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Current Trade Deficit:    
New Strategic Partners China and Brazil Hail Recent WTO Agreement
William R. Hawkins
Monday, August 16, 2004
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William R. Hawkins is Senior Fellow for National Security Studies at the U.S. Business and Industry Council.
The business press has been hailing the World Trade Organization framework agreement that emerged from around-the-clock, last-minute meetings in Geneva on July 31.  The hope expressed is that the deal saved the Doha Round trade talks, and perhaps the WTO itself.  Yet, there is little ground for optimism about the future of “free trade.” The turmoil that has wracked the WTO since the collapse of the Seattle ministerial conference in 1999 continues because it reflects the crisis in the global economy which erupted in 1997.  The Seattle meeting was supposed to launch a new Round, but didn’t, as the clash of national interests rendered any consensus impossible to reach.

These differences were papered over two years later in Doha, Qatar.  When the negotiators again tried to tackle substantive issues, however, the talks collapsed at Cancun, Mexico last year.  In Cancun, a broad coalition of developing nations demanded that the richer nations (mainly the United States, Europe and Japan) abandon their agricultural export subsidies that put small farmers in poor countries at a disadvantage.  These smaller countries did not have the political muscle to act on their own.  Their role was to support the agendas of the rising major powers of China, India, and Brazil who want to overturn the global status quo, the center point of which is the United States.  

This is most obvious in the growing “strategic partnership” that has been declared between China and Brazil.  Brazilian President Lula da Silva visited China May 22-27 to discuss coordinated foreign policy actions with Chinese President Hu Jintao.  Da Silva is a close associate of Cuban dictator Fidel Castro and has long expressed his animosity for the United States.  Add to the mix Venezuelan strongman Hugo Chavez, another Castro ally who has brought his oil-rich country to the brink of civil war.  There is underway a left-wing campaign to seize the most important states in Latin America.   Beijing is eager to see this campaign succeed.

Da Silva and Hu set up a China-Brazil coordinating committee chaired by Chinese Vice Premier Wu Yi and Brazilian Vice President Jose Alencar.  In the joint communique released at the end of the summit, Brazil agreed that Taiwan and Tibet are inseparable parts of China and stated its opposition to any unilateral action aimed at separating Taiwan from China.  The two sides agreed never to politicalize the human rights issue in world affairs, leaving it to each state to do as it wished internally to crush dissent.  Beijing expressed its appreciation for Brazil's support in the United Nations convention on human rights– a forum that has made a mockery of the term.  

The most important statement, however, was the use of the following phrase: “Both sides insist on the democratization of international relations and global multi-polarization.” This has long been Chinese terminology for ending American preeminence in world affairs.  The status of the United States as “the last Superpower” presents what Beijing calls a “hegemonic” threat to its ambitions.  China (like the European Union) wants America pulled down to a level it can deal with.  Undermining the U.S. economy plays a critical part in this plan.  

China’s Xinhua news bureau was happy to report, “Brazilian President Luiz Inacio Lula da Silva hailed as a victory of the developing countries the WTO agreement which set basic guidelines for the Doha Round and had developed countries committed to eliminate agricultural subsidies.” Brazil's Foreign Minister Celso Amorim claimed the Geneva agreement marked a victory for the Group of 20 (G-20), which includes China and  Brazil.  

The Doha Round is explicitly dedicated to a global redistribution of wealth.  According to its Ministerial Declaration, negotiations are to focus “on products of export interest to developing countries....The negotiations shall take fully into account the special needs and interests of developing and least-developed country participants, including through less than full reciprocity in [tariff] reduction commitments.” The system is supposed to encourage “developing” countries to protect their home markets while boosting exports.  The position of most countries, including China, was that they would take no new steps to open their markets.  

The purpose of Doha is to support industrial expansion in the Third World at the expense of the old “rich” industrialized countries, who have been on top for too long.  In practice, the poorest countries will not have the means to rise very high in the new order.  The main beneficiaries will be the rising middle-tier countries and large regional states, who can amass the resources to shift the world balance of power in their direction while the old “core” states decline.

Free trade advocates fail to realize that commerce runs on the basis of competition, not harmony.  The great error that has dogged economic liberalism is the belief that peaceful trade can replace international strife. When former WTO Director-General Mike Moore told an Asian conference on August 11 that he has “never feared a strong China” it was only another sign of how far some people have removed themselves from the real world.

Trade has always been a major component of strife.  True statesmen know that where factories, research labs, jobs, capital, and other resources are located is where wealth and power will also develop.  And as a society becomes stronger, it can better shape events so as to bring more security and prosperity to its people.  It is a game for the highest stakes.  

Past trade agreements have opened the door for foreign rivals and transnational firms to hollow out much of American industry and weaken the nation’s finances with mounting trade deficits.  Now, American farmers are on the block.  There is more than a bit of irony in this, as the farm lobby has been a major political supporter of free trade – as long as it was industry being hurt and not them.  But the 1996 “Freedom to Farm Act” failed to keep its promise to substitute higher exports for subsidies, and there is no reason to expect such a trade-off will fare any better as the result of a Doha agreement.  Certainly the WTO coalition that got its way in Geneva expects that American farm exports will be reduced and that Third World farmers will be selling more in the U.S. market.  More American farmers will be driven into bankruptcy from both directions.  Willie Nelson’s “farm aid” concerts will not be enough to offset bad trade deals.

There is still time to avoid disaster.  The Geneva agreement only set a framework to guide future negotiations, the details are still largely up in the air.  The Doha Round is far from completed – though it wouldn’t take much for it to be (thankfully) ended.  The next big WTO meeting is December 2005 in Hong Kong, which gives either a second Bush Administration or a new Kerry Administration plenty of time to reformulate U.S. trade policy, toss off the sophistry of free trade, and gain an improved awareness of how a political economy should operate in a world of contending nation-states.  

William R. Hawkins is Senior Fellow for National Security Studies at the U.S. Business and Industry Council.