Australia takes guard (1956)

From the August 1956 issue of the Socialist Standard

A sure fire subject of conversation with almost any reticent Englishman in the summer of 1956, is the latest Test match score, and many a City gent, on bearing of another fallen wicket must have locked his office door and with his umbrella shown himself just how he would have put Lindwall away to the boundary.

Yet not all the headlines about an Australian “fightback” and “aggression” need refer to happenings at Lord's or Old Trafford, for in the pot of international disputes there is something of a trade war brewing up between England and Australia. The director of the Commonwealth Bureau of Agricultural Economics has said in Canberra that Britain's “attitudes, policies and behaviour” are “unfair” and “reprehensible” and among the mumblings of Australian politics is that of Mr. John McEwen, Minister of Trade, who has recently described his government as “hurt” by Britain's trading policies. Mr. McEwen, with a substantial press backing, is currently peddling a “get tough with Britain” line.

What are the reasons for this tetchiness in Canberra? First, Australia's trade with the U.K. is badly out of balance—in the nine months ended in March of this year she imported goods from Britain worth £A269 million compared to exports in return of only £A181½ million. Then there is the matter of wheat, of which Australia is one of the world's major exporters. The stockpiling scramble of the Korean war caused a vastly increased production of wheat and a consequent fall in its price. The end of the boom left Australia, growing some of the cheapest wheat in the world, with an unsellable surplus and looking sourly on the British policy of supporting home production on the one hand and preferring to buy Argentine wheat on the other.

Another source of irritation is the present state of trading preferences. In the Ottawa agreement of 1932 Britain and Australia agreed to grant entry to each other's imports at a lower duty than they charged on other countries goods. Australia accepted a preference based on fixed duties and the benefits of this have dwindled in our post-war inflation, just as money which was banked in 1932 has by now been devalued. But Britain secured a preference based on a percentage of their exports values and this has enabled her to keep a relative advantage on the Australian market. So a measure which was supposed to promote international friendship has turned out to be a cause of dissension; but there is nothing new in that.

To ease her problems Australia would like the U.K. to restrict imports of cheap wheat (unless, of course, it comes from Australia) and to re-negotiate the Ottawa pact so as to give Australian products new preferences. The difficulty in the way of both these suggestions is Britain's membership of G.A.T.T., whose rules forbid any such moves. Even so, Australia is pressing for a new. comprehensive Commonwealth trade agreement; this was one of the points raised by Mr. Menzies at the recent London conference of Commonwealth Prime Ministers. If Australia cannot gain any concessions here, she may, in return, take steps to end her status as Britain's largest single export market.

Meantime in the past few years Australia has several times drastically reduced its imports, the latest of these restrictions being introduced on July 1st. last. These cuts were designed to prune Australia's imports by about £32 million in a full year. In addition Australia is making a strong bid to capture as much as possible of the U!k.’s trade with New Zealand.

Another reason for the deepening rift between the two countries is the change in the strategic relations of the Pacific since the war's end. Before the sharpening of the Russo-American conflict Australia's military interests extended to the Middle East. Now that Asia is a centre of tension these interests have been forced back to the Pacific, where the gap left by Great Britain's waning power has been largely filled by that of America. Increasingly, Australia is dependent on the United States to keep intact her perilous existence between the great powers on the one hand and an almost indifferent Asia on the other. Whitehall gets hardly a look in.

Now the conclusion which we can draw from all this is that the much-boosted bonds of the British Commonwealth of Nations do not hold against the pressures of Capitalist competition and international conflict. Australia, as a normal Capitalist power, has trading interests which she will defend in any way open to her, even if that should mean offending her partners in the Commonwealth. For example, the recent import cuts came at a particularly bad time for the struggling British car industry but, as The Economist has put it, “trade cuts across politics.” Even the politics of the supposedly united British Commonwealth and with the government of the traditionally Empire-fostering Tory party bossing it in Whitehall.

