Threat of Global Market, Global Trade, Global Investment and Global Culture in the Next Decade
( Present paper at the Thai Australia Association Annual General Meeting September 2, 2006, Royal Thai Air Force Club, Bangkok, Thailand. )
Ladies and Gentlemen :
It is my pleasure and honor to be here today to share my view with you on the global economic issues. But first of all I would like to thank you Professor Kriangsak Charoenwongsak, the President of the Thai Australian Association for giving me this opportunity. In fact, though my background education is Economics but I don’t want to claim myself an economist, I would prefer to be called a journalist. This story will tell you why?
President Truman was the first president to appoint a council of economic advisers. Unlike some later presidents, he actually liked to listen to his policy advisers. However, he preferred a clear recommendation, not a long discussion of the advantages and disadvantages of a particular course of action.
He quickly grew tired of economist who gave a good recommendation, and then began, "On the other hand. . ."
A journalist says what he saw, an economist also says what he saw but add - on the other hand !.
The issues and approaches I am going to touch on today would be from a perspective of a journalist not an economist, so don’t worry you will not hear me say : on the other hand !
The global issues including global market, global trade, global investment and global culture in the next decade are quite broad and boring so I don’t want to sell bad produce to a farmer. The positive and opportunity aspects of those issues which I am sure all of you know better. So, I will focus on the threat of those issues which is the protectionism in the developed countries.
The topic today can be defied- globalization in the next decade.
A short definition of globalization by many academics is “the growing liberalization of international trade and investment, and the resulting increase in the integration of national economies.” It may also be taken to mean the increasing tendency for firms to think, plan, operate, and invest for the future with reference to markets and opportunities across the world as a whole. So, globalization has a tendency toward uniformity (or “harmonization”), by which norms, standards, rules, and practices are defined and enforced with respect to regions, or the world as a whole, rather than within the bounds of nation-states.
Globalization refers to the implementation of free trade on a global
scale, which is accomplished through international trade liberalization. A country liberalizes its trade with other countries by removing policies that serve as barriers to trade.
Examples of trade barriers include tariffs, which are high taxes on imported goods that make them less competitive with domestic products, and subsidies, which are monies paid to domestic producers that allow them to sell goods more cheaply than their foreign competitors.
Both policies keep foreign producers from selling very much in domestic markets, because when given the choice most people will buy what is cheapest.
A policy agenda that seeks to maximize the number of tariffs and subsidies a government employs is usually called protectionism.
Trade policy is extremely simple: it boils down to what tariffs or subsidies a government chooses to implement to keep its country’s markets closed to other countries (of course there are other policies governments can use, such as quotas on imported goods, expensive licenses for importers, and sometimes outright bans on foreign goods, but tariffs and subsidies are the main ones).
Mr. Ernesto Zedillo, the former President of Mexico said , Developed countries have low tariffs on industrial and service imports and high tariffs (or other forms of protection) on agricultural imports. Industrialised countries have been the main beneficiaries of trade liberalization brought about by the previous eight rounds of multilateral trade negotiations.
( The report of a High-level Panel on Financing for Development appointed by the UN Secretary General on 15 December 2000. Chaired by Mr. Ernesto Zedillo, the former President of Mexico)
Oxfam's report the "Rigged Rules and Double Standards," shows that 128 million people could be lifted out of poverty if the rules allowed Africa, Latin America, East Asia and South Asia each to increase their share of world exports by just one percent. In Africa it would generate over $100 billion - five times what the continent receives in aid and debt relief.
However, rich world hypocrisy and double standards stop this from happening. The G8 countries (especially US, EU, Canada and Japan) and big corporations rig the rules by:
Subsidizing agribusiness to the tune of $1.5 billion a day. Surpluses are dumped onto world markets, depressing prices and destroying local markets in poor countries.
Using the IMF and World Bank to pry open poor countries' markets with little regard to social consequences.
Taxing goods from poor countries at four times the rate of goods from rich countries.
Profiteering off falling commodity prices that condemn many poor economies to failure.
Allowing corporations to ride roughshod over internationally recognized workers rights.
Subsidies in the developed countries
In May 2002, US President George Bush signed a farm bill that would increase subsidies by $83 bn over a period of 10 years. This will raise subsidies to cotton growers by more than 60 per cent. Therefore, other things being equal, cotton producers in East and West Africa and other developing areas should not expect the world price of cotton to go up anytime soon
Katherine Daniels, trade policy adviser of Oxfam America said in her report and published in the "Rigged Rules and Double Standards,":
''The key point is that local Thai farm products are unlikely to compete with US counterparts, as the US annually spends billions of dollars in subsidies to its farmers, of corn and maize for example, allowing US farmers to sell their products in the world market, including Thailand, at low prices.''
