TCS Daily


What's Going to Be the Next World Order?

By James Pinkerton - September 3, 2003 12:00 AM

What's going to be the next world order? Right now, one surveys the globe and sees mostly disorder. But the U.S. has a chance to create a better and more compassionate order next month, at the upcoming meeting of the World Trade Organization in Cancún, Mexico.

 

The irony is that if America offered a new trade deal to the world's poorest people, it could offer its own people a better deal, too. That is, by expanding trade and making the Third World better off, we'd also be making ourselves better off. Moreover, by embracing free trade, truly free trade, at the WTO, we could substantially improve our geopolitical standing around the world. Of course, if a given idea is that much of a win-win-win -- a win for the Third World, a win for America's economy, and a win for our diplomacy -- and it hasn't been enacted, then it must have powerful enemies. Which it does, in the form of American farmers and other protectionists. And so here's what we could see in Cancún: a missed opportunity so huge it could fit into the history books. As the French diplomat Talleyrand said in a different context, "It's worse than a crime -- it's a blunder."

 

The Iraq war, before and after, proves that the U.S. could use some more allies. As everyone remembers, of the five permanent members of the UN Security Council, three -- China, France, and Russia -- opposed American plans for "regime change." Those "nay" votes guaranteed that the U.S. could not get a formal resolution from the Security Council, but the U.S. tried at least to gain a moral victory of sorts by securing "yea" votes from a majority of the Council overall. But of the 10 non-permanent members of the Security Council for 2003 -- Angola, Bulgaria, Cameroon, Chile, Germany, Guinea, Mexico, Pakistan, Spain, Syria -- only Bulgaria and Spain were on our side. To put it another way, all the Third World members of the Council -- Angola, Cameroon, Chile, Guinea, Mexico, Pakistan, and Syria -- opposed the U.S.

 

Today, as we struggle yet again to get help from the UN -- which needs to be thought of not just as a posh bureaucracy in Manhattan, but also, however imperfectly, as the collective voice of 191 mostly dinky countries -- we might pause to take a look around at our alliances. We've got the United Kingdom, at least for as long as Tony Blair is Prime Minister. We've got shriveling Japan, beleaguered Israel, Australia, and a few other small countries.

 

But Western Europe is drifting away. And Russia has never been much of a friend; even now, it is unabashedly helping the Iranians build nukes. And "New Europe" -- that is, the former Soviet bloc sandwiched between Berlin and Moscow -- will eventually be bribed or cajoled into joining the European trendline. So much for the western portion of the Eurasian landmass.

 

So let's look elsewhere in Eurasia the vast area that the geostrategist Halford Mackinder considered to be "the cockpit of the world." There we find two more big powers, China and India.

 

There's good news and bad news about China. The good news is that we are major trading partners; as the two countries demonstrated during the Hainan Island incident in 2001, when there's lots of money at stake, it's in everybody's interest to settle disputes quickly and peacefully. The bad news is that China is a great power, with increasingly great power ambitions. So while trade holds us together now, the future, which is likely to include frictions over North Korea and Taiwan, is much less certain.

 

And what of India? Indian-American relations are better than they have been in years, driven once again by expanding and mutually beneficial trade. But at the same time, Hindu nationalism is a powerful and not always Western-friendly force. In any case, India is preoccupied with its own struggle against Muslims, internal as well as external; the recent bomb blasts in Bombay, thought to be the work of Muslim extremists, left 48 dead -- and that's what the Indians worry about most. Meanwhile, the U.S. must balance its relations between India and the other nuclear power in the immediate neighborhood, Pakistan -- which we need for its continued help, such as it is, in the war on terror.

 

So China and India are iffy. They are with us on economics, but often against us on politics. So one might ask: As the Iraq semi-war grinds along, are we gaining friends? Defenders of the present course say that we are gaining respect, although that respect, of course, depends on the U.S. sticking to it for decades, through many presidencies; only then will the world have to acknowledge that the U.S. accomplished something in the Middle East.

 

But if we look past the bulk of Eurasia, there's one other huge bloc of people and territory still up for grabs: the Third World. And that's where trade comes into the equation, more than ever.

