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New Strategic Partners China and Brazil Hail Recent WTO Agreement
AmericanEconomicAlert.org ^ | Monday, August 16, 2004 | William R. Hawkins

Posted on 08/16/2004 2:50:59 PM PDT by Willie Green

For education and discussion only. Not for commercial use.

The business press has been hailing the World Trade Organization framework agreement that emerged from around-the-clock, last-minute meetings in Geneva on July 31.  The hope expressed is that the deal saved the Doha Round trade talks, and perhaps the WTO itself.  Yet, there is little ground for optimism about the future of “free trade.” The turmoil that has wracked the WTO since the collapse of the Seattle ministerial conference in 1999 continues because it reflects the crisis in the global economy which erupted in 1997.  The Seattle meeting was supposed to launch a new Round, but didn´t, as the clash of national interests rendered any consensus impossible to reach.

These differences were papered over two years later in Doha, Qatar.  When the negotiators again tried to tackle substantive issues, however, the talks collapsed at Cancun, Mexico last year.  In Cancun, a broad coalition of developing nations demanded that the richer nations (mainly the United States, Europe and Japan) abandon their agricultural export subsidies that put small farmers in poor countries at a disadvantage.  These smaller countries did not have the political muscle to act on their own.  Their role was to support the agendas of the rising major powers of China, India, and Brazil who want to overturn the global status quo, the center point of which is the United States.  

This is most obvious in the growing “strategic partnership” that has been declared between China and Brazil.  Brazilian President Lula da Silva visited China May 22-27 to discuss coordinated foreign policy actions with Chinese President Hu Jintao.  Da Silva is a close associate of Cuban dictator Fidel Castro and has long expressed his animosity for the United States.  Add to the mix Venezuelan strongman Hugo Chavez, another Castro ally who has brought his oil-rich country to the brink of civil war.  There is underway a left-wing campaign to seize the most important states in Latin America.   Beijing is eager to see this campaign succeed.

Da Silva and Hu set up a China-Brazil coordinating committee chaired by Chinese Vice Premier Wu Yi and Brazilian Vice President Jose Alencar.  In the joint communique released at the end of the summit, Brazil agreed that Taiwan and Tibet are inseparable parts of China and stated its opposition to any unilateral action aimed at separating Taiwan from China.  The two sides agreed never to politicalize the human rights issue in world affairs, leaving it to each state to do as it wished internally to crush dissent.  Beijing expressed its appreciation for Brazil's support in the United Nations convention on human rights– a forum that has made a mockery of the term.  

The most important statement, however, was the use of the following phrase: “Both sides insist on the democratization of international relations and global multi-polarization.” This has long been Chinese terminology for ending American preeminence in world affairs.  The status of the United States as “the last Superpower” presents what Beijing calls a “hegemonic” threat to its ambitions.  China (like the European Union) wants America pulled down to a level it can deal with.  Undermining the U.S. economy plays a critical part in this plan.  

China´s Xinhua news bureau was happy to report, “Brazilian President Luiz Inacio Lula da Silva hailed as a victory of the developing countries the WTO agreement which set basic guidelines for the Doha Round and had developed countries committed to eliminate agricultural subsidies.” Brazil's Foreign Minister Celso Amorim claimed the Geneva agreement marked a victory for the Group of 20 (G-20), which includes China and  Brazil.  

The Doha Round is explicitly dedicated to a global redistribution of wealth.  According to its Ministerial Declaration, negotiations are to focus “on products of export interest to developing countries....The negotiations shall take fully into account the special needs and interests of developing and least-developed country participants, including through less than full reciprocity in [tariff] reduction commitments.” The system is supposed to encourage “developing” countries to protect their home markets while boosting exports.  The position of most countries, including China, was that they would take no new steps to open their markets.  

The purpose of Doha is to support industrial expansion in the Third World at the expense of the old “rich” industrialized countries, who have been on top for too long.  In practice, the poorest countries will not have the means to rise very high in the new order.  The main beneficiaries will be the rising middle-tier countries and large regional states, who can amass the resources to shift the world balance of power in their direction while the old “core” states decline.

Free trade advocates fail to realize that commerce runs on the basis of competition, not harmony.  The great error that has dogged economic liberalism is the belief that peaceful trade can replace international strife. When former WTO Director-General Mike Moore told an Asian conference on August 11 that he has “never feared a strong China” it was only another sign of how far some people have removed themselves from the real world.

Trade has always been a major component of strife.  True statesmen know that where factories, research labs, jobs, capital, and other resources are located is where wealth and power will also develop.  And as a society becomes stronger, it can better shape events so as to bring more security and prosperity to its people.  It is a game for the highest stakes.  

Past trade agreements have opened the door for foreign rivals and transnational firms to hollow out much of American industry and weaken the nation´s finances with mounting trade deficits.  Now, American farmers are on the block.  There is more than a bit of irony in this, as the farm lobby has been a major political supporter of free trade – as long as it was industry being hurt and not them.  But the 1996 “Freedom to Farm Act” failed to keep its promise to substitute higher exports for subsidies, and there is no reason to expect such a trade-off will fare any better as the result of a Doha agreement.  Certainly the WTO coalition that got its way in Geneva expects that American farm exports will be reduced and that Third World farmers will be selling more in the U.S. market.  More American farmers will be driven into bankruptcy from both directions.  Willie Nelson´s “farm aid” concerts will not be enough to offset bad trade deals.

