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Lots of zeroes still add up only to zero for developing world

Geneva, 27 Nov (Chakravarthi Raghavan) - One thing must be said to the credit of the United States and its Trade Representative, Mr. Robert Zoellick: he can advance the most radical-sounding proposals with great fanfare and publicity and some catchy sloganeering, knowing full well that no one will accept the US proposals, and the US will not really have to deliver on it.

Zoellick, along with Commerce Secretary Don Evans, announced at a press conference in Washington a new initiative for phasing out all world tariffs on manufactured goods no later than 2015, and presented it as one that would benefit consumers and enhance welfare, and “every corner store in America into a duty-free shop for working families.”

In fact the proposals are so couched as to attract rejection, so that the US can continue its own protectionist policies - and attempt to remove from public eye such things as the steel safeguards, the anti-dumping investigations and policies, high levels of agricultural support, and protection with high tariffs for such industries like textiles and clothing etc.

The view that ending all import tariffs and barriers to trade is welfare enhancing and promotes exports is a theory that liberal economists, both in academia and at institutions like the IMF, World Bank and the WTO have been advancing and pushing on the developing world for quite some time.

If this has any basis, surely the industrial world, and more so the United States as the hegemon in the world today, and unabashedly flaunting the ‘imperial mien’ should put into practice, both on industrial and agricultural products, enhance the welfare of its consumers, and demonstrate it works - when no doubt everyone will follow.

The last time such a zero tariff and trade barrier approach was put forward and introduced was in the late 19th century, by the then hegemon, Britain, which more or less completed its industrial revolution and emerged with an output about 8 times that of Europe and elsewhere, and then adopted a laissez faire policy that Adam Smith and David Ricardo had advocated a century earlier in Britain.

The British thereafter ‘sold’ such an approach to France and Germany which adopted the same free trade policies, but within a decade found that they were worse off, and quickly abandoned it.

Britain also had enforced such a policy on its empire and colonies - and economic historians have left no doubt that this resulted in the de-industrialization of India, and arrested industrialization in Latin America and other parts of the world.

Under the proposals advanced in the Washington press conference, all tariffs of 5% or less on consumer and industrial goods would be completely eliminated while those above 5% would be capped at no more than 8%.Thereafter, all WTO members would make equal annual cuts in their remaining tariffs between 2010 and 2015 until they reached zero tariffs.

At the WTO, the US has come under sharp criticism for its protectionist policies - ranging across several industrial sectors, both old and new, as well as in agriculture, where support policies have increased sharply, and the new proposals can be used by the US to distract attention.

The proposal also calls for a separate programme to identify and eliminate non-tariff barriers, but details would be announced in January, with negotiations to run parallel to that on industrial tariffs. The proposal for ending tariffs, Zoellick and Evans claimed, would reduce the tariffs on nearly $6 trillion worth of traded goods and, “would benefit both developed and developing nations.” The new plan, the US said, would open the US market to many manufactured goods from the developing world but would also require developing nations to open their markets even further for US-made consumer goods.

The developing countries have already paid a high price in the Uruguay Round to the US and the industrial world in order to gain access to their markets for the Third World’s agricultural and manufactured goods. The US is now asking them to pay a new price that would de-industrialize and marginalise them even more.

According to an IPS report from Washington, Zoellick told reporters that the plans would help both US exporters, by lowering tariffs on their products, and US consumers, by bringing cheaper and more diverse products into the country.  The changes would also open markets around the globe for US workers, farmers, and companies, and create new export opportunities. “This historic proposal would benefit the average American family of four with an extra $1,600 a year, while also removing high foreign tariff barriers on more than $670 billion in US industrial and consumer goods exports.” US Commerce Secretary Don Evans said the proposal would ensure a level playing field for America’s goods and ingenuity “to compete fairly around the world”.

Some US industrial lobbies, which fear competition from cheaper products made in the developing world where labour costs are much lower, have been resisting the plan. Textile makers, for instance, have reportedly said they will fight the plan, while other industries that stand to benefit have complimented the proposal.

According to the US National Association of Manufacturers, industrial goods make up more than 80% of US exports, so a boost in such exports would be a definite boon to the economy. Exports of US consumer and industrial goods totalled more than $670 billion in 2001.

The new US proposal will be formally submitted next week during trade talks in Geneva, Switzerland among 144 members of the WTO. The European Union and Japan might welcome the ambitious plan because it could mean more access for their goods in the US, but developing countries may hesitate as the proposal could strike a blow to their flagging local manufacturing industries.

Already developing countries are suffering from double standards in international trade in agriculture, where rich nations adopt protectionist policies and provide their farmers large subsidies but at the same time ask that developing nations “open up” and “liberalise” even further. – SUNS5244

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