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Focus on Trade #37 (fwd)
FOCUS ON TRADE
Number 37, August 1999
Focus-on-Trade is a regular electronic bulletin providing updates and
analysis on regional and global trade and finance. Although initially
concerned with APEC, the scope of the bulletin now extends to
include the World Trade Organisation (WTO), the ASEAN Free Trade
Area (AFTA), the Multilateral Agreement on Investment (MAI), the
International Monetary Fund (IMF) and any other acronyms that
require critical attention. Focus-on-Trade carries updates on trends in
world trade and finance, with an emphasis on analysis of these trends
from an integrative, interdisciplinary viewpoint that is sensitive not
only to economic issues, but also to ecological, political, gender and
social issues related to developments in world trade.
Your contributions and comments are welcome. Please contact us c/o
CUSRI, Wisit Prachuabmoh Building, Chulalongkorn University,
Bangkok 10330 Thailand. Tel: (66 2) 218 7363/7364/7365, Fax: (66 2) 255
9976, E-Mail: admin@focusweb.org, Website: http://focusweb.org
Focus on the Global South is an autonomous programme of policy
research and action of the Chulalongkorn University Social Research
Institute (CUSRI) based in Bangkok.
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IN THIS ISSUE of Focus on Trade Aileen Kwa reports the outcome of
the recent G15 Trade Ministers meeting and the parallel civil society
consultation held in Bangalore on 17 and 18 August and analyses the
arguments on whether or not developing country governments should
support a new trade round. In Thailand, one of the lasting effects of
the financial crisis is the presence of the World Bank. Supara
Janchitfah reports how Thai NGOs are now questioning the Bank's
right to set development policy. And in two separate articles, Walden
Bello warns that the world remains without a serious system of
defence against the periodic stampedes of the Electronic Herd and
speculates on what Larry Summers has in store for Asia.
Also in this issue is the summary of the Bangalore civil society
meeting 'Southern Agenda for the WTO: a civil society perspective'
plus a copy of the 'No New Round' letter for those of you who have
not yet signed.
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A new trade round: to have or have not?
Aileen Kwa
Power, timidity, and irresponsibility in global finance
Walden Bello
Thai groups questions World Bank legitimacy
Supara Janchitfah
Deconstructing Larry: what the new man at treasury
has in store for Asia
Walden Bello
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A new trade round: to have or have not?
Aileen Kwa*
As civil society groups from all over the world are gearing up for their
organised demonstrations at Seattle opposing a new round,
developing governments, too, have been looking at what shape the
negotiations at Seattle and beyond should take.
This was the objective of a recent G15 meeting of developing country
governments in Bangalore 17-18 August. Southern governments met
to establish solidarity and to forge common objectives for the WTO's
Third Ministerial Conference.
There was unanimity amongst the governments that their highest
priority at the Seattle Ministerial would be the resolution of
developing countries' implementation issues and the 'removal of
inequities in the existing agreements to restore the balance of rights
and obligations forged in the Uruguay Round'. Governments felt very
strongly that 'mandated negotiations and mandated reviews should
constitute the core agenda for the next round of negotiations'.
Two other features of implementation were also highlighted
- the non-realisation of benefits by many developing countries in
areas of interest to them, such as agriculture and textile and clothing,
and therefore the need for developed countries to fulfil their
obligations in spirit;
- the Special and Differential provisions in the Uruguay Round
Agreements which have remained unimplemented. These must be
operationalised.
Some of the governments gathered were prepared for limited add-ons
such as tariff negotiations. Governments, however, emphasised that
they did not want the agenda overloaded.
Unfortunately, there seemed to be a shift in India's position from an
adamant 'no' to a new round it had previously articulated, to a more
'wait and see' position. Commerce minister, Ramakrishna Hedge told
the media that 'We do not want to be seen as an opponent to new
issues but we want to be cautious' (The Economic Times 19 August
1999).
As the leader and champion of the cause of developing countries at
the WTO, this change in India's position has implications for the other
developing countries.
What is behind this change and what are the implications?
Road-map of the Built in Agenda and New Issues
The WTO's Second Ministerial Conference in May 1998 identified four
building blocks for the future work programme of the WTO. The
General Council has been asked to make its recommendations on them,
on the basis of consensus, at the Third Ministerial Conference at
Seattle. The four building blocks are:
Implementation of Existing Agreements (usually known as the 'built-in
agenda')
a) Problems, issues and concerns arising from the implementation of
the existing agreements (eg. expected benefits which have not been
forthcoming such as in textiles and clothing, agriculture; abuse by
some countries of anti-dumping and countervailing measures etc).
b) Mandated negotiations under the existing agreements, such as in
agriculture and services
c) Mandated reviews of existing agreements: TRIMS, TRIPS.
New issues arising from the previous Ministerial Conferences
>From the Singapore First Ministerial Conference (December 1996)
a) Trade and investment
b) Trade and competition policy
c) Transparency in government procurement practices
d) Trade facilitation
>From the Second Ministerial Conference (Geneva, 1998):
e) Global electronic commerce
Implementation of the decisions taken at the High Level Meeting on
Least Developed Countries (LDCs)
Other new issues to be decided by consensus:
a) Industrial tariffs (unlike the others on this list, this is not a 'new
issue', but it is new in that it does not fall under the mandated built in
agenda).
b) Trade and environment
c) Trade and labour standards
d) Transparency in WTO's work process
e) Global free logging agreement
f) Genetically modified products
EU, US and Developing Countries' Positions: There are several
positions to date on how to move forward in the future work
programme.
The EU and its allies are pushing hard for a broad round of
negotiations at the WTO. The EU has repeated its thinly veiled threat
that it will consider negotiations in agriculture only if there is an
ambitious and comprehensive trade round. At the top of the EU's
agenda in the new round are further cuts in industrial tariffs, and,
importantly, binding multilateral rules on foreign investment.
Further liberalisation in agriculture is extremely sensitive on the
domestic front, in countries such as the EU and also in Japan. A
comprehensive round including investment would help diffuse
tensions amongst their domestic lobbies should they make
compromises in agriculture.
