The Need for a Free-world Trade Order

Source : Daily World

If we believe Bertrand Russell then we do not have much to choose between democracy and dictatorship; “Democracy; the fools have a right to vote. Dictatorship; the fools have a right to rule”. Russell was a mathematician and a philosopher. That entitled him a realm from zero to infinity and from existence to non-existence. Ordinary mortals should be obsessed with ordinary things like economy, politics, wars, and pestilence, even peace. Democracy is open, noisy, vibrant, warm, and even hot, at times. Dictatorship is cold, distant, shuttered, and shuts up the noisemaker. There is not much common ground between the two except that what is uppermost in the minds of both is how to weaken, and if possible, destroy the other.

By a quirk of fate, a war started by Hitler, the epitome of a dictator, was won by a combination of democracies with the help of another dictator, Stalin and helped in raising him to the level of a threat to democracies. His tanks rolled into Eastern Europe and muffled democracy in half of that continent. That should have been a lesson to democracy – if you join a dictator even in a righteous cause, he is the gainer at your expense.

The lesson was not ignored from day one. Democracies were sitting with the USSR around a table constituting the UNO, where both the systems of governance were treated equally.All this while, the USSR was dividing Germany and Berlin, and extending the iron curtain far beyond its borders already extended by the Czars to swallow Central Asia. Just four years later, another set of comrades took over China and enjoyed the support of the USSR to become another powerful dictatorship. In spite of their bickering with each other, the two together became the harbinger of “Red revolutions” around the world from Vietnam to Cuba and from Chile to Ethiopia.

The lesson was still not learned by democracies. Richard Nixon opened the USA to China thinking it would help in containing the USSR. Having abandoned Taiwan, in favour of communist China, Clinton sponsored China’s membership to the WTO. It had all the elements of a mystery. Just one year ago, Clinton had imposed trade sanctions on China. Trade unions, that usually lean left, opposed the act of opening the US economy to China; capitalist corporations who would normally be wary of anything communist supported joining hands with the dictatorship.

The reactions of both the labour union and the corporations were not based on any moral principle; they were not concerned with Russell’s or any other philosopher’s ideas about democracy or dictatorship. They were driven purely by concern for wages for workers and profits for the corporations. The workers felt that the huge working class in China would push their wages down. The corporations salivated that the huge population of China would be a large new market. Both had obviously forgotten the words of Benjamin Franklin, spoken before the USA had come into existence, “Those who would give up essential liberty to purchase a little temporary safety deserve neither liberty nor safety”.

In the instant case of China entering the WTO, all three behaved like traders; they had no driving force except profit. Even the earliest trading nation, the Phoenicians, had neither a country nor any other ideology, except profit. They worked with equal ease with rivals and merrily traded with Mesopotamians, Egyptians, Greeks and Romans, with Gauls, Minoans, and Etruscans thrown in. Alexander, who did not bargain with them or with Persians, destroyed them. Let us remember that communism is an ideology based on the long-term goal of universal imposition. Communists are not traders and they use trade, as they use everything else, to subserve that goal.

As part of the WTO, China threatens and confronts the USA and flaunts its military and economic muscle. Yet, it still labels itself a developing country and has enjoyed all the advantages that go with that label. USA, for obvious reasons, is labelled a developed country and has to carry all the disadvantages that the WTO attaches to that label. Interestingly, there are no criteria for the label “developing”. The label is self-assigned and China has stuck that label to itself giving no voice to “developed” nations in the matter.

The label “developing” brings with it the advantage ofa longer time-frame for tariff reduction and higher asymmetry while accessing foreign markets. It assures handholding by protecting trading interests and technical support from the WTO. The pious intention behind these discriminatory measures is that the world becomes better for everyone as poverty is reduced anywhere through increased employment and equal partnership of the unequal in global trade. That China, which is the second largest economy in the world, enjoys this preferential advantage may surprise many and has frequently drawn the ire of Donald Trump.

Has this preferential treatment produced any of the intended outcomes in China? A report in the international media on May 31, 2020 quoted Chinese Prime Minister, Li Keqiang that while the average per capita monthly income in his country is about $350, 600 million people Chinese earn $140 a month, that being the rent of a one-room apartment in mid-sized cities. It does not mean that they are starving but it does mean that they leave their families in the villages and live a dozen to a room in the cities. In fact, the Chinese Premier said that there are 900 million migrant workers in China, which means that there is acute poverty in rural areas with no employment opportunities.

One would have sympathy with them and their country if one did not know that China spends more on its armed forces and armaments than any other country except the USA. In 2001, when it joined the WTO, its defence expenditure was $52 bnthat rose to $266 bn in 2019. The world economies, including that of China have been hammered by the Coronavirus-induced lockdowns and disruptions in the supply chains. Yet, in May this year, China announced a 6% increase in defence spending. And still, it labels itself a developing country and laments the poverty of 42% of its population.

The WTO has been detrimental to the erstwhile prosperous countries of North America and Europe. Low wages, slave labour, absent or weak environmental regulation, theft of technologies and IPRs and hidden state subsidies resulted in much cheaper Chinese goods. That led to the shifting of manufacturing to China, unemployment in other countries and even worse, a supply chain stranglehold of China in critical areas like pharmaceuticals and power generation including solar panels and communications. This further led to stunting of R&D in critical sectors in America and Europe and an example of the fall out is the dominance of Huawei in 5G.

The enrichment of China is not only to the detriment of other developed nations; it has hurt the Chinese people and other poorer countries. The riches made the CCP and the state even more powerful and arrogant and they trample the human rights of the Chinese people even more ruthlessly. Technology has made it a surveillance state. Abroad, it has intensified its subversion of other nations through its Belt and Road Initiative loans where the other assets of the borrowing nations like ports and mines are collateral. The entire loan amount flows back to China as wages for Chinese workers and equipment and materials imported from China. In the absence of real benefits, there is inability to service the huge debt which results in China taking control of the collateral assets. Hambantota port was taken over by China when Sri Lanka could not repay the BRI loans. Many other countries have fallen in this trap.

There is already talk of independence from the Chinese trade stranglehold. Australia and New Zealand are talking of a travel and trade bubble, as are some nations of Europe. Nations have earmarked funds for moving industries out of China. USA has announced measures to take control of vital supply chains. These are knee-jerk reactions to the situation created by the Coronavirus. Once things settle down, the trader mentality will come into play and attraction of low prices will point the compass needle of international trade towards China again. History repeats itself but more like the tires of a vehicle; the world moves forward with time. During the next crisis, the world may find China unassailable.

Are we in a hopeless situation where we have to silently watch an increasingly powerful, undemocratic China ride roughshod over other countries, callously cause contagions to ruin world economies and treat its citizens as nothing more than instruments for state empowerment. Should the free world keep playing the game of treating dictatorships the same as democracies and keep losing in the game? Can the two unequal ever deserve equal treatment? Does it not give a huge unfair advantage to the dictatorship with which it threatens the free world?

Time is running out for casting aside inhibiting political correctness and giving an unequivocal answer to these questions. The answers will obviously not come from dictatorships; the nations of the free world have to help themselves and each other and stop empowering the dictatorships. The democratic countries have to bond together against the menace of megalomaniacs, as many of them did against Hitler. Manufacture is the life and blood of economies; it provides employment, purchasing power and the multiplier. Democracies have to recognise that self-interest, human rights and morality demand that they will encourage manufacture only under a democratic flag. Even though it may result in a price disadvantage in the short term, we have to remember the words of Benjamin Franklin and be deserving of essential liberty.

This will require a new world trade order, one that comprises only democratic countries. The combined resources and populations of the free world are sufficient to set in motion a process which will further enrich and empower these democracies and will add economic freedom to the political freedom of their people. WTO presumed these goals. Time has shown that these goals apply fully only to open democracies and not to the ever-increasing opacity of a Bamboo Curtain.

The writer RN Prasher is a retired IAS officer of Haryana cadre | Personal Opinions

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