The New Protectionism: Global Trade Rules Protect Corporations. Let Nations Protect Their People
Hines, Colin, Lang, Tim, The Nation
"Protectionism" has received an undeserved bad name of late, thanks mainly to the steady barrage of propaganda leveled by the master builders and profiteers of the global economy--the transnational corporations, or T.N.C.S. They charge that any attempt to preserve regional or community values, traditional economies, local jobs or natural resources is an assault on the higher cause of globalism. But the global economy is itself a vast protectionist scheme used by T.N.C.s and banks to expand their own power, unfettered by the inconvenient checks of democracy. It's time to take back the term protectionism from the corporations and restore it to the people.
What we call the New Protectionism aims to regenerate interest in the preservation of communities, economies and livelihoods. It would foster a return to the security provided by local self-sufficiency based on local economic control and local production for local consumption and protected by a modern trade philosophy that does not close the door on all trade but restricts unnecessary international trade and other harmful activities.
As working people all over the world have become acutely aware, the need to halt the lockstep march of globalism is urgent. The rapid replacement of secure jobs by short-term contracts, part-time or lower-paid work or technological unemployment sharply accelerates a spreading sense of insecurity, while lowering overall effective purchasing power, a prescription for eventual global economic disaster. In 1995 the International Labor Organization announced that one-third of the world's willing-to-work population was either unemployed or underemployed, the worst situation since the thirties.
Globalization unquestionably leads to lower-wage economies. The British economist Adrian Wood has calculated a not insignificant shift of 9 million jobs from North to South in recent years. It is not hard to understand why. In 1993 manufacturing labor costs in West Germany were the equivalent of 24.9 U.S. dollars per hour; in Japan, S16.9; in the United States, $16.4; and in Britain, $12.4. But in South Korea labor costs were $4.9 per hour; Hungary, $1.8; and China, 50 cents! This is why European companies like the Italian sportswear- and shoe-manufacturer Fila have, as a commentator put it, "found one way of coping with a fundamental problem of European manufacturing. It is trying not to have any." Meanwhile, Britain is advertising itself as a low-wage country to attract industry. The trend is clear.
In France a parliamentary finance committee concluded that much of the nation's present unemployment is the direct result of the shift of factories to Third World countries. A 1993 survey of 10,000 large and medium-sized West German companies found that one in three intend to transfer part of their production to Eastern Europe or Asia, because of lower wages and more lenient environmental standards. Even high-tech jobs are not immune. In Britain's high-tech service sectors, more and more major companies are directly or indirectly using Indian computer programmers, most of whom earn less than $3,000 a year. New electronic export zones that offer high-quality and high-tech services for vastly lower wages than Europe can offer are being set up near New Delhi, Bombay, Calcutta, Cochin, Kandi and Madras.
Rising unemployment in manufacturing sectors was supposed to be compensated for by a growth of the service sector. But now new technology is taking out the service jobs, too. Most of the recent cut-backs in the United States have been in the service industries, such as banking, insurance, accounting, law, communications, airlines, retailing and hotels.
The companies in the forefront of automation are often those with sufficient capital to exploit fully the new technologies. Prominent among these are the transnational corporations. The global economy is undergoing a phenomenal concentration of power into the hands of these global giants. The combined sales of the world's largest 350 T.N.C.s total one-third of the G.N.P.s of all industrialized countries. The largest 100 T.N.C.s account for more than $4 trillion of world assets, of which $2 trillion is outside the country of origin.
This formidable (and rising) concentrated control over world output is not hopeful news for employment. The world's 100,000 T.N.C.s, large and small, employ only 65 million people, just 3 percent of the world's estimated work force. T.N.C.s have shed labor heavily. In just one year, from 1992 to 1993, according to the Institute of Directors, the top 1,000 British companies reduced their total work force from 8.6 million to just over 7 million. Small enterprises will not be able to take up the slack.
It is time to rethink the direction of global economics. What we call the New Protectionism is aimed at returning power to governments at local, regional and national levels, enabling them to take charge of their economies in order to relocalize and rediversify them. The goal is maximum local trade within diversified, sustainable local economies and minimum long-distance trade. The ultimate objective is to build up truly sustainable economies and shift away from economies that subjugate local jobs to global pressures. Here are some steps to that end:
[sections] Import and export controls. These should be introduced on the national and regional bloc levels, with the aim of allowing localities and countries to produce as much of their own food, goods and services as they possibly can. Only goods that cannot be provided locally should be obtained nationally or regionally, with long-distance trade the very last resort.
[sections] Local control of capital. Currently, with barriers to trade being dismantled and international capital flows virtually unfettered, national treasuries have lost control over their economic destiny. There should be regulations on banks, pensions, insurance and mutual funds to insure a majority of their investment is made within the locality where the money is generated and/or needed; in other words, an "invest here to prosper here" policy.
[sections] Controls on T.N.C.s. I.N.C. activities need to be brought back under national government control, even at the risk of abrogating the General Agreement on Tariffs and Trade and the World Trade Organization. Access to a country's economy would depend upon compliance with a "site here to sell here" policy
[sections] New competition policy. The domination by big companies is a feature of economic life that requires urgent debate. Many should be broken up, thus guaranteeing the local competition needed to maintain the impetus for improved products, more efficient resource use and the provision of choice.
[sections] Trade and aid for self-reliance. The GATT should be transformed into a General Agreement for Sustainable Trade. Aid, technological transfer and the residual international trade should be geared to the cultivation of sustainable local economies, with the goal of fostering maximum employment through sustainable regional self-reliance.