The US has been less enthusiastic about negotiations based on a
single undertaking (negotiations on an issue is concluded only when
all negotiations are concluded). They have been pushing for an 'early
harvest', where issues can be completed without having to wait for the
completion of all other issues. The reason for their hesitance towards
a broad agenda is that they do not want difficult fundamental
questions about the TRIPS agreement to be brought up by the
developing countries, such as its basic contradictions with the
Convention on Biodiversity.
Implementation concerns have and will continue to be the priority of
developing countries. Until prior to the G15 meeting, developing
countries had been resolutely stating that only the built-in agenda,
with perhaps the inclusion of industrial tariffs should be on the
agenda. Many of the market access benefits they had expected from
the last round did not materialise, and therefore, the focus of future
negotiations should be on redressing imbalances, instead of pushing
ahead on new issues.
To Have or Not to Have A New Trade Round: Is it the Right Question?
As the governments were debating in Bangalore, a group of civil
society representatives were also holding a parallel meeting on the
same issues, organised by the Consumer Unity and Trust Association
(CUTS). Former foreign secretary and trade veteran, Muchkund
Dubey led the debate there about the pros and cons of a new trade
round.
The main reason to oppose a new round with new issues is that many
developing member countries are not even equipped to keep pace with
the built-in agenda. It would be extremely difficult, if not impossible for
them to keep apace with the negotiations if more subjects are brought
on board.
Conversely however, Dubey cited recent examples showing that even
without a trade round, new issues have constantly been brought up
and put on the agenda by developed countries. For example, the
information technology agreement was agreed upon in Singapore,
after the US used the APEC forum to get an initial consensus on it.
Similarly, at the second ministerial, the surprise waiting for developing
countries was the declaration endorsing a standstill in tariffs on
electronic commerce.
At the same time, issues of interest to developing countries have not
been negotiated. For example, negotiations on the movement of
natural persons have not been restarted, even though the first round
had brought only very superficial results for developing countries.
Developing countries have tried, to no avail, to press for a subsequent
round. Likewise, the TRIPS review that was mandated to take place in
1999 has been quietly sidelined because of developed countries'
reluctance to address the sensitive issues of concern to developing
countries.
Dubey therefore felt that perhaps, with a trade round, developing
countries would have more time to react to the new issues which are
brought to the table, rather than be taken by surprise. In the past, this
led to developing countries giving in to the Northern agenda without
in fact receiving any significant benefits in return.
However, Dubey criticised the argument given by developed
countries - that if there is no wider round, there will be no gains for
developing countries. This, he said, is blackmail. It is equivalent to
saying that developing countries must negotiate on the terms of the
North, or else...
At the end of the day, Dubey says, the issue is really not about
whether or not there is a new round, but in fact, what goes into the
negotiating agenda.
One of the problems about trying to develop a Southern agenda is
that countries are interested in different items. It is therefore very
difficult, perhaps even impossible to find agreement between
developing countries about which items should be included or
excluded.
What to make out of all this? One may or may not agree with Dubey,
that a new round would be better as developing countries will have
more time and will be able to better ensure that their issues are also on
the table, so that trade-offs can be made.
This may be a sensible position of one who has taken into account all
the political realities. Already, the G15 meeting gave no clear
indication of opposing a new round. Some countries may be willing to
accept certain new issues in exchange for concessions in key areas of
concerns. For India, for instance, one key area could be bringing the
TRIPS agreement in line with the Convention on Bio-diversity so that
the rights of communities are recognised and patents not granted
under the CBD are also not granted under TRIPS.
The key question here, however, is that if new issues proposed by the
North are allowed to get on the agenda, and developing countries do
want to engage in some of these issues in return for other benefits,
where is the point at which the full-stop is drawn? This is a tricky
issue given the number of developing countries and their different
economic and political interests, and that at the WTO, countries
unfortunately attempt only to negotiate for own benefit, regardless of
whether or not this impedes their Southern neighbours' interests.
In the very short time before Seattle, developing country government
may want to ponder on some of the comments by trade experts at a
meeting in July at Columbia University, where there was no
enthusiasm for a new round and new issues from the most surprising
quarters. This included OECD secretary general, Donald Johnston,
former WTO director-general Arthur Dunkel, and free trade advocate,
Jagdish Bhagwati.
Bhagwati noted that developing countries were now weak due to the
financial crisis, and therefore had no bargaining power. It would
therefore be questionable whether or not the South would be able to
get their issues on the agenda if a trade round encompassing new
issues pushed by the North were to be launched. He said that a round
with the wrong issues (issues which are irrelevant to trade and which
are dominated by the Northern corporate agenda) could bring the
WTO down the wrong road, so that a programme of unilateral
liberalisation may be better.
OECD chief, Johnston warned that industrialised countries were
pushing developing countries to liberalise before they could adjust.
He called upon Northern trade negotiators of the North not to be
overly influenced by narrow commercial interests.
Arthur Dunkel, who was GATT chief at the time of the Uruguay
Round recounted how he had recently chaired an International
Chamber of Commerce meeting on the views of business on the new
round. He was struck that the views of the business leaders reflected
the views of their governments in trade negotiations, which led to ask
'who is driving the trade policy agenda, governments or business?' He
also said that the WTO should not be overloaded in the next round,
with subjects which are not related to the system being taken on
board. He advised that a realistic agenda should consist of the built-in
agenda and tariffs.
Rubens Ricupero, head of UNCTAD pointed out that whatever the
theoretical benefits of trade liberalisation, the empirical record is
otherwise. He commented that the majority of diplomats from the
South are looking at the new round with resigned fatalism and not
enthusiasm. He called for the round to be a Development Round,
where the real focus is on the North opening up their markets to
products of the developing counties (Suns #2288).
Developing countries must weigh carefully, whether or not they will
benefit from another round of trade negotiations, and not be lulled
into thinking that a new round will be able to re-balance their interests.
Trade negotiations are a slippery slope which developing countries
have found they are usually sliding down rather than making upward
progress.
When under pressure to put new issues on the agenda, it may be a
good time for developing countries to throw back at the US, the
latter's response to developing countries' wish to extend the TRIPS
Agreement transition period:
'We haven't gotten any benefit out of this agreement (the Uruguay
Round Agreements) from many countries with whom we negotiated so
hard in the Uruguay Round. To now have them say, 'we should
negotiate to make changes before we've provided you any benefits',
we find completely unappealing.'
