do not face the ballot-box and need not trouble themselves about the sweatshop vote at all.

But the most important reason is that Third World governments may have no choice. Post-war development has already taken them down a road from which they are offered little chance of return. Informed that the path to development lies through urbanisation and industrialisation, the Third World borrows money for investment, plants cash crops for export, neglects the peasants, subsidises the city-dweller, encourages the growth of mega-cities. But commodity prices tumble and debts mount.

To recycle the debt, it agrees to more of the same free-trade medicine, in the guise of 'structural adjustment policies' imposed by the International Monetary Fund or the World Bank. These involve dismantling welfare systems, chopping down forests for sale abroad, destroying self-reliant craft industries and replacing barter economies with money economies. Reliance on cash makes them more vulnerable to global capitalism. The debt grows.

The general impression is that the rich world gives money to the poor world. This is quite wrong. Between 1982 and 1990, according to the OECD, the Third World gave the West, in debt servicing and loan repayments, and after all Western aid and investment is taken into account, the staggering sum of dollars 418bn - six times what the US gave to Europe after the war under the Marshall plan. According to development analysts such as Susan George, such huge South-North transfer payments result from the routine, daily operation of the global free market.

The Uruguay Round of Gatt, however, adds a novel twist. Any rule or institution that might prevent another nation's goods from entering freely will be counted as a tariff. (The process is known as 'tariffication'.) It will then, under a Gatt regime, be reduced. Environmental laws - action by countries to ban imports of rainforest timber or to impose rules on product recycling - are among the examples. But ways of life - cultural diversity - are also at stake.

The best-known example is the French film industry - the French government's subsidies are counted as tariffs because they give it an advantage over Hollywood imports. Another, lesser-known example is Japan's large-scale retail store law, which encourages small shops in pedestrianised streets - the hokoosha tengoku or 'pedestrian heavens'. American companies, used to car-borne shopping in the ubiquitous out-of-town mall, do not like pedestrian heavens and American trade negotiators consider them a barrier to trade. If Gatt goes ahead, the law, and the pedestrian heavens, could be tariffied out of existence.

So who does win from Gatt? The evidence suggests that the main winners from the Uruguay Round will be the big multinationals - the 500 companies that already control two-thirds of world trade - and will have an even wider and easier choice of cheap and unregulated locations for their factories. Those Western consumers who manage to hang on to their jobs may do well, too - as long as they do not mind the hours they are forced to work. Third World elites not faced with the choice between a neglected peasant economy and an urban sweatshop should also prosper.

The losers, however, will be a vast and growing proletariat, in both rich and poor countries, whose jobs, wages and employment conditions will depend increasingly on the caprices of international capital. It is a disturbing prospect - of a sort of global slave state. An alternative exists, one that deals more in regulation, moral frameworks, rural development, local and regional self-sufficiency, job sharing - and that might even restore some of the 'freedom' to free trade. The odds are, however, that if the Gatt power blocs sign a deal at Blair House, such alternatives will barely figure in their calculations.

(Photograph omitted)