SANE Views

Vol.5 No.24, 28 November 2005

Global Trade: look at the Facts rather than heed corporate lobbying

Published in the Financial Times on 11 November 2005

A letter to the editor by 142 Civil Organisations

Sir, We, the undersigned organisations and individuals represent tens of millions of workers and farmers, landless and unemployed, human rights, development and environmental campaigners, women, students, academics and citizens from all corners of the earth. We are writing in response to the letter (November 8) signed by the chief executives and chairmen of the world's "leading corporations" in which they urge World Trade Organisation member governments to conclude the Doha round of negotiations "on time".

Although we have no illusions about why the corporations are so eager to see the round concluded, their argument that trade liberalisation is a "strong driving force for global economic growth, job creation and wider
consumer choice" is utterly misleading.

Their first claim about growth is questionable. A recent report from the Center for Economic Policy Research (CEPR), compares average growth rates in 175 countries between 1960-1979, and 1980-2000, divided into five groups according to their per capita income at the start of each period. In the top four groups, average growth rates fell by more than half, from averages of 2.4 to 3.1 per cent in 1960-79 to averages of 0.7 to 1.3 per cent in 1980-2000. Only the group with the lowest per capita gross domestic product showed a tiny increase, from 1.7 to 1.8 per cent, even though it includes fast-growing China and India. ("The Scorecard on Development: 26 years of Diminished Progress", CEPR, September 2005, www.cepr.net).

Figures from the International Labour Organisation tell the same story: the mean world GDP per capita growth fell from 3.6 per cent in 1961 to just 1 per cent in 2003 ("A fair globalisation", World Commission on the Social Dimensions of Globalisation, ILO, 2004). Latin America shows the most dramatic reversal of fortunes: between 1960 and 1979 the region grew by more than 80 per cent. However this dwindled to just 11 per cent by 1980-2000 and 3 per cent for 2000-05.
This is the worst economic performance in modern Latin American history, even including the Great Depression.

Although the world's "leading corporations" argue that further trade liberalisation would reverse this trend, the reality is that during the past 25 years Latin America has already undertaken across the board and unilateral liberalisation of goods and services, in addition to wholesale privatisation, under the guidance of more than 80 International Monetary Fund programmes.

In contrast, 1980-2000 was a period of accelerated trade liberalisation: the average contribution of trade to GDP went from 40 per cent to almost 60 per cent. There does not appear to be a strong correlation between growth and increased trade flows.

Second, they claim that trade liberalisation will lead to job creation. Again, if we look at the research, between 1990 and 2002 unemployment increased in seven out of nine regions. In south-east Asia unemployment almost doubled from 3.6 per cent in 1990 to 6.5 per cent in 2002. Similarly, in that period unemployment grew by almost 50 per cent in Latin America; and even in east Asia, which includes China, unemployment almost doubled from 3.6 per cent in 1990 to 6.5 per cent in 2002. These regions are all experiencing high population growth, so the absolute number of unemployed is growing at an even faster rate. And although the world's top 200 companies account for a quarter of world economic activity, they employ less than 1 per cent of the global workforce (Institute of Policy Studies, December 2000).

We realise that the WTO and trade liberalisation has been good for the corporate bottom line. In fact, 49 of the 62 companies signing the November 8 letter are in "Forbes 2000" (2004) which lists their combined profits as $109.29bn and their total market value as $2,180.5bn. But, before making extravagant claims for the benefits of trade liberalisation, the CEOs of the world's leading corporations should look at the figures. Otherwise, they risk being charged with distorting the facts in pursuit of their own interests.

In the pressured days before Hong Kong, trade negotiators in Geneva would be well advised to look at the facts rather than listen to corporate lobbying.

Action Aid International - Ramesh Singh, Chief Executive

Alternative Information and Development Centre (South Africa) - Dot Keet, Co-ordinator

The full list of 142 signatories can be found at:
www.focusweb.org and www.ft.com/signatories