*Aileen Kwa is a research associate with focus on the Global South.
She is presently based in Geneva working on the review of the
Agreement on Agriculture. A summary of the Bangalore civil society
consultation is at the end of this newsletter.
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Power, Timidity, and Irresponsibility in Global Finance
Walden Bello*
Asia's stock markets are soaring again. To some, that portends real
economic recovery. To others, it is an ominous sign that the
"Electronic Herd, " as New York Times columnist Thomas Friedman
calls it, is back in its Asian grazing grounds, happily snapping up
promising stocks and high-interest bonds now, but ready to move out
tomorrow, perhaps in another
furious stampede triggered by God knows what.
The herd, in fact, began moving in Manila the day after President
Joseph Estrada's State of the Nation address on July 26, as the foreign
funds that had been pouring into the country over the last few months
reversed course, forcing the Philippine stock market index to drop 113
points to its three month low. Was the Philippine chief executive
looking more besotted than usual, some asked?
One would have expected that two years after the outbreak of the
Asian financial crisis, there would be institutions in place that would
prevent a repeat of the massive and rapid exit of $100 billion that
triggered the collapse of the region's economies. After all, even the
new US Treasury chief, Larry Summers, who holds the view that
"crony capitalism" is the
Main reason for Asia's troubles, now admits that "a strong case can
be made that excessive capital inflows may have contributed
importantly to the recent problems in emerging markets."
A quick look around shows, however, that Chile has lifted its controls
on foreign capital inflows, while Malaysia has withdrawn the
controversial restrictions on foreign capital outflows that it imposed
last year. These moves certainly do not stem from the fact that
national-level mechanisms have been rendered superfluous by the
erection of serious capital controls at the international level. For all its
brave talk about creating a "new global financial architecture," the G-7
at its summit in Cologne in mid-June gave birth to a mouse--to a
program that put the emphasis on voluntary disclosure of financial
information by hedge funds and other financial mechanisms and
voluntary risk management by the private sector.
Cologne also produced another ironic result- a stronger International
Monetary Fund to exact economic reforms from emerging economies,
but without the organizational reforms in terms of greater
transparency, greater accountability, greater consultation, and a more
self critical approach to its programs that the Fund's many critics have
long demanded.
The Cologne program bears the stamp of the Summers and his
predecessor Robert Rubin. Alternative proposals within the G-7, such
as "target zones" to reduce fluctuations among the euro, dollar, and
yen, practically vanished when the controversial Keynesian Oskar
Lafontaine resigned as Germany's Finance Minister in March. The
remaining potential counterweight to US domination of the financial
agenda is Japan, but it has refused to play the role of Washington's
fiscalizer.
Indeed, Japan has proven to be a very big disappointment to many
people and governments in Asia.
The first big letdown occurred a few months into the crisis. In what
was then seen by practically all Asian countries as an innovative
response to the currency crisis, Tokyo proposed the establishment of
the Asian Monetary Fund (AMF), which would have been capitalized
to the tune of $100 billion from the reserves of Japan, China, Taiwan,
and Hongkong. The AMF was conceived as a multipurpose, low-
conditionality, quick-disbursing facility from which governments
whose currencies were under attack could have drawn cold cash to
counter the speculators. But the US Treasury and the Fund opposed
the idea on grounds that it would weaken the ability of the IMF to
"extract reforms." Moreover, as analyst Eric Altbach has noted,
Summers and the Treasury "saw the AMF as more than just a bad
idea; they interepreted it as a threat to America's influence in Asia."
Japan backed down, the opportunity to stabilize the situation early on
with an inter-governmental united front backed by hard reserves
passed, and key Asian economies plunged into spiral accelerated by
Washington-backed contractionary IMF programs.
Since then, Japan has largely danced to the American tune. No
concrete proposals have come from Tokyo on global capital controls,
though Finance Minister Kiichi Miyazawa and other Finance Ministry
officials have rhetorically targeted hedge funds on occasion. Tokyo
has also made critical noises about the IMF but it has not followed
these up with actual proposals for institutional reform.
The vaunted Miyazawa Plan has, in fact, elicited US approval, largely
because it provides aid that is conditioned on advancing
Washington's agenda for Asia-that is, rapid liberalization,
deregulation, and privatization. In the Philippines, for instance,
Miyazawa money has been made contingent on Manila's implementing
two things: the privatization of the National Power Corporation, which
has been a longstanding demand of the World Bank and the IMF; and
the opening up of retail trade to foreign participation, of which the
American Chamber of Commerce has been a prime advocate.
It is not that Japan lacks the clout to stand up for an alternative
paradigm of global financial stabilization. For when it comes to issues
that bear on its domestic economy, Japan has not hesitated to take
decisions that Washington protested but could do nothing about, like
Tokyo's refusal to open up its forestry and fisheries sector and its
move to restrict the short-selling of stocks. What Japan has
studiously avoided is filling a leadership role for Asian interests.
Unchallenged by Europe and Japan, the US has dominated the global
financial agenda. This agenda has been fairly consistent. The reason
that Washington has felt uncomfortable about attaching urgency to
controlling global flows of speculative capital is that, as a New York
Times series earlier this year revealed, Treasury's push for rapid,
indiscriminate liberalization of the capital accounts of the Asian
economies was a central cause of the crisis. And as the crisis
developed, Washington's agenda, as former Federal Reserve Governor
Lawrence Lindsey has pointed out, has been to take advantage of the
situation to push its longstanding bilateral agenda of opening up
trade and financial markets.
Now it is true that today, Larry Summers talks about "properly paced
liberalization," but it remains the case that capital account and trade
liberalization in the emerging markets continues to be the central
thrust of its program for global financial reform. Washington's main
antidote against global financial instability is not international
measures to throw sand in the wheels of speculative capital but more
liberalization at the national level. Summers revealed the logic behind
this approach in his comments on Argentina in a recent speech:
"Today, fully 50 per cent of the banking sector, 70 per cent of private
banks, in Argentina are foreign-controlled, up from 30 per cent in 1994.
The result is a deeper, more efficient market, and external investors
with a greater stake in staying put." To put it in the curious algebra of
the US Treasury, financial liberalization equals financial stability
equals the global interest.
