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"Prosperity for the South via Access to Northern Markets"
Time for the Alternative of Localisation


Colin Hines writes

During the 1999 anti WTO 'Battle of Seattle' third world speakers made it clear that export led growth was damaging their social and environmental fabric. Sara Larrain, a Chilean grass roots environmentalist who stood for President on a manifesto based on a two year community consultation process, asked exasperatedly 'why is it that people from the north think exports benefit us, they are wrecking our environment and increasing inequality?'

Yet Ministries of Development, UN Agencies and to their shame many development NGOs are virtually united in their belief that exports to the North are a route for funding improvements for living conditions of the poor in the South. The same approach has now been expanded to the former communist countries of Russia and Eastern Europe. Yet the NGO movement's own research and that of, for example, the World Bank shows that with the exception of the Newly Industrialised Countries (NICs), pre the 1997 Asian crisis, the position of the majority in such export dependent countries did not improve and in many cases worsened. In cash crop exports, the position is even clearer due to decades of experience of the adverse effects. Cash crops worsen land tenure, deprive small farmers of a living, result in increased numbers of landless and neglect of the rest of a nation's rural infrastructure.

'You can make more money by growing food for export' might on the surface seem a sensible aim. Unfortunately, it just doesn't work. With more and more countries fighting for the same markets, producers are forced to drop their prices in order to compete, resulting in not more money for farmers, but less. One of the most significant examples of this is coffee, the world's most valuable export after oil. With the 'aid' of World Bank loans, Vietnam invested heavily in this crop, and as a result tripled its coffee output between 1995-2000. This made it the second largest producer after Brazil. All well and good for the Vietnamese economy, one might think, but what of the farmers in the other 49 Third World countries that produce coffee? As a result, world coffee prices have collapsed and 20 million farmers worldwide now see their livelihoods at risk.

A similar story is unfolding in the case of tea. China already provides 80 per cent of the green tea traded on the international market. With growing interest in the health-giving properties of green and organic varieties in the West, China is gearing up to meet the upsurge in demand - even if this means flooding the market with tea at rock bottom prices to ward off competitors such as Sri Lanka and India.

Indians Demand Protection
And this is just one of the problems facing the world's biggest democracy India. Following a complaint by the United States, the World Trade Organisation decided in 2000 that India would have to remove trade barriers that previously protected its own, local producers. Ever since, Indian farmers have found it harder and harder to survive, as products that they had once produced for the home market are now undercut by cheaper imported alternatives. The country now ships in coconuts from Indonesia, and as a result prices have fallen 80 per cent. Likewise coffee prices have collapsed by over 60 per cent, and the price of pepper has plummeted by 45 per cent.

The most dramatic effects, however, have been felt in the market for edible oil, where India's domestic production has been effectively wiped out. Highly subsidised soya from the US and palm oil from Malaysia have flooded the market due to low import duties, and imports now account for 70 per cent of domestic consumption.

In response, activists from all over India have been at the forefront of demands regarded by most of the world's economists as the ultimate heresy - namely a call for the reintroduction of protective trade barriers. In September 2001, two former Indian Prime Ministers Shri VP Singh and Deve Gowda joined with political parties, trade unions, farmers' organisations, peoples' movements, and workers, to launch the Indian People's Movement Against the WTO, and to push for more protective controls on imports.

Trouble Brewing In Europe
While these demands for a return of tariffs are now being heard mainly in poorer countries, it is unlikely they will stop there. For just like their counterparts in India, the livelihoods of smaller farmers in the United States and Europe are also at risk.

Plans in the European Union to reform the Common Agricultural Policy may contain a welcome shift away from subsidising overproduction in favour of supporting greener farming methods. However, on its own this fails to address the central curse of the CAP, which is never adequately discussed, much less addressed in official circles. Namely that enforced global competitiveness is a curse. As a result European farmers are being asked to perform two mutually exclusive tasks at the same time. First they have to achieve ever-greater levels of international competitiveness by increasing efficiency through larger scale, more intensive farming. But at the same time, they are being asked to maintain higher standards of social, environmental and animal welfare. The two simply can't go together.

Furthermore, this model of competitive, predominantly intensive agriculture is also being promoted in the countries of Eastern Europe that are currently seeking to join the European Union. In Poland, for example, the farmers are being forced into competition against the more 'efficient', large scale farmers of Western Europe. The result is that Poland will probably see the collapse of up to two million agricultural livelihoods.

