Free Trade for Whom?

An interview with Kristin Dawkins

by David Barsamian

Z magazine, November 1998

Kristin Dawkins is director of the Trade and Agriculture Program at the Institute for Agriculture and Trade Policy in Minneapolis. She directs the Institute's work on ecological economics and the links between trade and environmental policy. She came to the Institute from Harvard Law School Program in Negotiation, where she was Senior Writer for the publication Consensus. From 1973 to 1989 she worked in community development in Philadelphia, where she served as the Executive Director of the Philadelphia Jobs and Energy Project. She is the author of Gene Wars: The Politics of Biotechnology.

BARSAMIAN. You write, "The Uruguay Round of the General Agreement on Tariffs and Trade, known as GATT, and the creation of the World Trade Organization, WTO, have elevated concerns about the impacts of global trade rules on rural and urban communities, family farmers, consumers, indigenous peoples, the environment, democracy, and human rights. You want to delineate a little bit?

DAWKINS: In general, the objective of globalization, particularly as it is being driven by trade policy, is the commercialization of everything. The marketplace determines societal decisions. Its goal is to have corporate wealth as the measure of human welfare. This is the general problem that the Uruguay Round and its 28 different trade agreements is exacerbating. Each one of the constituencies you listed is affected somewhat differently by one or more of the 28 agreements, according to the part they play in the general economy and the changes that are driving the way they can or can't make money in a global economy.

I'm interested that you mention "democracy" and "human rights" as a constituency.

There are constituencies trying to reinforce democracy and human rights as alternative frameworks for global policy. The United Nations and its agencies are not perfectly democratic, but at least all of the governments of the world do have a vote. On the other hand, the World Trade Organization, the World Bank, and the International Monetary Fund are the three institutions spearheading globalization, often referred to as the Bretton Woods group. This group is not driven by a voting procedure in which all governments have a voice or a vote. It is driven by a voting procedure based on the dollar. The wealthy countries that invest money in those organizations get to make the decisions. The poorer nations of the world, who are generally the recipients of the policy and the actual financial aid, have no voice in the decisions that are made.

Bretton Woods is in New Hampshire. In 1944 it was the site of a big power economic summit to shape the postwar economic world.

It was part of the general, movement towards the Marshall Plan. After the war, the very highly industrialized U.S. economy no longer had war production to fuel the economy, and so they were trying to convert to a peacetime agenda. That peacetime agenda was essentially to rebuild Europe. So they embarked on a series of institutional design questions, created the World Bank, the IMF, and what was the GATT up until very recently. It's been converted into the WTO. In so doing, they poured a lot of money into construction of harbors, shipping, transport, railroads, and factory development. All of that was designed to subsidize the reconstruction of Europe. Once Europe was reconstructed, however, things really changed. It became a competitor. The industrial sectors of Europe and the U.S. began to compete with each other and to compete for foreign markets in the developing world. As a result, over time there's been a switch in the policies that these three Bretton Woods institutions embrace. These policies are now designed to move the industrialized production system into the Third World, exploit the resources and the labor of the Third World, and make those cheaper imports available to a globalized economy that is supposedly more efficient, but definitely more profitable for the transnational corporations.

Perhaps some people are stuck in the quagmire of acronyms that surround trade issues. We've already mentioned GATT and the WTO. Then there are NAFTA and MAI and terms like fast track. Could you sort these out?

GATT is the General Agreement on Tariffs and Trade. At the time, the Bretton Woods negotiators were really designing something they called the International Trade Organization. Reading those original documents, one sees a number of principles that might be considered valid and important to implement at the international level, such as antitrust regulation and fair pricing for trade and international commodities. These parts of the International Trade Organization, however, did not get implemented into international law, precisely because the Truman administration at that time was having a number of partisan disputes with Congress. The only piece able to emerge from the congressional process was the one segment of the International Trade Organization that dealt with commercial trade. So only commercial trade was regulated, and in those days the regulations were primarily promotion of trade in order to restimulate investments in Europe. To this day they remain a promotion of trade more than a regulation of trade.

