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Guest Opinion: Export Led Development?

Export Led Development?


By Paul Bruce
Latin America Committee Aotearoa New Zealand

At the recent APEC summit in Thailand, George Bush, choose to call for support for his "war on terrorism" and Iraq reconstruction, rather than talk economics, possibly indicating a change of tactics in implementing US's corporate agenda. Bi-lateral trade agreements are now the weapon of choice not only for the US, but also for New Zealand.

New Zealand regards itself as a "developed" country. However, New Zealand continues to pursue policies that keep the economy heavily reliant on the export of primary commodities and corporate traders in a similar way to many low income countries. Elimination of tariffs to a level below our trading partners, has led to closure of manufacturing industries, a consequent de-skilling of our workforce and a relatively high level of unemployment. New Zealand now also has high levels of foreign ownership, a large trade imbalance ($3.18 billion - $1.2 billion deficit with China), and an overseas debt equal to our GDP.

A proposed free trade agreement with Hong Kong was left lying last year. More recently, the Government announced further reductions in tariffs, in spite of no movement from our trading partners, leading to more promised closures, and putting at risk thousands of jobs of NZ Maori and Pacific Island workers. The Government then followed this up, with an announcement at the APEC summit, of negotiations for a free trade agreement with Thailand. Thailand has an appalling record of exploiting tens of thousands of children, when its minimum wage, of less than $1 an hour, is below the cost of living (NZ Clothing Workers Union).

Low price goods have become available to one and all, but at what cost to the community and environment, here and overseas? Who stands to gain most from these trade deals?

In Mexico, Anita Roddick reports that during the past two years, 500 export assembly factories have shut down, throwing 218,000 workers onto the street. Their crime was that the $1.26 an hour base wage they were paid by companies such as Alcoia Fujikura to produce auto parts for export to the US, were now "too high" in the global economy.

"Never mind that the Alcoa workers in Acuna live in makeshift cardboard huts that lack potable water. Never mind that many of the workers in nearby Piedras Negras were selling their blood plasma twice a week to Baxter International for $30 in order to survive. Those same auto parts are now being made in Honduras by workers earning 59 cents an hour, in Nicaragua for 40 cents an hour, and in China for 27 cents an hour!" Should we follow the trend?

Every Earth citizen deserves the same as every American or New Zealander, but equitable development cannot occur with the current "race to the bottom".

NZ would do well to consider a different agenda being pursued by a number of Latin countries. A positive example is the recent deal between Cuba and Venezuela, where trained Medical doctors were sent to deprived urban areas in exchange for oil. Argentine president Nestor Kirchner and Brazilian president Luiz Inacio Lula da Silva also met in Buenos Aires during the week of Oct. 12 to sign a statement of intent that essentially rejected US trade policies and called for job generation and trade terms that would be more equitable for developing nations. They called the statement the Buenos Aires Consensus, a jab at the "Washington Consensus," a common name for US-sponsored neoliberal economic policies.

Latin American countries began applying the measures demanded by "new trade" in the mid-eighties, opening their internal markets and freeing up capital flows. The World Bank and IMF had a four-step "reform" formula for each country. The formula included Capital-market liberalization, privatization, market-based pricing, and, finally, the introduction of "free trade."

Today, exports remain tied to primary products (approximately 75% of total Latin American exports are natural resources), contain very little value-added, generate few jobs, and often entail severe environmental impacts. The value of all these products have been falling, so to maintain income, producers have to resort to constantly increasing the volumes they export. This trade has not lead to economic or social improvements. Approximately a third of last year's foreign investment went to extractive sectors, particularly oil and minerals. At the same time, imported products have invaded domestic markets, displacing small and medium-sized agricultural producers with a handful of large agro-industries. Current capital flows for Latin America, showed a net outflow of $39 billion for last year (Gangs of New Trade, Eduardo Gudynas - www.americaspolicy.org ]. Academic defenders of these policies tend to rotate back and forth between government posts and positions in universities, international institutions, or corporations!

There has been a change of thinking over recent years, with the biggest challenge made by Brazil who lead the group of twenty-two developing nations (G22) at the recent WTO (World Trade Organisation) negotiations in Cancun, Mexico.

Andreas Hernandez from the Department of Development Sociology Cornell University observed: "This tremendous organizing on a global scale, directly challenges a neoliberal world and the power, and might be the first visible signs of a social democratic turn in the global system".." Are these major structural signs of a challenge to world domination by the US, Europe and Japan and the legacy of 500 years of exploitation of the Global South - first through colonization and then developmentalism and neoliberalism?"

