By Kollengode S Venkataraman, (written in 2002)
Industrialized nations, with the U.S. leading the pack, preach to the less developed countries the virtues of Free Trade and dissuade them from imposing duties on the goods they import from them.
The argument is compelling: Import duties are protectionist and artificially make the imported goods more expensive even though they cost less and are better made. The real losers, the industrialized nations argue, are the ordinary citizens of the LDCs (Least Developed Countries) since they have to live with costlier, but poorly made goods than the imports.
Many LDCs during the last fifty years never attempted to nurture internal competition while they gave protection to native industries from overseas competition. The Nehruvian India is a classic example.
The unholy alliance among India’s Congress Party, big industrialists (in the Indian context) and India’s entrenched bureaucracy kept alive what was derisively called the Permit-Licence-Quota Raj.
The politicians’ palms were kept greased. And the already established industrialists (the Tatas, Birlas, Mafatlals, Kamanis and their ilk), by working on both the politicians and the bureaucrats, saw to it that no competition-domestic or overseas-ever came in their way.
The top-level civil servants got their vicarious pleasure in making the industrialists wait at their door for an appointment even as they took the crumbs the tycoons threw at them periodically. This system was preserved for decades till it imploded after the Cold War. Given this background, it was no surprise that none of the Indian industrial giants ever dared to enter the aggressively competitive global marketplace.
But in asking the LDCs to remove trade barriers, the industrialized West is driven more by self-interest. While the industrialized West tells the rest of the world to remove duties on imported goods, it grants subsidies to its farm products — grains, cheese, meat, poultry — to artificially depress their prices in the global market.
The industrialized nations spend over $300 billion of their taxpayer money per year on agricultural subsidies. This subsidy alone is roughly close to the total GNP of sub-Saharan Africa.
Gov. George W Bush, in his election campaign two years ago, said in stump speeches that if elected, he would phase out farming subsidies so that farm products would be produced and priced by market forces.
That was two years ago. But his election rhetoric was replaced by the realities of US congressional election in November 2002.
So, what did he do? He signed legislation increasing the farming subsidies by nearly 80%, ostensibly to protect small farmers, that would cost US taxpayers nearly $90 billion over the next ten years.
But the truth is the largest beneficiaries of this subsidy are large-scale corporate farmers who are driving family-owned farmers out of business. And when Treasury Secretary Paul O’Neill and the Irish rock star Bono toured sub-Saharan Africa for 11 days, he heard an earful on the US hypocrisy on farm subsidies. Bono publicly chided O’Neill that the US-backed International Monetary Fund has pressured Ghana to drop farm subsidies, while dumping US taxpayer-subsidized rice on Ghana (Wall Street Journal, editorial, May 30, 02).
In LDCs, where over 70% of their populations are in farming, this makes domestic products less competitive than the imports. This is a prescription for social disasters. In the less populous industrialized West, only ~ 5% of the workforce is engaged in farming. It needs no imagination to know the social consequences in nations where 80% are engaged in farming lives on food grains imported from richer nations.
This is similar to companies underselling to kill competition. When businesses do this, others go to court. But when powerful nations do this to poorer nations, they have to plead for fairness, or for mercy.
The free-market Republicans seem to give a perverted meaning to “Think Globally, but Act Locally.” If you ask them, they will still say they believe in what they preach. But they would add, “Look, we didn’t say we have to reconcile the ‘thinking’ and the ‘preaching’ part with the ‘acting’ part.”
The “local” considerations for President Bush are the 2002 Congressional election in which he wants to wrest the US Senate from Democrats’ 51-49 majority and retain his majority in the House. Midwestern states are toss-up states in the senatorial election. And the farm subsidy comes in handy to tilt the balance in the Republicans’ favor.
* In another decision, the Bush administration yielded to the lobbying of steel manufacturers in the US by raising duties on imported steel by up to 30%, again, ostensibly to protect the domestic steel industry and the steel jobs against dumping by mostly third-world steel producers.
But the real reason is to increase the odds of his second inauguration in January 2005. Thanks to Enron and the energy mess of 2000-01, California, with its largest number of electoral votes, is gone for the Republicans in the 2004 election. So, the steel-making states — West Virginia, Pennsylvania, Ohio, Florida — are important to him in 2003 because in 2000, Bush won or lost by a wafer-thin margin in these states.
And even though Republicans are ideologically averse to the power of organized labor, they also know it doesn’t hurt to keep unions on their side because organized labor brings in voters.
* The Teamsters Union and the US trucking industry are trying to stop Mexican 18-wheel trucks from coming into the US as per the NAFTA agreement. They are using all kinds of arguments, such as the poor safety records of Mexican trucks, even though the Mexican trucking industry is bending over backwards to comply with US standards.
The real reason is that since moving goods to and from Mexico using Mexican trucks is cheaper for US businesses, the US trucking industry will lose its business, and the Teamsters Union will lose their jobs. Mexican President Fox threatened that if Mexican trucks cannot ply in the US, then US 18-wheelers will have “No Entry” signs at the border. So, bye, bye Free Trade! END