Globalisation is opposed through ignorance: let's keep it factual

The World Economic Forum annual meeting in Davos in February saw a scaled-down version of the demonstrations against globalisation that took place in Seattle last year.

The Swiss authorities, however, showed less sympathy for the ragbag of complaints against globalisation and more resolve in restraining protestors than did the US authorities in Seattle.

One of the striking features of the Seattle demonstrations was the range of accusations levelled against globalisation and the World Trade Organisation (WTO) for its part in it. Yet the complaints from participating non-government organisations (NGOs) showed little or no knowledge of the WTO agreements or how they operate. Worse, serious inconsistencies among the NGOs amounted to contradictions in the anti-globalisation coalition.

Environmental lobbies regard trade and economic development as a threat to nature conservation and fear that their single-issue solutions will be rejected when governments are exposed to the benefits of global arrangements.

Trade unions in manufacturing industries that have come under cost pressure from newly industrialising economies want to preserve old jobs and privileges and, above all, wage relativities. This is their argument for ‘fair’ trade.

Cultural protectionists dislike foreign competition even though it gives people greater choice. This justifies trashing McDonalds, no matter how popular the fast food chains are with low income families.

Development lobbies want more aid (which raises their incomes) rather than more trade (from which they gain no credit). Never mind which is more effective in overcoming poverty.

The Seattle demonstrators shared a hatred of multinational enterprises, free trade and international cooperation, but had many differences. Their many objectives were not consistent, exposing deep divisions in the anti-globalisation coalition.

For example, attempting to enforce universal labour standards by applying trade sanctions could increase poverty in countries where labour productivity is still low. The poorest developing countries would be deprived of the opportunity to compete internationally if the labour unions’ demands for ‘uniform labour standards’ were enforced.

Doubts about the justification for forcing outside standards, with their economic costs, on developing countries were absent. But such costs could be significant and could bring the present global prosperity to an end. Look what happened the last time sanctions and trade wars were practised in the early decades of the 20th century. What began with protectionism ended in the world economic crisis of the 1930s, mass unemployment and world war.

One of the WTO’s difficulties is that some of its member governments and many outside commentators want to enlarge its responsibilities. Yet adding topics with only tenuous links to trade to the WTO’s agenda was one of the main reasons why the Ministerial Council meeting in Seattle last December failed to launch a new Round of trade negotiations.

At a global level, free trade promotes economic growth. It leads to job creation, forces companies to be more competitive and lowers prices for consumers. It also gives poor countries the opportunity to develop, owing to injections of foreign capital and technology, and, by facilitating the spread of prosperity, creates the conditions in which democracy may grow.

However, anti-globalisation protestors charge that trade liberalisation—supervised by the WTO—has undermined employment and wages in OECD countries, lowered environmental standards, increased disparities between rich and poor nations, and weakened democracy and national sovereignty.

The WTO is also accused of being supranational (its ‘decisions’ overriding national governments), untransparent (its decision-making processes being hidden from the public), undemocratic (ignoring NGO demands and minority interests), and is charged with ‘marginalising’ poor countries (anti-development).

These assertions are at best parodies of reality, but they get wide publicity and attention in the media. Clearly, ignorance of the functions, structure and decision-making of the WTO continues to drive the anti-globalisation coalition.

Representing a broad array of groups and lobbyists, the anti-globalisation coalition has adopted the term ‘global civil society’ because it suggests community service based on voluntary organisations. Nothing could be further from the truth. Although some NGOs are nationally based, they usually have international links and act internationally. They therefore lack the traditional obligations of citizenship and the legal status associated with ‘civil society’.

Moreover, most NGOs are run centrally by small powerful elites and are unaccountable to their societies. Most are little more than single-issue lobby groups gathered into a coalition against mostly imagined enemies.

Trade liberalisation is one of these imagined enemies. Trade liberalisation has facilitated trade flows, but it is technological change that has been the driving force behind globalisation. The NGOs themselves rely on the revolution in telecommunications to coordinate their international protests. Do they really believe they can stop the benefits of globalisation from spilling into the global economy?

A first step for the WTO under this anti-globalisation threat is to launch a new Round of trade negotiations to fill some of the gaps that NGOs are trying to exploit. The agenda for the new Round should be made manageable by removing many of the controversial new issues. The ‘built-in’ agenda from the Uruguay Round—covering agricultural trade, trade in services and reviews of specific agreements, including dispute settlement—provides a good basis for negotiations if industrial market access is added.

As a medium-sized OECD economy with little bargaining power, and buffeted by the revival of protectionism in Europe, Japan and the United States, Australia depends on multilateral rules to protect its trade interests. Australia’s participation in a strong WTO and an increasingly integrated global economy provides support for national independence and should not be sacrificed to lobbying by NGOs.

The WEF meeting in Melbourne this month seems like a good place to begin a counter-attack against the anti-globalisation lobbies. The great lesson of the 20th century is that liberal trade promotes prosperity and that meddling with the principles of free trade can easily trigger economic stagnation and the cataclysms that follow from economic despair.