Al-Ahram Weekly   Al-Ahram Weekly
16 - 22 December 1999
Issue No. 460
Published in Cairo by AL-AHRAM established in 1875 Issues navigation Current Issue Previous Issue Back Issues

Front Page

Global trade
and global government

By Roger Owen *

Can you have a global trading system without some form of government or regulation? The present answer seems to be yes and no. The World Trade Organisation was created to adjudicate disputes. However, the rules are still supposed to be made, or agreed to, by all its members in concert, making it more like a UN agency than a real world government.

Nevertheless, this is widely seen as a step forward from the previous system of global trade which flourished at the end of the nineteenth century and which is still thought of as more or less self-regulating. In fact, as many economic historians have shown, it was also heavily dependent on the international agreements of the 1870s, which encouraged many of the leading trading nations to back their currencies with gold, as well as on the dominant position within it of a single, free trade power, Great Britain, and on London's role as the financial capital of world commerce. European power and money also played a significant role, forcing many states, like the Ottoman, to lower tariffs either as a result of military weakness or their own international indebtedness.

But what is just as important is why it collapsed. Even before the first World War the free trade system was being threatened by the fact that the two rising world powers, Germany and the United States, were quite heavily protectionist. The war itself then ushered in further regulation and state control. Finally, the attempt to return to a quasi-free trade system after the war was marred by serious structural dislocations. One was the huge debt owed by Europe to the United States as a result of war-time borrowing. The second was the failure to create the British/American partnership necessary to manage the difficult period while world economic hegemony passed from one to the other. The result was the Great Depression and a return to protectionism and bilateral, rather than multilateral, trade agreements.

Another result, after the second World War, was that the new world trading system not only had to be constructed without the participation of Russia and the Eastern bloc but was also increasingly challenged by an important legacy of the colonial period, the rise of anti-colonial economic nationalism based on models of protectionism and planning. Only after the end of the Cold War and the collapse of the Soviet Union could a new wave of economic liberalisation occur, orchestrated and encouraged by the United States.

Where are we now? This is a vital question, which has been posed with renewed force following the collapse of the world trade conference in Seattle. The facts of the matter seem quite obvious. American leadership of the drive towards free trade has been blunted by arguments over its own domestic agenda and by its unresolved dispute with the European Union over agricultural subsidies. Trade liberalisation has now progressed beyond simply the removal of tariffs to issues of regulation which bite deeply into each country's national sovereignty. And, in the rich countries at least, there are a huge number of vested interests with the power to lobby for a wide variety of trade-related issues. Meanwhile, the WTO itself has not only grown large and unwieldy, but it contains a group of members like India, Brazil and Egypt, now willing and able to assert themselves in support of a much slower pace of advance.

Where the great differences arise is over questions of how to understand the present state of the world system and then to work out how it should be encouraged to develop in the future. One way of trying to narrow the subject down is to see it as a question of the management of world trade. Specifically, who makes the rules and within what institutional framework? But it is also clear that there is an even larger question just in the background, and that is who or what is to manage the whole process of world economic liberalisation, paying proper attention to the inevitable divisions between winners and losers as they affect more and more billions of lives.

For some, the events of Seattle suggest that what is happening has some resemblance to the late nineteenth-century world system, dominated as it was by the imperial powers. They can point to the American effort to stage-manage the whole conference, including President Clinton's forceful interventions and Charlene Barshevsky's heavy-handed chairmanship. They can also point to the fact that, when Americans and Europeans talk of the need to pay attention to the protests and for the greater democratisation of the WTO, they seem to privilege Western protest and Western opinion, confident that no pro-Third World demonstrations were likely to take place in such a venue.

Nevertheless, the world is much too complex a place to allow us to assume that there is just one single agency at work. What is needed is a way of analysing the present system of world economic power that pays attention to structure, to difference and to the possibility of new forms of coordinated action. For example, capital flows are different from labour flows, and there may well be a case for regulating one in quite a different way from the other. Again, concern for the environmental aspect of world trade is not the same as that for what President Clinton called "core" labour standards, and should be negotiated in a separate way.

However, I also think that some of the concepts employed by the classical theorists of imperialism still retain considerable value. One is the notion of inter-imperialist rivalry and its ally, the notion of contradictions. The industrial world is clearly divided into three blocs, the North American, the European and the Japanese/East Asian, with quite fundamental differences between them when it comes to core interests such as subsidies for agriculture or trade in Genetically Modified food. There is also an obvious relevance of the old notion of a "labour aristocracy" in which the interests of workers in the high-wage industrial countries are seen as antithetical to those in the lower-wage, poorer ones, preventing cooperation between them. And lastly, there is the old concept of "crisis", which in this context could be taken to mean that an organisation like the WTO is only really needed if and when this second moment of global free trade begins to go seriously wrong.

Of course, none of this is likely to be of much immediate help to the ministers of trade and commerce in the Middle East as they contemplate their next moves. One or two may still have the extraordinary luxury of being simply able to sit tight, to ride the present wave of liberalisation and increasing world trade and to wait and see how things develop. For the vast majority, though, there is the infinitely more challenging task of assessing their own national interest when it comes to the inevitable debate about the future of the WTO, the creation of new international institutional mechanisms and the relative merits of going it alone as opposed to signing up with the EU's Mediterranean initiative or creating a new, purely Arab, or purely Middle Eastern, common market of their own.

Still, trying to make sense of the larger picture will remain an intriguing intellectual puzzle. Perhaps we ought to be thankful for the brouhaha surrounding the Seattle conference. Just as the literature on globalisation was starting to become repetitive, over-politicised and banal, we have a new subject to think and write about: the world system and its proper governance.

*The writer is former director of St Anthony's Middle East Centre, Oxford University, and currently a professor at Harvard.
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