In sum, five years after the Mexican financial crisis and two years after
outbreak of the Asian financial crisis, Washington's single-minded
pursuit of its financial agenda and European and Japanese timidity
have ensured that the world remains without a serious system of
defense against the periodic stampedes of the Electronic Herd. This is
irresponsibility of the highest order.
*Walden Bello is director of Focus on the Global South and professor
of sociology and public administration at the University of the
Philippines.
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Thai groups questions World Bank legitimacy
Supara Janchitfah*
Nine years ago, landless Soy Onthai of Nakhon Sawan had to move
from the province to find jobs in the big city. She thought she was
fortunate to get a job at Par Garment in Rangsit for 45 baht a day.
Last March, she was receiving 162 baht a day for the work that she
has been doing for nine years now: sewing 400 pieces of parts of
various brand name shirts for the world market.
``Export competitiveness is an important potential tool to reduce
poverty in developing countries, as it can lead to higher economic
growth and can increase the likelihood of lower prices and better
products for consumers,'' says J. Shivakumar, the World Bank's
Country Director in Thailand.
``World-wide experience has shown that countries'inward-looking
strategies eventually fail, for such policies almost always result in low-
quality, high-cost products, in greater poverty, in disadvantaged
consumers, and with only a well-connected and privileged minority
benefiting. Export performance is thus a key ingredient of Thailand's
recovery and growth strategy,'' said Mr Shivakumar. If Mr Shivakumar
is right, Ms Soy and millions like her powering Thailand's teeming
export companies should have better lives after they joining the export
workforce.
But Ms Soy's hard life is an illustration of factual truths: it's been nine
years but she still has to eat the cheapest meal as she could: five baht
of sticky rice and some grilled chicken bone. ``We cannot eat much. I
have to keep some part of the money for housing, for electricity, for
water and to save some to send home,'' said Soy. According to the
Department of Export Promotion, Thailand's exports last year
amounted to 2,248.08 billion baht. The past four years totalled 6,938.46
billion in exports. If the labourers that bring this much money in do not
seem to benefit, who does?
Soy and many other Thai workers nationwide are living a little above
poverty line, more often than not deeply in debt. Most are farmers
who are being pushed to produce more for export under the World
Bank's Countries Assistance Strategies (CAS).
Promised the rose but sent the clay
Item 84 of the CAS states the objectives of rural development are to
improve the competitiveness of agricultural exports and import
substitutes, continue commercial agricultural productions and rural
restructuring to improve farm incomes, improve irrigation for high-
quality export rice and diversified high-valued exportable crops.
Soy used to grow in her 30-rai ricefield. Her family had to invest in
fertiliser, chemicals, and eventually sank deep into debt. They were
forced to produce more than her family needed in order to feed the
market and the world. Her family lost their land and Soy became a
waged earner.
Worse still, when the economic crisis hit Thailand in mid-1997, Soy
and hundreds of thousands of Thais who went to work for export
companies lost their jobs. One of them was Mrs Pramorm Chombud,
who worked for the Thai Melon factory for 26 years. While the
government has been attempting to solve the problems of financial
market instability and loss of investor confidence by implementing
economic policy remedies prescribed by the International Monetary
Fund (IMF) and the World Bank, Pramorn continues to buy the
cheapest bones and vegetables for her children to eat. Will they
benefit from the government's actions? How? When?
At fleeting times, Pramorm, 51, thinks about those questions, but she
has to go out and find a job. Her husband is paralysed. Her mind has
more than enough worries to examine, and she doesn't have the time
to dwell on the state of the nation's finances. She does odd jobs and
earns less than 100 baht a day. She wants to go back to Lop Buri
province. That's where she was born. But even in her hometown, there
is no place for her. Her old friends are just as hard up as she is.
The dialogue
In June 1998, the World Bank published its Country Assistance
Strategy (CAS) for Thailand and announced a US$300 million Social
Investment Project (SIP) loan. In May 1999, the Bank announced a
strategy for rural development in Thailand.
The NGO Coordinating Committee on Development (NGO-COD)
invited the World Bank's Thailand Country representative to brief
NGOs, academics and community leaders on CAS-Thailand last
month. Enthusiastically responding to NGO- COD's invitation, the
Bank sent a group of eleven people to the meeting, led by the country
director, Mr J. Shivakumar. Despite the long association between the
World Bank and Thailand, this was the first time that Bank officials
and Thai NGOs have formally met with each other. In the past, Thai
NGOs and local communities has resorted to campaigns against the
Bank's funding of socially and ecologically destructive projects and
policies including large dams such as the Pak Moon, against the
export-led agriculture policy, against chemical-intensive agriculture,
and against proposed resettlement of forest-dwelling communities.
The World Bank officials spent half of the meeting to explain its stand,
and the intent of the CAS. Academics and NGOs criticised the CAS as
not designed to benefit the majority. In response, Bank officials
insisted on explaining once more ``who we are and what we are doing
here.'' This information is available on the website and in books. The
critics recognised it as an evasion tactic.
The straightforward questions raised by the Thai NGOs were not
adequately responded at the meeting:
1. What legitimacy does the World Bank have in influencing
Thailand's national policies?
2. How will the World Bank, and its executive board, respond to the
public's growing criticisms of its aid strategies?
3. How does the World Bank plan to deal with its past mistakes? And
if its proposed social restructuring programme incurs adverse
consequences, will the Bank be willing /ready to take responsibility?
4. How can the public regulate the Bank's activities?
5. What are conditions for the World Bank's loans? What will happen
if the government fails to fulfil the requirements?
No legitimacy
Rhethorical strategies sound beautiful but hard to attain. For instance,
the strategic theme for the World Bank's social and environmental
programs in Thailand is ``sharing growth and ensuring quality of life
with the focus on people.'' The World Bank aims to ``protect the
vulnerable, target poverty, redress rural-urban imbalances, build a
viable social security system and protect natural resources and the
environment.''
Moreover Mr Shivakumar points out that `` the rapid growth has
pulled millions of Thai people out of poverty every year.'' Civil society
groups such as the NGO- COD point out that the Bank continues to
use the free-market economic paradigm to support CAS-Thailand, and
refuses to allow the people to take part in preparing the CAS.