[sections] Introduction of resource taxes. These would help fund the needed radical economic transition and would be environmentally advantageous. Competition from regions without such taxes could be held at bay by the reintroduction of tariffs and controls. Relocalization would mean that adverse environmental effects would be experienced locally, thus increasing the impetus and potential for control and improved standards.
[sections] Re-empowerment of government. In the name of globalization, government is inexorably shifting away from the local to the international levels (and the T.N.C.s). This needs to be reversed. Global institutions must be reoriented with the focus redirected to the local. Local, state and regional governments need to have control over access to markets and to foster more local savings and banking systems.
Within Britain, a number of arguments are given against a New Protectionism. We address these in turn.
[sections] Britain lives by trade and dies without it. This argument fudges the greater question, What sort of trade? When Britain was the dominant world power, the wealthy did indeed benefit by trade. Today, trade pressures arc costing jobs, driving the deregulation of wages and social and environmental conditions, reducing elected governments' control over their economies and thus undermining the value of democracy. British society is dying with globalization, not without it.
[sections] Lack of competition is inefficient. This argues that consumers lose if local companies and jobs are protected. However, giant corporations compete for purchasers' favors by cutting costs through shedding workers. This, in turn, cuts consumers and economic problems result. Under the New Protectionism, the emphasis on local markets and limited company size would encourage the positive aspects of competition: the impetus to be cost-competitive, to utilize better designs and to make more efficient use of resources.
[sections] Even if such change were desirable, no one country can go it alone. Both Labor and Conservative governments know the power of the global financial markets. The New Protectionism cannot be achieved through autarky or go-it-alone policies. One argument against this happening is that the New Protectionism will emerge in affluent areas of the world, such as the European Union or North America, and that those markets are big and powerful enough to dictate conditions to international capital and T.N.C.s. Other regions would follow suit very quickly. Another argument is that the case for self-reliance emerges strongest at the periphery of an economy. We already see community self-reliance movements emerging in the battered postindustrial cities and in the marginalized Third World.
[sections] A fortress economy in Europe would be unfair to the poor the Third World, who depend on trade to escape poverty. A handful of Third World countries, mostly in Asia, dominate trade with the Organization for Economic Cooperation and Development and receive most of the direct investment from it. During the transition period to the New Protectionism, they could substitute interregional trade for this trade. For the rest of the developing countries, and indeed for most of Eastern Europe, the present system forces such countries to distort their economies to produce the cheapest exports, usually in competition with poorer countries. Competition not only means setting poor against rich workers but poor against poor; it prevents resources from meeting the basic needs of the poor majority; and ultimately it benefits only the elite classes in these countries who gain when workers compete for ever-lower wages. The challenge is not to encourage further spirals of ruthless competition but to rewrite aid and trade rules in such a way that they facilitate the cultivation and diversification of local economies everywhere, and stimulate greater equity and sharing of resources. Only then will the needs of the poor majority be met.
[sections] The New Protectionism will pander to and play into the hands of right-wing nationalism. We fear just the opposite. The adverse effects of the present globalization process include the spread of what could be termed "free-market fascism." Only the hope and deeper security offered by the New Protectionism can help reverse the very conditions and anxieties that foster the rise of the ugly nationalist right.
[sections] Protectionism failed in the thirties, and it failed in Communist countries everywhere. In the thirties protectionism was nationalist and designed to protect the powerful. The goal was for each protected industry or country to increase its economic strength and then compete at the expense of others. The more countries did this, the less trade occurred between them. The closed economies attempted by Communist regimes led to stagnation and environmental degradation. The New Protectionism's emphasis on internal competition and the international flow of ideas and technology would prevent these outcomes.
Unless people have work and the promise of a decent quality of life, society is destabilized. The globalization orthodoxy is caught in a double bind. On the one hand, it is pushed to restructure and to shed labor. On the other hand, it is pulled by the need to have consumers. Already there is a rising chorus of voices against the current orthodoxy. Even from within the supposedly successful Asian Tigers, there are critiques of the damage: rampant injustice, social dislocation, inequality and insecure work. The message of the globalization orthodoxy tells people: "You might not be needed."
We have not argued that the clock be turned back. Our case is that with barriers to trade now tumbling down, to the advantage of the global giants--companies and trading countries--the structural basis of the new culture of insecurity is laid bare. Insecurity on a scale not seen since the thirties must be dealt with effectively; if not, history could repeat itself. One only needs to remember Mussolini's chilling pragmatism: "Fascism was ... not a doctrine worked out beforehand in detailed elaboration; it was born of the need for action."
Colin Hines, formerly co-director of Greenpeace International economics unit, is co-director of the International Forum on Globalization-Europe. Tim Lang is professor of food policy at Thames Valley Universio;, London. They are co-authors of The New Protectionism (The New Press).…
Questia, a part of Gale, Cengage Learning. www.questia.com
Publication information: Article title: The New Protectionism: Global Trade Rules Protect Corporations. Let Nations Protect Their People. Contributors: Hines, Colin - Author, Lang, Tim - Author. Magazine title: The Nation. Volume: 263. Issue: 3 Publication date: July 15, 1996. Page number: 29+. © 1999 The Nation Company L.P. COPYRIGHT 1996 Gale Group.
This material is protected by copyright and, with the exception of fair use, may not be further copied, distributed or transmitted in any form or by any means.