And "It is note that Brazil's new government came to be through intense struggle, especially by those who have been the most exploited. The possibility of an emerging global architecture with more social solidarity may only be sustainable to the extent that mobilization continues on all levels, democratizing and transforming the institutions which structure people's lives" (see Participatory Water Management).

Porto Alegre: Participatory Water Management

The most well-known example of participatory water management is probably the Departamento Municipal do Agua e Esgoto (DMAE), the water company of Porto Alegre which is the capital of the Rio Grande do Sul province in Southern Brazil. Water has been under public control in Porto Alegre since the Workers Party gained power in the city 15 years ago (Partido dos Trabalhadores, PT). DMAE is publicly owned, but financially independent from the state and fully self-financed through the water bills paid by the 1.4 million inhabitants.

It is a not-for-profit company that re-invests profits into improving the water supply. DMAE allows a far-reaching level of public participation and democratic control over its operations and investments. Not only does a council of local civil society representatives control the daily work of the company, DMAE's operations and investment decisions are subject to a participatory budget process. Like many other areas of public life in Porto Alegre and other parts of the Rio Grande do Sul, community members directly decide the budget priorities of their water company.

Through a process of public meetings, every citizen can have a say in which new investments should be made first. This participatory model is one of the reasons that poor communities in Porto Alegre have gained access to clean water: their needs are prioritised because they participate directly in deciding about new projects. Some 99.5% of the residents of Porto Alegre have access to clean water, far more than anywhere else in Brazil.

There are many other advantages to this system, such as awareness-raising from being involved in decision-making, and a collective sense of ownership which allows the possibility for occasional price increases structural changes which may be necessary for new projects. DMAE's water price is one of the lowest in Brazil, but at the same time environmental information campaigns and the progressive price structure has made overall consumption go down. Water use above a basic level - such as for swimming pools - is relatively expensive.

http://www.psiru.org/reports/2002-08-W-dmae.pdf

Mahathir, retired Prime Minister of Malaysia and a long time critic of unfettered globalization, called for "fair trade" rather than "free trade", at the APEC Summit, "Fair trade can be free, but free trade can be unfair," he said. "Fair trade means that our own weaknesses will be taken into consideration."

Ex Malayasian PM defends local rules

Mahathir compared free trade to an American football game between the United States and Malaysia. "In the first place, the Malaysians...would not know [the rules]," he said. "In the second place, they are a small people like me. And you know American football players are 240 pounds, each one of them."

"So what do we do? We give handicaps," as in golf, he continued. "You have to have handicaps because otherwise it will not be a fair game. So it is the same with trading." Mahathir also defended his country's efforts to protect some of its industries, such as its auto industry. He said that multinational corporations are merging and growing bigger, and "they propose that we should not restrict them from coming and operating in our country without any condition, in fact to be regarded as national companies," a reference to proposed international investment rules.

But they will compete with "our little corporations, our little banks," he said. "We think that we should be allowed to protect our own little businesses, our own little banks and industries, at least until the time comes when we are big enough to be able to compete fairly with the giants which come from other countries. We want to feel that we are something, not just a lot of workers who provide cheap labour for other people," he said (Bureau of National Affairs, Inc., Washington)]

Last month (October 2003), Bolivia in the cone of South America and also part of the G22 negotiating block at Cancun, saw their President flee the country following a popular revolt over a sweetheart natural gas deal with the US.

A massive popular mobilisation of non-violent Aymara peasants, and urban workers of La Paz seceded in reversing a $US5.2 billion dollar natural gas project to export gas to the United States. Former President, "Goni" - Gonzalo Sanchez de Lozada resigned and left for the US. About 60 Bolivians were killed in demonstrations, with hundreds more injured by security forces.

Bolivia has also been the site of remarkably resilient and powerful people's movements, such as the campaign to stop the privatization of water in Cochabamba in 1999-2000. Today 's movement demands, in addition to the resignation of the President, the formation of a new Constituent Assembly and a repeal of privatization and foreign investment laws.