Export Model's Only Success Story?
The one example that supporters of the export route to poverty eradication used to point to was the manufacturing and hi-tech sectors of the Asian Tigers. Usually overlooked is the fact that their head start was only made possible by domestic protectionist policies in these countries, coinciding with the opening up of markets in the North. Nowadays, under the World Trade Organisation rules, such an approach by the South is impossible.

Even before the 1997 Asian crisis finally ended the region's 'miracle', relocation was beginning to threaten the domestic advantages of these original countries. Workers there had begun to earn higher wages and the response was for Japanese, Korean, Thai, Taiwanese, and other owners of factories to go offshore in search of cheaper labour.

Exporting Ruthless Job Competition
Those who think that more access to Northern markets for developing world exports will help the poor tend to highlight what they claim is the hypocrisy of the North in delaying opening up its markets like agriculture and textiles, compared with the South having been bullied into opening up its markets far more quickly.

However, even if Northern opposition could be overcome and the last remaining barriers to the South's exports were removed, the international competitive pressures between these southern exporters would result in conditions worsening for the world's poor. Development priorities are and will be pushed aside in the race to the bottom in terms of price, and the suppression of workers' and environmental conditions necessary to grab these export markets.

China - the Ultimate Bottom Line
China, like Russia, has seen conditions for the majority worsen as both countries have opened up to the market. Should China join the WTO, things will worsen both internally and for their Third World Competitors for export markets. Wages and conditions will remain very low and probably worsen. An estimated 100 million people have already left the land in search for work in towns and cities, thought to be the biggest migration in human history. WTO membership will result in cheap food imports, thus accelerating rural decline and the move to urban centres. In addition it is expected a further 150 million jobs will be lost as 'inefficient' state enterprises are made ready for international competition. Whatever the actual final numbers, this trend will ensure a permanent cheap labour force whose products will undercut workers in other developing countries as well as in the North.

When Canada removed cotton T-shirts from quota restrictions in 1997, China gained 95% of its market - at the expense of Bangladesh. Mohammed Uzair Afzal, chief executive of the Bangladesh garment manufacturers expressed worry having seen the Chinese government's forecasts suggesting that its garment exports will double over the next few years, as the Multi-fibre Agreement is phased out by 2005 and their country joins the WTO.

Those who imagine that wide open markets in the North will help the poor of the South should consider what third world's exporters' options will be should, for example, China's textile exporters fulfil what they perceived as their potential for producing all the world's textile needs by this 2005 deadline.

To point this out is not to be anti-Chinese, but anti the impoverishing effects that Globalization is already having on China. These trends must serve as a wakeup call to highlight the implications for their competitors, and for those who propose an export led route to poverty alleviation for the South in general.

However both Government, and those who call for a fairer world for the poor, seem mesmerised by Mrs Thatcher's corrosive legacy of TINA - 'there is no alternative' to globalisation. This leaves them mentally stranded with only the option of weak tinkerings to try and ameliorate this processes excesses.

A New Development Agenda -Trade and Aid for Localism
A far more radical approach is urgently needed. It must not encourage further downward spirals of ruthless competition, but instead facilitate the building up and diversification of local economies globally.

This end goal will be a major engine for change that will help bring about conditions to meet the needs of the poor majority. But such a major transition requires the grass roots movements and the development lobby to campaign actively for it. Governments at present all subscribe to the 'globalisation is like gravity' school, and so will have to be forced by the politically active to dramatically change to become the initial driving force for such a change.

Today's global trade rules must be replaced by a General Agreement for Sustainable Trade. Aid, technological transfer and the residual international trade should be geared to the building up of sustainable local economies. The goal should be to foster maximum employment through sustainable regional self reliance.

Not surprisingly such fatalism grips most politicians, concerned as they are with the day to day juggling of the status quo. Less understandable is that far too many concerned citizens and organisations working for a fairer world also seem to have been bamboozled into accepting globalisation and international competitiveness as inevitable. Yet these are not God given. Indeed the briefest perusal of the Bible's Ten Commandments reveals that there is not a single Commandment saying, 'Thou shalt be internationally competitive'. It's a modern construct, elevated to a theology.

