Free trade is a mixed bag

September 26, 1997|By William Pfaff

PARIS -- The United States came under much criticism at the Hong Kong joint meeting of the World Bank and International Monetary Fund because many in Asia hold Washington responsible for the crisis that has struck the region's currencies and markets.

When leaders such as Malaysia's Prime Minister Mahathir bin Mohamad accuse Western speculators of responsibility for the crisis, Mr. Mahathir is usually held not to understand today's global economy.

And it is true that Malaysia, Thailand and other Asian countries have brought many of these problems onto themselves through real-estate speculation, uncontrolled bank credit, grandiose state projects and insider profiteering. They also have had considerable encouragement from abroad in their profligacy.

Nonetheless, it is indispensable to understand that the United States is promoting a revolutionary remaking of international trade and markets, which in the short term mainly profits the West, and whose long-term consequences remain profoundly uncertain. We do not known where this revolution will take us.

The politically correct description of this says that Washington's drive to reduce trade barriers and open up still more markets to international trade will eventually produce advantages for everyone -- including for the people in countries that may suffer a brutal short-term introduction to the international competition to drive manufacturing costs down and corporate profits up.

A politically incorrect description would say that globalization is an American-inspired drive toward universal economic deregulation.

The result of this deregulation not only lifts tariffs meant to protect local markets and producers but subjects small-country producers to an international competition they often are incapable of withstanding, tending to destroy the power of smaller governments to regulate their own economies, not to speak of their fiscal systems. That is what the Malaysian prime minister is saying.

Globalization universalizes the labor market, thereby undermining labor unions and labor standards in the advanced countries. It tends to render environmental regulations in those countries irrelevant by promoting the transfer of production and pollution to poorer countries or regions where environmental standards are weak or nonexistent.

Their promises of a radiant future too often rest on what amounts to an inversion of Marx's dialectical materialism, equally unscientific in its premises and equally utopian in expectations.

The obvious examples of this mutually beneficial process include the European Single Market and trade between the United States and Europe and Japan.

But trade does not produce only benefits, and this is what people in Southeast Asia, and also in the less-developed Third World, are attempting to say. Dominant opinion in the West tends to dismiss the downside of trade deregulation by describing it as mere "creative destruction."

In the future all will be well. Alas, in a very distant future.

The economic transformation taking place today is extremely complex, and in social and political terms it could produce very destructive international consequences. The immense variety of humanity's economic societies are being violently annexed into a Western economic monoculture, dominated by enormously powerful Western economic actors, whose motivation is simply to maximize return on investment.

Trade between the West and countries in the non-Western world may destroy subsistence agriculture, co-opting Third World farmers into production for the international marketplace, while their societies are made dependent on imported foods. The social and cultural consequences of this may be very serious.

Resources may be pillaged, as is happening in Asia's forests. Local artisan production can be wrecked by international

competition, causing more unemployment than the new employment produced by international investment.

When barriers between advanced and backward economies are destroyed, a new form of human exploitation can follow, resembling that of colonialism in the 19th and early 20th centuries, complete with new forms of indentured labor.

Listening to President Clinton as he asks Congress for "fast-track" negotiating powers, one would think that nothing but positive effects will follow the expansion of free-trade zones and further deregulation.

It is time to recognize that the trade, labor and environmental regulations which globalization undermines were put there in the past for a reason. Much of this regulation came about as a direct result of the rampant abuses and exploitation of the industrial and colonial systems of the 19th century. Do we really wish to restore the conditions for such abuses?

It is time for Congress to call a halt and to think. It is time to let the free trade groupings we already have come to maturity, so that we understand their longer term implications. It is time to consider whether economic interest is our only interest.

William Pfaff is a syndicated columnist.

Pub Date: 9/26/97

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