The DC Voter
League of Women Voters of the District of Columbia
Vol. 77, No. 7, July/August 2001
Supplement

LWVDC Summary of Remarks by Dr. Moísés Naím
at Symposium on Trade, Assessing the Impact or Liberalized Trade on Developing Countries, June 11, 2001

[Companion Event, LWVUS Council 2001, Washington, D.C]

Dr. Naím's presentation provided an overarching view of how to look at trade in the context of globalization. While trade may be the cutting edge of globalization, globalization goes beyond trade to embrace other financial matters, such as investment flows or even non-economic aspects like the international spread of culture, political rules, and institutions.

He began with what he called a preamble with four paradoxes (the titles are ours):

Paradox # 1, Reality/Action vs. No Action:

A ministerial meeting of the World Trade Organization appears in the media to be full of action, judging by the events in Seattle. But the action is on the part of protesters in the streets. From the point of view of those inside, that meeting was a failure because countries could not agree on launching a new round of measures that will induce countries to pursue free trade.

The next ministerial meeting is to be held in Doha, capital of Qatar, one of the Arabian Gulf States. There is criticism because Qatar is very hard to access, and measures are being taken to limit protests. However, according to an informed view by a friend of Dr. Naím's, this is going to a very boring meeting for those wanting to see results. It will be even more of a failure in trying to provide a new round of free trade.

In a similar vein, a few months back there was a meeting of all Heads of State of the Western hemisphere in Quebec. One of the purposes of the meeting was to try and see if they could follow up on the promise of a prior summit in Miami, namely, to have a free trading hemisphere at 2005. In Quebec, inside the building where the summit was held nothing substantive happened; outside the building there were major street protests again, but about a meeting where nothing happened.

Paradox #2, Impact of Protected, rather than Free, Trade:

The impact of free trade on developing countries is often mentioned as an issue of grave concern. Yet to assess the consequences of limiting international trade one can also look at what happens when developed countries curb trade. The best laboratory in the world for this is Europe, in agriculture. It is very hard to export agricultural goods to Europe. As a result, Europeans have to pay 260% more for their sugar than the average world price, 200% more for rice, 180% more for bananas, 150% more for corn, and 100 % more for citrus. Just imagine the vested interests and political forces that are forcing European consumers to pay so much more for these basic goods. Now think about how much more vulnerable a government in a poor country is to the influence of those that will benefit from limiting trade. Of course, they will call it "protect local producers" and wrap themselves in the national flag.

Paradox #3, Free Trade Talk vs. Political Realities:

As part of his platform, President Bush characterized himself as an unabashed free trader. Nonetheless, he has recently promoted measures to protect U. S. Steel (by governmental action to limit imports of foreign steel). For the rest of world, including developing countries, it is going to be hard to export steel to the United States. Note, however, that the market capitalization of the total steel industry in the United States is about one billion dollars, which is very small. Even so, steel interests are powerful enough to encourage a freetrader President to adopt protectionist measures at the expense of U. S. consumers of steel. This is like the industry capable of having all Europeans pay 260% more for sugar.

Paradox #4, Popular Imagery of the WTO: All-Powerful vs. Wimp:

To hear people talk, one would imagine that the World Trade Organization is quite powerful. In fact it is an organization that ought to be capable of taking on powerful interests, such as steel, sugar, bananas, etc. However, the WTO is very small, new, underfunded, and understaffed. By definition all new organizations have great difficulties performing at high levels quickly. It also is clumsy, as with all international organizations wherein decisions have to be made by reaching agreement among sovereign states. It is not that the WTO cannot reach important decisions, that it is incapable of mustering and mobilizing ideas and political support for initiatives that are of global importance. It may eventually get to that point, but we are very far from it. It is important to appreciate the WTO's limitations.

With the above contrasts to set the scene, Dr. Naím then discussed an organizing framework for how to think about trade, how to read about trade. He suggested that it was useful to divide people into three categories or themes.

He identified them as the three "P's" of international trade: Trade as "panacea," "poison" and `platform"

• Panacea: The free traders, and some are quite fundamentalist in their approach, see free trade as the be all and end all. Free trade can solve many of the world's international poverty problems and domestic problems. Free trade is good, period.
• Poison: These see free trade as bad It forces small, poor countries to compete with global behemoths and multinationals. Free trade hurts the environment, women, children, and the poor. It increases inequality, both inside countries and between countries.
• Platform: These say we know that trade is what it is, neither poison nor panacea; but we are going to use trade to advance other goals. We will use it as a lever. There is no other way in which we can introduce our issues, our agendas in conversations unless we tie them to trade. Therefore, we are going to use a variety of tools to inject our issues into the negotiations of trade: trade and environment, trade and labor; trade and women, trade and political development .... Imagine a problem, and there is a group that promotes the linkage of the solution or eradication of that problem with trade negotiations.

