The Debt and Trade Trap – Agenda of the 6th WTO Ministerial Conference
Posted on January 5 2006 |
Developments leading to the 6th Ministerial Meeting of the World Trade Organization show little in store for the majority of economically marginalized and debt-burdened people worldwide save the promise of wider and deeper trade liberalization both in goods and services. It is an opportune time to make the inextricable links between debt and trade doubly clear and to expose them as mutually reinforcing sides of the same coin. It is through the nexus of debt domination and exploitative trade that international finance institutions, North governments and corporations continue to condemn the South to poverty and deprivation.
Debt: leverage for imposing trade liberalization
It was only a little more than two decades ago when the debt crisis erupted, a consequence of the unilateral rise in interest rates following a period of aggressive loan peddling by Northern banks and governments to Third World governments, which massively took on the loans both for public and private ends. By 80s, the debt of developing countries had ballooned to US$567 billion. Crippling debt burdens, chronic budgetary, trade and balance of payments deficits became widespread among South countries – the stage was set for entrapment in so-called structural adjustment.
Mexico’s default on staggering financial obligations and the threat of other countries following suit loomed large for the International Monetary Fund and the World Bank, which responded by offering new loans conditioned on the implementation of structural adjustment programs (SAPs). Aimed at bringing countries up to speed with debt servicing, SAPs required reshaping countries’ financial and economic systems along sweeping neoliberal lines. These entailed among others the push for export-led growth, stringent budgetary cuts (largely in services), devaluation, the imposition of new taxes, privatization of state-owned enterprises, raising interest rates, currency devaluation for export competitiveness, and financial and trade liberalization.
Trade liberalization: deepening debt domination
Told to export or perish in the early 80s to keep apace with the drive of liberalizing trade, South countries across Africa, Latin America and the Caribbean, Asia and the Pacific went more vigorously into the production of cash crops for international markets. Colonial terms of subjugation and exploitation came back full force as South economies again went down the path of providing cheap raw commodities and cheap labor for the interests of the North.
From the World Bank’s own reports, over half of the export revenues of 50 developing countries are sourced from only three or less commodities. Least developed countries (LDCs) fare worse with 90 percent of their export earnings dependent on raw commodity exports. Crippled from developing their own production and industrial capabilities and building levels of self-sufficiency, the South has remained vulnerable to any drop in commodity prices and fluctuations in foreign exchange. A handful of industrialized countries have hugely benefited from maintaining this exploitative arrangement that keeps the South as exporters of unprocessed commodities and importers of finished products from the North. The same arrangement has kept the South dependent on debt and enslaved to loan conditions that viciously chain them to the very conditions of their maldevelopment and their poverty.
In social, financial and ecological terms, the outcomes of imposing export-oriented and trade liberalization policies on the South have been devastating. More than 500,000 children under the age of five died each year in Africa and Latin America in the late 1980s directly from the debt crisis and the trade conditions imposed by SAPs, according to the UN. Trade liberalization is estimated to have cost sub-Saharan Africa alone some US$275 billion over the past two decades. Meanwhile, countries are more deeply entrenched in poverty than before with the flow of resources from South to North far from evened out by the “free” market and liberalized trade. Debt stocks would rise to more than a trillion dollars in 1986. It is currently estimated at well over US$2 trillion.
SAPs, by any other name
In 1999, the much-discredited SAPs donned new clothes as the Poverty Reduction Growth Facility of the IMF, with Poverty Reduction Strategy Papers required of countries accessing loans and applying for debt relief. Developing countries are only too painfully aware where these have brought us.
The same structural adjustment blueprint for all countries were simply redesigned to appear country-driven and owned. But more dangerously, they pushed for a faster process of privatization and greater acceleration of trade liberalization as the price for new loans.
Thrown into a price war among themselves, South countries remain dependent on imports of finished goods and bound to the role of producing the same raw materials. Attempts by some governments to encourage in-country processing by taxing exports of raw materials have met disfavor, scored as barriers to liberalization and trade. As commodity prices and exports earnings continue in its downward spiral, so does the vulnerability and the bondage deepen to North governments and creditors using debt burdens as leverage for the undeterred imposition of neoliberal designs.
