[unsigned, Militant No. 580, 4 December 1981, p. 8]
The open trading system, on which the post-war success of western capitalism was based, is slowly being strangled by creeping protectionism.
Faced with prolonged world recession, rival capitalist states are abandoning liberal trade policies and adopting ‚beggar thy neighbour‘ measures in an effort to defend their own markets and profits.
„The depressing effect on trade of the weakening of aggregate demand,“ commented Britain’s National Institute (NIESR) earlier this year, „continues to be reinforced by protective measures.“
Few countries have openly challenged the liberal non-discriminatory trading principles of GATT, the General Agreement on Tariffs and Trade, now supported by about 121 countries. But every year GATT’s annual report includes an even longer list of trade restrictions.
Monetarist policies at home have led to increased capitalist pressure for import controls
In 1979/1980 world trade grew by only 1½% in volume in contrast to the 7% growth in 1978/79. (The dollar prices of world exports increased by 18% to 20% during 1980.) Growth of trade in 1980, in fact, was the lowest for two decades-except for the slump year of 1974/ 75 when there was a 5 % fall.
After that slump, which really marked the end of the post-war upswing, the major capitalist governments mostly resisted the demands from some sections of big business for import controls (through duties or quotas). They feared that protectionist measures could precipitate an all-out trade war, with disastrous consequences for world capitalism.
The major states continued with the „Tokyo round“ of GATT 1973/79. This appeared to be a great success, achieving agreements on new tariff reductions and also a ‚code of practice‘ on ’non-tariff‘ restrictions.
These include concealed protectionist measures like dumping (selling goods at below cost price in overseas markets); subsidies (e.g. cheap fuel for home industries); government procurement policies which prefer home-produced goods; and things like customs valuation methods, road tolls, and health and safety regulations which can be applied in a way that discriminates against imports from particular countries.
While the Tokyo-round negotiators were still congratulating themselves, however, more and more countries were invoking GATT’s Article 19, an ‚escape clause‘ which permits safeguards against . imports causing damage to domestic industry.
A number of advanced countries, like Britain, have adopted restrictive measures under Article 19 which blatantly discriminate against particular countries or producers, in open violation of GATT principles.
One current example is Thatcher’s insistence that the Vehicle Licensing Centre in Swansea should buy a British-produced ICL computer, a directive now being challenged under GATT agreements by the US giant IBM.
This creeping protectionism, which contradicts the GATT countries‘ high-minded commitment to free trade, is the direct consequence of the deflationary, monetarist policies being pursued at home by major capitalist governments.
Abandonment of Keynesian policies, based on high government spending to sustain the demand for goods, was bound to have repercussions internationally.
Drastic cuts in public spending, together with high interest rates and other credit restrictions, put the squeeze on industry, particularly the backward sectors of big business. Outdated firms have been increasingly succumbing to a flood of imports from countries with cheaper labour or more technologically advanced, more productive factories.
This produced a clamour for protective measures from the threatened sections of big business, particularly in older industries like steel and textiles, but also in fields like electrical and electronic consumer goods.
Most of the overt or concealed protective measures taken by the advanced capitalist economies have been aimed against their more recent rivals, like South Korea, Taiwan, the Philippines, Malaysia, Argentina, Brazil, etc., who have penetrated European and American markets in areas such as steel, textiles and electrical goods.
In the boom years, these new producers could be allowed a share of the market. But with recession, their highly competitive businesses are being increasingly excluded.
More recently, however, governments in the advanced economies have also begun to take measures against rival industries in other advanced countries. The case of Japan is well known. The US, Britain and the EEC have also imposed controls or “voluntary restraints“ against Japanese steel, and especial by Japanese cars.
In the last few years, other advanced countries, too, have been hit by creeping protectionism.
Between 1977 and 1980, for instance, US firms increased their share of the European market for polyester filament yarn from 4% to almost 30%. They have now been hit by import quotas imposed by Britain and other EEC countries, who claim that cheap, subsidised fuel gives the American firms an „unfair advantage“.
In Britain, the Confederation of British Industry, in 1980, openly came out in favour of import controls.
And so it goes on. Even the West German government, resolutely opposed to protectionism until recently, has now resorted to border levies to keep out cheap steel products. This is how the IMF’s Annual Report summed up the position in 1980:
„Significant measures of protection were in evidence in such sectors as steel, shipbuilding, textiles and clothing, and a variety of other manufacturers, especially electronic consumer goods. In one or more of these fields, the EEC, US and Canada as well as some other developed countries maintained or introduced new measures of import restraint affecting trade among the developed countries – particularly trade between a number of these countries and Japan – as well as trade with the developed countries.“
While not openly challenging GATT, all the capitalist countries are subverting free trade by stealth
The prospects for world trade are gloomy. The capitalist forecasters expect a growth of only 1% to 2% for 1981. With some recovery in the main countries, world trade, they hope, ‚may‘ average a growth of 4% to 5% over the next three years. But this is low by the standards of the late 1960s and early 1970s, when growth averaged 8½%. Even in 1977 growth was still averaging 5½% a year.
Fearful of an all-out trade war, capitalist governments are still attempting to keep up the appearance of working within GATT agreements. Nevertheless, to defend their national interests, all the main capitalist countries are, to a greater or lesser extent, attempting to subvert free trade by stealth.
This is the remorseless logic of capitalist crisis.
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