There is still time to avoid disaster.  The Geneva agreement only set a framework to guide future negotiations, the details are still largely up in the air.  The Doha Round is far from completed – though it wouldn´t take much for it to be (thankfully) ended.  The next big WTO meeting is December 2005 in Hong Kong, which gives either a second Bush Administration or a new Kerry Administration plenty of time to reformulate U.S. trade policy, toss off the sophistry of free trade, and gain an improved awareness of how a political economy should operate in a world of contending nation-states.  

William R. Hawkins is Senior Fellow for National Security Studies at the U.S. Business and Industry Council.


TOPICS: Business/Economy; Culture/Society; Editorial; Foreign Affairs
KEYWORDS: doha; globalism; thebusheconomy; wto

1 posted on 08/16/2004 2:51:00 PM PDT by Willie Green
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To: AAABEST; afraidfortherepublic; A. Pole; arete; billbears; Cincinatus' Wife; Digger; DoughtyOne; ...

ping


2 posted on 08/16/2004 2:51:29 PM PDT by Willie Green ( Never underestimate the power of stupid people in large groups.)
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To: Willie Green

The Chinese have ALWAYS cheated at trade and will continue to cheat. In the 10th Century, to defy quotas, their ships would accidentally "blow" off course and end up in the Japanese ports. The goods off of the Chinese ship would "disappear" before the Japanese authorities could show up and "guard" the ship.


3 posted on 08/16/2004 2:53:08 PM PDT by mingusthecat (Mingus has again opined. Like any cat, she doesn't really care what YOU think.)
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To: mingusthecat

At many points in Communist Russian history, their economy had a negative value - that is, what they produced was worth less than value of the raw materials that went into those products.

Sometimes I get the same thought about (still Communist) China. Although their currency reserves are very high and their holdings of the US dollars high, some have claimed that the cost of their products are less than the raw material costs of domestic US manufacturers.

If that is so, then is it possible that the great industrial development of China is predicated on China giving up their resources for free, in exchange for employing their millions of laborers?

Although I expect China to be hot for a long time, I would think that if a country allocated zero cost to its resources it would then greatly distort its economy and set itself up for great turmoil later.

Basically they are giving up some amount of their resources so that they can become the manufacturing center of the world economy. This will help them industrialize. They will end up with millions, billions of these pieces of paper that I carry around in my wallet. They will go very nicely as wallpaper if they don't spend them on U.S. products.

They send Toyotas, we send dollars. Whoops, scratch that. That was Japan... They send Cadillacs (recent announcement) we send dollars.

Oh what will they ever do with these pieces of paper? Sell their US Treasuries, but to whom? At some exchange rate I'm sure the Europeans would be buyers.

Unless they let their exchange rate float (which dampens the zeal of buying from them), they just create themselves one big mess -- just like Japan did.

Any other thoughts on this?

Hoppy


4 posted on 08/16/2004 3:18:06 PM PDT by Hop A Long Cassidy
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To: Willie Green
Return the ping.

The economy has floundered since PNTR was passed under this Administration.

Trade deficits are bad for this country. They export both jobs and the money then used to buy America.

5 posted on 08/16/2004 3:20:55 PM PDT by ex-snook ("BUT ABOVE ALL THINGS, TRUTH BEARETH AWAY THE VICTORY")
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To: ex-snook; Willie Green

Further shifts of US production abroad caused the trade deficit for goods to reach the once unimaginable level of -$60.2 billion in the 30 days of June. Trade deficits in manufacturing industries are -14% worse in '04-H1 than in the same record-setting period last year. This widening deficit suggests domestic production (GDP) grew by only 2.8% in Q2, weaker even than the BEA's first 3.0% estimate.

Job growth stalls;
The July jobs report is further confirmation that the weakest economic recovery on record has stalled. The headline of only 32,000 net new jobs created in July overlooks sharp downward revisions to May and June estimates leaving the new total estimate for July jobs –29,000 LESS than previously estimated for June. The Index of Aggregate Weekly Hours worked in the private sector rose in July but remains below levels reached in May and – unprecedented – remains –0.5% BELOW levels of 32 months earlier when the economic recovery began in November, 2001. Reflecting both the unprecedented loss of jobs but the equally unprecedented shortening of the workweek during the current recovery, this important indicator is now more than –10% below average recoveries and almost –6% below even the “jobless recovery” of 1991-’93.

Incomes fall, spending plunges;
Real per capita disposable incomes declined in June to levels below those reached in April and real spending plunged to levels of last February as households reacted to declining incomes and extremely low levels of recent saving. As a result of the sharp drop in spending, personal savings recovered from just 1.2% of disposable incomes in May to 2.0% in June. These levels of personal savings remain extremely low by historical standards and with the decline in real per capita incomes raise increasingly serious questions about the strength and sustainability of the economy in the months ahead.