According to Ms Daniels, Oxfam views that the US subsidies are not fair. The depressed market prices would affect Thai farmers as a whole, just like what Mexican cotton and maize farmers faced when the North American Free Trade Agreement (Nafta) took effect.
As a result, Mexican farmers had to migrate to work at factories in big cities and the United States in droves, she said.
A recent study led by Thammasat University academic Rangsan Thanapornpan claims that the Australia-Thailand free trade agreement has benefited only a small group of industrialists, while people in the agricultural sector have been adversely affected.
The study says Thailand enjoyed a trade surplus with Australia during 1998-2004. In 2005, the year the FTA was first enforced, Thailand had a trade deficit with Australia worth 3,199 million baht. Not to mention other repercussions that hurt the Thai farmers. In 2005, imports of milk and dairy products from Australia increased by 57%. Beef imports also increased because the tariff was reduced from 51 to 40%. Thai dairy farmers and cattle raisers were directly affected. Meanwhile, many groups have been concerned that the more vulnerable agricultural sector will not be able to compete with Australia’s agricultural businesses. For example, most dairy farms in Thailand are small, with only 10 to 20 head of cattle each. These are organised into 117 cooperatives. Dairy Australia, on the other hand, has more than 10,000 registered farms with about 200 cows each and receive subsidies from Australian government. .
About 300,000 dairy farmers are suffering as a result of increased imports of powdered milk from both Australia and New Zealand, he said. “This oversupply problem could get more serious despite the quota restrictions to protect local farmers.”(www.ftawatch.org)
Although the volume of Thai exports to Australia grew by 28.5% in 2005 because of tariff reductions. But only auto part of Transport Minister Suriya Jungrungreankit, whose family owns the Summit Auto-Parts group, is well positioned to increase exports to Australia significantly under the new 5 per cent auto-parts tariff barrier – down from 40 per cent last year. The growth of the auto-parts sector is at the expense of 300,000 dairy farmers.
The Rise of Corporations
Today we know that corporations, for good or bad, are major influences on our lives. For example, of the 100 largest economies in the world, 51 are corporations while only 49 are countries. In this era of “globalization”, marginalized people are becoming especially angry at the motives of multinational corporations, and corporate-led globalization is being met with increasing protest and resistance.
Large, transnational corporations are becoming increasingly powerful. As profits are naturally the most important goal, damaging results can arise, such as violation of human rights, lobbying for and participating in manipulated international agreements, environmental damage, child labor, driving towards cheaper and cheaper labor, and so on. Multinational corporations claim that their involvement in foreign countries is actually a constructive engagement as it can promote human rights in non-democratic nations. However, it seems that that is more of a convenient excuse to continue exploitative practices.
The following are collected from a report by the Institute for Policy Studies. The report is called Top 200: The Rise of Corporate Global Power
Of the 100 largest economies in the world, 51 are corporations; only 49 are countries (based on a comparison of corporate sales and country GDPs).
1. The Top 200 corporations' sales are growing at a faster rate than overall global economic activity. Between 1983 and 1999, their combined sales grew from the equivalent of 25.0 percent to 27.5 percent of World GDP.
2. The Top 200 corporations' combined sales are bigger than the combined economies of all countries minus the biggest 10.
3. The Top 200s' combined sales are 18 times the size of the combined annual income of the 1.2 billion people (24 percent of the total world population) living in "severe" poverty.
4. While the sales of the Top 200 are the equivalent of 27.5 percent of world economic activity, they employ only 0.78 percent of the world's workforce.
5. Between 1983 and 1999, the profits of the Top 200 firms grew 362.4 percent, while the number of people they employ grew by only 14.4 percent.
6. A full 5 percent of the Top 200s' combined workforce is employed by Wal-Mart, a company notorious for union-busting and widespread use of part-time workers to avoid paying benefits. The discount retail giant is the top private employer in the world, with 1,140,000 workers, more than twice as many as No. 2, DaimlerChrysler, which employs 466,938.
7. U.S. corporations dominate the Top 200, with 82 slots (41 percent of the total). Japanese firms are second, with only 41 slots.
