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UNCTAD latest report highlights disappointments in free trade

UNCTAD, the UN organization dedicated to trade and development issues, offers in its latest annual report1 a fairly credible picture of the real issues facing the global economy. Although it does not deal directly with issues related to agriculture and food, many of the orientations advocated in this report can be used to inform the reflection on the reform of the rules of multilateralism in agriculture.

Without falling into alarmism, the institution calls for an in-depth rethinking of multilateralism with the obligatory passage of the rehabilitation of the regulatory state. Two very comprehensive chapters on the democratic and economic stakes of the main contemporary technological breakthrough, digitalisation, and the underinvestment in infrastructures illustrate the decisive role of public action to remove factors that block development.

In the first place, UNCTAD advocates the establishment of genuine industrial policies in the countries least developed in the digitalization of economic activities in the name of emerging industry protection and digital sovereignty. Indonesia, the Philippines and Vietnam are therefore highlighted for the measures taken to develop networks and domestic capacities to fill a gap that could prove to be synonymous with economic dependence and impediment to development.

Rehabilitating the strategic role of the State in infrastructure investment is also promoted by the Geneva organization, since a lack of infrastructure is often a limiting factor for development. While the abundance and liberation of capital flows were seen as the most propitious levers, one thing is clear: “The neo-liberal shift in development policies has diluted the original purpose of multilateral finance to fund infrastructure projects”. This state of affairs is particularly illustrated by the improvement of agricultural productivity as soon as access to energy or irrigation is facilitated.

The Chinese example

In view of the central message of the report, it is not surprising that China returns several times. With Alibaba, it has nothing to envy to Amazon, and the new roads of the Silk (Belt and Road Initiative) are put forward for the unprecedented scale of this program of investments (in trillions of dollars) alone able to meet the 2030 Sustainable Development Goals (SDGs) for infrastructure development.

Based on the exploitation of input-output databases, UNCTAD also highlights an interesting feature of the Chinese economy: it is the only country where the share of value-added created locally and the share of value-added coming back to the workforce in total value added do not decrease. The explanation is as follows: China’s economic policy allows it to be less subject to the logic of global value chains where value tends to be drawn by the countries where the decision-making centers of multinational enterprises are located.

Also, UNCTAD calls for relativizing the dynamics of the BRICS, because beyond the growth of China the economic vitality of BRIS remains quite relative. This is particularly the case in South America where the ebb of the commodities boom shows “a position in trade similar to that of the 1990s, highlighting a limited technological catch-up”.

On the subject of China still, UNCTAD is clearly taking sides and calling for reason in the face of analyzes that would tend to blame the most populous country for the imbalances on which the current trade war is based. The root causes of the imbalances are rather to be sought from the questioning of the “liberal post-war order” that began three decades ago with “the liberalization of capital markets, the abandonment of policies of full employment, the downward pressure on the remuneration of work or the close proximity between economic and political powers”. On the contrary, China is doing nothing more than putting in place the revenues that have been proven in the early stages of development in OECD countries. The review of Chinese agricultural policy would fully support this view.

Monopolies

For UNCTAD, the state of the global economy is far from encouraging and no structural reform has been undertaken since the 2008 financial and economic crisis. The economic dynamic is still driven by both private and public debt that now reach a record level of three times the world GDP. In addition, the correction of financial overvaluation amplified by a decade of cheap money, such as large capital outflows from some emerging economies, gives rise to fears of new financial crises and their contagion.

The global economy is suffering from a contraction in demand caused, among other things, by low wages, widening inequalities and tax optimization strategies. On this last point, the report states that “American companies generate more income from Luxembourg and Bermuda than from China and Germany”. Corporate concentration would therefore have reached an excessive level where competition would have given way to a “win-get-all” regime and annuity control strategies that are detrimental to the global economy and the cause of growing resentment. to a “hyperglobalisation […] ruled by large firms that have progressively established dominant market positions and operate under ‘free trade’ agreements that have been the subject of major lobbying […] “. The report mentions the food chain as one of the main examples where corporate concentration has become excessive2.

For a new narration

While tariff escalation is certainly not a timely response to the consequences of “hyperglobalization,” UNCTAD rejects the free trade discourse by denouncing the gap between the narrative of prosperity guaranteed for all by economic forces freed from the yoke of politics on the one hand, and the reality of a hypertrophied economic power of a few companies able to extract themselves from regulatory frameworks on the other.

For the institution, it is urgent to develop a new narrative in the face of a “neo-protectionism” that it would be “stupid to seek to dismiss […] on the basis of ignorance of the subtleties of the Ricardian theory of trade or simply the mischief caused by populist politicians “.

Against the backdrop of falling international cooperation and the return of protectionism, UNCTAD is campaigning for a Global New Deal that would promote international economic integration in more democratic, equitable and sustainable forms. In order to initiate this movement, the institution is pushing to revisit the spirit of the 1948 Havana Charter.

Three key ideas, directly derived from the latter, are put forward:

  • the first is to view the development of international trade not as an end in itself, but as a means to serve higher goals, including the SDGs;
  • the second is to integrate global safeguards into global governance against “corporate business practices […] unfavorable to competition, market access or monopolistic control”;
  • the third is to provide countries with sufficient leeway to ensure that trade integration is not at the expense of their local objectives, by restoring a “political space” to trade agreements “which, in last decades, especially privileged the demands of capital and limited the possibilities of development according to the social priorities”.

UNCTAD is calling for further and forwarding these goals in the light of the challenges of the twenty-first century. We are obviously thinking of the protection of the environment, the fight against climate change or food security that require a common ambition on a global scale. In conclusion, it calls for a return to the path of cooperation to avoid the “tragedy of our time … where more than three decades of relentlessly hitting the drum of free trade have drowned the feeling of confidence, of equity and justice on which such cooperation depends. ” In short, here are three ingredients that will have to be at the rendezvous to succeed in renewing multilateralism in agriculture and food.

https://unctad.org/en/PublicationsLibrary/tdr2018_en.pdf

2 Voir page 69 du rapport.

3 Pour une présentation détaillée de la Charte de la Havane cf. François Collart Dutilleul «La Charte de la Havane, Pour une autre mondialisation », aux éditions Dalloz

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