The Clinton administration, like most administrations in the United States, was given the all important task of economic recovery. Reducing the deficit seemed to be the priority of the Clinton administration and it is the priority of Obama as well, even though he has two wars to clean up. The Clinton administration pushed through two landmark trade agreements: the first was the North American Free Trade Agreement (NAFTA), which joined the United States with Mexico and Canada in the largest trade area of the world, with over 420 million people and a combined GDP of $11.8 trillion. The second was the Uruguay Round of trade negotiations that had begun 1986 and ended in 1994, creating the World Trade Organisation , an international organisation designed to enforce the rules of the game in international trade. The agreement reduced further trade barriers on goods, and greatly expanded the trade liberalisation agenda to services, intellectual property, and investment.
These developments, among countless others, have lead to the propagation of globalisation. A term widely used to describe a variety of economic, cultural, social and political changes that have shaped the world in the last 60 odd years. Some like Joseph Nye who is the Dean of Kennedy School of Government at Harvard University, say that the phenomenon has been going on as long as human history. The ancient Silk Route which connected China to Europe in the Middle Ages was, for Nye, an early form of globalisation. Economic globalisation was quite prevalent in the 19th century as well. When Karl Marx wrote the communist Manifesto in 1848 he actually referred to the networks of interdependence that were destroying local industry all over the world.
What Karl Marx pointed out has very much been the case in the last five or six decades. Countries around the world are exporting and importing equal amounts of identical goods in the name of economic prosperity and growth. In London, butter from the nearest village costs much more than butter from New Zealand. This has been the effect of economic globalisation.
Through the Uruguay Round the Unites States did not only open up a whole new area of trade liberalisation but also did so in an unbalanced way. It managed to gain access to the service sectors of other countries but, in Joseph Stiglitz’s words, “resisted, successfully so, efforts to reciprocate”. With the benefits of economic globalisation came a greater sense of economic insecurity. Construction and marine services were not included in the agreement, much to the dismay of the developing countries. Furthermore, financial service liberalisation allowed large international banks to squelch the local competitors. These large banks controlled the funds in the economy and would only hand them out to international firms they were comfortable with, thus crippling the local small and medium enterprise. Gradually foreign banks took over the banking systems of developing countries like Argentina and Mexico.
Similarly, the agreement insisted that the countries reduce their barriers to United State’s products and eliminate subsidies for products that competed against it. At the same time US gave massive subsidies to its farmers and kept intact barriers for goods produced by developing countries. To look at one consequence of this US cotton farmers account for a third of global cotton output despite the fact that US production costs are twice the international price, gained at the expense of over 10 million African farmers who depend on cotton for their meager living.
The harmful effects of economic globalisation are too numerous too state here. Can we remedy it though? One possible solution that has gained much attention recently is localisation. Colin Hines’s book “Localisation: A Global Manifesto” is just one of the many books written on the subject. Even though Hines’s idea of reversing the process of globalisation and returning to the age of innocence has its critics, what is important is the concern here – the need to protect local production. If not a complete reversion to local produce then at least a change in the terms on which the local of the developing world interact with the global.
The writer is News Editor, Profit