8. Of the U.S. corporations on the list, 44 did not pay the full standard 35 percent federal corporate tax rate during the period 1996-1998. Seven of the firms actually paid less than zero in federal income taxes in 1998 (because of rebates). These include: Texaco, Chevron, PepsiCo, Enron, Worldcom, McKesson and the world's biggest corporation - General Motors.
9. Between 1983 and 1999, the share of total sales of the Top 200 made up by service sector corporations increased from 33.8 percent to 46.7 percent. Gains were particularly evident in financial services and telecommunications sectors, in which most countries have pursued deregulation.
Intellectual Property Rights
The developed countries have tightened their protection of new technologies through the WTO's trade-related intellectual property (Trips) agreement, making it more difficult for developing countries to obtain advanced technologies than in the more permissive regime when today's advanced countries were developing.
IPRs are artificial monopoly rights to intangible goods and services — methods of doing business on the internet, trademarks, computer programmes, designs, manufacturing processes, drug formulations or types of rice. They give IPR owners the right to prevent anyone from making or using their "creation". As such, they provide companies a direct tool to control a portion of the market, to block out competition and to fence off territories. That is why they are seen as a thorn in side of free trade dogma. They are protectionist barriers to enterprise, administered by governments.
Ben Bagdikian, the former Dean of the Graduate School of Journalism at the University of California in Berkeley. When the first edition of his book, The Media Monopoly, was published in 1983, fifty corporations controlled most major media outlets in the United States. When the second edition of Ben Bagdikian's book was published in 1987, twenty-nine corporations controlled most media outlets. When the sixth edition of The Media Monopoly was published in 2000, six megacorporations dominated the mass media.
When Ben Bagdikian's last book, The New Media Monopoly, was published in 2004, only five, five megacorporations dominated the mass media, and control what most the world hear, see, read, and believe.
— Time Warner, Disney, Murdoch's News Corporation, Bertelsmann of Germany, and Viacom (formerly CBS) — own most of the newspapers, magazines, books, radio and TV stations, and movie studios of the United States.
These Big Five (with General Electric's NBC a close sixth) do not manufacture automobiles, or clothing, or nuts and bolts. They manufacture politics and social values. The media conglomerates have been a major force in creating global culture. They have almost single-handedly as a group, in their radio and television dominance, produced a coarse and vulgar culture that celebrates the most demeaning characteristics in the human psyche — greed, deceit, and cheating as a legitimate way to win (as in the various "reality" shows).
The Consequence of globalization is inequity, the cause of Poverty Around The World
Inequality is increasing around the world while the world appears to globalize. Even the wealthiest nation has the largest gap between rich and poor compared to other developed nations. In many cases, international politics and various interests have led to a diversion of available resources from domestic needs to western markets. Historically, politics and power play by the elite leaders and rulers have increased poverty and dependency. These have often manifested themselves in wars, hot and cold, which have often been trade and resource-related. Poverty is therefore not just an economic issue, it is also an issue of political economics
A few places around the world do see increasing rates of growth in a positive sense. But globally, there is also a negative change in income distribution. The reality unfortunately is that the gap between the rich and poor is widening. For example:
About 0.13% of the world’s population controlled 25% of the world’s assets in 2004.
20% of the world’s population consume 86% of the world’s goods while 80% of humanity gets just the remainder 14%.
The first group has 13% of the world's population and receives 45% of the world's PPP income. This group includes the United States, Japan, Germany, France and the United Kingdom, and comprises 500 million people with an annual income level over 11,500 PPP$.
The second group has 42% of the world's population and receives only 9% of the world PPP income. This group includes India, Indonesia and rural China, and comprises 2,100 million people with an income level under 1,000 PPP$. (See Milanovic 2001, p.38).
As of May 2005, the 125 richest people in the world have assets that exceed the combined gross domestic product of all the least developed countries (calculation based on data from list of countries by GDP (PPP) and list of billionaires).
The total wealth of the top 8.3 million people around the world “rose 8.2 percent to $30.8 trillion in 2004, giving them control of nearly a quarter of the world’s financial assets.”
In other words, about 0.13% of the world’s population controlled 25% of the world’s assets in 2004.
Half the world — nearly three billion people — live on less than two dollars a day.
· The GDP (Gross Domestic Product) of the poorest 48 nations (i.e. a quarter of the world’s countries) is less than the wealth of the world’s three richest people combined.
· Nearly a billion people entered the 21st century unable to read a book or sign their names.
· Less than one per cent of what the world spent every year on weapons was needed to put every child into school by the year 2000 and yet it didn’t happen.