``In preparing the CAS, the Bank chose to dialogue only with elite
groups: technocrats in the government sector, establishment
economists supportive of economic liberalisation, and a number of
NGOs uncritical about the World Bank's past performance in Thailand
and in other developing countries,'' said Mr Srisuwan Kuankachon of
NGO-COD. To these NGOs and academics, the Bank continues to
refuse to discuss alternative solutions to the crisis of economy in
Thailand. Many insist that the export orientation is at odds with the
self-reliance policy recently advocated by His Majesty the King
himself.
The Bank continues to insist that the public benefits from this export
policy. They also insist that its public legitimacy rests with the fact
that it comes into the country at the request of the government, which
is one of the Bank's stakeholders, and an elected governments
represent the people's interest.
What the World Bank seems to ignore is that many groups feel that
the government is made up of political parties formed to protect the
interests of the political elite and big business. The Bank has also
ignored the widespread public perception that the government
therefore lacks the political will to translate into action its avowed
principles of more equal distribution of income among different social
classes.
Dr Worawit Charoenlert, political economist of Chulalongkorn
University, says that ``the aims of better distribution of wealth and
improving the quality of life of the people conflicts with the Bank's
`business as usual' nature. ``That is because it requires the highest
return from the loans it extends."
``It ensures high returns by attempting to pave investment
opportunities in all the world's regions to benefit the economies of
industrialised countries and the multinational corporations.'' For
instance, the World Bank and the IMF have collaboratively pushed
the government to sell key state enterprises, including the liquidity-
scarce Electricity Generating Authority of Thailand (Egat). Egat's
employees are currently opposing the government's privatisation
attempts.
Political economists and activists are concerned that key utilities will
soon be transformed into the entities that profit multinational groups
that will, at best, make token gestures to the plight of the poor.
``This privatisation policy would also be implemented in the country's
educational system. This will make education unaffordable to the
poor,'' said Dr Worawit. ``Education should be subsidised by the
government as an investment for human resources of the country,'' he
said.
Do more harm than good
Over the past four decades, the World Bank has imposed free-market
ideologies on developing countries. This helped to make economic
disparity a global problem. For instance, many countries in Latin
America, Africa and Asia that borrowed World Bank funds and
complied with its policy dictates have become and remain heavily
indebted.
Most of the World Bank's financial resources have been geared
towards developing infrastructures such as highways, dams and
power plants which mainly benefit the business sector rather than the
poor, said Mr Srisuwan. In his opinion, these infrastructure projects
destroyed and degraded natural ecosystems, as well as economic and
cultural ways of life of local communities.
Mrs Sompong Vienchan, a community leader in the Pak Moon dam
area remains distressed over the loss of her livelihood after the dam,
one of the many dams in Thailand financed by the World Bank, was
built. Mrs Sompong demands the World Bank take responsibility for
the suffering of hundreds of small-scale fishing communities in the
Moon River Basin who continue to protest at the dam site in Ubon
Ratchathani province.
The World Bank washes its hands of her sufferings, saying: ``The Pak
Moon dam project was closed by the Operations Valuations
Department."The World Bank's completion report is satisfactory.''
The fishermen of the Pak Moon River basin say: ``We have been
protesting against this project even before it was supported by the
World Bank.'' ``We submitted several petitions. We went to the World
Bank office in Bangkok in 1991, but they chose to ignore us,'' said Mrs
Sompong.
Make a pair of shoes for the whole world
In response, a World Bank official said that ``the World Bank is a
bank, not a charity organisation.'' Many academics and NGOs see the
World Bank as instrumental in the four-decade development process
which expanded the bureaucracy and corruption, while decreasing
genuine people's participation. Now, in order to impose a ``good
governance'' agenda, the World Bank blames inefficient, non-
transparent and corrupt public institutions as responsible for the
economic collapse.
Dr Worapol Promigabutr, Thammasat University sociologist, said that
the World Bank's past dictates ``created many problems, but now it
returns to suggest ways to solve the problems it created.'' Although
its CAS states two ways to improve good governance; to increase
private sector role and greater participation of civil society
organisation. NGOs wish the World Bank could distinguish the
differences between the civil society development (CSD) and the
CSOs. As their working's philosophies are different.
In the effort to restructure the financial sector as part of improving
Thailand's competitiveness, the World Bank's role resulted in the
Financial Restructuring Agency taking over bad loans of now-defunct
56 finance companies. The World Bank and the IMF pushed
governments of crisis-hit countries to guarantee private debts
incurred from private international banks. This has been severely
criticised as a method to transform a private debt into public or tax-
payer's debt. `` The ultimate beneficiaries from this process are the
foreign financial institutions in industrialised countries such as Japan
and the USA,'' said Dr Worapol.
The IMF and World Bank forced Thailand to maintain high interest-
rates to cope with the capital flight and achieve short-term
stabilisation. This resulted in rising manufacturing costs, increasing
non-performing loans, and liquidity crunch. This caused thousands of
firms to close down and almost all manufacturers to downsize. This in
turn resulted in mass industrial lay-offs, shrinking incomes, collapse of
domestic demand and further downward spiral of the economy.
Labourers who wanted to return to farming could not do so due to low
market price for agricultural products.
Most farmers are now deep in debt.
The World Bank rejects the subsidies policy for farm products saying
that it will create dependencies. However, the World Bank pushes the
government to subsidise the bad debts of financial institutions. If
farmers can't profit, the Bank is not affected.
* Supara Janchitfah is a journalist with the Bangkok Post. She is
presently visiting the Narmada Valley with a group of Thai activists
and journailsts.
------------------------------------------------------------------
Deconstructing Larry: what the new man at treasury
has in store for Asia
Walden Bello*
This article came out in the July 26, 1999 issue of Business World
(Manila) and the July 28, 1999 issue of the Nation (Bangkok.)
Larry Summers, the new US Secretary of the Treasury, first crashed
into my consciousness in 1991, when, as chief economist of the World
Bank, he penned the notorious internal World Bank memo justifying
toxic waste exports to the Third World on the grounds that they were
"underpolluted." "Just between you and me," he asked close
colleagues, "shouldn't the World Bank be encouraging more
migrations of the dirty industries to the LDCs [less developed
countries]?"
