Page 12
Street Roots • June 23-29, 2017
Commentary
Corporate-sponsored globalization is not free trade
BY ROBIN HAHNEL
C O N T R IB U T IN G C O L U M N I S T
Robin Hahnel is a
professor o f economics
emeritus at American
University in Washington,
D .C ., faculty affiliate at
Portland State University
and co-director of
economics for Equity and
the Environment.
here is a grand debate over international
economic policy now raging, and the
outcome will have profound impacts on
how the world evolves over the next several
decades. But don’t be tricked into thinking this
is a debate about “free trade” - the unhindered
exchange of goods - because it is not.
The grand “neoliberal” transformations of
the international economy over the past few
decades are, first and foremost, about
increasing international protection for
intellectual property rights (patents and
copyrights) and making it easier for financial
capital and productive facilities to relocate
Street Sm a rt Economics is a periodic series
anywhere they choose.
written fo r Street Roots by professors emeriti in
Those pushing for these changes want
economics.
people to think the debate is about trade
liberalization - mutual reductions in tariffs on
imported goods - to distract people from what
measures” (TRIMS), and “trade related
is really being done, which is to further
international property rights” (TRIPS),
empower multinational corporations at the
whereas the WTO has made acceptance of
expense of everyone else.
these provisions a requirement for
This includes setting up tribunals completely
membership. T R IM S is techno-babble for
outside national judicial systems in which
outlawing regulations on direct foreign
corporations can sue to stop governments from
investment and TR IPS is techno-babble for
passing regulations their citizens favor to
extending coverage and enforcement of patents
protect the environment and worker safety.
and copyrights to all countries. What is
Trade liberalization has been the least
important to know about this is that no country
important component of the neoliberal
has ever succeeded in achieving economic
globalization process over the past 30 years.
development without sometimes placing
The General Agreement on Tariffs and
restrictions on foreign investors and without
Trade did far more to reduce tariffs and
being able to adopt technologies developed
promote “free trade” in the first two decades
elsewhere at low cost. So don’t be distracted
after World War II than the World Trade
by talk of “free trade.” Instead, ask yourself
Organization (WTO) has done to reduce tariffs
whose interests are served by protecting
since its founding over two decades ago -
international property rights and liberalizing
giving lie to the claim that neoliberal
both direct foreign investment and
globalization is primarily a push for trade
international financial investment (IFI, or
liberalization.
portfolio investment), and whose interests are
Not only was trade liberalization the main
harmed. The answer to who benefits is obvious
mission of General Agreement on Tariffs and
- multinational corporations. Here is the
Trade, the emphasis under it was primarily to
answer to who has been harmed:
reduce tariffs in the
more developed
1. In more developed economies, less skilled
"Jbfe yo u rself whose Interests
economies. This
industrial workers have been hurt first and
are sew ed b y p ro te ctin g
provided some
foremost by liberalization of direct foreign
leeway for less
investment, as their employers both threaten
In te rn a tio n a l p ro p e rty rig h ts
developed countries
and do move their jobs to less developed
and llb e r a llr ln f both d ire ct
to protect their
countries where wages are much lower and
fo re ig n Iw e s tm e n t and In
domestic industries
working conditions are much worse. Combined
te rn a tio n a l fin a n c ia l Invest-
through early stages
with a decline in unionization, liberalization of
m ent? and whose Interests are
of industrialization in
direct foreign investment has led to a dramatic
harm ed, The answer I® who
what was referred to
deterioration of employment and wages of less
as an “import
benefits Is obvious —
skilled workers in more developed economies.
substitution”
After 30 years of this, it is hardly surprising
sn n ltln a tlo n a l corporations?8
development
that many less skilled workers in the
strategy. It also
“industrial heartlands” of more developed
initially advantaged
economies have rebelled against the political
the United States
establishment that presided over this grand
because unlike other, more developed,
transformation, and voted for Brexit in the
economies, the U .S. productive infrastructure
U .K ., Sanders over Clinton in the Democratic
had not been reduced to rubble during World
primaries, Trump over a field of establishment
War II, so that lower tariffs for all more
Republicans in the Republican primaries, and
developed economies boosted U ,S. exports
finally Trump over Clinton in the general
more than imports in the post-war years. More
election.
importantly for present purposes, the General
Agreement on Tariffs and Trade negotiated
2. In less developed countries, the effects of
reductions in tariffs without forcing countries
financial liberalization was disastrous, as
to acquiesce to “trade related investment
currency crises triggered deep recessions
T
which took years to recover from in Mexico
(1995), Thailand (1997), Malaysia (1997),
Indonesia (1997), South Korea (1998), Russia
(1998), Brazil (1998), Turkey (2001) and
Argentina (2002). And since neoliberal
globalization threw more peasants off the land
in less developed countries than it added new
jobs in labor intensive manufacturing, there
was often little or no increase in less developed
countries wages.
3. For decades the ill-effects of international
financial liberalization were confined to less
developed countries. But in 2008 the biggest
financial crisis since the crash of 1929 hit the
United States and the European Union harder
than elsewhere. When establishment political
parties in more developed economies bailed
out the banks but not the victims of
foreclosures, and allowed unemployment to
linger far longer than necessary, conditions
were ripe for political rebellion.
> otn
< center right and center lett
>establishment political parties in more
B
developed economies have suffered huge
electoral losses everywhere as they struggle to
maintain power.
Sometimes the
populist revolt has
Trade H b o ra la a fio a has bees
been led by
the least » p o r t a » ! oo»po»® at
progressive forces,
of the n e o lib e ra l f lo b a lb a tlo a
such as Syriza in
process w e r the past 3 0 years«
Greece, Podemos in
Spain, Uncut and
Jeremy Corbyn in the
U .K ., and Occupy
and Bernie Sanders
in the U .S. But unfortunately the right-wing
rebellion against the establishment has more
often been led by right-wing politicians such as
Marine Le Pen in France, Nigel Farage in the
U .K ., Geert Wilders in the Netherlands, and
most spectacularly, Donald Trump in the
United States. Right-wing populists scapegoat
immigrants and refugees from wars and
poverty caused in no small part by havoc
unleashed by neoliberal globalization, denounce
all international economic treaties and
organizations and threaten to raise tariffs
dramatically. It remains to be seen how much
of their pre-election rhetoric is a program with
concrete substance and how much is pure
demagoguery.
Over the past three decades progressives
honed a compelling critique of neoliberal
globalization. More recently progressives have
forthrightly denounced racist campaigns by
right-wing populist forces against immigrants,
refugees, Muslims and people of color as little
more than vicious scapegoating. But
progressives have struggled to present an
attractive alternative to both neoliberal
globalization and right-wing populism. I will try
to fill this gap and describe what a progressive
alternative might look like in my next article.