Free Trade’s Feeble Metaphors

by Roberto Bissio*

The negotiations of the Doha Round of multilateral trade negotiations, also known as the “development round” because they ought to include subjects of interest to countries on the periphery, began in 1991 and have now bogged down. To get the press interested, some pro-free trade negotiators are making an effort to find intelligible metaphors to save journalists the time and effort involved in actually analyzing the figures and documents, wrote Roberto Bissio, executive coordinator of Social Watch. Some of these metaphors are extremely feeble, like comparing trade liberalization to bicycles (as the United States did) or to mules (an idea from the Director General of the WTO, Pascal Lamy).

The rounds of negotiations about world free trade go on for years. The Uruguay Round, which set up the World Trade Organization (WTO) and incorporated intellectual property, services and investments into the system, lasted all of eight years, from 1986 to 1994. The current Doha Round, also called the “development round” because it ought to include subjects of interest to countries on the periphery, began in 1991 and has now bogged down.

To combat boredom and to get the press interested, some negotiators have been racking their brains to find intelligible metaphors to feed to journalists and thus save them the trouble of actually analyzing figures and reading documents (the annexes of the Uruguay Round ran to twenty thousand pages). So, for example, the argument that trade liberalization is a permanent process that cannot be stopped without serious risks is always illustrated with the metaphor of a bicycle: if it is not moving it will fall over.

Until one day, angered by the continual pressure for faster trade opening than his country was prepared to concede, the Indian ambassador in Geneva, B.K. Zutshi, gave the North American negotiator the following sarcastic reply, “In my country we know something about bicycles, and I assure you that when the traffic light turns red all the bicycles stop and nobody falls over. I can explain to you how we do this if you like …”

On 7 April, the Director General of the WTO, Pascal Lamy, was talking to the press and he tried to make the figures that his organization had just published look better. The WTO reported record trade growth of nearly 15% in 2010 but predicted a gloomy 6% for 2011, and this figure may be revised downwards if the impact of the earthquake and nuclear emergency in Japan is greater than has been forecast. To make matters worse, the political climate for further trade liberalization is unfavourable and the Doha Round has not been able to circumvent the stumbling block of access to markets for non-agricultural products. Lamy admitted that this is “…a very difficult time, but the WTO is like a mule, reliable and tenacious”. He added that trade figures are “…like a mule: they do not go backwards. The problem with a mule is that it sometimes stops and does not go forward; it does not go back but it refuses to go forward”. He said that this is what is happening today with the world trade system.

International trade fell by 12% in 2009, but in 2010 it recovered and grew more in one year than it has done since 1950, when statistics were first produced. In 2010, total production in the world increased by 3.6%, which means that trade increased four times as much as real production. The WTO says the reason for this growth is the same as what caused the fall in 2009, “Global production chains mean that goods go across national borders several times during the production process, so the international trade we measure is growing much more than in the past”.

International trade in the goods that have been hit most seriously by the crisis, like industrial machinery and durable consumer goods, includes a far greater proportion of component parts than final products. This explains the severe fall in 2009 and the big recovery last year; they were both much greater than the corresponding fall and rise in production.

Lamy explained this in a column in the Financial Times, “Thirty years ago products were assembled in a country using inputs from that same country, and it was easy to measure trade. But today manufacturing is organized in global chains and most of goods can be said to be ‘made globally’, not ‘made in China’. And this distinction is not merely academic. Trade imbalances can cause political friction, so the way we measure trade can exacerbate geopolitical tensions”.

The veteran journalist Chakravarthi Raghavan, who has been covering trade negotiations in Geneva for forty years, disagrees with Lamy’s assertion that this is a new phenomenon. To back up his criticism he produced an 1785 copy of the Annual Register, a yearly almanac that has been in publication continuously since 1758. It says that “…the French taste for English carriages is so great that more than eight hundred sets of wheels and shock absorbers are being sent to France to be used in the production of vehicles a la mode d’Anglois”.

If production chains are such an old phenomenon, the problem is not whether Chinese exports contain 60% of imported components or if the percentage is higher, but that the proportion of value added in China is in fact profit for the transnational enterprises that organize the business.

Raghavan gives the example of the trade relations between Portugal and England that classical economists like Adam Smith and Ricardo studied more than two hundred years ago. Portuguese peasants cultivated the grapes, fermented the juice and sold it in barrels to merchants from Bristol, and they bottled it and sent it to England in English ships. This meant that the profits from Portuguese exports went to English merchants, and the Portuguese economy is still underdeveloped today while England was the leading power in the world until nearly halfway through the 20th century.

Moral: People should be more careful with the metaphors they use to defend free trade at all costs. And bear in mind that a mule is cross between a donkey and a horse, and it is sterile.

*Director of the Third World Institute (ITeM).

Source: Agenda Global