The reason for this, he argued, was that toxic substances such as
carcinogens will have a greater impact "in a country where people will
survive to get prostrate cancer than in a country where under-five
mortality is 200 per thousand." So long as there exist wage disparities
between rich and poor countries, continued the memo, "the economic
logic behind dumping a load of toxic waste in the lowest wage country
is impeccable and we should face up to that." "Grating" is how even
the Economist, a Summers fan, described the leaked document.
Summers made an even bigger splash in 1995, when, as Robert Rubin's
undersecretary, he emerged as the brains behind and manager of the
Clinton administration's massive $20 billion rescue package for Mexico
in early 1995. The commitment of IMF and US money bailed out
hundreds of US investment funds and banks, and the lesson that
many of the world's high rollers drew from the episode was that
countries in which massive amounts of speculative capital were
committed would not be allowed to fail. Reassured, many of the same
players moved from Mexico to play the overheating Asian casino, and
the term "moral hazard" entered the popular vocabulary.
Which brings us to Summers and Asia. What really is Summers' record
on Asia?
One might begin by pointing out that Summers was the World Bank's
chief economist when the most important Bank research he oversaw
was written and produced: the now famous East Asian Economic
Miracle. In accounting for the "miracle," the Bank identified as a key
factor the fact that "in each HPAE [high performing Asian economy],
a technocratic elite insulated to a degree from excessive political
pressure supervised macroeconomic management." It went on to say
that "the insulation mechanisms ranged from legislation, such as
balanced budget laws in Indonesia, Singapore, and Thailand, to
custom and practice in Japan and Korea. All protected essentially
conservative macroeconomic policies by limiting the scope for
politicians and interest groups to derail those policies."
With the outbreak of the Asian financial crisis, Summers, scarcely
batting an eyelash, made a 180 degree turn and attributed the
developing disaster to "crony capitalism," or a typical Asian brew of
government intervention, monopoly control, and financial
shenanigans.
But even as Summers and his boss embraced the crony capitalist
explanation, many close observers of the Asian scene were
unconvinced and some, in fact, pointed to their policies as central to
the crisis. As a remarkable New York Times expose that appeared
earlier this year revealed, the Rubin-Summers team's "too dogmatic"
insistence on free capital flows was identified by their own colleagues
as a major factor that touched off the financial implosion. In the case
of Korea, for instance, a key Treasury memo on June 20, 1996 sought
to use accession to the OECD as a "way of prying open Korean
markets in part to win business for American banks and brokerages."
Nowhere in the strategy memo's three pages "is there a hint that South
Korea should improve its bank regulation or legal institutions."
Once the crisis got going in earnest in mid-1997, Summers again
played a decisive non-constructive role, this time by preventing what
could have turned out to be a quick stabilization mechanism: the
Asian Monetary Fund (AMF). Capitalized to the tune of $100 billion,
the AMF was conceived as a multipurpose, low-conditionality, quick-
disbursing fund that would have provided Asian economies with
reserves to defend their currencies against speculative attack. Backed
by Japan and practically all East Asian governments, the Fund was
nevertheless vetoed by Summers on the grounds that the AMF would
weaken the ability of the IMF to extract "reforms" from the troubled
Asian economies. Moreover, as analyst Eric Altbach has noted,
Summers and Treasury "saw the AMF as more than just a bad idea;
they interpreted it as a threat to America's influence in Asia" coming
from Tokyo.
As the continuing speculative attacks forced Asia's currencies down,
Summers and Treasury pushed Thailand, Korea, and Indonesia into
the straitjackets of orthodox IMF stabilization programs, with their
stress on high interest rates and fiscal cutbacks. Not surprisingly, this
had the effect of turning a downturn into a deflationary spiral from
which the Asian economies still have to recover.
Conservative monetary and fiscal policies of the emerging economies
combined with radical free-market reform have constituted the
principal thrust of Treasury's Asia policy since then. Yet so evident
has been the central role of speculative capital in activating the virus
of financial instability that spread to Russia and Brazil that even
Summers and Rubin have had to speak about the need for a "new
global financial architecture." That was all rhetoric, however, and
Treasury's strategy in the G-7 has been to dilute or kill efforts to
control hedge funds and other speculative institutions and install the
equivalent of speed bumps on the flows of speculative capital.
The recent G-7 program for global financial stability issued at Cologne
in June was quintessentially Summerian in its stress on the usual
litany of more transparency, better monitoring, and reliance on
voluntary risk management by the private sector. The lack of teeth in a
proposal for global reform is both disappointing and alarming,
especially in light of Summers' admission in a Time interview that
"Global capital markets pose the same kinds of problems that jet
planes do. They are faster, more comfortable, and they get you where
you are going better. But the crashes are much more spectacular."
This exercise in deconstructing Larry inevitably leads to the question:
With such a record of environmental insensitivity, analytical errors,
and macroeconomic missteps, how did Summers qualify to be
Secretary of the Treasury?
Part of the answer lies in the Rubin-Summers team's unsurpassed skills
in manipulating the media. The selling of Summers as whiz kid, top
economist of his generation, and natural heir to Robert Rubin has
been going on for several years now. It reached its climax in 1998, at
the height of the Asian crisis, when, on the TV evening news,
Summers would play Sundance Kid to Rubin's Butch Cassidy. The
spreading global financial crisis often appeared to be simply a
backdrop for the performance of a mutual admiration club, with tough
questions serving as the cue for the boss to compliment the
young Summers as the real strategist behind the US economic team
and yield the stage to him.
But, aside from superior media management, there is one area where
Summers has indeed been successful, and this is in promoting US
economic interests. The grand buyout of depreciated Asian assets by
US financial and industrial corporations now in progress from
Bangkok to Seoul owes itself to Summers and Rubin's taking
advantage of the crisis to pursue the strategic goal of opening up
Asia to US corporate interests. Summers' vision for the post-crisis
Asian economic order may be gleaned from his comments in a speech
he gave to the Council of the Americas on May 3, 1999. In the
Same smooth way that his predecessor equated the common good
with the US interest, Summers said: "Today, fully 50 per cent of the
banking sector, 70 per cent of private banks, in Argentina are foreign
controlled, up from 30 per cent in 1994. The result is a deeper, more
efficient financial market, and external investors with a greater stake in
staying put." Asia was, of course, as much on Larry's mind as
Argentina.
