Are there alternatives?

Dear Jan:
"In a recent posting you said:
While few people seem prepared to sacrifice capitalism's advantages,
many
yearn somehow to put up the shutters.
But yielding to foes of global capitalism by restricting trade and
investment would not end popular anxieties, many of which stem from
technological change and other sources unrelated to globalisation.
The only result would be impoverishment, above all of struggling
economies, whose prospects hinge on improved access to world markets
and foreign capital.
No superior alternative to capitalism and an open global economy is
on offer. 

I should be grateful for comments on the following ideas of mine on this
subject
Proposals for a fairer distribution of the benefits of globalization,
plus some concrete ideas on how developing countries could make good use
of the suggested changes.

Regards            Paul

HOW THE BENEFITS OF GLOBALIZATION COULD BE DISTRIBUTED MORE FAIRLY 
In order to enable individual countries to carry out trade policies,
well fitted to their needs, it would be necessary to find enough votes
among the present members of the WTO, for a motion that would establish
a double standard for belonging to this organization:

REGULAR MEMBERSHIP for countries, who accept all the present rules and 
regulations of this body and
ASSOCIATE MEMBERSHIP for countries wanting to negotiate special terms, 
according to their individual needs and degree of economic development.
Since a citizen of Thailand has been chosen as the next president of the
WTO and since developing countries command a majority of votes, such a
motion should have a reasonable chance to succeed.

Under such rules, the ASSOCIATE MEMBERS would have the right to protect 
certain sectors of their economy, which employ a great part of their
workforce and are not (or not yet) capable to compete with imports. Some
basic agricultural crops and industries such as textiles, shoes etc.
might be among the protected sectors.

On the other hand such countries would also want to have access to world
markets for products in which they enjoy comparative advantages and
would naturally have to offer a fair compensation for such privilege;
e.g. the elimination of import duties for a number of goods, that might
generate a volume of roughly similar value. Such a BALANCED
international trade might seem to offer a fair deal for both sides.

The pioneering country might also want to invite foreign investments in
selected sectors, where such investments offer both a lot of well paying
jobs and other benefits for the country and good profitability for the
investors.  Conditions on decent and slowly growing wages, workers
protection and on safeguarding the environment could be established in
the invitation or could be negotiated. The free withdrawal of yearly
profits and conditions for a gradual repatriation of the investment
itself should also be determined in beforehand.
To make such investments desirable in spite of such limitations,
compensations such as reductions on taxes or import duties or other
positive incentives might be needed.

As an example I have tried to imagine on how these proposals could work
out in practice here in Chile.

Chile has been very successful during a long period, through
liberalizing its trade relations and relying mostly on exports for
economic growth. Nevertheless some less beneficial results have appeared
after the Asian economic crisis and are still with us several years
later.
Many jobs have been lost through industrial reorganizations and
investments in new activities are lagging. The unemployment rate is now
approaching 10 %, which is a major disaster in a country that has as yet
no functioning unemployment insurance and no system of public welfare. 
When people lose their jobs, they might be able to go on for a little
while, spending their very limited savings, but afterwards they have 
only 2 options to survive: BEGGING OR STEALING. 

But unemployment is not the only problem; while there are many VERY rich
people, a great % of families can barely survive on what they earn.

Under my proposals for "associate membership" Chile could apply the
following measures:
In order to protect the most vulnerable sectors of its economy against
cheaper imports, higher customs duties or quotas and other non-tariff
barriers could be established.
Among industrial products, textiles and shoes might benefit most from
such policies, creating jobs for many unemployed persons. At least the
present number of workers could be maintained. 
As to other sectors, wheat and sugar beet farmers and cattlemen are most
in need of protection. (see below for details).

On the other hand Chile would want to not only preserve the markets for
its export products, but to find also new ones for items with more added
value. To achieve such goals Chile would have to negotiate with its
trade partners, first of all with the many fully industrialized
countries, who at present buy its copper, wine, fruits, wood-pulp,
salmon etc. But since Chile also imports many industrial goods such as
cars and computers from the US, Japan and Europe and many cheap consumer
goods from China, a roughly balanced foreign trade would be beneficial
for BOTH SIDES, 
therefore such negotiations should be relatively easy.
To achieve similar results with other developing countries, such as
Argentina, from which it imports great quantities of wheat and meat,
would be more difficult, but with some imagination any emerging problems
could also be overcome. Chile could temporarily raise some tariffs and
impose some quotas on the items most resented by its farmers and
cattlemen. Nevertheless, to really help them in the long run, they
should be guided towards more specialized crops and breeds of animals or
towards making better use of their forestry resources.

Chile should also replace the present trend of allowing absolute freedom
for the flow of capital, with fixed or negotiated conditions for
withdrawing annual profits and the gradual repatriation of the capital
itself, deemed to be equitable. The flow of purely speculative capital
should be severely restricted. 
To encourage new investments in chosen sectors, in spite of such
imitations, positive inducements, such as tax exemptions and/or granting
exploitation rights for desirable mineral sites might be needed. One
example:
Using such inducements for attracting investors into adding more value
to its copper, through transforming it HERE into cables, wire etc. would
be especially beneficial.
Similar measures should be used to encourage the industrial development
of
RENEWABLE energy sources, such as hydro ~, wind ~ and geothermal power.