The Cancun summit - The WTO on the edge of the abyss

Instead of further integrating the world's economies, the World Trade Organisation (WTO) summit in Cancun actually succeeded in creating more polarisation and deeper divisions between its members. The viability of the WTO, which since Seattle (December 1999) has gone from failure to failure, is more than ever in doubt. Luis Enrique Barrios, from the Mexican Marxist paper Militante analyses the breakdown of talks and future prospects.

"Nations do not have friends only interests"
George Washington

Instead of further integrating the world's economies, the World Trade Organisation (WTO) summit in Cancun of September 2003 actually succeeded in creating more polarisation and deeper divisions between its members.

Generally speaking, two main camps with seemingly irreconcilable positions confronted each other at this summit. On the one side, the developing countries, which demanded that the industrialised countries cut their farming subsidies and, on the other, the developed countries (USA, Japan and EU in particular) which responded that they would only do this if the developing countries eliminated all barriers to agricultural trade.

These two positions succeeded in splitting the WTO, triggering the creation of the so-called Group of 21 (formed by the most important developing countries), which actually became 23 in the end. Allied to the group of 21, the ACP, formed by 100 countries from Asia, the Caribbean and the Pacific, was able to wield more power than in previous meetings. All these countries together stood as a united block against the positions of the imperialist countries.

However, there were even more developments. The extreme polarisation produced another new group of 16 different countries, amongst which Venezuela, Cuba, Malaysia and other African ones, who stated their refusal to sign any type of agreement until the benefits that they would obtain from economic liberalisation were clearly explained to them.

The bomb that blew Cancun apart: farming subsidies

The conflicting positions over farming subsidies were the main stumbling block of the WTO negotiations in Cancun. However, despite the fact that certain WTO members were using this issue as an indirect way of obtaining other concessions in different domains (i.e. Mexico would like to obtain a favourable immigration agreement with the US), there is no doubt in our minds that the reasons behind this confrontation between the two blocks are by no means of secondary importance.

The current world market in agricultural produce is monopolised by only four gigantic multinationals: Nestlé, Kraft, Sara Lee and Procter & Gamble. The latter generate more than 100 billion dollars together. At the same time, 74% of agricultural exports originate from the 14 most developed countries. This is mainly thanks to the active policies pursued by the main capitalist countries in the domain of world agriculture during the decades following the Second World War, which consisted in keeping a tight control over international raw materials prices (which are in fact at their lowest in the last 100 years), transforming, for better or for worse, entire countries into huge plantations (the coup d'état sponsored by the US group United Fruit Company in July 1954 which deposed Jacobo Arbenz, following his land reform act, in Guatemala is the most striking example) and in subsidising their own agricultural sectors with massive injections of funding. In 2002 alone, the rich nations paid a total of 318 billion USD in subsidies to their farmers, three quarters of which were used to keep prices low and generate surpluses for export.

Maintaining tight control over agriculture, its products and markets has for decades provided massive profits for the imperialist countries, who realised that the only way for this to continue was to change none of the methods used up to now. However, another factor has appeared in the recent period making it impossible for the imperialist block to change its agricultural policy, namely the massive leap forward in the development of the productive forces during the 1990's, on the basis of new scientific and technological developments, which means that each hectare of cultivated land in the industrialised world is now far more productive than in the past. Countries such as the USA could alone meet world demand for agricultural produce fairly comfortably.

However, other developed countries, apart from the US, have this same productive potential. This, however, comes up against an objective obstacle, which goes well beyond the good or bad will of the WTO member countries to reach a deal or not. It comes up against the natural limits of the world market and of the tight limits of the nation state.

The imperialist countries are now facing problems caused by a far more competitive agricultural sector. These problems, which were already present during the economic boom of the 1990's (e.g. the so-called Banana wars between the USA and the EU and the latter's veto in 1997 on GMO's and hormone-treated beef from America), have now become far more of a worry now that the world economy has entered a period of stagnation and recession.

