Beyond Free Trade

This book comes at a time when scarcely a day passes that major news outlets do not carry some coverage of free trade deals being negotiated and signed around the world. Unlike five or ten years ago, that coverage now arrives to many of us through a number of social media platforms. Weaving together the narrative of the journalist with that of the social commentator, the activist with that of the NGO, the policy maker with that of the social movement participant, such coverage and analysis reveal a complicated, power-laden, and contested landscape. Upon its terrain, critical observers pursue distinct ‘wars of position’ (Gramsci 1971), in order to destabilize monolithic techno-representations of free trade as common sense, good-for-all, strategies to support human development. As this introduction was being written, the following headline appeared in our Facebook newsfeeds: ‘The truth behind the Transatlantic Trade and Investment Partnership’ (TTIP), directing the observer to the Sierra Club’s US website where the organization describes negotiations for the TTIP between the United States and European Union as ‘cloaked in secrecy’ and ‘dominated by corporations’, threatening, if approved, to ‘put corporate rights on steroids’, to ‘open the floodgates for fossil fuel exports and fracking’, and to ‘revise law-making in favour of corporations’ (Sierra Club 2014).

Markets are not natural institutions, inherent in human nature, as Adam Smith suggested. Nor are all humans born as homo economicus, market- oriented, profit-maximizing individuals. Markets and international trade are social and historical products. This chapter will discuss the historical process of creating international markets by applying historical commodity chain analysis to coffee.

Preferential trade is a major aspect of the post-World War Two international economic environment. It includes the reciprocal liberalisation of trade between parties under free trade agreements (FTAs) and the non-r eciprocal liberalisation of market access by one party to those countries self-categorised as ‘developing’.² Mainstream narratives on African, Caribbean and Pacific group of states (ACP) trade with the EU claim that the non-reciprocal preference regime under the Lomé Conventions (1975–1999) failed to stimulate economic development. The typical alternative proposed is the reciprocal liberalisation of tariffs in combination with re-regulation in areas such as intellectual property rights and trade-related investment measures to enhance ‘competitiveness’ (e.g. DG TRADE and DG DEV 2002). A more heterodox view is that trade preferences did (and can) stimulate ACP development as part of a wider programme of strategic industrial policy, but this is contingent on the ACP maintaining policy space in several ‘contentious areas’ (e.g. Lui and Bilal 2009). This chapter offers a third perspective: while agreeing that preferences can support capitalist development, the history and ongoing institutional reproduction of ACP-EU trade preferences must be understood in the first instance as part of the accumulation strategies of particular European capitals (’domestic-societal’ interests).

The East Asian region is now the home to over one hundred bilateral and plurilateral intra- and extra-regional trade agreements (RTAs) and proposals. The most important of these are the Association of Southeast Asian Nations (ASEAN)+1 agreements with China, Japan and South Korea, negotiations over a China–Korea–Japan trilateral agreement, an ASEAN+6 Regional Comprehensive Economic Partnership (RCEP) with a 2015 target completion date and the US-led, 12-member, Trans-Pacific Partnership (TPP) targeted to be completed by the end of 2013 although still ongoing.

The new role of China as global development agent is much disputed, with polar positions that see China either as the new imperialist on the block or as offering countries of the Global South a more sustainable and sovereignty-respecting path to development and a welcome alternative to the Western model of coercive neoliberalism and structural adjustment. A number of studies suggest that the idea of imperialist China is grossly exaggerated. Indeed, certain versions of this idea are taken to extremes in imputing a conspiratorial relationship between Chinese state diplomacy and Chinese private emigration, which is alleged to be part of a deliberate official strategy of global encroachment and colonization. Huynh et al. (2010, p. 287) cite the example of the award-winning British journalist Andrew Malone, who warns that the ‘invasion’ of Africa by China has been occurring ‘secretly’ through the movement of Chinese people to the continent.

