| US Trade Policy Gokarran Sukhdeo According to United Nations studies, the world today is capable of adequately providing food and other basic needs for twice its population. Even in the scriptures we are told so: "For the earth is full, there is enough and to spare; yea, I prepared all things, and have given unto the children of men to be agents unto themselves." But everyday 8,200 and more die from AIDS in poor countries because treatment though available is not affordable; 6,020 children die from diarrhea because they do not have clean water to drink; 2,700 die from measles because the vaccines are available but not affordable, and 24,000 die from hunger because "the children of men" who have been the "agents" or custodians of the distributive process choose to distribute the resources with such skewedness that today, roughly 80 percent of the world's resources are owned and controlled by 20 percent of the population. Had Cancun 2003 materialized successfully, the UN had estimated that 140 million people would have been lifted out of poverty – all through a more equitable distribution of resources brought about by fair trade practices. In the first part of this series (ustrade.html) I explained why the rich nations, the United States in particular, through their trade policies, stubbornly hold on to and maintain this skewed distributive process – because US trade policy has been largely determined by security concerns. For the US, the issue of security and strategic importance transcends any singular Foreign Relations policy, and covers all aspects of relations including trade, foreign aid, economic assistance and military assistance. In addition, these policies are largely influenced by the inevitable process of globalization, which itself is a process of vicious marginalization of the poor. Thus, free trade – the engine of growth, the international panacea to poverty – highly recommended by Nobel Prize economist, Jagdish Bhagwati, and countless other reputed economists, will remain a myth. Trade policy will continue to remain the "handmaid" of the politics of security, and the US will continue to cling to certain protectionist policies. Because of this dichotomy of interest between security and trade, professor of political science Judith Goldstein observes that US trade policy is riddled with inconsistencies. In exploring US trade policy with particular reference to Latin America and the Caribbean, in the first part of this series, I traced the development US hegemony and trade in this region beginning from the end of WWII from a realist perspective. In this article, I will look at development in trade liberalization in Latin America and the Caribbean – also from a realist perspective. Structural Realism & the Liberalization of Trade in Latin America The shift from total protectionism to pro-liberalism by the US, following the shock of the Great Depression, and failure of Smoot-Hawley, was boosted by the passing of the 1934 Reciprocal Trade Agreement Act (RTA). The RTA, which empowered the president to conduct bilateral trade negotiations and reduce tariffs as much as fifty percent, could be considered the catalyst of US and global trade liberalization. The RTA was the intellectual, and for the United States, the legislative progenitor of the General Agreement of Trade and Tariff (GATT). GATT was designed and promoted by the US in 1940s in a sincere effort to knit together the countries that cooperated during the war, and assist in their recovery and economic development. It was intended to highlight the kind of cooperation that was manifested during the war, and to avoid the intense trade wars and economic chaos that prevailed before it. Becoming operative on January 1, 1948 initially with 23 members, GATT had a membership of 125 countries by 1994 and accounted for 90 percent of world trade. Despite its popularity and the great benefits accrued from GATT, political and technological changes the world over, aided by several escape clauses whereby members could hide behind certain agricultural protectionist measures or violate property rights, left several of GATT's provisions in need of modification, as they did not provide optimum benefits to all participants. To correct the kinks that developed in trade relations, several US and UN sponsored conferences followed with modifications of GATT's original provisions. Beginning with the Geneva Round in 1947, there were seven subsequent major tariff conferences – Annecy (France) 1949, Torquay, (England) 1951, Geneva 1955, the Dillon Round 1956, the Kennedy Round 1963-1967, the Tokyo Round 1973-1979, and the Uruguay Round 1986-1993. It should be noted, also, that most of this period was during the Cold War, and US foreign policy was dominated by the Cold War. In many ways this affected the smooth trading relations among the membership of GATT. In addition, the US stubbornly stuck to a host of agricultural protectionist measures that prevented unlimited quotas and free access of Third World agricultural products to the US market. These constraints resulted in several conglomerated actions by Latin American and other Third World countries, some of which will be mentioned later. But