In addition to issues relating to the world market, one of the other major reasons why the imperialist countries cannot change track now is related to what they have come to define as their "national security policy". This policy covers a number of different subjects, from the strengthening of their military power to the control of key raw materials such as oil. However, food also plays a very important role in this policy as no imperialist power could afford to allow its food reserves to be threatened. Any imperialist nation that would allow them to do so would run a very great risk of seeing major and very negative social and political consequences within its own national boundaries. At the same time, its dependency on others for its food would put it at the mercy of other imperialist countries. One of the main aims of farming subsidies is to prevent this from happening. Anyone who doubts this only has to look at what happened to the Soviet Union whose serious agricultural crisis was a major factor behind the Stalinist bureaucracy's capitulation to the demands of the imperialist countries, resulting in the restoration of capitalism and the loss of super-power status.

This is one of the major reasons preventing the industrialised countries from changing their agricultural policies. For these very important reasons, it is hard to imagine that there will be profound change in this domain, apart from perhaps minor reforms that will not significantly modify the subsidies policy.

Someone will have to pick up the bill in the end

Although the problem of farming subsidies appeared as a dispute between rich and poor countries at Cancun, the real issue at the centre of this is the enormous agricultural potential of the imperialist powers. The latter do not protect the agriculture of the underdeveloped countries whose agricultural structures are in ruins. A good example of this is Mexico, where the situation has deteriorated so much that Mexican maize producers obtain a yield of 2 tonnes per hectare at a higher production cost than their US counterparts who obtain a yield of eight tonnes per hectare. Liberalisation means that Mexico now imports 11 billion dollars worth of agricultural produce from the United States whereas before the NAFTA, in 1993, it only imported 804 million dollars worth.

And this is the case of Mexico, which is considered one of the 10 most robust economies in the world. Most other underdeveloped countries have an agricultural infrastructure either equal to or worse than Mexico's, and therefore represent no threat to the imperialist nations. The International Food Policy Research Institute (IFPRI) estimates that if these subsidies were withdrawn, poor countries would gain approximately 40 billion dollars. This is not even half the annual profits earned by the world's four biggest multinational food groups.

Although this is certainly no small amount, either for the multinationals or the poor countries, it is still merely a hypothetical calculation. In reality, the poor countries are in fact completely incapable of competing on a level playing field with the imperialist nations in agriculture or in any domain for that matter. To think otherwise is fantasy, and the industrialised countries are fully aware of this. Mexican farmers were promised that NAFTA would bring enormous progress for them, however the actual results have been very much different.

The reason behind the underdeveloped countries' demand for a reduction or even total elimination of subsidies is their need for foreign currency. However, the rich countries' main motivation for refusing this is not because they want to prevent the latter from obtaining a bigger share of the world food market. The main reason is the imperialist countries' fear of the damage that they could do each another if one of them implements a different farming subsidies policy to the current one, particularly in the current context of economic crisis which is shrinking the world market a little more each day.

However, this contradiction cannot continue in the same impasse indefinitely - it has to find an outlet. And the only outlet is through the weakest links in the chain of world capitalisms: i.e. the underdeveloped countries. Imperialism has very powerful means with which to pressurise the government of any underdeveloped country that opposes or even tries to oppose its interests. Debt is one of such tool used by imperialism, coupled with technological dependence, investment, duties, authorisations for exports from poor countries etc.

Regarding this last issue, there is evidence that imperialism is once again trying to impose its own conditions e.g. the so-called Salmon War in which the United States wants to impose customs duties of 40% on Chilean salmon exports, which up to now were completely exempt from such duties. Also Mexico has been completely prevented from exporting tuna to the US and Brazil, like all countries outside of NAFTA except Turkey, Argentina and Thailand, is facing a hike in the duties on its steel exports. And there are many more examples of this kind elsewhere around the world.

Another measure that exemplifies the way imperialism, particularly the United States, intends to act in the future is the recent veto by the US Treasury Department on the "Sovereign Debt Restructuring Mechanism" (SDRM), proposed by the IMF, which is designed to allow a minimum margin for manoeuvre to the poor countries by providing a number of protective measures for creditors. The Americans rejected this mechanism as they are unwilling to budge even an inch on a system which has brought huge benefits, in economic and political terms, for many decades.

In any case, the prospect of even more ferocious attacks by the imperialists on the agriculture of the poorest countries of the world is starting to appear on the horizon. Only once they have exhausted this avenue, will they go elsewhere in search of a solution to their problems of agricultural overproduction.

