Sunday, April 18, 2021

Trade wars (1993)

From the April 1993 issue of the Socialist Standard

At a recent meeting at the White House, President Clinton promised John Major that he would "try to make the GATT accord succeed" (Financial Times, 25 February). Subsequently. however, both he and his Secretary of State. Warren Christopher, were less conciliatory in their pronouncements.

Speaking to students at Washington University. Clinton said “we will say to our trading partners that we value their business, but none of us should expect something for nothing". Warren Christopher, addressing NATO foreign ministers, referred to “a new diplomacy that views domestic and foreign issues as inseparable. Wc will elevate us economic security as our primary foreign policy goal” (Daily Telegraph, 27 February).

The North America Free Trade Agreement, the supposed US answer to the European trade bloc, has resulted, however, in the use of cheap labour in Mexico by American industrial manufacturing companies with resultant lay-offs in the corresponding industries in the US.

The United States is constantly calling for a “level playing field" with the other major capitalist powers. This ignores the fact that America has imposed import duties on steel, wine and cereals. The volume of US exports abroad expanded by 74 percent between 1985 and the first quarter of 1992, compared to increases in German exports of 28 percent and those of Japan by less than 20 percent (Financial Times, 10 February). So the "cooperation" that Clinton and Christopher are demanding is really a greater share of the world market.

In Europe the promises of prosperity based on an expansion of trade with the former Eastern Bloc countries has given way to the worst recession of the post-war period. Nor has the German economic miracle that was to follow the unification of the two former German states materialised. Instead. Europe now has increasingly bitter internal conflicts over jobs, trade, currencies and interest rates. The volatility of the two latter is indicative of the failure of the larger market to produce convergence or stability.

The average level of unemployment in Europe has risen to 10 percent. Recently 7000 German steel workers demonstrated against proposed job cuts. Car manufacturers in western Europe have drastically cut costs by restructuring plants and laying off workers. Far from stimulating trade, the EEC has put up barriers, particularly to countries such as Poland and the former Czechoslovak Republic whose labour costs are lower (hourly rates for car workers are about one tenth of those of western German workers). Exports to the EEC from the former Eastern Bloc countries have increased to 19 percent during the past half-year. Czech exports to the EC alone rose 10 percent last year to 51 percent of the new regime's total exports. Restrictions on textiles, farm products and cement imports already exist and it is anticipated that these measures will shortly be extended to steel products from Hungary. Poland and Slovakia.

Western capitalist politicians who welcomed the break of the eastern European states with the Soviet Bloc as a triumph for democratic capitalism which would lead to an economic boom are now erecting a reverse version of the Berlin Wall by creating trade barriers.

Japan and China
Japan, a country involved in a worsening slump, is frequently the object of exhortation by American spokesmen to lower its trade barriers on industrial goods as well as rice imports. Industrial production is falling, bad debts are increasing rapidly as property values continue to slide whilst banks struggle with at least 100 billion dollars of doubtful loans. For a country in this position to lower import barriers so as to admit manufactured goods could only worsen a rapidly-deteriorating situation. Domestic sales of cars fell by 7.2 percent in 1991. Importing Fords and Chryslers will hardly mitigate the problem. Against this background Japan can offer a market for little else than Japanese goods. As an export dependent country to an extent greater than its rivals, Japan has no alternative other than to struggle for an outlet for Japanese manufactured goods.

One country whose production is rising rapidly is China which is already beginning to seek an outlet for its manufactured goods on the world market. As it is, China’s exports to the United States are rising and this is causing tension:
  The Americans have made it clear that GATT membership for China will not lay to rest the provisions of America’s own laws that make China’s most-favoured nation (MFN) status a perennial subject of dispute. The Clinton administration’s China policy is still unformed, but it seems likely that human rights, Chinese arms sales and China’s huge trade surplus with the United States (more than $18 billion last year) will all crop up yet again in this years’s MFN debate. (Economist, 6 March).
Already the US trade negotiator Douglas Newkirk has gone on record as saying that ’’China and America are further apart now' than they were before the talks were broken off in 1989”.

What we are witnessing is the division of the world into rival trade blocs where the major powers are following the “beggar thy neighbour policies” of the 1930s. Far from stimulating world trade this can slow it down drastically. All the high-sounding phrases such as “free trade” and “cooperation” are merely attempts to dress in respectable language the struggle of the various capitalist powers to grab a bigger share of the world’s markets.

Many observers have draw n parallels between the present world economic crisis and the Great Depression of the 1930s. The Wall Street Journal (15 February) recalled that Cordell Hull, United States Secretary of State under Franklin D. Roosevelt, had said in 1937 "I have never faltered and will never falter, in my belief that enduring world peace and the welfare of nations are indissolubly connected with friendliness, fairness, equality and the maximum practicable degree of freedom in world trade”. Thus the same nebulous phraseology was being used then as the modern politicians are using now. One other more significant quote is attributed to Hull in the same article, and is said to be heard nowadays in the corridors of GATT headquarters in Geneva, "that when goods don't cross frontiers armies do”. War commenced in Europe two years later.

The present crisis and trade war exemplify the anachronistic nature of capitalism in terms of social development. Marx saw the contradiction clearly:
  The enormous power, inherent in the factory system, of expanding by jumps, and the dependence of that system on the markets of the world, necessarily beget feverish production, followed by over-filling of the markets, whereupon contraction of the markets brings on crippling of production. The life of modern industry becomes a series of periods of moderate activity, prosperity, over-production, crisis and stagnation . . . Except in the periods of prosperity, there rages between the capitalists the most furious combat for the share of each in the markets. (Capital, Vol.1. chapter 15, section 7)
The present trade war cannot be ended by GATT, NAFTA or G7 summits. It will continue in one form or another as long as world production is organized to produce primarily for profit rather than use. The present mode of production can no more function without trade conflicts than it can without world slumps as we have today.
Terry Lawlor

No comments: