Developing World Trade

Why doesn’t the United States treat Latin America and Asia with an attitude of economic “conversion” nowadays? After all, there is a strong case to be made for a newer, more relevant disposition toward these important trade regions. We might well ask if current US-style trade drives the developing world to look for better trade partners, leaving the American economy behind. And, if the US seems to promote trade agreements with the developing world for its own interest, then is the US truly concerned with broader implications of such trade policy? 

True, America has sought economic and political hegemony in the developing world for centuries, often with a murderous and meddlesome history of political and economic intervention. The familiar tools of policy: intervention, war and aid. All commonplace in late 20^th Century, the US employed many more implements to forge economic inroads and shackles in the developing world. We need only name the countries – Cambodia, Vietnam, Japan, Guatemala, Chile, El Salvador, etc. – to remember our failed and unfriendly attempts at global economic hegemony. 

Today, we ought to ask if this inheritance is worth maintaining, or if we should change our ways. Make no mistake that we are in that position. And perhaps it would do the US some good to recognize a number of details often left by the wayside.

The Other America

Latin America showed an impressive fecundity for economic growth in the decades 1950 through 1970. Yet with the termination of state-run programs and development plans, such growth shriveled. Importantly, this economic period allowed for collective groups to stipulate greater political and social democracy, thus checking the usual economic strengths of the upper classes. Moreover this twenty year growth period was more evenhanded and more evenly distributed than anything that was to follow. 

What we take away from this epoch in Latin American’s economic history is substantial. Simply put, there existed amply viable alternatives to the often predatory flavors of capitalism which Latin America experienced largely under the Reagan administration. Yet as with many other things at the time, the US felt free to ignore this. 

The concept of free trade eventually garnered strong bipartisan political support in the US after Reagan. President Bill Clinton made globalization a mainstay of his foreign policy, ratifying the infamous North American Free Trade Agreement (NAFTA), and the World Trade Organization (WTO). Any talk, however, of calibrating the balance between development and private enterprise gave way to the powerful protections afforded corporate and property rights. 

But Latin America’s experiment with an economic teleology underpinned by the new brand of international commercial law – and the ratification of free trade – meant some of the greatest instances of dispossession for the region. Countries with undercapitalized state industries legalized laissez-faire fundamentalism as they grew desperate for foreign capital and investment. This change in legislations was indubitably symptomatic of the violence waged against economic nationals and Latin American socialists. It made the costs of challenging Washington’s wants bloody for anyone opposed to the new economic alliance. 

From the outset of the 20^th Century Latin America suffered record-high wealth inequality. Between 1947 and 1973, per capita income in Latin America rose over 70 percent in terms of real wages. Yet from Reagan to Clinton, 1980 to 1998, average per capita income languished at a dismal zero percent. IMF protocol led to more frustration due to its pathetic job ensuring better health care services, education programs or nutrition prerogatives. 

At the end of the 1960s, roughly ten percent of Latin Americans were destitute, with their poverty defined as subsistence by today’s standards on less than two dollars daily. By 1996, one-third of Latin America’s population was destitute or, 165 million people. In 2005, at least 220 million people lived below the poverty line. This means that in less than ten years, regional poverty increased 20 percent. 

Hindering Self-Determination

In 1981, the International Meeting on Cooperation and Development took place in Cancún, México. US President Ronald Reagan unveiled his plans for a new economic system. Until this debut the language of “developmentalism” was frequent in discussions on international economic relations. The leaders of Latin America took a shining to the economic thought of Raúl Prebisch, the Argentine economist who headed the United Nations Economic Commission on Latin America. His widely acclaimed contribution: radically restructuring the terms of global trade.

Support was international. In September of 1981, the 21^st president of France, François Mitterrand, implored that America open its markets to developing world products, making further demands on America: renegotiations of crushing debts, stabilize prices for primary products, and enter into global talks that would legitimately recognize Third World grievances. Canadian and European politicians showed their support, suggesting that development aid be increased from $26 billion to $50 billion annually. 

The implications of what developing nations themselves wanted were broad in scope. The majority of these placed demanded new international institutions. The list included a World Bank affiliate, with the duty of ensuring the manageability of energy costs. Many also sought to form one collective in order to voice their interests at the U.N. General Assembly. Economic tides were ebbing from and not flowing towards Washington.

Nations called for increased financial assistance to developing countries, rich-world technologies and industry transferred to poorer nations, lowered tariff barriers to manufacturing and recognition of full sovereignty in terms of natural resources and economic activities. These nations wanted also to legitimize industrial expropriations and nationalizations, and setting prices for ten main commodities (cocoa, coffee, sugar, rubber, copper, tin, etc.)

Reagan balked at the creation of such institutions, and Latin America became a Frankenstein of unfettered free-market debauchery. The region endured the onset of cheap consumer goods and dubious promises of better services via privatization. There was of course the dual transfer of both legal rights and rich-world production facilities (and the promise of higher wages). Yet somehow this transference magically benefited only a small portion of Latin America’s working sector, neglecting to redistribute the wealth more impartially. 

This change in both legal and trade dynamics invited U.S. corporate expansion, and US companies used the region for raw materials and agriculture. American firms came to dominate the railroads, electric companies, ports, mines and oil fields of the continent. Railroads, postal services, roads, factories, telephone services, schools, hospitals, prisons, waste management, water, broadcast frequencies, pension systems, electric, television and telephone companies were sold for disadvantageous reasons. Latin America bore the sale of over two thousand government industries between 1985 and 1992 alone. Multinational corporations and the superrich of Latin America, growing amazingly rich in the unprecedented process, swooped in to assume the property. 

Alas, a debt crisis ensued and killed the New International Economic Order’s nonaligned economic aspirations. A windfall of economic stabilization tactics were employed to make Latin America more attractive to foreign investment and capital: tax cuts, exempting foreign companies from labor and environmental laws, slashing health care funds, etc. Education and other social services suffered as regulations were abandoned. Unions were hostile to the gears of the new economy and legislation was passed to allow business to repatriate 100 percent of their profits. Subsidies designed to protect national manufacturing evaporated, interest rates ran amok, and state industries as well as public utilities fell to privatization. Poor countries which sought to unify efforts and set commodity prices – to bring about fairer terms from the industrialized world – experienced capitalism’s miraculous race to the bottom. It was the next step in attracting foreign capital. 

The Unassuming Player

Unlike what happened for the US under Reagan, China employed a mix of Keynesian deficit-financing and plenty of infrastructure projects in the name of economic stimulation. After decades of unusual direction, China eventually healed to the WTO in 2001, left somewhat bound to neo-liberal rules of the world market. Nevertheless, both the state and communist party power in China made for a distinct economic makeup. 

Under Mao Tse-tung, China became the People’s Republic of China in 1949. Vast changes in economic and social policy were soon to follow. The state set out to tax China’s peasant commune sector rather than afford it subsidies. The government subsidized urban workers with lowered food prices, buying food from rural farmers at low prices. Equipped with food and far-reaching improvements in public health, China prompted its economic reforms with a thrust of agricultural production, a healthy public, and a radical market reform of its food sector. 

In years that ensued, the Chinese government designated numerous cities along the coast and other regions to absorb foreign investment. This resulted in failures for the automobile industry and manufactured goods. Nevertheless, the majority of business success came from overseas Chinese with their intimate connections back home. Nominal legal protections for businesses magnified the importance of these informal Chinese relations. 

China also underwent incredible rates of urbanization. 40 or more cities exceeded one million people after 1992. Such growth required large investments of fixed capital too. Chinese projects sought to absorb surpluses of capital for years to come, including one project worth $60 billion. China built subway systems and highways in several major cities, and proposed thousands of miles of new railroads connecting the interior to the flourishing coasts. Shortly after the turn of the millennium, foreign direct investment (FDI) represented more than two-fifths of China’s GDP. China became the largest recipient of FDI in the developing world, destined for second place to US FDI.

The results of China’s changes were not all positive. In 1975, however, China’s per capita income was between seven and eight percent of that of Western Europe; by 2000, China had an economy one-fifth the value of Europe’s. Today, China grows at an impressive eight percent per capita rate annually. What is more, China is eradicating its own poverty: roughly two-thirds of China’s population subsisted on less than one dollar per day in 1981, declining to just 17 percent in 2001.

As a developing world power, China faces myriad challenges, economic and otherwise. The renowned economist Jeffrey Sachs coined China as the world’s “most successful economy” since 1978. Yet Sachs acknowledges that China continues to play economic “catch-up” with the rich, industrialized world thanks centuries upon centuries of economic subjugation by the West. But China as a nation of people today is important to consider. The Chinese population alone accounts for 1.3 billion today, more than one-fifth of the world’s population. This is in itself a commanding amount of human capital. 

China should not be considered alone in terms of potential trade – especially in terms of Latin America. Russia and India are also experiencing various class transformations. The alliance formed between Brazil, India, China, South Africa and others at the Cancun conference signals the beginnings of a different and important force in global politics, with the potential importance to rival the alliance established in Bandung in 1955. 

Suitable Bedfellows

Little more than a decade ago China and India changed the trajectory of Latin America’s economic future. Benefiting the South American continent in particular, one of Asia’s most important contributions was raising prices for Latin American commodity exports. The many growing ties with Asia have indeed meant the economic upturn of Latin America, owing particular kudos to China. 

Did the US neglect Chinese president Hu Jintao’s visit to Argentina, Chile and Brazil in November of 2004? President Jintao bore promises of Chinese investment worth millions of dollars. Why? Because Latin America is home to the many commodities that China desperately needs to continue its formidable growth. 

These were not empty promises: direct investment totaled $4 billion in 2004, and Chinese businesses did not limit their investments to infrastructure alone. Ecuadorian and Venezuelan oil fields and Peruvian mines represent but two areas of investment for Chinese businesses. Jindal Steel and Power, an Indian company, followed Chinese business savvy and fostered a $2.1 billion investment in Bolivian iron-ore deposits – a massive investment for such an impoverished country like Bolivia.

It would be a mistake to think the relationship between Asia and Latin America is one-sided. Venezuelan President Hugo Chávez visited Beijing shortly after the Chinese president’s tour of South America and extolled China’s plans to invest seriously in Venezuela’s oil industry. A strong partnership with China can liberate Venezuelan dependence on US petroleum consumption, invariably adding to its own political prowess in the hemisphere. 

China’s visit to Brazil was no small detail either. A promising relationship between China and Brazil’s agribusiness and environmental services can only bolster their growing economic prowess. The good news for China is that Brazil exports more beef, coffee and orange juice than any other country in the world. A Brazilian agriculture research institute claims that Brazilian agriculture could utilize another 90 million hectares without even approaching the rainforest if need be. But export and agricultural dominance aside, Brazilian farming rates exceeded six percent from 1990 to 2004 — a growth rate twice that of the EU and US. 

Given the economic growth that China foments in Latin America, we should remember that Latin America has long been considered one of the most advanced regions in the entire developing world. Geographical location has meant close proximity to US markets for years, and some speculate that closeness has given Latin America an advantage especially in the arena of “low-value-added” manufacturing. 

Indeed, Latin America’s textile and clothing exports have increased over the years, enjoying not only proximity but also a history of trade preferences. Of course, after several barriers to Chinese textile exports were eradicated in the mid-2000s, Latin America’s share in the market declined with negative results for manufacturing in the region. Between 2000 and 2004, one of every four maquiladora plants left Mexico for China. The majority of the plants were textile and other low-value and laborious businesses.