It won't be easy for imperialism

Nevertheless, despite this, the poor countries put up a fierce fight against the imperialists' plans at Cancun. As we said above, this is due to their desperate need for foreign currency as well as pressure from a section of their bourgeoisie that is closely tied to agriculture. However, there is also enormous pressure on the ruling classes and the governments of the poor countries coming from another sector - the working class and other oppressed layers of society. The latter have already shown that their impatience is running out and that they are no longer prepared to allow their interests to be trampled under foot. The tide is starting to move towards the left.

This process has been very clear in Latin America in the last three years, exemplified by the openly revolutionary movements in Argentina and Venezuela, for example, and the important partial defeats of several privatisations. In Peru, Toledo was forced to back down from privatising the electricity sector and similar events took place in Costa Rica. In Bolivia, the privatisation of the water distribution system in Cochabamba was stopped, whilst in El Salvador the deregulation of the national health system was prevented. These are only but a few examples.

For roughly the last two decades, imperialism and the bourgeoisies of developing and underdeveloped countries have been able to work together hand in hand without much difficulty. However the situation has now changed with the entry of the working class on to the scene (including in industrialised countries such as Italy, Spain and Austria where there have been major strike waves recently). From now on, the imperialists' plans will face stronger and more determined opposition from the working class in the poorer countries. For example, it only took a few hours for the military coup d'état in Venezuela to be defeated in April 2002.

The upsurge in struggle by the workers and other oppressed layers of society, coupled with the Argentinean uprising in December 2001, has sent a shiver down the spine of governments in developing countries, which can no longer implement the diktats of imperialism with ease. The pressure from below is so great, that the rulers of these countries are continuing to resist the overtures of the IMF, which is pledging easier access to loans for those countries that have been effected by market deregulation, as promised last May by the director general, Horst Köhler, in a meeting with the WTO General Council. In any case, these governments will generally try to force a few more minor concessions from the imperialists in order to justify the measures that they will be forced to take when they finally give in to the imperialists' pressure. However, they should certainly not count on the acquiescence of the workers and peasants, as any further attack on living standards is bound to trigger massive resistance from the impoverished masses.

This time, the real opposition to the imperialists' plans will come from the working class and not the bourgeoisie of the underdeveloped nations. Only a massive defeat of the proletariat will allow the imperialist nations to intensify their looting and plundering even further.

Will the WTO collapse?

The massive cost of the Second World War, in all respects, convinced the imperialist powers that they could no longer continue using this type of conflict as a way of finding a solution to their problems and of extending their spheres of influence. They therefore decided to create the General Agreement on Trade and Tariffs (GATT) in 1948. Thanks to this entity and its successor, the WTO (created in January 1995), world trade was able to increase 1800% between 1948 and 1998, increasing from 7 to 17% of world GDP.

A demostration against the WTO in Cancun

This process was by no means linear and contained a number of contradictions. However, unlike today, trade was able to develop at a time when the productive forces were growing at the most dynamic and vigorous rate of all the history of capitalism, especially during the post-WW2 boom. Under these conditions, Japan grew 141%, Canada 69%, France 61%, West Germany 54% and the USA 48% between 1963 and 1973. This, coupled with the accumulated energy of the economic boom, enabled these powers to sign up to trading agreements that did not threaten their interests for a whole period of time.

However, the current situation is completely different given that in the last two decades, the economies of these powers, as well as those of the rest of the planet, have grown at a far slower rate due to the decline of capitalism. Japan, which for many years was considered the model capitalist country, is about to complete its fifteenth year of economic recession and its public debt stands at 186% of GDP.

The boom of the 1990's was feeble and was actually known as the 'sad' boom during its first half (1990-95). However, matters got better when the devices used to extend the world market started to kick in and when workers in the United States boosted their productivity. During the 1990's boom, the USA was the main powerhouse, if not the only one, of the world economy, as the massive growth in its internal market sucked in substantial amounts of imported goods manufactured in all parts of the world. However, the price of this has been far too high.

This colossal level of goods being imported into the USA came into contradiction with its enormous productive capacity, causing saturation on the domestic market and severe negative consequences for its manufacturing sector which now has total unsold inventories of 1.5 trillion dollars. This has forced the mighty US industrial sector to leave 27% of its productive capacity idle, which has naturally led to a rise in unemployment. During G.W. Bush's mandate alone, nearly two million Americans have lost their jobs.

The US economy is currently beset with massive problems that are getting worse all the time. The budget deficit, according to the forecast made by the Congressional Budget Office, will reach 480 billion USD in 2004 and the trade deficit is already at around 500 billion USD.

During the boom, extending the domestic market by cutting interest rates stimulated the economy. This policy was successful for a while, but it in fact only postponed for a while the eventual saturation of the market. Now, the FED, in addition to other measures implemented by the government, is trying to use cheap lending (the current interest rate is at its lowest level - 1% - for the last 45 years), in order to kick-start the faltering US economy. However, the hoped-for success has still not materialised. On the contrary, the FED's policy is about to have exactly the opposite consequences: personal debt already stands at 1.7 trillion dollars - i.e. double the total foreign debt of all Latin America! In the last few months there have already been 1.57 million personal bankruptcies. A report on BBC World on August 11 of this year revealed a trend that is bound to intensify over the next few months. According to the BBC, the drop in the use of credit cards by US consumers totals 1.3 trillion in unspent dollars. The consequences of this on the US domestic market will be dramatic.

As we have seen above, the US economy's reserves of energy are starting to show significant signs of exhaustion. None of the measures taken up to now has had a permanent effect and deflation is now more than just a latent danger. A statement by Paul O'Neill, Treasury Secretary, last November summarises quite well the current situation of the American economy: "... one of the reasons why our gross domestic product is not increasing by 3.5% or 4% is that we do not have an extra demand." The National Security Advisor, Condoleeza Rice gave a clearer indication of the attitude of US imperialism to its problems: "...A Republican Administration will proceed from the firm ground of the national interest, not from the interests of an illusory international community." In reality, the US has no other solution as it is not prepared to lose its role as the biggest imperialist power on the planet.

The United States has currently made the rescue of its industrial sector an absolute priority, in order to prevent the recession from going deeper. Three conditions are necessary for this: n°1, boost labour productivity (which will require fiercer attacks on the working class by a number of methods) n°2, increase its share of the world market and n°3, protect its industry from foreign competition.

However, the problem is that the other industrialised countries, especially those in the EU, have exactly the same objectives. Each industrial power has its eye on the market of its rival power and on that of other countries too. This fact, coupled with the contraction of the world economy resulting from the economic crisis, will inevitably lead to an intensification of trade disputes, the like of which has not been seen in the last few decades. As the crisis deepens (Germany, the main economic powerhouse of the EU, entered into recession at the end of the first half of the year and France is just about to), each imperialist nation will try to use trade agreements to impose its own interests and will.

From this point of view, the viability of the WTO, which since Seattle (December 1999) has gone from failure to failure, is more than ever in doubt and the objectives of the Bogor Declaration (Indonesia 1994), designed to create a system of free markets between developed countries by 2010 and for poor countries by 2020, are further and further off.

The USA will stop at nothing

There is already much concrete proof to support the argument in the paragraph above. For example, the steel war, started by the USA when it decided to hike duties on imports from countries not in NAFTA, except Argentina, Thailand and Turkey, by 30%. The Europeans countered this measure, which according to the EU will cause annual losses of 2 billion USD for its steel producers, by a temporary 26% hike of duties on imports from outside Europe. In doing this, the EU wanted to stop steel imports, particularly from Asia, which could no longer enter the USA, from ending up in one of its member countries. The victims of this war will end up being China, Japan, Russia, Brazil and other major steel producers.

In addition to its antidumping law of 1916, which it can use wherever and whenever it sees fit, US imperialism uses other more indirect methods to protect its industry. For example, influencing the value of the dollar. Admittedly the creation of the euro three years ago and the conversion of a part of the foreign currency reserves of a number of Arab countries into the single currency sapped some of the dollar's strength, but this was not the main reason for the almost 25% drop in the greenback's value.

According to the investment bank Goldman Sachs, the dollar needs to be devalued by 40% in order to reduce the current account deficit. The FED, which is in agreement with this objective, has done what it can (a FED report dated July 2002 shows that the money supply increased 12.75% throughout 2001 up to 7.8 trillion dollars). And in this same year, the Department of Trade reported that the CPI only increased 3%. According to Ben Bernanke, a Federal Reserve governor, "…the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost."

The USA intends to use this type of measure to make US goods more competitive, particularly vis-à-vis those from the EU. This has already set alarm bells ringing at the European Central Bank, which is seriously worried that if things do not change, the exchange rate could drop to nearly two dollars for one euro.

The Bush government's decision to reduce taxation, particularly for large multinationals like Microsoft and others, is also in line with this policy. Furthermore, unlike the other imperialist powers, the USA refused to sign the Kyoto protocol and therefore American industry is not burdened with the cost of protecting the environment.

The EU, which is also thirsty for raw materials and anxious to increase its share of the world market, has already reacted to US actions by increasing duties on steel imports, engaging in endless quarrels with the Americans within the WTO and threatening to increase duties on US textiles and citrus produce as well etc. One of the EU's most recent initiatives was the announcement made in August that it would slap a fine on Microsoft equivalent to 10% of its sales if the latter was not able to give "convincing arguments" that it was not taking advantage of its "dominant position". This matter is still pending, however there is no doubt that the US imperialists would react very swiftly with sanctions against the EU, if such threats were actually carried out against the software giant.

In other words, instead of favouring the signing of more trade agreements, the current situation is creating a whole load of time-bombs ready to blow up into new and even fiercer trade wars sooner or later into the future. The speed and intensity of this process will be mainly dictated by the rate at which the international economic crisis develops and pushes the economies of the main imperialist powers further and further into a blind alley.

For an International Socialist Federation

In 1930, the US President Hoover, in order to fight the recession that was affecting America at the time, passed the Smoot-Hawley Act, which hiked duties on certain imports by 100%. Within a year, more than 25 other governments had passed similar laws. In doing so, the world market was wrecked and all the trade agreements signed up to then were reduced to worthless bits of paper. The world economy collapsed and the whole of humanity was pushed into the bloodbath of the Second World War.

Conditions at the moment do not favour progress in the current trade negotiations at the WTO. On the contrary, they favour an intensification of protectionist tendencies and the jettisoning of previous agreements. Deflation and the erosion of profits are leaving the imperialist powers no other choice. All this suggests that sooner or later the economy of the whole planet will experience a 1930's style collapse, although of course there will never be a 'final crisis of capitalism', given that, unless the working class takes power, the capitalists will always find partial and temporary solutions to the economic crises affecting their system by placing the burden on to the shoulders of the workers. Although for the moment the imperialist nations have ruled out the option of a military conflict as a means of sharing out the world market between each other, the recent events in Afghanistan and Iraq show that the various imperialist powers, especially the USA, are increasingly choosing this option as a way of imposing their own conditions and defending their profit margins and the interests of their multinationals.

Another certainty is that it is clear that a new economic collapse will have even more devastating effects than past crises on workers and their living standards and, for the capitalist system to recover, the capitalists will demand unparalleled sacrifices from workers all over the planet.

It is hard to believe that given the massive level of economic integration between countries on a global scale and the colossal development of the productive forces in our modern world, that hunger, poverty and unemployment are once again on the increase. These two factors have created the material basis for eliminating once and for all one of the biggest scourges affecting humanity. However, under capitalism, these two factors have created the opposite; the cause being the private ownership of the commanding heights of the economy and the existence of nation states. For this simple reason, the idea - however well intentioned it may be - that it is possible to fight for fair trade or capitalism with a human face, is pure pie in the sky.

The only way that the whole of humanity can benefit from each economic and technological step forward is by expropriating the bourgeoisie in each country and by placing the means of production under the democratic control of the workers, and then integrating each country into a World Socialist Federation. The most recent episodes of class struggle bear the clear stamp of the working class, particularly the events in all of the underdeveloped countries and especially in Latin America as well as in the impressive general strikes in Europe - not to mention the huge demonstrations against the military intervention in Iraq that took place all over the world.

In all these events, the workers have clearly shown their desire to fundamentally change their living conditions. The only thing missing at the moment is a party able to dig deep roots into the masses and offer them a fighting programme able to lead them in the right direction i.e. the elimination of the private ownership of the means of production and the building of international Socialism, which is the only way of destroying the barbarity engendered by the capitalist system.

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