What is required is for the politically active to undergo a 'mindwrench' away from acquiescence to the new theology of globalisation towards considering the possibility of its replacement with a localism that protects and rebuilds local economies worldwide. This 'mindwrench' requires courage, almost of the order of an economic 'coming out', in order to reject the orthodoxy's ceaseless mantra chant of the need for international competitiveness. It needs to challenge head on this constant reiteration by a self-serving priesthood of mainstream economists, commentators and the new 'masters of the universe'- big business leaders and international financiers.

The clarion call to be internationally competitive has become so powerful that it has infected the thinking of those who should know better. These include trades unionists, small businesspeople, farmers, and those concerned about making commerce more ethical and environmental. All seem duty bound to pepper their public utterances with fervent assurances that were their aims to be achieved, then it will hurry society further down the path to international competitiveness.

The global commandment that every nation must contort its economy to outcompete every other country is an economic, social and environmental nonsense. It is a beggar-your-neighbour act of economic warfare. There have to be losers, because no matter how much a specific market may be growing, if its needs can be supplied by a competing range of outside sources, then large numbers, often the domestic producers, have to lose.

Bringing about the Change in Direction
Localisation - a process which reverses the trend of globalisation by discriminating in favour of the local. Depending on the context, the 'local' is defined as part of the nation state, the nation state itself, or even occasionally a regional grouping of nation states. At Localisation's heart is the replacement of today's environmentally and socially damaging global subservience to international competitiveness. In its place it prioritises local production and the protection and rediversification of local economies, such that everything that can sensibly be produced within a nation or a region should be.

Long-distance trade is then reduced to supplying what could not come from within one country or geographical grouping of countries. The policies bringing about localisation are ones that increase control of the economy by communities and nation states. The result should be an increase in community cohesion, a reduction in poverty and inequality and an improvement in livelihoods, social infrastructure and environmental protection, and hence an increase in the all important sense of security.

Localisation is not about restricting the flow of information, technology, trade and investment, management and legal structures which further localisation, indeed these are encouraged by the new localist emphasis in global aid and trade rules. Such transfers also play a crucial role in the successful transition from globalisation to localisation. The rules for this diminished international sector are those of the 'fair trade' movement, where preference is given to goods supplied in a way that is of benefit to workers, the local community and the environment. Under these circumstances, beggar-your-neighbour globalisation gives way to the potentially more cooperative better-your-neighbour localisation. It is not a return to overpowering state control, merely governments' provision of a policy and economic framework which allows people, community groups and businesses to rediversify their own local economies.

To achieve such a dramatic turnaround I have drawn from many people's ideas and detailed in my book 'Localisation- a Global Manifesto' a set of interactive and self reinforcing policies that can bring about localisation.

Protecting the local economy
The first step must be a 'mindwrench' away from the passive acceptance that globalisation is as inevitable as gravity and towards support for a set of self-reinforcing measures that will bring about a 'Protect the Local, Globally' end goal internationally.

Protective safeguards, such as import and export controls, quotas, subsidies etc, will need to be introduced over a clearly agreed transition period to all continents. This will not be old-style protectionism which seeks to protect a home market whilst expecting others to remain open. The emphasis will be on local trade. Any residual long-distance trade will be geared to funding the diversification of local economies. Such a dramatic, radical change will need to overcome TNC opposition and so will need to take place at the level of regional groupings of countries, especially the most powerful - in Europe and North America.

[Sovereignty comments: We do not necessarily agree that such a programme can only be implemented at the level of a regional grouping of nations, or that we should, or can, wait until agreement is reached among such a group. One country could go a long way to setting an example by itself. It would soon be joined by others.]

Localising Production and Controlling TNCs
Industry and services will be localized by site-here-to-sell-here policies to ensure localized production. Threats by TNCs to relocate, thus become less plausible, as the market is lost to existing, or government encouraged, new local competitors. Once TNCs are thus grounded, then their domestic activities and the levels of taxation paid are back under democratic control. Campaigners' demands for social, labour and environmental standards also become feasible. Adequate company taxation can help compensate the poor for any increases in prices.

Localising Money
The disastrous effects of the unfettered international flow of money has led to global calls for some controls to be reintroduced. What is required is a regrounding of money to remain predominantly in the locality or country of origin to fund the rebuilding of diverse, sustainable local economies. Measures include controls on capital flows, Tobin-type taxes, control of tax evasion, including offshore banking centres, the floating of civic bonds and the rejuvenation of locally orientated banks, credit unions, LETS schemes etc. Public and private flows of money to other countries must also be directed to strengthen the local economies of the countries concerned.

