Michael Perelman: Globalization, “Free Trade,” and Food as a Strategic Weapon

Michael Perelman gave a wide-ranging talk in Ankara called the Anarchy of Globalization which focused on the local impact of globalization. The presentation was wideranging and included a discussion of the evolution of usage and theoretical concerns.

We’ve extracted a section below, on the role of “free trade” agreements and one of their not-widely-recognized side effects, that of weakening food security. The case study is Mexico.
By Michael Perelman, a professor of economics at California State University, Chico who also writes at Unsettling Economics

Judging by the official discourse about globalization, one might imagine that we are witnessing a natural evolution of free trade that benefits everybody touched by globalization, as in Thomas Friedman’s vision of the flat world. In truth, much of the pressure to intensify globalization does not necessarily come from market successes, but often comes from disappointment in market outcomes. Dissatisfied that markets were not providing sufficient profits, powerful states adopted a strategy of pressuring their weaker counterparts to join in so called free trade deals.

In fact, free trade is, at best, a secondary consideration of the trade agreements. For example, tariffs on trade between the U.S. and Europe are only 3.5 percent. A treaty to eliminate such tariffs would not be of great importance certainly one that would not involve strong diplomatic pressure and threats.

In contrast, free trade agreements put enormous emphasis on intellectual property agreements, which are antithetical to trade, in general, because they grant monopoly status, which allows suppliers to set their own price without competition. In this sense, intellectual property is a violation of sacred market principles, according to which the price of a good should be the cost of producing one more unit, what economists call “marginal costs.”

Intellectual property, however, generally costs virtually nothing to reproduce. Because of this violation of free market principles inherent in intellectual property, libertarians including libertarian economists had long opposed patents and copyrights, although less so now that few libertarians are leery of excessive corporate powers. Free trade treaties’ treatment of intellectual property is more accurately described as a transfer of power, rather than a promotion of free trade. Such intellectual property agreements can threaten public health. For example, people in impoverished countries cannot afford the exorbitant costs of pharmaceuticals. Diseases that could be relatively easily contained have more room to spread.

Free trade treaties include investment dispute provisions, adjudicated by a tribunal made up of judges (generally with strong corporate ties). In other words, they have a better understanding of corporate interests rather than a typical body of law.

Under many such treaties, corporations have the right to expect a static regulatory framework. In other words, the tribunals can find new regulations illegal because a corporation could not have predicted them when it first began planning its investment. At the same time, corporations are free to change their corporate policies. There is a surge of cases in which corporations have sued under this provision. Even when a country’s preexisting regulations prevent an investment, such creating a toxic waste, the company can take the government before a tribunal. They almost always win such cases. And, yes, a panel of supposedly neutral judges actually permitted the toxic waste dump in question to go ahead.

In effect, this new legal structure elevates elevated to the status of an independent government, or perhaps even a higher status, in that corporations can limit what a government might do, while governments lose significant power to limit what a corporation might do.

Of course, a real free trade agreement, regarding what most people understand as free trade would be a very simple matter, consisting of a paragraph or two. Instead, such arrangements, supposedly made in the spirit of free trade, are actually thousands of pages of severe restrictions on public policy measures in the weaker countries that are pressured to accept these impositions. But free trade treaties even limit strong countries because political leaders want to free business from regulations. They may do so because it is in their interests rather than the people whom they supposedly represent.

For example, signatories of free trade agreements surrender their right to regulate imports of cigarettes or junk food, which might affect the health of their populations. The United States is particularly insistent in demanding that no country can prevent the marketing of genetically modified seeds or the crops that Monsanto and other suppliers want to sell around the world. These so called free trade agreements also regulate the regulation of virtually everything that an independent government might do. They demand that states adopt regulatory structures regarding intellectual property rights or finance that please the dominant powers.