for economic and political reasons Latin America and other Third World countries have always been wary of US liberalization policy, as early as the 1970s. Latin America in particular, noted for its rigid import substitution, protectionist trade regimes, was suspicious of, and slow in the implementation of new ideas. They resisted to open up of their markets in reciprocation to the US, while at the same time expected unlimited access to the US market. The interpretation of their behavior draws upon the structural realist approach which maintains that the behavior of states is determined by their relative power capabilities. They are trying to maximize their power and control their destinies. They are behaving the way states always do. Developing countries in Latin America, like all states, are concerned with vulnerability and threat. Like all states, also, they want power and control as much as they want wealth. Unlike developed countries, however, they have been noted for weak political regimes – domestically and internationally. Because of their weakness they could not cushion external shocks, and they were, and still are exposed to vacillations of the international market system. To correct these situations they demanded an increase in the flow of material as well as capital resources, and the creation of a more stable and predictable trading environment than what was offered by US liberalization policy. Their strategy in correcting these problems led them to seek to change or control existing regimes and/or establish new ones so that they could alter the norms and rules of the regime. Some regimes they were instrumental in establishing include UNCTAD which was established primarily to counter GATT, Law of the Sea Convention, and service related regimes as UNIDO (UN Industrial Development Organization) and an air traffic regime seeking equal allocation of traffic between foreign and domestic airlines. Because of their individual inherent weaknesses and lack of military, economic and ideological power which are the basic qualifications in effecting regime change or establishment of new ones, they, in accordance with idealist reasoning, formed alliances with other Less Developed Countries (LDCs), such as Organization of Petroleum Exporting Countries (OPEC), Association of Southern Asian Nations (ASEAN), Group of 77, Organization of African Unity (OAU), Free Trade Areas and Common Markets, and other bilateral and multilateral trading agreements of which there have been about a dozen in Latin America over the past two decades such as the Andean Trade Preference Act 1991, Latin American Integration Association 1980, Chile-Colombia FTA 1993, Chile-Mexico FTA 1991, Chile-Venezuela FTA 1993, Colombia-Venezuela FTA 1992, El Salvador-Guatemala FTA 1991, Nueva-Ocotepeque Agreement 1992, Andean Pact 1969, Central American Common Market 1960, CARICOM 1973, Mercosur 1991, Caricom-Colombia FTA 1991, Caricom-Venezuela FTA 1991, Colombia-Central America FTA 1993, Colombia-Venezuela-Mexico FTA 1993, Mexico-Costa Rica FTA 1994, Mexico-Costa Rica-El Salvador-Guatemala-Honduras-Nicaragua FTA 1992, and Venezuela-Central America FTA 1992. The major objective of these alliances is not so much to have free trade among themselves, since most of them produce the same goods, but to strengthen their negotiations with other trading blocs and their voting power in world and other multilateral organizations. The 1970s saw major attacks by LDCs on the liberal international order, as voting changes enabled them to gain control in the UN and in many international organizations. These changes were directly opposed and inimical to the US, and consequently the US withdrew from the International Labor Organization (ILO) and UNESCO, and later rejected the UN Law of the Sea Convention. Now, after nearly three decades, the Bush Administration is considering rejoining UNESCO. That this intention has been announced in France a month ago, in the wake of France and other European disenchantment to US tactics in the Middle East, speaks volumes of US attempts to regain lost confidence at the international scene, and support for its hegemonic schemes. The gains of Third World Countries since the 1970s resulted in breaking of the ideological hegemony of the US. On April 15, 1994 at a GATT conference in Morocco, attended by delegates representing its 125 members, GATT, the brainchild of US liberalism and chief instrument of US postwar ideological and economic hegemony, was formally dismantled and the World Trade Organization (WTO) was set up to replace it. The ideas of structural realism, therefore, helps us understand world dynamics and the policy movements from the RTA to GATT, to the restructuring of GATT, and its replacement by WTO, and now the apparent collapsing of WTO. Both the RTA and GATT have their origins in the Cold War era, and were designed to cultivate alliances to deal appropriately with Cold War issues. With the collapse of the Soviet Union and the globalization of the economy, however, economic concerns have replaced the Cold War preoccupation with security matters, especially the need to contain communism in Latin America. Therefore, as the US forged ahead with trade liberalization, three major trade arrangements were made with Latin America and the Caribbean, the most recent and promising being the North American Free Trade Area (NAFTA). These were:
Unfortunately, because of certain interest-related objections, the growth of NAFTA has suffered a number of major setbacks. For one, there has been an apparent lack of US resolve – through two failures to renew "fast-track" during the Clinton Administration – has impeded US leadership in trade liberalization and integration in the hemisphere. Even though NAFTA held so much promise for long term security and trade expansion for the US, it was only narrowly ratified in 1993 after a bruising debate. It was significant to note that it was approved by Clinton with more Republican support that Democrat. Clinton also received generous Republican support for trade liberalization policies with China as well as African and Caribbean states. This represents a radical change on the part of the Republicans who have always believed in low taxes and high tariffs (protectionism). But Clinton again met with strong congressional resistance in 1997 when he attempted a fast-track authorization of additional free trade agreement to boost NAFTA. Opposition to certain elements of NAFTA came from both parties. Even the two Democratic forerunners for the 2000 presidential election, Albert Gore and Richard Gephardt took opposite sides, for and against, respectively. It is interesting that all this disagreement over trade policy occurred during a decade of apparent great prosperity. Between 1992 and 1997 nearly 14 million new jobs were created in the US and unemployment dropped by 4.7 percent. The stock market reached unprecedented high. Yet, the current account deficits persisted, primarily caused by huge gaps between US imports and exports, a phenomenon occurring consistently since the mid eighties. As an aside, it is interesting to note how both parties converged on the issue of trade liberalization. In explaining cross party support for trade liberalization, David Karol, presenting a model that assumed presidential tendency towards liberalism, and divided government, showed that divided government aids liberalization or at the least, maintains the policy status quo. And that a protectionist party gains from divided government while a liberal party is harmed by it. He further shows that a divided government does not necessarily reduce executive delegation, but under certain conditions may increase it. Karol's study showed that both Republican and Democrat postwar presidents favoring liberalization tended to receive some support from the opposing party for their liberalization policies, citing Eisenhower, Truman, Reagan, Bush and Clinton as examples. Hence, Congressional division is not a function of party, that is, the independent variable was not party, but according to Karol, it was the constituencies represented by senators – both Republican and Democrat. Another explanation is that of Michael Hiscox whose theory of cross party support is that the continual shift towards liberalism which began as far back as the Reciprocal Trade Agreement Act of 1934, was a function of the changing nature of trade policy coalitions and their relationships with each party. The changes, he claims, result directly from (1) the effects of WWII on US export and import-competing industries, (2) long term shifts in US comparative advantage, and (3) shifts in the economic and geographical interests of party constituencies. Hiscox believes that cross partisan support are efforts to swing the political balance in favor of free trade interests in order to gain reciprocal concessions for US export-oriented products, and hence political support from industrialists. I think what is also very significant about Hiscox's thesis was his conclusion that: since trade liberalization policy was driven by a particular alignment of societal coalitions in the past, it was quite possible that policy could well be stymied or reversed by similar or different coalitions in the future. This appears to be exactly what is currently happening with NAFTA in that there is a growing opposition and protest against the present policy which is largely influenced by certain US interests that are calling for a return to protective measures. Latin American countries have also become less enthusiastic about NAFTA, and are beginning to show a revitalized interest in regional pacts that had originated purely in Latin America and the Caribbean, without US influence, such as Mercusor, Caricom, Andean Pact, etc. In their opposition to the US, some countries are following along with other LDCs the world over in calling for a change of present liberalization regime to a new international economic order. In concluding this series I will look more closely at opposition to trade liberalization both from within the US and the region, and some refutations to this opposition. As previously stated, trade is a hot and exciting topic. If you think Seattle and Cancun were exciting, then you should look forward with enthusiasm to Geneva, December, 2003. Copyright. GuyanaJournal |
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