visser_logo_small.gif (1783 bytes)SociaI and Environmental Dimensions of Trade Liberalization: 
Some Early Reflections on the World Trade Organization

Williams, page 1 - 2 - 3 - 4

by Mariama Marjorie Williams

At the time of the consultation, the author was Assistant Professor of Economics, Fashion Institute of Technoology, State University of New York, New York.   
Section headings:

dot.gif (101 bytes) 1. Introduction dot.gif (101 bytes) 4. Critical areas of Concern
dot.gif (101 bytes) 2. A Brief Historical Overview of Globalization and Trade Liberalization dot.gif (101 bytes) 5. Conclusion
dot.gif (101 bytes) 3. From GATT to WTO dot.gif (101 bytes) 6. Bibliography


home.gif (503 bytes) index.gif (483 bytes) feedback.gif (656 bytes) glossary.gif (710 bytes) links.gif (499 bytes)

1. Introduction

We are living in a time of great social, spiritual, political and economic upheavals. Economic insecurity due to rapid changes in the world economy have made people's lives, especially the poor and the marginalized, who are primarily women and people of color, increasingly vulnerable to exploitation and violence. In poor and rich countries alike we have witnessed the hegemonic rise and control of financial interests over national production as well as the re-definition and re-organization of the role and functioning of the state. The subsequent deregulation of national labor and financial markets and the retrenchment of the public sector have created widespread insecurity and uncertainty across broad spectrum of workers. For example, in the US plant closures, downsizing or so-called "re-engineering" have resulted in massive layoffs creating havoc from the upper levels of management right down to the plant floor.

In country after country, hard won benefits and social guarantees for workers have been drastically altered or slated for elimination. In general in most OECD countries the real wage has fallen drastically, a consequence of the promotion of greater "wage flexibility," [erosion of the collective bargaining process and the increasing flexibilization of production. Undergirding this process has been the rise of structural (longterm) unemployment which has led, in part, to the resurgence and predominance of part-time, temporary work, sub-contracting, and the general contingent nature of work in countries such as the U.S., Canada, Spain, and France.]

Currently there are 120 million unemployed workers in the world [UNRISD (1994) States of Disarray. United Nations Research Institute for Social Development. Geneva], approximately 35 million of these live in OECD countries [Stevens, Barrie. "Social Fabric Under Pressure" OECD Observer, p. 1]. Many of these workers are likely to be permanently without jobs. The phenomenon of rising joblessness (due primarily to technological change) along with rapidly changing work requirements are forcing many people in OECD countries to operate in labor markets in which the terms of participation have hardened significantly against workers. Against this backdrop is the looming threat of further integration of the world economy which implies greater competition for jobs and wages.

Meanwhile workers in the South, especially those that live in highly indebted countries, face increasing hardship, hunger and homelessness. After fifteen years of structural adjustment programs, the promised benefits of economic growth and prosperity have not arrived. Instead only the local elites and international capital have benefit from the re-organization of economic and social priorities. In most countries people's access to food, clothes and shelter have rapidly worsened; hence wherever growth did occur, it came with increased economic misery.

Whether or not we are speaking of structural adjustment in the South, or structural change or economic re-structuring in OECD countries, one thing is very clear: the social and environmental fabric of every nation is under siege and extremely vulnerable to further pressures. Almost everywhere, the key social and economic institutions -- whether labor organizations, the family or other social organizations -- are breaking down, except of course for the large multinational corporations which seem to only grow stronger as the rest of society disintegrates. As pointed out by a recent UNRISD report, transnational corporations have managed to enlarge their sales and overall growth over the last twelve years. Since 1992 the 37,000 parent corporations and their 200,000 affiliates worldwide control over 33% of the world's productive assets accounting for $5.5 trillion dollars in sales which is more than double the $2.4 trillion they earned in 1980. Yet they only employ roughly 5% of the global work force (UNRISD), 1994, p.ll).

This process can only be further intensified by greater trade liberalization. Conventional wisdom would argue that while trade liberalization is bound to create some fall-out in the short run, the long run benefits of increased growth and prosperity will more than compensate for any negative effects. However, past experience would suggests a great deal of caution in this regard. The nature and practice of trade liberalization shows that there is no inherent tendency for it to improve working condition, wages or preserve the environment.