Such demands should not be surprising because in the United States, free trade agreements are actually written by corporate interests. Congress has no say in their content. Representatives can only vote to accept or reject the treaties. The final product, which might be celebrated in board rooms across the United States, requires poor countries to abandon all sorts of legal rights, while exposing their economy to market forces that can overwhelm their fragile economics.

The proposed Trans Pacific Partnership also seems to have been crafted with geopolitical policy rather than trade in mind by bringing many nations into the United States’ orbit, while excluding China. The hope is that once the treaty is in place, China will want to join even though the country had no say in the drafting. Should that happen, then the Chinese government would lose most of its control over the economy. In the meantime, corporate interests are busy writing this so called free trade agreements in so much secrecy that even members of Congress are not permitted to read what was being proposed. Recently, after strong protests both in and out of Congress, the Obama administration finally opened a tiny window, allowing congressional representatives to read a single chapter of the agreement, while forbidding them to make any record of what they have read or even to discuss it with others. The public at large remains completely in the dark, except for a few parts that whistleblowers have leaked. But then again, secrecy is one of the great benefits of globalization.

The agreement has little to do with trade. Instead, it gives wide ranging rights to corporations, while prohibiting states from enforcing regulations of health and safety, finance, the environment, and virtually anything else that might inconvenience business. Member states that violate this treaty receive severe punishment.

The Obama administration is pressuring Congress to vote on the unread agreement without the option to offer any amendments. Meanwhile, domestic businesses interests are more than happy to see restrictions limiting the state’s power to regulate them. So much for free trade! unless the meaning of free trade is expanded to include the votes of compliant politicians who serve corporate interests.

If anarchy constitutes the absence of government, this aspect of globalization might seem to be a move toward a special kind of anarchy what may be called anarchism for the rich and powerful.

Within this globalized anarchy, weakened states are incapable of addressing serious global problems, which require globalized responses. The most obvious example would be climate change. Largely because of the resistance of domestic business from accepting any responsibility for climate change, states are paralyzed in the face of taking action. One area in which governments do cooperate is in joining together to oppose any regulations that might be useful in reducing climate change. The effectiveness of this cohesive bloc suggests how much good statewide achieve.

Of course, not all states sign on to this defense of inaction. For example, small island states, such as the Maldives, face existential risk from rising oceans submerging their nations. However, when the Maldives attempted to draw world attention to the danger it faced at the international conference on climate change, coincidentally, the government was suddenly overthrown: a different form of anarchy, suggesting that many states still exercise enormous power, but they cannot use that same power when it is not in the interests of even more powerful corporations.

In 1969, Charles Kindleberger presciently observed the rise of corporate power relative to the government within the context of international trade, predicting, “the nation state is just about through as an economic unit.”

More recently Wolfgang Reinicke went further, concluding: “Global corporate networks challenge a state’s internal sovereignty by altering the relationship between the private and public sectors. By inducing corporations to fuse national markets, globalization creates an economic geography that subsumes multiple political geographies. A government no longer has a monopoly of the legitimate power over the territory within which corporations operate, as the rising incidence of regulatory and tax arbitrage attests.”

Reinicke even suggested that this globalization was trending toward a form of anarchy. If anarchy constitutes the absence of government, this aspect of globalization might seem to be a move toward a special kind of anarchy what may be called anarchism for the rich and powerful.

In his “Politics as a Vocation,” Max Weber suggested a broader interpretation of this seeming anarchism. After citing Trotsky saying, “Every state is founded on force,” he went on to note, “The state is considered the sole source of the ‘right’ to use violence.” From Weber’s perspective, globalization is actually empowering the state.

The same progress in information technologies that that created a utopian belief in the possibility of worldwide democracy, facilitated the growth of globalization that made the new anarchy possible is also being used around the world to rapidly increase authoritarian powers, which now have the capacity to monitor virtually everything that ordinary people do. So, while one part of society enjoys the privacy that this new regime of secrecy provides, the rest of society has been rapidly losing what little remains of its privacy.

