Globalization 3

To Richard:
Complementing a prior message, I should like to call your attention to
statements made by Joseph Stiglitz, outgoing chief economist of the World
Bank, Martin Khor of the Third World Network and the leader of AFL-CIO John
Sweeney, emphasizing the need for new WTO rules, that would ensure a more
equitable distributions of the benefits of globalization. 

On the basis of these important voices, a discussion on the agenda of the
reform movement seems to be both pertinent and urgent.

Here are some of the highlights of their statements:

MARTIN KHOR:
"Financial liberalization, especially when done inappropriately, was the
main cause of the East Asian economic crisis.
Seattle provides an opportunity to re-examine the record and to reformulate
what is the appropriate approach for trade policy and thus also for the
future role of the WTO.
It is simply not true that "we are all gainers, there are no losers", as
some leading proponents of the Uruguay Round and the WTO would have it.
Some have gained more than others; and many (especially the poorest
countries) have not gained at all but may well have suffered severe loss to
their economic standing.
"The top fifth of the world's people in the richest countries enjoy 82
percent of the expanding export trade and 68 percent of foreign direct
investment ---the bottom fifth, barely more than 1 percent.  These trends
reinforce economic stagnation and low human development.
What one must understand about trade liberalization is that if it is
imposed upon countries that are not ready or able to cope, it can
contribute to a vicious cycle of financial instability, debt and recession.
The problem in trade liberalization is that a country can control how fast
to liberalize its imports (and thus increase the inflow of products) but
CANNOT determine by itself how fast its exports grow.  Export growth partly
depends on the prices of the existing exported products (and developing
countries have suffered from serious declines in their terms of trade) and
also on having or developing the infrastructure, human and enterprise
capacity for new exports (which is a long-term process and not easily
achieved).

It also depends on whether there is market access especially in developed
countries.  Herein lies a major problem beyond the control of the South,
for as is well known there are many tariff and non-tariff barriers in the
North to the potential exports of developing countries.  Unless these
barriers are removed, the South's export potential will not be realized.

This should lead us to conclude that trade liberalization should not be
pursued automatically or rapidly and in a "big bang" manner.  Rather, what
is important is the quality, timing, sequencing and scope of import
liberalization, and how the process is accompanied by (or preceded by)
other factors such as the strengthening of local enterprises and farms,
human resource and technological development, as well as the build up of
export capacity and markets.   

In the TRIMS Agreement, "investment measures" such as local content
(obliging foreign firms to use at least a specified minimal amount of local
inputs) will be prohibited for most developing countries from Jan. 2000.
This would prevent them from maintaining policies they have had to promote
the local firms, to enable greater linkages to the domestic economy, and to
protect the balance of payments.  Developing countries need these policies
because of the low level of development of the local sector, which would
not be able to withstand free competition at this stage.  Thus, by
implementing TRIMS, developing countries will lose some important policy
options to pursue their industrialization.

If the WTO is to improve its already poor credibility, it should focus in
the next few years on reviewing problems of implementing the Agreements and
make the necessary changes in the agreements.  These will be enormous
tasks. Developing countries should therefore not accept and developed
countries should refrain from the injection of these new areas into the WTO.

The goal and dimension of development must be primary in WTO rules and
assessment of proposals or measures.   The "special and differential
treatment" principle should be greatly strengthened operationally, far
beyond its present weak state.

Joseph STIGLITZ:
The world's poor countries are being denied a seat at the table where key
international economic decisions are made even if those decisions hurt them.
As for Russia privatization had gone ahead without a sufficient legal
framework. As a result, rather than providing incentives for wealth
creation, there have been incentives for asset stripping.

Commenting on the way the IMF and other institutions handled the Asian
financial crisis of 1997-1998, Mr. Stiglitz said that ''decisions were made
in the last crisis that really adversely affected working people and small
businesses.'' Many people were thrown out of jobs ''even though it was
international financial markets that were at the root of the problem.''
''It was small businesses that faced interest rates that put them into
bankruptcy, in some countries more than 50 percent of the firms being put
into bankruptcy. Yet these people whose interests were vitally at stake did
not have a seat at the table when those important decisions were made.''
One of the challenges for the international financial community was ''to
establish a framework in which economic policies are made which affect
everybody,'' and to make sure that all those affected ''can have a voice in
those policies.''

JOHN J. SWEENEY
We must ask ourselves: what is the fundamental test of globalization? It's
not whether markets are more open or less open. That mistakes the means for
the end. The end is human development. The fundamental question is whether
globalization is helping to lift the poor from poverty; whether its
blessings are shared widely; whether it works for working people.
Yes, globalization is creating vast new wealth, but financial crises are
growing more frequent and severe, and inequality is rising, as the UN
reports, both among and within nations. This means that the seeds for
rejection of globalization are in every political system, in developed
nations as well as developing nations.
That is why Seattle is so important. The protests in the streets by
workers, environmentalists, farmers, and students from across the world
were mirrored by the anger inside the hall from developing country
delegates who felt just as locked out as the demonstrators. As Joseph
Stiglitz reminds us, if we care about equitable, sustainable development,
then the impact on people - not only incomes, but the environment, health,
food safety and democratic participation - as well as urgent issues such as
debt forgiveness, can no longer simply be left to chance.
Understand the message of Seattle. It wasn't an isolationist rejection of
open markets; it was a call for new global rules. Workers North and South
marched together. And the many different voices made one clear statement:
the current course cannot be sustained; fundamental reform is needed.
Clearly, we have to do better. If we do not - if the global system
continues to generate growing inequality, environmental destruction and a
race to the bottom for working people - then I can assure you, it will
generate an increasingly volatile reaction that will make Seattle look tame.
Leaders of the global institutions face a legitimacy crisis that cannot be
solved by better public relations. 
THEIR INSTITUTIONS WILL BECOME MORE ACCOUNTABLE, OR MORE IRRELEVANT.
Global non-governmental organizations raise fundamental concerns.
 Now IT IS IMPORTANT FOR THE NGOS TO GO FROM OPPOSING WHAT IS, TO PROPOSING
WHAT CAN BE. 
Leaders of the corporate community should join the effort to build
enforceable laws that put limits on cut-throat competition. It is in the
self-interest of multinational corporations and the governments that
regulate them to have rules that are agreed upon by all.
In this panel, in this conference, I realize I raise a minority voice. But
these views are shared by a broad and growing majority - both in the United
States, where voters overwhelmingly believe that workers' rights and
environmental protections should be enforced in the global economy, and
across the world, by working people whose voices too often go unheard in
meeting halls such as this one.
Here, let us all agree on one thing: that business as usual cannot be the
order of the day. This global economy will either be reformed or face ever
greater resistance."

Regards Paul Riesz