 

Why? Because the Third World is mostly broke--it needs the money that comes from selling things. Unlike, say, the Europeans, Third Worlders experimented with socialism when they had little -- and so now, as a result, just a few decades later, they have almost nothing. Today, older and poorer, they have discovered the enduring truth of Adam Smith, whose most famous book, An Inquiry into the Nature and Causes of the Wealth of Nations, still speaks loud and clear. And one of Smith's most powerful ideas was trade, as he wrote in 1776:

 

If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry, employed in a way in which we have some advantage. The general industry of the country...will not thereby be diminished...but only left to find out the way in which it can be employed with the greatest advantage.

 

The reality that the Third World had changed its views on economics came to this writer last August, while attending the World Summit on Sustainable Development in Johannesburg, South Africa. The Summit was mostly the brainchild of globalcratic do-gooders, intended to celebrate the Third World in its pseudo-Rousseauean noble savagery, but the Third Worlders themselves seemed to have different ideas. They didn't want to be admired for hewing to ancient customs; they wanted to be enriched by getting in on modern economics. Moreover, they were starting to figure out that the current world trading system is rigged against them.

 

According to the World Bank, agricultural subsidies by the "North" amount to $350 billion a year. By contrast, total development aid to the "South" is about $50 billion. In other words, the North spends seven times more on its own farmers than it does on the poor of the Third World.

 

No wonder the newly trade-conscious South Africans are members of the Cairns Group, 17 agricultural exporting countries ranging in wealth from Canada to Paraguay, chaired by export-intense Australia. The group came together in 1998 to produce a "vision statement," which declares, "All trade distorting subsidies must be eliminated and market access must be substantially improved so that agricultural trade can proceed on the basis of market forces." And amen to that, says Adam Smith.

 

But now comes the dilemma. The U.S., which has gained the most by applying Smithian prescriptions over the last couple of centuries, now finds itself on the wrong side of the current agricultural debate. How so? Because while most Americans are willing to submit to the rigors of the marketplace, American farmers are not, and they have the clout instead to go Washington and rent-seek for themselves an easy life on the federal dole.

 

If the only issue were just giving American farmers welfare, that would be one thing; after all, plenty of Americans live off Uncle Sugar, hurting no one but the taxpayer. But the "farmfare" issue is egregious, because as those policies play out, their effect is not only to impoverish the Third World, but also, potentially, to radicalize billions of people in an anti-American direction.

 

And so, starting in Cancún, which is the next step in the so-called "Doha Round" of trade talks, Americans must confront this self-induced affront to both international morality and their own national self-interest. Yanks should take the lead in reducing -- "eliminating" also has a nice ring to it -- the multi-hundred-billion-dollar domestic agricultural subsidies and, at the same time, opening the huge American market to food and fiber imports.

 

Free traders should be at the vanguard, of course, because they should seek out every opportunity to demonstrate a treasured conviction: that people at the bottom need free-market capitalism the most. And if open-marketeers rally to this cause, they will find some unexpected allies. The editorial page of The New York Times, for example, has been terrific on this issue, running a series of pieces under the rubric of "harvesting poverty." The Times asks, "What could be more absurd than the sight of the world's richest nation -- a fiery preacher of free-trade and free-market values at that -- spending $3 billion or $4 billion a year in taxpayer money to grow cotton worth less than that and selling its mounting surpluses at even greater loss?" Those subsidized exports, the Times continues, are "killing" farmers in Africa, in countries such as Benin, Burkina Faso, and Mali.

 

Another surprising bedfellow will be Oxfam, the activist NGO. Its research director, Kevin Watkins, argued in the Financial Times earlier this month that "the world's richest countries" have selfishly put the whole of the Doha negotiations are "in real danger of collapse." The problem, according to Watkins, is this: "When developing countries export to industrialized nations they face tariffs four times higher on average than those applied to trade between industrialized countries." And yet the 2002 U.S. farm bill will actually increase American subsidies by $8 billion this year, "guaranteeing continued overproduction."

 

One might wonder, parenthetically, if our troops might someday be dispatched to those countries -- just as they have been in nearby Liberia -- in order to put to order a disorder caused by poverty? After all, as President Bush has said, "Persistent poverty and oppression can lead to hopelessness and despair." And failed states, he reminded his audience, "can become havens for terror."