A number of the regulations that are emerging from the last couple of rounds of trade negotiations, in particular the Uruguay Round, which was finished in 1994, require governments to undo laws that had been made at the national level through processes of citizen participation, through Congresses or Parliaments, as the case may be. According to the WTO, which is the new World Trade Organization created by the Uruguay Round to enforce the new trade regime, many existing national laws need to be either changed in order to conform' with international trade law or a country has to pay a penalty if they prefer to keep what has been their democratically derived national legislation.

NAFTA, the North American Free Trade Agreement, passed Congress by a narrow vote.

In 1993, Congress voted in favor of NAFTA, 234200. The vote was close because of well organized campaigning against the kind of free trade the U.S. promotes on behalf of corporations. Canadians can talk at great length about the changes in their economy, none for the better, that the 1989 Free Trade Agreement with the U.S. started up there. Then free trade promoters took a number of those principles, applied them to Mexico, and added another couple of layers. Free trade means that corporations are allowed to send goods back and forth across borders, regardless of a number of policies that at the border used to be considered legitimate protection for the citizenry. Take, for example, the inspection of meats. One of the provisions of NAFTA was that the meat industry should be allowed to ship meat back and forth across the border with minimal inspection standards.

In the summer of 1997, there was the largest recall of meat in U.S. history.

There are more and more scares every day. I just read that the average American has one stomach upset per year as a result of eating food. There is a general decline in food safety standards. Meat inspections are way down. So, too, are pesticide standards, so that the amount of toxic residue on the fruits and vegetables that we get at the store is often higher than in the past. All of this is in the interest of promoting trade and commerce, not in the interest of protecting the public.

When the U. S., which is the prime mover behind these free trade pacts, crafts them, they are structured as agreements rather than treaties. Why that distinction ?

This gets us to fast track. Under our Constitution, the Senate has the obligation to determine what international treaties become national law. It requires a vote of two-thirds of the Senate for an international treaty to be implemented as part of U.S. law. The two-thirds requirement is fairly stiff. In order to evade that particular requirement, which I would say is a highly democratic provision, the White House, going back a good 20 years, has used what is called the fast track process and changed the classification from treaties to executive agreements requiring just a 51 percent majority vote of the House or Senate. They claim that it's difficult to reach a balance with a number of issues having been bargained back and forth to reach some kind of optimal agreement among many countries. In order to preserve this delicate balance, the White House prefers to eliminate through fast track the right and obligation of the Congress to approve them as treaties. Instead they're obliged to vote on the entire package as a simple agreement with a majority vote, up or down, one vote each for the whole package. No debate and no consideration of the different issues.

The advocates of free trade argue that the world is becoming a global village and we are interdependent economically, and that's a good thing. So, for example, you can get a batik sarong from Indonesia in Minneapolis or you can buy basmati rice from India in Boulder, Colorado. In return, people in those countries can get a Madonna video, a Michael Jackson CD, or Nike Air Jordans.

The joys of modern progress. There are definitely some advantages to trade. I drink coffee. I drink orange juice. Those things aren't grown in Minnesota where I live, so it is a privilege that I have as a citizen of the global economy to be able to consume these products daily. But on the other hand, the premise that trade generates wealth for all is a bogus argument.

Tetteh Hormeku of the Third World Network in Penang, Malaysia, in an article in Third World Resurgence magazine, writes that U.S. trade policy in Africa is "intervention by other means.... President Clinton's offer at the Denver G7 summit in June of 1997 to expand trade to Africa is not designed to build the continent's economic capacities. Rather the move is part of a multi-pronged attempt to promote U.S. corporate interests in Africa. "

First let me explain the MAI which you asked about earlier. The MAI, the Multilateral Agreement on Investment, is the latest and greatest effort by the transnational corporations to completely eliminate any regulations that nation-states may have created to try to make sure that there is some degree of trickle-down. An investor comes into a country, let's say Zimbabwe, and sets up shop, develops an enterprise, makes some money, and ships that money back home to a bank in New York or Switzerland or offshore. The Zimbabweans may have established some rules governing foreign investors to ensure that some percentage of the value of what that enterprise makes is reinvested in the local economy before the profits are taken out of the country: performance requirements that an investor has to either hire locally or use locally manufactured inputs, for example. The draft MAI is a set of rules for governments requiring them to free investors from the kinds of development policies that I'm mentioning. As a further violation of democratic principles, the MAI is being negotiated not at the global level, but in the Organization for Economic Cooperation and Development (OECD), which is the grouping of 29 or so of the richest countries in the world, the industrialized nations' club, as it's sometimes called.