This is especially so since the maximization of profit, which is the motivating force behind trade liberalization, is engineering the breakdown of the social contract and tearing apart the social safety net that protects families from poverty (where it exists), and it operates to preclude establishing such safety nets in other parts of the world. Given that the present round of trade liberalization is spearheaded by corporations in the absence of international mechanism(s) of accountability and transparency, coupled with declining national governmental authority, there is great need to proceed with caution. It is crucially important to construct some measures of safeguard for workers and the environment into the existing institutional framework.

Trade liberalization agreements, such as the North American Free Trade Agreement (NAFTA), the European Economic Agreement and the Uruguay round (GATT), are designed to institutionalize the reorganization and realignment of the industrial base of the world economy by reshaping and redefining power relations within and among governments, and between workers and firms. By their very nature, these arrangements tend to enforce the downward harmonization of wages, health, safety and living standards. What then are the implications of the exclusion or workable safeguards to protect workers, the poor and the marginalized from the Marrakesh agreement?

The Marrakesh Agreement ushered in the World Trade Organization (WTO) as the centerpiece of a reformed international trade system. Since the purpose of the WTO is to protect free trade, not workers' rights, nor the environment, it will abrogate the rights of national governments to impose social, health and environmental control on global capital. Thus WTO could potentially have serious negative implications for workers and the environment.

The rest of this paper attempts to identify, in a synthetic and concise way, the major highlights and challenges that the WTO poses for social justice and environmental sustainability. Most often the WTO is discussed purely in terms or commercial objectives; wherein the key outcomes are increased market access, improved national competitive advantage and increased commodity and service flows, in this paper economic and social considerations are inextricably linked. Thus the major concern is the process of social adjustment that accompanies trade liberalization and hence the implications of the WTO for social objectives and its potential impact On human dignities, in the Kantian sense of life, health, material well being, citizenship and freedom.

There are five sections. The following section presents a brief overview of the historical evolution of the current system. Section three focuses on the points of departure from the GATT of 1947 to the WTO. Section four presents three areas of critical concerns surrounding the WTO. Section five concludes with observation as to the challenges ahead.

2. A Brief Historical Overview of Globalization and Trade Liberalization

The debacle of the great depression of the 1930s led to a re-assessment of international trade system and ultimately, the creation of the General Agreement on Tariffs and Trade (GATT) which inspired widespread reductions of tariffs on manufactured goods. This was reinforced by the realignment of power between the US and Great Britain that gave birth to the Bretton Woods System of managing the international trade and monetary system. The Bretton Woods era which lasted form 1944 to roughly 1973 created the International Monetary Fund, and the World Bank which worked in partnership with the GATT and the US military-industrial complex to ensure the orderly process of the expansion of the market worldwide.

Throughout this period a certain level of social cohesion was maintained by the Keynesian consensus which engineered a concordant between workers and the business sector to redistribute some of the largess of capital accumulation in terms of wages and social welfare programs. Within this framework government fine-tuned the economy to ensure full employment and provided a social safety net. That much of the largess of capital accumulation was attained by the rampant exploitation of the developing countries as well as the labor of certain sectors within OECD economies (notably, women and people of color) was never fully appreciated.

In the 1970s the prices of many key commodities (such as oil) hitherto available in abundance and at cheap prices, rose as many developing countries sought to restructure the terms at which their commodities were sold on the world market. This fact coupled with rising international competition among emerging multinationals in Europe and Japan and, their already established American counterparts engendered a slow down in accumulation of capital. A consequence of this was the relative decline of the US postwar economic hegemony and the collapse of the Bretton Wood System.

By the mid-1970s most OECD countries experienced high inflation and low output growth. This led to strategies by the business sectors and governments to improve profitability by promoting economic growth. These strategies include reorganization of tax systems to lessen taxes on corporations; a switch in focus from full employment policy to a single-minded focus on the containment of inflation; cut backs in government social and welfare spending; and deregulation of the financial and labor markets. This was spurred on by revolutions in communication, telecommunication, industrial manufacturing and engineering. [Nontariff barriers (NTBs) are measures other than tariffs that are used by governments to restrict imported goods. NTBs encompass a wide variety of instruments such as labelling and package requirements, import quotas, subsidies and domestic content requirements.] These forces combined to engender the restructuring of the industrial base of the world economy.]

To a large extent the roles of the IMF and the World Bank have somewhat lessened, having been supplanted by the globalization of the financial market. Today the international financial markets exercise great power over the value of national currencies and limit the autonomy of government monetary and fiscal policies. It has also led to rapid diffusion of foreign direct investment and the expansion of manufacturing and service activities worldwide. Ultimately, then the nature and scope of the IMF and the World Bank have been seriously limited as it relates to influencing economic events within and among OECD countries. However, these agencies continue to exert unduly strongly influence on developing countries' economies.