Trade-Debt domination in the arsenal of war
Following 9/11, debt and trade domination over the South has significantly figured in the US administration’s proclivities for war-making. Iraq, with its crippling debt of some US$125 billion has already shelled out more than US $18 billion in reparations for Saddam Hussein's 1990 attack and occuption of Kuwait, to whom G8 countries like France and . But the Iraqi people continue to be bled for Saddam’s aggression, paying US$1.8 billion since he was ousted from power in April 2004. Horrendously wrapped up among the legitimate claims by Kuwaitis, are claims by largely American multinational corporations, which have reportedly succeeded in getting 78 percent of Iraq’s reparation payments.
Mostly for profits lost (not even for properties damaged), “reparations” running to millions of dollars were reportedly awarded to Texaco ($505 million), Halliburton ($18 million, Bechtel ($7 million), Mobil ($2.3 million), Shell ($1.6 million), Nestlé ($2.6 million), Pepsi ($3.8 million), Philip Morris ($1.3 million), Kentucky Fried Chicken ($321,000) and Toys R Us ($189,449). Without this unjust burdens, including payments on Saddam’s odious debts, it would not have been necessary for Iraq to recently accept from the World Bank another loan for rebuilding the country’s educational system.
Tightening the vise
A series of negotiations that had begun years before with the ratification of the General Agreement on Tariffs and Trade became enshrined in the establishment of the World Trade Organization in 1995. Its legally enforceable agreements now bind all its 148 members to ever-deeper liberalization of investments and trade in merchandise, as well as in services. Predictably, the WTO is gripped by the countries that control the decision-making processes in the IMF and the World Bank, the same nations in which transnational corporations engaged in a wide range of economic sectors are based.
In just a decade, from 1995 onwards, the number of transnational corporations operating worldwide rose from 7,000 to 40,000. It is obvious from the trading regime being welded by the many WTO agreements -- from the deals on Agriculutre and Non-Agricultural Market Access to the agreements on services and Intellectual Property Rights -- that giant corporations will gain even greater leeway to do what they will with the world’s economies, a quarter of which is already known to be controlled by the top 200 TNCs.
In June this year, G8 countries released a statement which included a proposal for multilateral debt cancellation that would be put to the Annual Meetings of the IMF, World Bank, and African Development Bank by September 2005. It falls way too short, not only because it is extended to only 38 of 160 debt-burdened countries, excluded debts claimed by other major financial institutions and evaded any measure of accountability for the debt burdens of the South, a large part of which was incurred for environmentally destructive projects and by politically repressive dictatorships. It is cruelly contingent on keeping track with programs of debt repayments and the fulfillment of old SAP prescriptions of the IMF-World Bank for privatization, exportation, financial and trade liberalization. Not surprisingly, the proposal was immediately accepted by the international financial institutions at their last meeting.
No to “Aid” for Unfair “Trade”
With the world already burdened by odious and illegitimate debt mechanisms, bribes are being used to break the deadlock of the stalled WTO negotiations in Hong Kong- called Aid for Trade- with the US, EU and Japan offering such a carrot.
By dangling this rotten carrot in front of developing countries, the rich and powerful nations hope to slam open the closing doors to profits from their goods and services for poor people of the world.
Jubilee South cautions the world community to such patent bribery and condemns the countries making such offers. It is reprehensible that these offers that would be used as bilateral arm-twisting measures, are being used at a supposedly multilateral trade forum! Such offers are a clear evidence of the extent to which rich countries can maneuver to perpetuate a World Order based on Debt (Aid) and unfair and enslaving Trade.
The same hypocrisy in the debt cancellation deal taints the current WTO negotiations, which has called itself a Development Round, in the face of intensifying global opposition. Moves of the developed countries in the run-up to Hong Kong from the forging of the July Framework in 2004 to recent pressures at setting tariff baselines, already indicate that genuine development is not on the agenda of the 6th Ministerial Meeting, but the hammering out of agriculture, services deregulation and other agreements aimed at further bleeding the South to serve the interests of the industrialized North.
The collapse of previous ministerials in Seattle and Cancun due to the intransigence of the industrialized countries to the issues of the majority of developing countries and LDCs particularly highlighted the WTO as an instrument of big business and North governments. But it also stresses that the march of social movements, trade unions, women and youth groups, peasant movements, fishers’ federations, other sectoral associations worldwide to regain their present and secure their future against neocolonial enslavement will not be stopped.
We cannot allow continued ravages on our economies, our communities and environments. We will not stand for the further the erosion of our rights as sovereign peoples.
People before Profits!
No deal in Hong Kong! No to the WTO!
Total and unconditional debt cancellation for all countries of the South!
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