· 1 billion children live in poverty (1 in 2 children in the world). 640 million live without adequate shelter, 400 million have no access to safe water, 270 million have no access to health services. 10.6 million died in 2003 before they reached the age of 5.
. As the world starts to globalize, it is accompanied by criticism of the current forms of globalization, which are feared to be overly corporate-led. As corporations become larger and multinational, their influence and interests go further accordingly. Being able to influence and own most media companies, it is hard to be able to publicly debate the notions and ideals that corporations pursue. Some choices that corporations take to make profits can affect people all over the world. Sometimes fatally.
Conclusion : What is the challenge?
Developed countries have low tariffs on industrial and service imports and high tariffs (or other forms of protection) on agricultural imports. Developing countries have substantial tariffs on industrial and service imports and on some agricultural imports. In the Doha round, developed countries are saying to developing ones: "You must make cuts in industrial, service and agricultural tariffs, and then we will make cuts in our agricultural tariffs and other agricultural supports. This will give you better market access for your agricultural exports, in line with your comparative advantage; and we will get better market access for our industrial, service and agricultural exports."
The developed countries are insistent that developing countries make big cuts in protection on non-agricultural imports, so much so as to yield the acronym Nama (non-agricultural market access). The developed countries are making a big push to get developing countries to accept Nama proposals.
Most developing countries face serious dangers of de-industrialisation if they accept the basic terms of this negotiation. They risk becoming more specialised than at present in the production of primary commodities and simple, labour-intensive products, and even less diversified in the production of more complex, rich country goods.
So the developing countries should strenuously resist the Nama agenda. They should push for rules that allow developing countries more latitude to set tariff levels in line with the maturity of their industries, and with variation rather than uniformity in tariffs across industries in line with differences in the time needed for upgrading. And they should push for relaxation of Trips.
The Nama may suit the collective interest of developed countries quite well, but it would be a bad result for the world. I take it as given that the world interest (at least of the human species) favours a more equity and equal distribution of income and wealth. My argument is that faster, catch-up economic growth and industrialisation in developing countries is unlikely in conditions of free trade.
The issue of complete deregulation allows corporations to benefit but at the possible expense of people in that nation or region if that deregulation means relaxation of environmental rules, health and educational services including control of natural resources and energy. Neither seems to answer the notion of fairness, though. Often those nations that promote free trade for all, want protectionism for themselves.
Globalization can be seen most clearly in the quickening pace and scope of international commerce. Global exports as a share of global domestic product have increased from 14 percent in 1970 to 24 percent today, and the growth of trade has consistently outpaced growth in global output.
Poverty trends have worsened. The number of poor people living on less than US$1.00 a day rose from 1,197 million in 1987 to 1,314 million in 1997, that is 20% of the world’s population. Another 25%(1.6 billion) of world’s population survive on between US$1 and $2 per day (UNHDR 1999).
The richest fifth of the world’s people consume 86% of all goods and services, while the poorest fifth are left with just over 1%. The wealthiest fifth also enjoy 82% of the export trade and 68 % of Foreign Direct Investment, the bottom fifth, just over 1%(UNHDR 1999).
When we talk about global market, global trade, global investment and global culture in the next decade, we want to see this statistic being reversed.
I hope I don’t confuse you with the perspective of the other side of a coin. So I would like to end my presentation with another story.
An architect, a surgeon, and economist. The surgeon said, 'Look, we're the most important. God is a surgeon because the very first thing God did was to extract Eve from Adam's rib.'
The architect said, 'No, wait a minute, God is an architect. God made the world in seven days out of chaos.'
The economist smiled, 'And who made the chaos?'
Thank you for the opportunity to share my view with you today, and I wish you the best of luck.
Boli, John and Lechner, Frank J. 2000. The Globalization Reader. Oxford: Blackwell Publisher.
Bagdikian, Ben H. 2004. The Media Monopoly. 3rd Ed. Boston : Beacon Press,.
Friedman, Thomas. What the World Needs Now, New York Times, March 28, 1999.
Goldsmith, Edward and Mander, Jerry. 1996. The Case against the Global Economy. San Francisco: Sierra Club Books.
Herman, Edward S. and McChesney, Robert W. 1998. The Global Media. London: Cassell Wellington House.
Korten, David C. 1995.When Corporations Rule the World. West Hartford : Kumarian Press, Inc.
United Nations. 2004. The UN Human Development Report. New York: United Nations.