Growth slows further in Q2
The BEA estimate of Q2 growth rate at just 3.0% shows further, sharp slowing from revised 4.5% rate in Q1 and 5.8% in the second half of 2003. The worsening trade deficit reduced growth by -0.1% in Q2 on top of an -0.8% reduction in Q1. The global trade deficit now stands at a record -5.1% drag on GDP, more than twice the worst levels of the mid-1980s. The BEA revisions also now show household savings rate of just 1.4% in 2003, the lowest since 1934. Savings fell further in ‘04-Q1 and recovered only to 1.7% in Q2. The worsening production losses to trade and the meager household savings raise further concerns about the strength and sustainability of the current recovery.

Wages are falling;
The BLS' Employment Cost Index for June verifies that workers’ compensation and especially workers’ wages and salaries are not keeping up with prices. The seasonally adjusted Consumer Price Index (CPI-U) rose 1.2% between March and June but total compensation (including employer-paid benefits) rose by only 0.9% indicating a decline in the purchasing power of workers’ compensation of –0.3% during 2004-Q2. More importantly, workers’ wages and salaries rose by only 0.6% in Q2 indicating that the purchasing power of workers’ wages and salaries fell by –0.6% over the three months to June. Employer costs for providing health and other employee benefits rose 1.8% in Q2, 0.6% above consumer inflation. Real wages for “Professional specialty and technical” workers fell by -0.8% while salaries of “Executive, administrative and managerial” fell by -0.6% and blue collar real wages fell by -0.5% in Q2.

All from here: http://www.mbginfosvcs.com/, left column, as of today.

Those damn farmers are keeping income UP--let's kill them off, too.


6 posted on 08/16/2004 3:39:43 PM PDT by ninenot (Minister of Membership, TomasTorquemadaGentlemen'sClub)
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To: ninenot; ex-snook; Willie Green

I have started my own boycott of US CEO's and stockholders, since they seem to wish to boycott US labor and steal our jobs.

Now, if I need something, which I can only get from Chinese, I no longer will buy US brands, but Chinese brands. Why waste my money, making some cheating slobs rich who won't employ Americans and pay extra for it.

Screw American companies manufacturing in China and selling here - such as General Electric.

Make those selfish - unpatriotic CEO's and stockholders pay !!!! SCREW THEM !!


7 posted on 08/16/2004 8:09:13 PM PDT by XBob (Free-traitors steal our jobs for their profit.)
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To: Willie Green

1 - "The status of the United States as “the last Superpower” presents what Beijing calls a “hegemonic” threat to its ambitions. China (like the European Union) wants America pulled down to a level it can deal with. Undermining the U.S. economy plays a critical part in this plan. "

Well said - and what free-traitors don't understand.


8 posted on 08/16/2004 10:29:40 PM PDT by XBob (Free-traitors steal our jobs for their profit.)
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To: XBob
I have started my own boycott of US CEO's and stockholders, since they seem to wish to boycott US labor and steal our jobs. Now, if I need something, which I can only get from Chinese, I no longer will buy US brands, but Chinese brands.

Interesting idea.

9 posted on 08/17/2004 2:04:23 AM PDT by A. Pole (Gen Ripper:"I cannot allow communist infiltration, to sap and impurify, our precious bodily fluids.")
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To: A. Pole

Well, I got to thinking, the free-traitors keep saying, US labor needs to compete with foreign labor - so, let US management and ownership compete with foreign management and ownership.

If they don't want to support us, American workers, why should we support them, American managment and owners?

We have got to whup them (the CEO's and FreeTraitors and stock holders) up side the head with a big 2x4 - so they get the idea.


10 posted on 08/17/2004 2:25:27 AM PDT by XBob (Free-traitors steal our jobs for their profit.)
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To: A. Pole

Now, if we can just figure out a way to get our idiot government officials to listen.


11 posted on 08/17/2004 2:29:24 AM PDT by XBob (Free-traitors steal our jobs for their profit.)
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To: martin_fierro
This is most obvious in the growing “strategic partnership” that has been declared between China and Brazil. Brazilian President Lula da Silva visited China May 22-27 to discuss coordinated foreign policy actions with Chinese President Hu Jintao.

I suspect the whole relationship is more about weapons technology for the Da Silva than anything else. Da Silva is greatly interested in Rocket and Missile technology. Brasil has vast unexploited natural assets that the Chinese may have interests in, along with other trade and economic considerations.

Finally, Brasil is a big country. You could have a lot of Chinese military activity going on there, and it'd certainly be difficult to track it all down.

12 posted on 08/17/2004 2:40:49 AM PDT by Caipirabob (Democrats.. Socialists..Commies..Traitors...Who can tell the difference?)
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To: Caipirabob

It may well be that weapons are the MAIN game these clowns are playing--but if in the course of that game they can also punch a few more holes in the US economy, so much the better.

Not all wars are fought with missiles and troops.


13 posted on 08/17/2004 5:21:49 AM PDT by ninenot (Minister of Membership, TomasTorquemadaGentlemen'sClub)
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