If the MAI is eventually approved by these 29 rich countries, then, the draft rules say, other poorer countries can join in, without having had any access to the negotiations. Africa is considered a very interesting new market, not so much for the sale of products but for investors as a source of new raw materials for production and cheap labor, of course. So the Clinton administration is looking at a way to get a head start over the rest of the world in setting up shop for U.S.-based transnationals to penetrate that African market. There is a bill in Congress that would basically set up a NAFTA-style arrangement with African countries, but it goes even farther than NAFTA in that it applies a number of the same conditions that go along with the so-called structural adjustment process. These are conditions required of indebted governments by the IMF and World Bank to restructure their economies so that, theoretically, they will pay off their debt as the top priority. One of the conditions is currency devalution. Suppose that on one day you had $10,000 in the bank and suddenly your currency is devalued, let's say, 50 percent; that means the next day you only have $5,000. So for holders of money, devaluing can be a terrible problem. For people, however, who are exporting, it means that the price of their goods goes down by half. The sudden cheaper price in the world marketplace means that they get a step up against their competitors. So suddenly you see the demand for those products increasing. Only half of the original value in foreign exchange is coming into their economy, but they're selling a whole lot more stuff. The foreign exchange gets banked, and enables the country to make a debt payment. This result is good for the traders themselves and the creditors, but bad for the nations and very bad for the general population. Currency devaluation is one of the conditions attached to structural adjustment policies in general and the Africa trade bill in particular.

Structural adjustment also encompasses privatization of the public sector and shredding of the social safety net.

Those are other conditions that are a general part of structural adjustment policies and the African trade bill. They are designed to take as much of the cash that is within an economy as possible, extract it from the local system, and get it into the big banks that are presently owed money through a lot of financial mismanagement over past decades. By privatizing government services, such as agricultural marketing boards or electricity and telephone services, governmental expenditures go down so more revenues can go into debt payments. By cutting back on health and education and other social services, more government revenues can go into debt payments. The whole purpose is to extract public wealth for the banking system.

The Clintonites and those who preceded them argue that free trade is essential for the future economic well-being and growth of the U.S. They liken it to a form of national security. They say that the U.S. must remain competitive in an increasingly tough global economy. The mantra of jobs, jobs, jobs is intoned by Clinton and treasury and trade officials.

This is deeply cynical. The jobs that one can point to as a result of the free trade agreements are in general a matter of lost jobs. The actual econometric evaluation of NAFTA, for example, looks at something like 420,000 jobs lost out of the U.S. economy as a result of the changes in our trading patterns. The idea that free trade generates jobs is really hard for the proponents to prove. One of the economists that they cite most often, who was with the Institute for International Economics, admitted one year after NAFTA was in place that he had been wrong and that all of his own projections had been incorrect. The economy, however, of the transnational corporations has been boosted by these agreements. It's easy to look at their bottom lines and see tremendous increases in sales as they've taken advantage of new markets in other countries, markets that were essentially stolen from national capital and small, local producers in the rest of the world.

In the context of the Asian economic meltdown, the International Monetary Fund has come under rather widespread criticism for the first time from economists like Jeffrey Sachs and Paul Krugman for some of its lending and bailout policies.

It's good to see, finally. The original goals of the IMF was for it to act as a stabilizer of last resort. So that at a much smaller scale, if this kind of a phenomenon had occurred in the 1940s and the 1950s, the theory was that the IMF would have the ability to take ,some of its money and invest it in that suddenly shaky economy and thus keep the amount of cash available to that system somewhat stable and therefore functional. The result, however, of the last few decades of IMF policy has been virtually the reverse. They are still a lender of last resort but only after a country is in a lot of economic trouble, and the conditions attached to those loans make things worse: devaluations, the privatization of much of the fundamental infrastructure in a country, and the extraction of every available public dollar to pay back those earlier debts. With new loans being used to pay off old loans, as Fidel Castro has pointed out, the debt is in many cases actually mathematically impossible to pay off with the kind of production systems that drive those economies; that is, the debts and compounded interest are so great that repayment can never be achieved. A private debtor would go bankrupt, but a country cannot close its doors. This is what we're seeing in much of Africa and in other parts of the Third World, where the debt has grown proportionately over many years. The IMF has loaned over and over again to keep some degree of fluidity in these economies, but without forgiving the debt. So as the debt mounts and mounts, an economy finally becomes prostrate before international policy. That's when the conditions swing in. Under IMF-imposed structural adjustment regimes, governments are forced to eliminate health, safety, education and food assistance subsidies.

The U.S. is the largest constituent member in the IMF and clearly calls the shots within that organization. Does that one dollar of taxpayer-supported money from the U.S. go to the IMF, then to Indonesia, and come back to pay off a New York bank? Is that fairly accurate?

It is, more or less. This bailout that is being talked about in Congress right now, and is the top foreign policy priority of the Clinton administration, is designed to do essentially that. The taxpayers' money would be given to the IMF. The IMF would then lend it to the banking system, the national treasury in these countries. They would use the treasury of that country, and therefore the credit-worthiness of the people of that country, to-help buy out the bankrupt companies in that country, as well as to give national fluidity to those handful of companies that have managed to stay afloat. Those companies that have gone bankrupt, oftentimes their creditors are the banks in New York. So under normal bankruptcy proceeding, there is the list of creditors who get paid off first and foremost. They tend to be the big banking names like Chase Manhattan and Citibank. Those guys then become the ultimate recipients of the bailout process.

You use the term biopiracy. " What is it?

The normal kind of piracy that we're all familiar with is when a ship on the high seas back in the 1700s would plunder another ship and loot it. In modern times the plunderers are going into wilderness areas in the Third World, the Amazon, some of the Asian and African tropical belts, and plundering the genetic resources, which are very prolific in these tropical zones. Modern biopirates are scientists, anthropologists, botanists, people with that kind of training who know how to approach a tribal community or a forest-dwelling community in the tropical forests and find out from their shamans, their medicine people, their leaders what their use of some of the focal plants may be. If you look at our modern medicine, some 90 percent of the medications that are prescribed have their active ingredient derived from plants. These traditional medicine healers have scientific knowledge. The anthropologists go into villages, find out about useful plants, take them back to the laboratories in the U.S. or Europe, develop a new medicine from that knowledge, patent that medicine with a 20-year monopoly on any use of that knowledge for that one company to profit from. This is biopiracy.

For example, the aloe plant. It has healing properties for cuts and burns. Are you saying that a corporation will have an absolute patent right on that and if you were living in Costa Rica you could not go into the forest and pick an aloe leaf and use it?

The police aren't lurking behind every aloe plant throughout the planet. In most cases people will still go out and pick the leaf and use it. But where there's a real profit to be made, the private police of that company are monitoring these kinds of activities. The case I'd like to mention is a practice that used to be very common in the U. S. and is still common throughout the rest of the world, and that is for farmers to re-use seeds. They plant a seed and it grows a crop and they select from that crop some of the better seed and then use it next year for the next planting season. But now that they are patenting seeds companies are finding that some farmers are going ahead and re-planting these patented seeds anyway, contrary to the terms of the contract that the farmers sign when they buy it, the companies are actually penalizing those farmers. You would think seeds are common and available. But when there is a tremendous market to be kept for the private use of one company, they will send the police out. Farmers in the U.S. have been fined and, in some cases, their crops have been burned as a penalty for re-planting patented seeds.

You talk about some case studies in India, three in particular, neem, basmati rice, and turmeric.

The basmati case is the most recent. In late 1997, Ricetech, which is a U.S.-based company, went to the Patent and Trademark Office of the U.S. government to file for a patent on basmati. The result means that they are the only company in the world allowed to use the name "basmati" on a commercially sold package of rice. In the northern region that straddles India and Pakistan, basmati rice has been produced for hundreds if not thousands of years. It is a special form of rice that is particularly sweet, aromatic, and very popular. This means that Indian farmers, who developed this rice, who made it sweet and aromatic through cross-breeding and selection processes, are no longer able to market the rice from the original region as long as Ricetech owns the patent and can monopolize use of that name.