 

To be sure, it's not just Americans who are to blame; the EU is even worse on this issue. The Guardian, the Manchester-rooted paper that still holds true to its free-trade origins in the 19th century, argued recently that "Brussels must shoulder most of the blame for the failure to get to grips with the issue at the heart of the new round." Much of the spending is perverse, almost obscene; as the World Bank noted, the EU's annual subsidy to dairy farmers works out to $913 per cow. That's almost twice the annual per capita GDP of sub-Saharan Africa, which is a mere $490.

 

But Adam Smith's point wasn't that free trade is good for one side in a trading relationship; it's good for both sides. Rick Lazio, president of the New York City-based Financial Services Forum, argued recently in the International Herald Tribune that the U.S. at Cancún must resume its long-standing role as principal promoter of trade liberalization: "Maintaining American agricultural subsidies not only hurts the developing world, it also puts millions of American service jobs at risk." That is, disputes about the oversubsidization of Georgia peanut farmers jeopardize trade talks that could lead to the further opening of world markets for big service-economy employers such as Microsoft and Citigroup.

 

In the past, the President has not shrunk from recognizing that the world is at an order-disorder crossroads. As he explained in March, "This growing divide between wealth and poverty, between opportunity and misery, is both a challenge to our compassion and a source of instability."

 

And one might add to the word "instability" another unpleasant word: "hostility."

 

Would free trade really help alleviate anti-Americanism? As we have seen, what the philosopher Montesquieu called doux commerce, "sweet commerce," has kept U.S. relations with both China and India -- and, for that matter, Europe -- on a relatively even keel, in spite of stormy geopolitical currents. So would the doux commerce approach work in the Third World? If we opened our markets to their agricultural products, would people of color like us more?

 

Let's hope so. But here's what we know for sure: if poor countries could sell us more, they would be less likely to fall into chaos. And that could save us the trouble and risk of more Liberia-like interventions. Moreover, we know that through the miracle of comparative advantage, trade enriches both parties in a transaction. In a win-win situation, we can't help but win, too.

 

But does any discussion of freeing up world trade belong in the real world? As the Economist wrote recently, when it comes to trade, "governments are reliably at their craven, cynical and incompetent worst." In other words, they pander to the millionaire corporate farmers in the U.S. and to the butter-mountain-makers in Europe.

 

Yet maybe contemporary politicians trying to screw up the courage to do the right thing might be heartened by the example of Robert Peel. He is best known to history for instituting the London police in 1829 -- affectionately nicknamed thereafter, "Bobbies." Peel became Prime Minister of Great Britain in 1841; soon thereafter, he was confronted by the Irish potato famine, which highlighted the cruel absurdity of England's "corn laws" -- tariffs on imported food. So Peel practiced "compassionate conservatism" at its best; in 1846, he abolished the tariff, thus lowering the price of food for the hungry. Not coincidentally, the overall English economy took off; exports soared, as well as imports.

 

Yet for his great work on behalf of common decency and international economy, Peel was opposed by the farm lobby of his day and was soon removed from office -- although, significantly, the tariff was not reimposed. Which is to say, the reactionary protectionists of Peel's day could take their revenge on the political actor, but not on his legislative act.

 

So what does this precedent teach present-day politicians? They might look at Peel's fate and think they'd rather hang on to their jobs, which the 19th century Briton failed to do. Or, alternatively, they might think that doing the right thing is rewarded, if not by contemporaries, then by history.

 

If the American government were to risk of taking on its own sacred -- and much subsidized -- cows in Cancún, the world would take notice. Skeptical onlookers would see that America is more than just guns and Britney Spears, that we are capable of taking action to help the world's hungriest and neediest. To put it bluntly, we'd win more friends and influence more people, their view of us sweetened by their own rising wealth. And in the meantime, we'd also be sweetened.

Sometimes it seems that capitalism is too good to be true. In fact, non-believers from various perspectives, right and left, have been proclaiming the free market's flaws for centuries now. But seeing is believing, and that's why the Third World, eyes open at last, wishes to climb aboard the free-trade bandwagon. The question next month in Cancún is whether or not we will let them.

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