Do not discard the US interests at stake here. If we focus on changes pertaining to Mexico, the Central Americas and the Caribbean textile exports, we should also note that Chinese economic possibilities stir up thoughts of future nonalignment with Washington’s economic interests. Whereas once these areas in Latin America subsisted on US necessities in trade and proximity – and with China absorbing this area of production and exports – what will Latin America be free to pursue henceforth without the previous dependence on the US? 

With China and other parts of Asia (especially India and Japan), Latin America can wager a sustainable, prosperous growth. But Latin America recognizes the need to consider policies that stimulate areas like education and research, as well as transportation and infrastructure. Otherwise, the type of development procured through economic growth may peter out before positive effects are ubiquitously felt. 

The American Attitude

President George W. Bush swore in his 2000 presidential campaign promised not to cajole Latin American leaders into kneeling before Washington’s interests. Instead, he promised to listen as a basic duty of his presidency. But obviously the attacks that took place on September 11, 2001 changed the gaze of Bush’s presidency. And when President Hugo Chávez made his disgust for the IMF model of development in Latin America known, and the White House shamelessly supported the coup to stop Chávez in 2002. It was as disastrous for the White House as it was successful in cementing popular opinion for Chávez and his own economic aspirations for Latin America itself. 

México was not eagerly forthcoming with its support for the invasion of Iraq, landing threats from Bush’s White House. The Caribbean Community (CARICOM) objected to the war, and was reprimanded with nothing short of flagrant threats. As numerous Latin American countries signed off on the International Criminal Court (ICC), the US bullied them with economic threats so as to procure deals exempting US citizens from certain ICC jurisdiction. Brazil’s opposition to the Free Trade Agreement of the America’s whipped up anti-trade sentiment from the White House, and Argentina likewise experienced Washington’s acidity when it started to openly think outside of the free-trade box. 

What do we take away from this tug-of-war in the early 2000s? Essentially, the White House is met with such international opposition because it long espoused an economic model that, rather than foment development and stability for its neighbors, lead to political calamities and economic woe, misery and poverty.  

Many experts agree that developing nations ought to be wary of sponsoring outright neo-liberal regimes for the sake of economic development. Often times the expert prescription is to remain skeptical of accepting life under the pretext of boundless capital accumulation and economic growth without regard for social, political and ecological consequences. Otherwise these nations might help to spawn the inalienable rights of private property and profitability (and even corporate personhood), rather than their own useful prosperity. 

The world has witnessed Washington’s agenda, recently extended through violence in places like Iraq and Afghanistan, and decades ago in Latin America. The proclivities of imperium furthered the rich-world agenda via tools we call the World Trade Organization, the International Monetary Fund, Wall Street, and the World Bank. Nevertheless, several communities which constitute the developing world — especially Latin America and Asia — are ready to reject all this. Many are ready to work strictly under the auspices of their own values and interests. These include but are not limited to values of an open democracy dedicated to social equality, and economic political and cultural justice.  

But maybe we continue to miss what is in plain sight. All across the globe – China, Brazil, Argentina, Taiwan, Korea, South Africa, Iran, India, Egypt, Eastern Europe, etc. – there are groups and social movements working for reforms and expressing at least some semblance of democratic values,  even if opposing the fancies of Washington. Unfortunately, the US continues to project the idea of economic burgeoning that can only be found within the context of neo-liberal American values. The requirement: that even those who disagree ought to accept these values based on the definition of what civilization is and what it demands. This disposition obviously continues to estrange the people of Latin America and China, and perhaps what they want for themselves. 

To paraphrase a quip from Dick Cheney, the human impetus for self-determination is great. As Latin America and Asia continue to find one another relegated to the margins of global society by US interest, they will continue to symbolize Cheney’s platitude of self-determination. Most likely, then, they will continue to trade together; alike in what they do not yet have, and what they desire.