The same with the neem. Neem is a tree that grows everywhere in India. It happens to have properties that are insecticidal and antibacterial. People go out in their backyards and pick a few leaves and use them to brush their teeth with, to wash their clothes with, to delouse with if they're having a problem with lice. The W.R. Grace & Company took the neem seed and, through a number of laboratory processes, developed a certain pesticidal extract and patented its manufacturing process. All together, more than a dozen U.S. patents have been taken out by various companies On uses of the neem. The patents don't mean an Indian can't use the tree. The neem police aren't watching every backyard. But they do prevent Indians from competing in the commercial world using a plant that is from India. It's W.R. Grace and the other patent-holders' right to commercialize neem in any capacity whatsoever for 20 years.

Turmeric is used in cooking and it helps in healing as well. There was a patent applied for in the U.S. which declared all commercial uses of turmeric would belong to the company. This one was successfully challenged by the Indian government, which is very likely to challenge the basmati patent, too. In the case of turmeric, after a good deal of publicity, the company was forced by the U.S. to withdraw its patent.

Today three giant corporations dominate agriculture, ConAgra, Continental Grain, and Archer-Daniels-Midland. The latter, which calls itself "supermarket to the world, " is a major sponsor of National Public Radio and PBS. It was convicted of price-fixing on the international grain market and fined $100 million, the largest amount in history. What kind of impact do those three corporations have on U.S. agriculture?

What we see in rural America is the result of a couple of decades of this process in which agribusiness has been lobbying for low farm prices-cheap raw materials for their industry. During the 1980s, the combination of low farm prices and high interest rates forced many farmers to go bankrupt. The number of family farmers today is roughly about a million, down from something like six to eight million a couple of decades ago, while the agribusiness conglomerates have expanded by leaps and bounds. This corporate windfall is structured in a very clever fashion. Every five years, the U. S. government produces something that they call "the farm bill." If you look back five years at a time, you find a very steady lowering of the legislated "target price." This is the price farmers get paid and, since the 1950s, it's been less than their costs of production. The farm bill then offers a taxpayer subsidy of the difference between this low target price and what the private sector, the companies that you mentioned, offer in the market. Thanks to this insulation by taxpayers, the big companies have gradually been able to offer a lower and lower market price. The taxpayers' contribution, up to a legislated target price, still fails to bring the value that the farmer makes up to the actual cost that the farm entails when it puts a crop into the ground. That difference, for many years around 25 percent of real costs, is what led to the bankruptcies of the 1 980s. Now we're seeing another wave of farm bankruptcies, as the most recent farm bill eliminated government support for farmers' income altogether.

Again, within the context of really existing capitalism, Archer Daniels Midland is one of the largest recipients of corporate welfare. This has 'been documented by Public Citizen and United for a Fair Economy.

This is absolutely true. Yet they go ahead and do their price-fixing and their market allocations with their subsidiaries in other countries around the world; The case that they got caught for had to do with a byproduct of the grains themselves, but they were colluding with Japanese subsidiaries to affect the international market for this Iysine product as well.

Where's the USDA in all this ?

ADM, the "supermarket to the world," was caught and fined a record-breaking $100 million. But compared to the $15 billion in sales ADM expects to make this year, it's not enough to eliminate this kind of rogue marketing. There's something like a couple thousand complaints of various sorts of antitrust violations that the U.S. government fields every year. They are only able to investigate something like a few hundred of those. Those few hundred end up getting mired in enormous bureaucratic procedures, otherwise we would hear about more ADM-type scandals. But this is the nature of antitrust enforcement in the government today. Not to end pessimistically, I'd say the average American is getting more and more skeptical about corporate welfare, while internationally there is a lot of resistance to U.S. policy as it is being advanced by the Bretton Woods Institutions. Campaigns at the WTO this year are focusing on food safety, meat inspections, and genetically engineered foods. Next year, we'll see fights at the WTO over whether Monsanto and Novartis should be allowed monopoly patents on life and how to stop biopiracy, with Africa leading the opposition. International organizing isn't very well reported in the news media, but there's plenty going on.

Kristin Dawkins can be reached at kdawkins@gatp.org; or the Institute for Agriculture and Trade Policy, 2105 Ist Ave. South, Minneapolis, MN 55404; 612-870-3410.

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