Australia's position in the affairs of international trade and conflict was neatly depicted by Manchester Guardian cartoonist David Low just after the Foreign Ministers’ conference a couple of years ago at Geneva. His sketch showed a path bordering a lake and into the picture from the left ran Anthony Eden, dressed as a nursemaid, dragging behind him a pram full of tattered Union Jacks. As he ran he stretched out an imploring hand to another nannie, scampering off to the right with her pram. This one was identified as United States Secretary of State John Foster Dulles. His pram was labelled “American Sphere of Responsibility” and it held a lot of bonny babies of various Far Eastern nationalities. One of the bounciest, sucking a stick of striped candy, was called “Australia.”

Ivan.

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.

Barriers

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

Unbalanced exports and experts (1964)

From the April 1964 issue of the Socialist Standard

One of the toughest problems which faced the Attlee government when it took over in 1945 was the deficit in Britain’s balance of trade. The six years of war had cost this country a great deal, apart from the bloodshed and the suffering which the working class had endured. Britain's capitalist class had lost a lot of their overseas investments, they had been forced out of several spheres of influence and had seen many of their traditional markets fall under the sway of their wartime allies. The Imperial Preference system, by which they had once set so much store, had lost a lot of its power as a tight trading club.

As the world turned from the production of munitions, attention was focused upon the markets offered by the rebuilding of the countries which had suffered in the war. There was a frantic rush to get into these markets; almost anything could be sold there, provided it got there quickly. The Labour government launched its famous export drive, sending its Ministers around the country to draw homely analogies between the world market and Mrs. Smith's housekeeping, and sticking up its “Work Or Want” posters. The more we exported, and the less we imported, went the story, the better off we would be.

Some of this propaganda went home. Many workers actually worried about the trade gap and as each set of figures came out, showing how large the gap was, they sank into gloom. It was useless to tell them that the trade gap was a problem for the people who owned the goods which were going in and out of the country and that workers should concern themselves only with their own economic interests. They were convinced that the bigger the gap the more everyone would suffer and perhaps, as well, they thought that the “lousy foreigners” were getting one over on poor, simple, honest John Bull. Amid the gloom, their blood boiled.

The Tories, of course, made a lot of hay while this particular sun shone. The trade gap, they said, was caused by the amateurish methods of the Labour government; there were too many controls, too much nationalisation, it was all something to do with Socialism. Just let a businessman’s government take over and in no time at all the trade gap would disappear.

Well that was a long time ago and it is time now to draw attention to one or two facts. First of all, the trade deficit has not disappeared under Conservative government; it has, in fact, remained as stubbornly as ever. Secondly, the fact that the Tories used to say in the days of Labour government that the gap inevitably meant poverty has not stopped them claiming that we are all having it good—although the gap is still there. And thirdly, the Tories have notched up the biggest trade deficit ever to be recorded for one month. All of which indicates that, however baffling the Labour government found the problems of running British capitalism, the Tories have not found the going much easier.

It was in last January that the trade gap reached its peak. Imports reached a new high of £457 million, while exports fell to £326 million which, taking into account £11 million worth of re-exports, left a “crude" trade gap of £120 million. This figure was especially impressive when compared to the monthly average gap of £45 million for 1962 and £49 million for last year.

By all the standards which the newspapers, the politicians and the city editors have used in the past, this was a crisis for British capitalism. But some of them, when the January figures were announced, revealed that they had adopted new standards, or had at any rate modified the old ones. The Daily Telegraph headlined a gap of only £72 million, without mentioning the fact that this lower figure was arrived at after using a method of calculation which had not been used before. In the Sunday Times, economic editor William Rees Mogg was saying “By this weekend . . . no one doubts that there is a serious balance of trade problem to be contended with," although The Guardian a couple of days later had it that “People can talk themselves into a financial crisis. But at the moment there is none in sight." Sir Alec Douglas-Home was keeping his eye firmly fixed on the next election: “Do not let us,” he said, “Talk ourselves into a crisis or write ourselves into one on the basis of one set of monthly figures.” And in this he was supported by Samuel Brittan in The Observer ". . . a crisis is a psychological phenomenon that exists when people think it does.’’