A Localist Competition Policy
Local competition policies will ensure that high quality goods and services are provided by ensuring a more level, but more local, playing field. Free of the 'race to the bottom' competitive pressures from foreign competition, business can be carried out within the framework of ever improving labour, social and environmental regulations, enhanced by the best ideas and technologies from around the world. Government competition policy will cover the structure and market share of businesses, plus regulate the behaviour of firms.

Taxes For Localisation
To pay for the transition to localisation and to improve the environment the majority of taxation will come from gradually increasing resource taxes, such as on non-renewable energy use and pollution. To promote a more equitable society, the removal of the option of relocation or the availability of foreign tax havens will make it possible to tax companies and individuals according to their wealth, their income, their spending through value added tax and their land. Part of this taxation will be used to compensate the poorer sections of society for any price rises and by shifting taxes away from employment to encourage more jobs.

Democratic Localism
A diverse local economy requires the active democracy of everyday involvement in producing the maximum range of goods and services close to the point of consumption. To ensure the broadest distribution of the ensuing benefits will simultaneously require wider, political, democratic and economic control at a local level. A Citizen's Income will allow involvement in the economy as a matter of right. Political funding will be strictly constrained and power will pass from the corporations to the citizens. This will involve the encouragement of maximum participation in defining priorities and planning local economic, social and environmental initiatives. This will require a balance of involvement of the state, community networks and organisations and citizen's movements.

Trade and Aid for Localisation
The GATT rules at present administered by the WTO should be revised fundamentally to become a General Agreement for Sustainable Trade (GAST), administered by a democratic World Localization Organization (WLO). Their remit would be to ensure that regional trade and international aid policies and flows, information and technological transfer, as well as the residual international investment and trade, should incorporate rules geared to the building up of sustainable local economies. The goal should be to foster maximum employment through a substantial increase in sustainable, regional self-reliance.

The residual long distance trade in foods or other items which cannot be produced in a region eg coffee, tea, bananas, should follow the principle of 'Fair Trade Miles', combining the requirements of 'fair trade' with 'food miles'. (The former covers goods produced predominantly by small farmers for a fair price and in a way that furthers environmental protection. The latter means producing as closely as possible to the market in order to minimise transportation and hence the carbon emissions that contribute to climate change.)

'Fair Trade miles' need to be linked to a guaranteed quantity of goods to be purchased by each buying country, within a guaranteed range of prices. This would allow the exporting nations to have as secure a level of earnings as is feasible with which to contribute to the overriding goal of re-diversifying local production

Finally 'Localisation' is not about trying to put the clock back. Globalisation is doing that as it reduces the security, basic needs provision and employment prospects for billions for whom things had been improving since the second world war.

It could return us to a path that advances the majority and doesn't mire them in cruel insecurity. It is not against trade, it just wants trade where possible to be local. The shorter the gap between producer and consumer, the better the chance for the latter to control the former. Adverse environmental effects are more likely to be experienced through long-distance trade and lack of consumer control over distant producers. Local trade should significantly lessen these problems and make possible the tighter regulation required.

Why Should this Radical Change Come About?
The widespread resistance to globalisation can be built upon to help fashion a viable localist alternative. There are already countless people and groups strengthening their local economies from the grass roots up. The greatest spur to consideration of such radical local alternatives at the governmental level will be the need to respond to global economic upheavals and the deflation, the job losses and inadequate consumer demand that will come in its wake. Equally crucial in shaping a different localist imperative amongst politicians will be the pressure that the politically active can bring to bear. This must shift from just fighting separate issue-specific aspects of globalisation to realising that their individual successes can only be secured as part of an overarching change to localisation, but in an internationally supportive manner.

Just as the last century saw the battle between the left and the right, what needs to become the big battle of this next century must be an alliance of localists, red-greens and small 'c' conservatives pushing a localist agenda, defeating the doomed globalists of the political centre. So, with apologies to Karl Marx and Margaret Thatcher, the rallying cry should be: ' Localists of the World Unite-There is an Alternative'.

Colin Hines is an Associate of the International Forum on Globalisation.
His book: Localization: A Global Manifesto was published in Summer 2000 by Earthscan. (£10.99)

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