For the last fifteen years developing countries economies have been bogged down by the international debt crisis. This debt crisis is the direct outcome of the Bretton Wood System's enforcement of an international division of labor based on comparative advantage. In this division of labor, developing countries specialized in the production and sale of primary commodities such as coffee and bananas and raw material that they sold on the world market at relatively low prices determined by international markets. The OECD countries specialized in the production of high priced manufactured goods (cars and machine tools). While the prices of developing countries' commodities persistently declined, the prices of manufacture goods increased. The end result was that developing countries suffered from chronic balance of payments deficit. Ultimately, these countries became indebted to international banks and capital markets and the IMF. Many had borrowed money to meet balance of payment difficulties, and to modernize their economies. High interest rate polices of OECD countries in the 1980s, the high price of oil and slow demand for their products led some countries to be unable to meet debt obligations.

Consequently, the IMF and World Bank prescribed structural adjustment programs as condition for new lending and the maintenance of credit worthiness. However, structural adjustment programs focussed on devaluing exchange rates, export promotion, reduction in government expenditure and liberalizing the market seemed to only have increased poverty and unemployment within developing countries. A disproportionately large share of the adjustment burden of adjustment was shouldered by women who were forced to increase unpaid work to make up for government elimination of subsidies and price control of basic food items. Many women also increased their labor market activities by working in export processing zones dominated by multinational corporations.

At the same time many other women were forced by the rapidly declining economic situation to emigrate to OECD countries where they work as domestic servants and casual (or "guest") workers. Their lives in OECD countries became increasingly vulnerable to exploitation and racist violence directed against them by citizens in these countries whose lives have also suddenly become uncertain and unstable. Unsure of what is happening they seek easy answers and scapegoats. Unfortunately, both the lives of immigrants and poor and marginalized OECD women and men are inextricable intertwined. They are all players in a complex game in which the rules are being written by transnational firms, international capital markets and multilateral institutions. In this environment national governments seemingly have less power to influence these outcomes.

Though the nature and form of the world economy is changing, with new rules, and new institutions, there is one constant across time, space and national boundaries: growth and prosperity of the economy is predicated on the economic subordination of women and by the exploitation of labor, in general. This is achieved through the sexual division of labor which simultaneously activates the power of women to drive the economy and, at the same time, excludes women from ownership and decision making. With the exception of Eastern Europe where there has been a backlash against female workers, women are now the major source of labor for the global assembly line in Asia, Latin America and the Caribbean. Women also dominate the service sectors of the OECD economies. Overall worldwide, workers as a group are experiencing declining real wages and rising responsibility for the general welfare of the society.

It is important to note that globalization is not a new or isolated phenomenon but rather has been fifty years in the making. This current round of re-ordering of the world economic, political and social forces is the consolidation of a momentum created in the Bretton Woods era.  Like the new world order that was ushered in with the creation of the International Monetary Fund, the World Bank, the GATT and the emerging American corporate and Military power elites in 1944, this "new" world order has the same requirements. It needs to obtain favorable local inputs for the production process; it requires the construction of social, industrial and technological infrastructure; and it requires the liberalization of trade and protection for global investments.

The end of the cold war brought to a close the era of the bipolar world. The subsequent demise of the Soviet Union has engendered "the celebration of the market both as a concept and as a process." This has strengthened the hands of bankers, investors and multinational corporations with the full backing and the active intervention of the US government to single-mindedly push through their corporate imperative to promote and extend market ideology and processes.

The Corporate imperative is a three-pronged strategy for maximizing accumulation. The first prong focuses on aggressively expanding multinational ownership and control globally. The objective of the second prong is to extend the domain for profit making domestically by industrial and financial interests. This is to be achieved by: (a) privatization of all possible aspects of the society; b) implementation of new techniques and methods to reduce cost (including massive layoffs, restructuring of firms, attacks on unions); and (c) a renewed emphasis on increasing worker productivity.

The third approach is to transfer the social cost of accumulation to workers. This involves ensuring that the poor pay for services by privatizing such services, and by enforcing user fees It also increases governments' responsibility for the construction of the social infrastructure necessary the for the construction of the " new global economy".

Crucial to the success of the corporate agenda is the construction of world trade system that, in one broad stroke, frees business enterprises from any significant responsibility for labor, social welfare or the environment while, at the same time, enforces the rights of the transnational corporation over the entire global economy. The General Agreement on Tariffs and Trade system was reconstituted to serve this purpose.

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