FTAA: My two cents worth

[Ed Weick]

Victor Milne:   Trade may produce more jobs in poor countries, as Ed Weick claims, but does that mean we can't have job-producing trade unless we sign on to this particular deal (FTAA)?   No, of course not. Trade theory, as I recall it from my economics courses, envisaged exchanges between equals, with countries specializing along different but complementary lines. Country A is best at growing rye; country B at making whiskey. Both would benefit if they continued to do what they did best and traded, rather than each producing both rye and whisky. The problem, throughout history, is that exchange has rarely been between equals. In a world without fixed and fair rules, powerful countries can bleed weak ones dry.   The issue isn’t really trade, it’s investment by rich countries with capital surpluses in poor countries which lack capital. Capital investment is essential for increasing productivity, creating employment and a raising the standard of living. But there are many different kinds of capital, and they can differ enormously in their impact. Investment in oil in Nigeria is often cited as being of the worst kind. It has wrecked communities and polluted the environment. Taliban’s investment in oil in Sudan has been cited for supporting a dirty war. However, what you have here is not capital working alone, but in association with corrupt and self-serving governments.   Capital which has recently moved into southern India and Ireland would appear to be different in character and impact. Much of it has focused on the knowledge industries, taking advantage of a relatively educated and skilled labour force. While, in India, it does not generate high wages in comparison with California or Silicon Valley North (Ottawa), it pays relatively high wages for India.   Another issue is how capital moves from country to country. During the Cold War, a great deal of capital moved from government to government; from the Soviet Union and the United States to strategically located poor countries. That stopped when the Cold War ended. The World Bank has also moved capital, much which has gone in large public works such as dams. Throughout, however, the largest amount of capital has moved via the corporate sector. And, of course, one form of this is speculative capital which moves in search of the highest return. It can pull the rug out from under an over-ripe economy very quickly, as happened in southeast Asia in 1997.   There is no question but that the movement of capital from the rich world to the poor world is exploitative. However, the real issue is whether, in spite of this, it may not do some good. I’ve argued that it can, provided that there are rules such as those which may come into being under the FTAA, the WTO and other international organizations. Very much depends on the quality of those rules and how well they are applied.   Does the kind of free trade promoted by corporations in fact raise anyone's living standard anywhere? Two quick counter examples:   (a)The notorious banana war between the US and the EU. The EU was (heresy) giving preference to banana producers in the former West Indian colonies of some member nations even though the prices might be slightly higher. It was repeatedly stated that the small producers in these island nations were at least giving their workers a halfway decent living wage. The US declared war because huge American-owned corporations were being frozen out of this market. It was said that these corporations were highly exploitive of their Central American workers. Just coincidentally Chiquita had contributed about half a million to Bill Clinton's re-election campaign. Is this true? Or is this just propaganda?   (b) For at least a decade now I have been reading that in the maquiladora free trade zones of Mexico the real wages have gone down with the introduction of American-owned factories. One writer who makes this assertion is Mel Hurtig in "The Betrayal of Canada." Hurtig certainly has a point of view on this issue, but I would consider him a meticulous writer who always bases his arguments on official statistics. I mentioned Nigeria above as an example of bad capital. Here is something I posted to this list in 1996: "In recent postings I took the view that it is up to governments to pass and enforce laws to exercise effective controls over TNCs. Shell's operations in Nigeria were mentioned as a case in point. I said: "Shell is playing by the rules that prevail. It was the government of Nigeria that executed Ken Saro Wiwa and the others. They should not be let off the hook." I now realize that I was wrong. In the case of Nigeria, there would appear to be no rules and, it would seem, there is no government. There is an article by Joshua Hammer on the situation in Nigeria in the June edition of Harpers. It says in part: "While Shell and the other companies did all the work, the government sat back and collected its share of the profit. Between 1970 and 1974, the portion of government revenue derived from oil production jumped from 26 to 82 percent, about where it remains today. This surge in oil profits transformed Nigerian politics. Controlling the country now meant access to an ever-filling jackpot, and the "Kaduna Mafia," the Muslim-dominated military-industrial cabal named after a city in Nigeria's north, rose to unchallenged power. Officials awarded themselves billions of dollars' worth of inflated government construction contracts, line their pockets with lucrative kickbacks, and transformed the British system of indirect rule through local chiefs into ethnic rivalry, nepotism, and institutionalized graft. ... The new wealth also created new poverty. While the average Nigerian scrapes by on less than $300 a year - down from about $1,200 in 1978 - the country's oil elite dwell in lavish compounds with fleets of Mercedes, imported food and wine, and overseas bank accounts. ... Meanwhile, the junta dropped any pretence of accountability to the people. In June 1993, Babangida annulled Nigeria's democratic presidential election. Five months later, Abacha ... seized power, abolished all democratic institutions and regional governments, shut down newspapers, and jailed most of the opposition, including the winner of the 1993 presidential election, Moshood Abiola. Such corruption, and the resultant neglect of infrastructure and development, has only furthered Nigeria's dependence on petroleum. Agriculture, which once accounted for 90 percent of export income, is in ruins. Nigeria's cities, swollen by mass migration from rural area during the 1970s oil boom, are smog-choked zones of anarchy." As you know, Mr. Abiola's wife was recently murdered." I believe, to borrow the phrasing of a famous resolution in the British House of Commons, the power of corporations has increased, is increasing, and ought to be diminished. Surely, WTO, MAI, NAFTA and FTAA are none of them effective means of diminishing the power of corporations.   Then surely it’s up to us as citizens to make sure that civil society is able to keep things under control.   Ed Weick