Capitalism is a system in crisis. An oft-repeated truism, but what does it mean — beyond a succession of different phases of capitalist development in which the system is pushed to the limits of its capacity to expand the forces of production and then restructured by mobilizing the forces of change released by the crisis? Take the post–World War II process of capitalist development, which has been periodized as an era of state-led development celebrated by historians as the ‘golden age of capitalism’ (two decades of unprecedented rapid economic growth that came to an end with a system-wide production crisis at the turn into the 1970s), followed by a decade of restructuring and transition to what has been described as a ‘brief history of neoliberalism’. The beginnings of this historical epoch can be traced back to the early 1980s in conditions of a fiscal crisis of the capitalist state, attributed by conservatives to the excessive costs of the social and development programmes of the liberal reformist development state; a matrix of forces released by actions taken to find a way out of the crisis and restructure the system; and a new world order based on market fundamentalism and the Washington Consensus regarding the virtues of free market capitalism and the ‘structural reforms’ needed to bring it about.

This chapter focuses on how extractivism increasingly dominates the direction of Canada’s domestic development as well as its hemispheric relations. We describe the instrumental role that Canada’s policies are playing in accentuating an extractivist paradigm that is shared by both neoliberal and progressive Latin American governments, and how such policies are shaping north–south relations. Whereas a large majority of Canadians believe that Canada’s foreign policy should be based on peacekeeping, mediation, and being a global leader on the environment (Broadbent Institute 2013), the reality of Canada’s presence in many Latin American nations is discordant with those values. Canadian foreign policy in the region is increasingly being driven by the interests of Canadian and global extractive capital (Veltmeyer 2013).

In the late 19th century, the Second Industrial Revolution in Europe and the United States drove up demand for raw material exports from South America. This resulted in the creation of enclave economies across much of the region without many backward or forward linkages.¹ Thus when demand collapsed for primary exports in the Great Depression (1929–1940), the region was left without a growth pole. A formalized theoretical critique of Latin America’s primary export model was developed by Raúl Prebisch and Hans Singer in the late 1940s (Bértola and Ocampo 2012: 25–28). They demonstrated that raw material export-based economies were destined to confront both sharply falling export prices (due to overproduction, the substitution of synthetic products for raw materials and declining income elasticity of demand for many primary products) and increasing long-term prices for imported manufactured goods from industrialized nations. A solution to this structural situation of falling terms of trade (TOT) can be found – but not through a laissez-faire approach that would rely on price information and ‘market forces’ to redirect the national production base of a nation.

Many food justice activists in the Global North regard Fair Trade as a moral alternative to retail markets dominated by corporate agribusiness. Fair Trade frames producer–consumer relationships in terms of social justice and environmental sustainability rather than the profit maximising calculus guiding large corporations. Compared to conventional goods, Fair Trade products typically fetch higher sale prices intended to benefit the farmers and workers involved in their production. In addition, a portion of each purchase is returned to producers’ groups as a ‘social premium’ that assists community development. A major goal of the Fair Trade movement is to create alternative circuits of exchange that avert the volatility of world commodity markets. In this chapter, which deals with small-scale farmers on the Windward Islands of St Lucia and Dominica following the deregulation of the European banana trade, it will be seen that Fair Trade producers remain vulnerable to a market with its own vagaries. In particular, as the global recession suppresses demand for higher-priced Fair Trade goods, a development strategy tied to social premiums yields diminishing benefits.

Growing attention has been paid in recent years to new political and economic trends encapsulated under the notion of the “rise of the South.” After centuries of uneven integration into the world system, a number of Southern countries have experienced decades of substantial economic growth – often faster than those historically experienced by the North – and gradual improvement in social indicators. Large developing economies led by Brazil, India, and China have been at the forefront of these changes, which have included intensified and expanded economic and political linkages between Southern partners; South-South Foreign Direct Investment (FDI) flows grew from $2 billion in 1985 to $60 billion in 2005, and the share of South-South trade of world merchandise trade increased from 8 per cent in 1980 to 26 per cent by 2011 (Shirotori and Molina 2009, UNDP 2013, p. 2). Changing South-South trade and investment patterns have been interwoven with new regional integration projects and increased action among wealthy countries to expand their relations with Southern partners.