Yes, Larry Summers may be a Neanderthal when it comes to the
environment and he may have an unenviable record as global
economic manager. But you have to grant that he does a pretty good
job at pushing the interests of American banks and corporations on
the benighted and the recalcitrant. And that, after all, is what makes
somebody a good Secretary of the Treasury.
* Walden Bello is the director of Focus on the Global South and a
professor of public administration at the University of the Philippines.
----------------------------------------------------------------------------------
CUTS Centre for International Trade, Economics & Environment
organised an international conference, "Southern Agenda for the Next
Millennium: Role of the Civil Society" at Bangalore, India on 18-19
August, 1999.
The Conference was held close to the G-15 Trade/Commerce Ministers
meeting. The objective of the Conference was to deliberate on the
current international trade policy issues from the civil society's
perspective so as to evolve a synergistic position, and take forward
well-argued viewpoints and concerns on sustainable development in
the South to the Seattle Ministerial Conference of the WTO.
SOUTHERN AGENDA FOR WTO: A CIVIL SOCIETY PERSPECTIVE
This Summary provides the highlights of the deliberations at the
International Conference on "Southern Agenda for the Next
Millenium: Role of the Civil Society" organized in Bangalore by the
CUTS Centre for International Trade, Economics and Environment, on
August 18 and 19, 1999. This conference brought together over 50
delegates from several NGOs and research institutions of the G-15 and
other developing countries to discuss the contribution that civil
society organizations could make to the Seattle Round deliberations,
so as to safeguard the interests of citizens in these, and other
developing countries.
A Vision for the World Order
The world trade order should accord a high priority to the autonomy
of developing countries in designing and implementing development
strategies. It should accept the fact that many instruments used by
these countries to achieve development objectives are in
contradiction to the theoretical concept of free trade. Provisions made
in the world trade system to account for the special needs and
problems of developing countries should not be stated as mere
expressions of interest by the developed world. The system must
enforce measures designed to provide special and differential
treatment to the developing countries.
No world order can succeed in its objectives if it does not
accommodate diversity. To do this, the WTO process needs to bring
back to centre stage a balance between the basic responsibility and
accountability of governments towards their people and the
requirements of an international system. It should respect the different
priorities of countries at various stages of development.
The acceptance of divergent development strategies is crucial,
because development cannot be viewed in simple terms of per capita
income. It is a multi-dimensional process, and each country should
have the autonomy and flexibility to decide how it prioritizes these
dimensions.
* A vision of the world order that gives countries the space to
implement their own strategies of sustainable, multi-dimensional
development, while respecting the priorities of other countries, is the
starting point of this agenda.
Strategic Coordination
There is general agreement that the WTO in its current form is far from
serving the best interests of the citizens of developing countries. This
perception is equally true for the common citizens of the developed
world. Based on the theoretical foundation that free trade benefits all
those who participate in it, the reality of the system since it was
initiated five years ago suggests that countries who advocate free
trade rarely practice it. More so, instead of evolving into an
organization based on principles, it had become one in which every
agreement was the result of intense conflict between countries or
groups of countries, which eventually concluded on the basis of the
superior bargaining power of developed countries. In fact, this is a
process, which has put the developing countries as a group at an
inherent disadvantage.
There are grave doubts about the merits of holding a new round of
trade negotiations while this unequal bargaining situation prevails.
>From the South's perspective, the benefits of continuing negotiations
in the WTO framework lie in using them for detailed reviews of
existing agreements, and implementation of remedial action achieving
balance and equity in the system. The best way to go about this is by
a process of strategic coordination between developing countries. It is
for developing countries to seek out their common interests and stand
firm as a group to assert those interests in the new round. To make
strategic coordination effective, an effort needs to be made at two
levels. The governments of these countries should work together with
clear perception of national interest in mind. This would need to be
complemented by active collaboration with civil society organizations,
which would assert the priority of issues relating to equity and social
justice. This combination would then be in a position to formulate a
strategic positive agenda that could be put forward at the Seattle
meeting of the WTO.
* The primary objective of continuing negotiations is a full review of
the implementation and impact of existing agreements.
* Southern countries must strategically coordinate to identify their
common interests, and collectively negotiate to advance them.
* Civil Society must ensure that equity and social justice are given
high priority in the negotiating positions of these countries. The
rights and interests of consumers, rural and urban workers, small
farmers and enterprises, and vulnerable social groups must be
protected.
* This process also requires that southern governments encourage,
support and collaborate with civil society organizations in their own
countries. Strategic co-ordination cannot be effective in promoting
joint objectives unless this broad range of resources is effectively
used.
* With respect to continuing negotiations, new issues, such as
investment policy, competition policy, government procurement, trade
facilitation, e-commerce, information technology, social and
environmental clauses et al should not be put onto the agenda.
The Structure of WTO
The WTO has four main functions: rule-making, policy orientation and
monitoring, negotiations and dispute settlement. All these functions
have been shaped by the unequal bargaining power between the
developed and developing world. For the WTO to have any chance of
advancing southern interests, concerted action by the southern
governments and civil society organizations is essential. The
immediate task is to develop a common agenda for the Seattle
negotiations.
It must be emphasized that the WTO does not operate in isolation. It
is a part of a broader arrangement of multilateral financial and
regulatory institutions, many of which also reflect the same
inequalities.
* Given the diversity of needs, interests, resources and approaches to
development among southern countries, a fair, equitable and
transparent rule-based system is necessary.
* A multilateral trade and financial system that is resistant to the
unequal bargaining power between South and North cannot emerge
without collective action by southern countries.
Agriculture and Food Security
The experience with the Agreement on Agriculture has been in virtual
contradiction to the expectations of southern signatories. The
pressure to reduce subsidies and increase market access to the
northern producers has been intense. Simultaneously, the degree of
support received by the latter from their governments has been
increasing. The subsidies typically provided by southern
governments have been classified as violating the Agreement. On the
other hand, the bulk of subsidies provided by northern governments
have been placed in the "non-actionable" category. Even as the north
continues to artificially enhance the competitiveness of its agricultural
products, the south is constrained to reducing or freezing its quantum
of subsidies to this sector. The same asymmetry prevails with respect
to market access. Both tariff and non-tariff barriers have been used by
the north to restrict the south's access to their markets. Genuine
competitiveness, which is the underpinning of free trade is clearly not
being given an opportunity in this sector.