Analyst Tom Kruse had this to say:

"Bolivia has enormous reserves of natural gas. However, how the gas is to be exploited, and who the benefits will accrue to, are heated political issues in Bolivia. Bolivia has passed through 3 major cycles of non-renewable commodity exports: silver through the 19th century, guano and rubber later that century, tin in the 20th century. These cycles for exports never laid the basis for a prosperous, productive and just society. On the contrary, Bolivia is one of the least prosperous and most unjust societies in Latin America. The question Bolivians are rightly asking is, 'how will this next round of non-renewable commodity exports be turned into real development?'"

The conflict is, at its core, about corporate 'globalization' of the type prescribed by the IMF. The IMF's structural adjustment programs, demanding reductions in public services, privatizations, and recessionary policies that throw people out of work, have been crucial in bringing the country to the crisis point. The natural gas exportation project itself was one encouraged by the IMF.

A US State Department spokesman Richard Boucher, said the United States, "will not tolerate any interruption of constitutional order and will not support any regime that results from undemocratic means." This is ironic, given that Goni only received 22.5% support in the last election, and Bolivians have never been given a say in economic matters. It is also a far cry from the US support for a military coup in April 2002 against Venezuela's progressive president Chavez. What's more, the US trained some of the most repressive dictators in Bolivian history at its School of Americas, among them Hugo Banzer, with ex Nazi, Klaus Barbie as Security Minister and on their payroll through to 60s and 70s (Barbie was extradited to France in 1984 to face war crime charges).

Noami Klein labelled the brutal economic model advanced by the World Trade Organization and the IMF as itself a form of war. "War because privatization and deregulation kill--by pushing up prices on necessities like water and medicines and pushing down prices on raw commodities like coffee, making small farms unsustainable. War because those who resist and "refuse to disappear," are routinely arrested, beaten and even killed. War because when this kind of low-intensity repression fails to clear the path to corporate liberation, the real wars begin."

Marian Hobbs, overseas aid Minister, in a thoughtful speech to October's Trade Aid Conference said, "the question of sustainability and the need to pay attention to the potentially adverse effects of increased trade on the environment and on the social and cultural relations looms large for me". On the other hand, Minister of Finance Pete Hodgson avoided answering a question in the House on NZ's support for "the unprecedented unity amongst the poor nations for a fair deal", stating that "I am not aware of our green room position.".

"Green room" is WTO code for secret back room talks between the rich and powerful nations, from which the developing world is largely excluded. Global warming is exacerbated by the increased use of carbon fuels from traded goods sloshing about the globe, and gives us another reason to maximize the value of traded goods. Tony Coleman of the Insurance Australia Group points out that, of the 8820 natural catastrophes analysed world-wide between 1960 and 1999, 85% were weather-related. So were 75% of the economic losses. Expected changes in weather due to global warming will have a huge and disproportionate impact. For example, a 1°C increase in average temperatures would mean that extreme temperature events, which hitherto occurred once every 300 years, will occur every 10 years. A 1°C increase in average summer temperatures will bring a 28% increase in wildfires.

In the early 80's, the Latin America Solidarity Committee was deeply involved in the "Nicaragua Must Survive Campaign". Education and health initiatives have suffered severe setbacks in recent decades following the application of neo-liberal policies, and the fall in commodity prices have diminished Nicaraguan's prospects even further.

Farmers have taken to the streets to demand government support for families on the brink of starvation. In the words of Simon Gerathy, former Campaign Manager Trade Aid, "governments now find themselves between the proverbial rock and a hard place!" The vast majority of the world' s coffee farmers, live in desperate poverty. One underlying cause of their crisis is world coffee prices, in simple economic terms the situation is one of oversupply. In spite of this, Tesco and Starbucks are experiencing record profits, due to the export price of coffee as a proportion of the retail price falling by half, to less than seven percent.

An answer to this, is for consumers to buy Fair Trade coffee, which guarantees a minimum floor price to cover cost of production and provide a modest return to co-ops. ( http://www.tradeaid.co.nz) It is no longer good enough to apply NZ labour and environmental laws to local business, whilst trading in products, unregulated and with no indication of their origin.

All over the world, there is a desperate need for development that leads to economic independence rather dependency, along with renewable energy and sustainable technologies. New Zealand must stand together with the G22 nations to transform our global trading relationships, while recommitting to a net transfer of wealth from the rich world to the poor and fair trading relationships. Do you demand fair trade coffee? Ask your family, business, school, university, hospital, local council, and your MP if they are using fair trade coffee!

*** ends ***

Paul Bruce Latin America Committee Aotearoa New Zealand LAC@apc.org.nz P O Box 6083, Wellington.


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