In effect, alongside the global redistribution of wealth and income, globalization also seems to be redistributing people’s rights. So far, I have been unable to detect any effective response to this troubling trend. What then, does free trade really mean?

Globalization of Food

Food, of course, has long been an integral part of the world of international politics. As far back as the beginning of historical records, belligerent countries have attempted to shut off food supplies for their enemies an early form of de globalization. The history of international food politics in the United States makes a fascinating study: with the recovery from the Great Depression, massively increased food demands needed for fighting the Second World War, together with enormous technical advances in food production in the postwar period, left the country saddled with substantial food surpluses. To dump the surpluses abroad, Congress enacted Public Law 480, which allowed countries to purchase food with their own currencies. At first, this policy displayed a humanitarian veneer, which seemed like a win win policy. Countries could get needed food and the cost of maintaining surpluses would diminish.

By 1957, Sen. Hubert Humphrey, later Vice President of the United States, let the cat out of the bag. Testifying before Congress about the program, Humphrey gloated: “I have heard … that people may become dependent on us for food. I know this is not supposed to be good news. To me that was good news, because before people can do anything they have got to eat. And if you are looking for a way to get people to lean on you and to be dependent on you, in terms of their cooperation with you, it seems to me that food dependence would be terrific.” Part of the attractiveness of this dependence was the high priority given to efforts to stamp out Communist influence, especially in Asia. PL 480 exports increased by roughly 40 percent during the Kennedy administration. George McGovern, then director of the Food for Peace program and a former bomber pilot during the Second World War, believed that food aid was “a far better weapon than a bomber in our competition with the Communists for influence in the developing world.”

A Mexican Laboratory

The experience of Mexico provides a striking example of the effect of this perverted form of free trade in food. In the wake of the North American Free Trade Agreement (1986), heavily subsidized American agriculture, equipped with the most modern technology devastated Mexican agriculture, setting off a massive migration out of agriculture and out of Mexico.
Similarly, one can only wonder how much the Mexicans lost when the free trade agreement with the United States left Mexican consumers and farmers more dependent on relatively homogeneous, industrialized corn instead of the wide variety of indigenous corn that had been developed over centuries in Mexico. Ultimately, the homogeneity of a crop leaves it more vulnerable. A 1970 outbreak of corn leaf blight proved that point, by ravaging the U.S. corn harvest.

The loss of the heterogeneity of Mexican corn is another example of unintentional globalization. Because corn is such an important crop around the world, the plant’s loss of genetic diversity affects much of the rest of the world. Eventually, some pathogen will evolve a method to take advantage of some genetic weakness in a dominant strain of corn.
Traditionally, corn breeders could themselves take advantage of the genetic heteroge
neity of Mexican corn to find some particular strain that could fend off the pathogen. The inevitable homogenization of Mexican corn with the disappearance of small growers, who maintained the local strains, will deprive future generations of farmers of traditional methods of defense.

As mentioned earlier, a major priority of the free trade agreements that are currently being negotiated is a restriction on countries’ capacity to regulate the use of genetically modified organisms, either by restricting imports or preventing their farmers from planting such crops. Farmers also will be prohibited from replanting the GMO seeds they buy from the United States, something that resonates with Hubert Humphrey’s unpleasant celebration of dependence. Such policies mean that the world will become increasingly dependent on a handful of seed companies, which would displace the previously heterogeneous population of seeds. Such genetic homogenization of crops ultimately poses a threat to the world food supply.

While trade agreements limit the rights of nations, such as Mexico, to help their farmers, farmers in California receive highly subsidized water transfers to be able to plant cotton on arid land, which would otherwise be unsuitable for cotton. As a result, the Colorado River no longer reaches Mexico, which badly needs that river’s water. The resulting U.S. cotton harvest has managed to snuff out the demand for a good deal of African cotton production, thereby ensuring, or even increasing, poverty there.