Closely related to the issue of market access is that of food security.
The existing agreement can conceivably put a country which is not
self-sufficient in food at the mercy of global traders to meet its basic
needs. Guaranteeing the availability of food to its citizens is a
sovereign responsibility of any nation. This cannot be subordinated
to the requirements of any world trading regime. One way of doing
this is to take domestic production for domestic consumption outside
the ambit of the
agreement.
* The reality of the Agreement on Agriculture is far from the
expectations of the southern countries. It has, in effect, forced them to
stop supporting their own farmers, while opening up their markets to
the heavily subsidized producers from the north. This is of particular
concern for countries threatened with food shortages, because food
aid programmes are declining in significance.
* Opening up trade in agriculture, under whatever conditions, cannot
be given precedence over the sovereign responsibility of
governments to ensure food security.
* Another objective is to protect the livelihoods of groups
traditionally involved in food production, such as small farmers and
fisherpersons.
Linkage Issues
Environmental and Social Issues
Environment and social issues are increasingly being pushed onto the
trade agenda. It is recognized that solutions to environmental and
social problems are a fundamental part of any vision of sustainable
development. These are not issues that need to be imposed on
southern economies in any way. There are existing national and
international mechanisms designed to address these problems. A
trade regime is neither an appropriate nor an effective device to
achieve these objectives. Firstly, there is every danger that it can be
used by countries to raise non-tariff barriers. Secondly, the bulk of
environmental and social problems are related to domestic economic
activity, whereas the WTO can only influence export-related activities.
* Environmental and Social Issues are an integral part of any vision of
sustainable development. Trade restrictive measures are neither
appropriate nor effective mechanism to address these problems. They
need to be advanced through independent policy routes supported by
international cooperation.
Inconsistency between Instruments
Conflict between TRIPs and CBD
The south is at a great disadvantage with respect to its biological
resources, because of the inherent conflicts between the Convention
on Biological Diversity (CBD) and the Agreement on Trade Related
Intellectual Property Rights (TRIPS). The former is a scheme, which
gives countries a great deal of control over their indigenous
resources; not just at the governmental level, but devolving to the
communities that have traditionally used these resources. The latter
seeks to commercialize traditional knowledge; it fails to recognize the
relationships between communities and biological resources. It is
structured so as to give an unequal advantage to commercial interests
of the north. The conflict between the two agreements could be
resolved in favour of the affected southern communities by taking full
advantage of the scope of sui generis legislation, which would protect
the interests of the groups involved in southern countries.
* The CBD acknowledges sovereignty and the rights of communities
to share in the benefits of biological diversity, neither of which are
acknowledged by TRIPs. The forthcoming review must amend TRIPs
to bring it in line with CBD.
-------------------------------------------------------------------------
Statement From Members Of International Civil Society Opposing A
Millennium Round Or A New Round Of Comprehensive Trade
Negotiations
In November 1999, the governments of the world will meet in Seattle
for the World Trade Organisation's Third Ministerial Conference. We,
the undersigned members of international civil society, oppose any
effort to expand the powers of the World Trade Organisation (WTO)
through a new comprehensive round of trade liberalisation. Instead,
governments should review and rectify the deficiencies of the system
and the WTO regime itself.
The Uruguay Round Agreements and the establishment of the WTO
were proclaimed as a means of enhancing the creation of global wealth
and prosperity and promoting the well-being of all people in all
member states. In reality however, in the past five years the WTO has
contributed to the concentration of wealth in the hands of the rich
few; increasing poverty for the majority of the world's population; and
unsustainable patterns of production and consumption.
The Uruguay Round Agreements have functioned principally to prise
open markets for the benefit of transnational corporations at the
expense of national economies; workers, farmers and other people;
and the environment. In addition, the WTO system, rules and
procedures are undemocratic, untransparent and non-accountable and
have operated to marginalise the majority of the world's people.
All this has taken place in the context of increasing global economic
instability, the collapse of national economies, increasing inequity
both between and within nations and increasing environmental and
social degradation, as a result of the acceleration of the process of
globalisation.
The governments which dominate the WTO and the transnational
corporations which have benefited from the WTO system have
refused to recognise and address these problems. Instead, they are
pushing for further liberalisation through the introduction of new
issues for adoption in the WTO. This will lead to the exacerbation of
the crisis associated with the process of globalisation and the WTO.
We oppose any further liberalisation negotiations, especially those
which will bring new areas under the WTO regime, such as
investment, competition policy and government procurement. We
commit ourselves to campaign to reject any such proposals. We also
oppose the Trade-Related Aspects of Intellectual Property Rights
(TRIPS) Agreement.
We call for a moratorium on any new issues or further negotiations
that expand the scope and power of the WTO.
During this moratorium there should be a comprehensive and in-depth
review and assessment of the existing agreements. Effective steps
should then be taken to change the agreements. Such a review should
address the WTO's impact on marginalised communities,
development, democracy, environment, health, human rights, labour
rights and the rights of women and children. The review must be
conducted with civil society's full participation.
The failure of the Organisation for Economic Cooperation and
Development's Multilateral Agreement on Investment (MAI)
demonstrates broad public opposition to the deregulation of the
global economy, the increasing dominance of transnational
corporations and escalating resource use and environmental
degradation.
A review of the system will provide an opportunity for society to
change course and develop an alternative, humane and sustainable
international system of trade and investment relations.
For further information contact: ronnieh@foe.co.uk
------------------------------------------------------------------------------
FOCUS-on-Trade is produced by Focus on the Global South (FOCUS).
Contact information: c/o CUSRI, Wisit Prachuabmoh Building,
Chulalongkorn University, Bangkok 10330 Thailand. Tel: (66 2) 218
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Website: http://focusweb.org
Focus on the Global South (FOCUS)
c/o CUSRI, Chulalongkorn University
Bangkok 10330 THAILAND
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