The obvious comment on this latter kind of optimism is that, if it is possible to talk ourselves into a crisis then all that is needed to remedy the situation is to talk ourselves out of it. (Sir Stafford Cripps, when he was Labour’s Chancellor, made a similar statement about a crisis in 1949 but the economic problems of British capitalism, beat him in the end—and no one could accuse Cripps of not being able to talk.) And if crises are only, after all these years, psychological phenomena, why, what the Treasury needs are not economists but psychiatrists, and Mr. Brittan's column should not be written by a financial wizard like himself but by an expert in mental disorders. What a pity nobody thought of it in the ’thirties! It would have saved the government such a lot of dole money.

This was not the end of the confusion. If the experts could not agree on whether there was a crisis, neither could they agree on what was needed to get rid of it. The National Institute of Economic and Social Research advised the government, in an article written a few days before the January trade figures were published, to increase personal taxation by about £200 million. Three days later the Federation of British Industries was recommending a decrease in income tax and an increase in indirect taxation. Mr. Rees Mogg declared himself ". . . opposed to import controls" — something which, said The Guardian, “. . . is beginning to be talked about again by economists in responsible places . . ." In the end, Mr. Maudling increased the Bank Rate, which some of the pundits had advised him to do but which the National Institute had described as “. . . not likely to be effective.’’

It is easy enough to pick out these contradictions. Whenever British capitalism finds itself in some sort of difficulty there is no lack of inconsistent advice from the experts. Whenever a Chancellor announces a measure which is supposed to relieve a crisis there are plenty of the same experts to crow that the measure is too little or too late, too large or too early, or that anyway they thought of it first. It does not seem to occur to them that, if they cannot agree upon the nature of a crisis, or upon the solution to it, or indeed upon whether there is a crisis at all, the chances of them ever being able to solve the economic maladies of capitalism are just about non-existent.

What the experts never tell us is that the trade gap is a problem which only capitalism can produce. Most of the world's developed countries are exporters—and even the undeveloped lands have some sort of export trade, if only in some primary crop like cocoa or sugar. But exports do not simply go off into the blue—every one of them is an import into some other country. The £457 million worth of goods which came into this country during January were worth about that much to the countries which sent them here. Sometimes a nation’s exports depend upon its imports; goods which are sent abroad are made by machinery which has been imported or include a vital component which, because it is made more cheaply in a foreign country, has been bought from there in preference to home produce. And with so many countries in this struggle, each of them fighting to get on top, it is impossible for them all exactly to balance their trade with each other. Even if they wanted to, that is; for if they were to try to keep their imports precisely level with their exports, capitalism's international trade would collapse and many of its industries with it.

This fact, naturally, is ignored by the government, who tell us what all good, docile patriots want to hear—that it is best for our country to be on top, for our country’s trade balance to be in credit and to hell with the rest. At the same time governments abroad, who are competing with British industry in the world’s markets, are telling their workers the same story and the workers are swallowing it and so the whole sorry mess goes on. While the people are busily swallowing the official propaganda, few of them are realising that the crises are interminable, that the experts and the Ministers are unable to deal with them and that in any case the state of their country's trading accounts has no appreciable effect upon their welfare.

Neither are they realising that it is capitalism itself which creates the balance of payments problem. Why, in the name of sanity, should one area of the world not import more than it exports? Why should the Americas not send out a lot of cereals? Or Africa a lot of raw minerals? Or Australasia a lot of dairy produce? Why should not the world’s wealth be produced in the areas where this can be done most efficiently and easily and sent to the areas where it is needed?

Why? Because at present the world is divided into opposing nations and groups of nations, who unite their interests, often temporarily, against the rest. Because the world is now split into rival trading groups who fight bitter economic wars against each other. Because the world produces its wealth to be sold so that the class which owns the machines and the materials which go into the wealth can make a profit on their investments.

We are now at the very root of the trouble. Until we deal with it the crises, of many kinds, will continue. But whoever may lose his job in a crisis, there is one type of person who will not be unemployed—the person who owes his position to his professed ability to do something about the uncontrollable ups and downs, stops and starts, which are an inevitable part of capitalism all over the world.

Ivan