In 2003, following a long period of recession with extraordinarily high levels of unemployment and poverty and widespread social unrest, growth resumed in Argentina and economic and social indicators started to improve. These changes accompanied major political and policy redefinitions under a government that rejected the neoliberal policy blueprint of austerity and liberalisation of the 1990s and took pains to make the country’s integration into the global economy compatible with the creation of conditions for resuming capital accumulation and rebuilding consensus in the country.

By July 2014, the United Nations Clean Development Mechanism (CDM) had registered over 8,500 projects, issuing 1.4 billion carbon credits known as Certified Emission Reductions (CERs), with each CER equal to one tonne of carbon dioxide equivalent (tCO2e). Despite a dramatic collapse in the value of CERs, from a high of over €20 per CER in 2008 to a record low of €0.19 in April 2013, the CDM continues to register projects while developing new strategies to revive the ailing scheme. In turn, the credits produced through its emission-reducing and/or emission-eliminating projects are destined for sale largely in the Kyoto Protocol’s compliance market, allowing participant states in the Global North to offset their greenhouse gas (GHG) emissions in place of material reductions at the source. As the largest global carbon offsetting scheme in existence, responsible for channelling billions of dollars in carbon finance to the Global South, the CDM has been the subject of significant critique stemming in part from the poor environmental integrity of many of its projects, and also due to its poor track record on protecting the human rights of many affected by it.

The severe forms of economic exploitation which are encompassed by the term ‘forced labour’ are a resilient feature of the contemporary global economy. The revised global estimates issued by the International Labour Organization (ILO) in 2012 indicate a likely total of 20.9 million people working in conditions of forced labour across the world, which the ILO itself stresses is a conservative estimate. Of those 20.9 million people, the ILO’s figures reveal that fully 90 per cent are exploited in the private economy by individuals or enterprises, and that 68 per cent of these are victims of forced labour exploitation (ILO 2012). In short, the problems of forced labour and trafficking for labour exploitation are overwhelmingly phenomena of economic exploitation in the private economy. They also span the breadth of the global economy, occurring not simply in nonmarket contexts associated with, say, subsistence agriculture, or small- scale production for local markets, but across a wide range of industries and sectors tightly integrated into global production networks (GPNs).¹ A growing body of detailed research documents the incidence of forced labour across a wide range of manufacturing, agricultural, extractive and other industries in the ‘mainstream’ of global economic activity (e.g. Andrees and Belser 2009a, Bales et al. 2009, US Department of Labor 2012, Verité 2012, Allain et al. 2013, Barrientos et al. 2013). In its latest reports, the US Department of Labour confidently identifies 134 goods from 74 countries listed as being produced using forced or child labour, and its list of suspected goods is much longer (US Department of Labor 2012).

To analyse trade and development through the disciplinary lens of neoclassical economics and its understanding of free trade and ‘comparative advantage’ requires making the initial assumption that trade policy, trade patterns, and trade outcomes are not significantly impacted or determined by unequal power relations between rich and poorer states; by domestic and global disparities and struggles around class, race, and gender; by historical legacies of colonialism, slavery, and imperialism; by political, ideological, and cultural institutions that pervade everyday life; by warfare, genocide, military invasions, and social violence; by corporate advertising, political funding, and media dominance; by complex implicit and explicit rules, norms, laws, and customs exercised through states and international regimes; by the ecological limits of industrialization and endless accumulation; by the real and perceived geostrategic interests of states in a competitive international ‘arena’; and by complicated, multidimensional, often obscure and unpredictable human behaviour, combined with the volatility and highly contingent nature of local and global markets. Once these factors are dispensed with, one can use the models of comparative advantage to develop and deliver trade policy. If the policy then fails, or if political and economic elites fail to fully adhere to the proffered prescriptions, as is so often the case, the above factors can be brought in at the end; the various failures attributed to ‘politics’ or ‘ideology’, which wrecked what otherwise could have been a smooth functioning project (e.g. see Stiglitz 2002, Sachs 2005, Bhagwati 2008).