TCS Daily

The First Priority

By Roger Bate - September 2, 2002 12:00 AM

JOHANNESBURG - Trade and globalisation were major themes of the conference last week. As we move into the second week the official delegates are still split on the issue, which is reflected in different bracketed text under discussion. Paragraph 45 of the official negotiating text contains competing definitions of globalisation. While both discuss the benefits and flaws of globalisation the first is more positive (written largely by American authors and the business lobby), the second decidedly negative (written more by European officials and NGOs). Indeed, these two differences in definitions are, in microcosm, the differences between these two warring factions.

Para 45 discusses the benefits such as 'increased trade and capital flows, increased sharing of ideas and the extension of democracy and rule of law to an ever-widening circle of countries'. Para 45 (alt.) discusses globalisation's destabilising effects on 'the international economic and financial system', its 'negative social and environmental implications and loss of cultural diversity'.

Most Northern NGOs believe that the second definition is the reality for most in the developing world. 'The World Trade Organisation and the trade and globalisation it encourages are the biggest threats to Sustainable Development' claims the British-based World Development Movement. WDM and other groups want the conference to promote heavily regulated trade rather than the freer version preferred by the business lobby.

Unfortunately, many business leaders seem to be listening because they are no longer the ardent defenders of free trade, as the green NGOs would have us believe. Most of the business lobby in Johannesburg are happy to discuss the benefits of the private public partnerships they are showcasing at the WSSD. That's fine so far as it goes. But they remain rather equivocal in strongly promoting the benefits of globalisation and widespread privatisation. As former OECD chief economist, David Henderson, explains, 'many in business are appeasers in a common cause - for regulated trade'. It's therefore, heartening and somewhat surprising to see that the few free market business leaders have a growing body of allies in the NGO community who want to promote a vision of a free society.

The Sustainable Development Network and other small pro-market groups argue that globalisation means bringing new technologies and management approaches to the poor of the world. They join the World Bank in promoting privatisation for energy and other utilities like water and electricity. A spokesman for the group said that for many people in the developing world 'the growth brought about by trade and open trade and free markets has increased life expectancy, reduced infant mortality and removed the back breaking toil of those in agriculture. What we need now is for the rest of the poor to have the same access to the institutions of a free society so they can develop too' he concluded.

Even Clare Short, British Minister for International Development seems to agree with much of what these pro-growth NGOs say. She is worried that the 'hard green' NGOs, as she calls them, will win out at the WSSD. They are working with certain EU countries to establish strong environmental rules, which may act as barriers to trade for poor countries. According to Short the hard greens may promote environmental concerns as an excuse for 'imposing rules that prevent poor countries from development. We have to guarantee development to the poor and manage the planet sustainably' she said.

The hard greens argue that without strong rules multinationals will site factories in the poorest developing countries, exploit the poor and despoil the environment. But according to Indian economist, Indur Goklany the evidence for this is virtually non-existent. There are numerous reasons for a 'multinational business to locate in numerous different locations and cheap labor and lax environmental laws are of far less importance than good governance in the country' he says. In fact the very presence of a multinational in the third world forces the local businesses to 'improve their performance since employees can see the benefits the MNCs provide in terms of better working conditions and pay', concludes Goklany.

Of course there are exceptions, some firms do exploit their workers, and the conditions under which they work are often far less safe than in the west. But the argument seems to be moving in the direction that the presence of large companies in the developing world is a massive net benefit. The pro-market NGO's admit that codes of conduct need to be improved, especially over accounting practices, and concede that there may need to be regulatory oversight by nation states and even the World Bank or UN but the first priority must be expanding trade. Without trade the poor will never develop, and as Clare Short says, its 'hypocrisy' to argue otherwise.

Dr Roger Bate is Director of the International Policy Network.

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