The End of Global Free Trade? Not Quite

In the past, globalized "free-trade" has generated enormous hostility and intense social protests between the poor and the intergovernmental organizations who they perceive as primarily serving the interests of elites and multinational corporations. These protests have only increased during the current economic crisis. But is the global free-trade regime in any significant danger? The masters of the free-trade universe are already in panic-mode.

In the name of "ensuring that trade flows as smoothly and freely as possible" among countries, organizations like the WTO and OECD seek to prevent governments from implementing policies that regulate trade to promote national interests or benefit vulnerable citizens (workers, farmers, etc). The OECD has recently released a report called, Trade-Separating Fact from Fiction, in which the organization warns against widespread questioning of the benefits of trade and free markets during the current crisis.

Freer flows of trade are part of the solution to the current economic crisis... Still, there are calls from some to protect industries and workers against imports by raising tariffs, imposing quotas or resorting to various non-tariff barriers. We would all pay a high price for heeding such calls.

The WTO is making a similar case for continued faith in globalized free-trade, warning governments not to make "protectionist" trade policy changes in response to greater unemployment. Governments risk catastrophic social unrest if they fail to offer some relief to constituents who are most vulnerable to shocks in the global trading system. In the so called BRIC countries such as India, China, and Brazil popular outrage about increasing pauperization, unemployment, and social service cuts are challenging the stability of their societies. Over 50,000 Indian farmers for example have mobilized in recent days against the WTO and demanded that the Indian government offer more defense against the organization's dictates.

For now, many developing countries are locked in a delicate balancing act between meeting the immediate needs of their citizens, and opening new markets for their exports in wealthier nations. The contradiction between dependency on external markets for exports and meeting domestic needs suggests that there is a significant trade-off under the current economic development strategy pursued by emerging economies. A structural shift among the largest emerging economies would appear to be highly unlikely in the near future.

I predict that ultimately, the BRIC nations will side with their pocket-books and seek to continue the path toward high-speed economic growth under the status-quo in the "Doha Round" WTO deliberations. So far, it appears that BRIC governments are merely paying lip-service to the aspirations of the poor---many of whom have asked for a complete break with the WTO altogether. However, we can expect to see some coordinated push-back against future rulings that explicitly limit freedom of action on trade policy by Brazil, India et al. and while this is not the complete reorganization of the global trading system the poor need, it is a long overdue step in the right direction.

All About the Benjamins Baby? The End of American Dollar Hegemony

There is an ever growing possibility that the US dollar's privileged status in the world economy may be eroding, permanently. A necessary step toward a more multi-polar world, why didn't this happen aeons ago?

It was 3 months ago when President Lula da Silva of Brazil remarked that white "blue-eyed bankers" were to blame for the global financial crisis. President da Silva's comments were just one of many diatribes among post-colonial nations against centuries old European and particularly American influence over the world's financial institutions.

Today, emerging powers in the global South met in Russia to discuss a drastic move toward transformation of the global financial architecture. The New York Times, in its standard neoliberal form, fasely described the meeting as a narrow attempt by Russia to challenge perceived American hegemony in the world-system.

For the Kremlin, undermining the dollar as the prevailing medium of exchange reflects a broader Russian belief that the United States exercises a dominance in global affairs that exceeds its diminishing power.

But the article misses the point, which is that something new and of historic proportions is happening in the world economy. In reality, the United States actually does exercise dominance in global affairs that exceeds its diminishing power. Since the 1970's the US dollar has had a virtual monopoly on global exchange. Raw materials, for example are bought and sold for U.S. dollars. Exchange rates between currencies are not fixed but fluctuate all the time, depending largely on speculation about interest rates, and trade balances. There has been no shortage of protest among developing nations against this form of American hegemony.

Today's agreement by China, Russia, India, and Brazil to possibly buy one anothers bonds to lessen dependence on the U.S. , could finally begin a structural shift against the supremacy of the US dollar. Bloomberg Financial News, citing economist Nouriel Roubini, recognized the impending effects of a push-back against US dollar hegemony.

For the U.S., a change in the role of the dollar would risk increasing its financing costs and undermining its preeminent place in the world economy...The currency has dropped 10 percent against the euro in the past three years.

A more horizontal structure of international trade would essentially take out the US as middle-man and level the playing field for developing countries. For the first time in the recent history of global capitalism, there may not be a sole hegemon that controls international exchange. And that may not be such a bad thing.