Additionally, Dr. Naím stressed how long trade has been with us but also how it has accelerated recently. The number of the people now in the world being touched by trade is bigger than ever. The rules of the game - - the actors, the technology, the problems, the institutions, the frameworks, the laws - - are new. In the late 1980's, early 1990's the negotiations were about trade. Now the debate includes, for example, intellectual property and new agricultural products (genetically modified organisms) present in much of the food we eat every day. Cultural attitudes impinge on economics and pose difficult issues to resolve for which we do not have precedents.

So the message is one of confusion, of diversity of issues, of speed and of proliferation of new actors. No longer are trade negotiations among the experts who understand the arcane acronyms. In the U. S., for example, there is the U. S. Trade Representative (the unit in the Administration that deals with trade issues) but also involved are the Departments of Agriculture, Justice, State, and Defense as well as state and local governments. There also is a proliferation of non-governmental actors, both organizations and media.

Furthermore, the debates about trade very often are not about trade. They are about investment, corporate control, politics, and cultural attitudes, including anxiety about rapid change and related outcomes. Even though countries are already trading, they want to sign trade agreements to share a common macroeconomic framework, harmonize regulations, and address migration (which is a big issue that is beginning to touch trade). Since such an array of concerns gets dumped under the moniker "globalization," Dr. Naím asked if LWVUS were going to extend the mandate of the League Trade Task Force to address the matters entailed in globalization that clearly transcend trade.

Conclusion

Dr. Naím concluded by noting that international trade is the essence of peacetime international relations. From his brief introduction Dr. Naím illustrated that such essence is being influenced by a full set of issues that are not going to go away. He thinks that it is going to be hard to avoid them, even if one thinks that trade should be about trade and even if one thinks it is not fair to burden trade with discussion of other issues, because the hidden forces of protectionism could use such other issues to limit trade.

Addendum/Key Comments in Closing Q&A Period: This provides perspectives offered by Dr. Naím on some significant matters (the transcript in the office covers his final remarks as well as his address).

• The institutions like the IMF and the World Bank are headed by representatives of governments, elected governments for the most part. It is appropriate for an elected government to send representatives to meetings to represent its country's interests. What is the alternative? NGOs? There may be a "deficit of democracy" in multilateral organizations; but there is an even bigger democratic deficit in accountability in NGOs. They were not elected (typically). We do not know who they report to, who appointed the representatives, who exactly they represent.
• In response to concerns about poor working conditions (especially for women in export processing zones in developing countries), Dr. Naím pointed out that the International Labor Organization has a new Director General, Juan Somavía, from Chile. He has been in office for three years and is turning around the ILO. He is a great thinker; he has a personal history of political persecution. Sweat-shop conditions may still be around but they won't be much longer. But be careful when assigning major problems of humanity to poor institutions that may look big but are bureaucracies and thus limited (e.g., the WTO for trade and the UN for wars).
• Further, when examining concerns about issues, such as exploitation of workers in export processing zones and the effects of the mobility of capital, the logic of arguments made by some would require endorsing policy prescriptions that may be counter-productive. 
  • For the zones, establishing governmental conditions and standards would wipe out the zones in most of the areas. For improvements, however, there may be alternatives. Soon consumers will be able to go to the Internet and, through cameras on site, watch products being made and the conditions of labor there. 
  • Concerning ideas to limit mobility of capital, this would call for controlling foreign currency. All transactions in foreign currency have to be negotiated by a bureaucrat. Nothing does more to stimulate corruption than having to depend upon a government employee to decide at what rate and how much currency to buy.
• We are in a time of hyper-competition, never has there been as much competition. Choices are not narrowed but greater. Another speaker had given an example related to Uruguay, implying restrictions, and under the economic rules of competitive advantage Uruguay would have only cowboys and herders. But Dr. Naím has a friend who, with new technology, can export handicrafts through the Internet.
• Concern had been expressed about endless, infinite concentration of corporations, including the control offered though patents. According to Dr. Naím, while mergers and concentration exist, this is not endless according to empirical reality and history. When companies get very, very large they eventually enter into risky stages of declining competitiveness, where their competitors displace then, or they are broken up by governments. As to patents, although patents are sought to prevent copying by others, these days inventions are protected by other inventions, a situation about which a government has little it can do.

[Prepared by B. Yeomans]