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Trade agreements: The little known agent of global inequality

Trade war: The Capture of Puerto Bello, 21 November 1739 by Samuel Scott. Portobello was ‘founded’ in 1597 by a Spanish explorer. From the 16th to the 18th centuries it was an important silver-exporting port. It was captured in 1739 by a British fleet during the War of Jenkins’ Ear. Photo: Pictures From History/Universal Images Group/Getty Images

By Jeff Rudin 

It’s a safe bet that few people have ever heard of the International Trade Administration Commission of South Africa (ITAC), despite being an important part of the department of trade, industry and competition. 

We have Ayabonga Cawe, the ITAC’s chief commissioner, to thank for reminding us of its existence. He does so in an all-too-rare public article by anyone from the ITAC, in a Business Day article headlined “Turbulent WTO comes of age”.

It seems to have taken the ITAC 29 years to realise that the World Trade Organisation (WTO) was aiding the breach of its 1995 founding mandate of “making global trade rules by consensus”. But, better late than never (even though the WTO is in breach of virtually all its lofty commitments).

So little is generally known of either the WTO or ITAC that a few words on both organisations are merited. 

According to its founding Agreement of 1995, the WTO, and its 195 current member countries, are committed to “raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, and expanding the production of and trade in goods and services, while allowing for the optimal use of the world’s resources in accordance with the objective of sustainable development, seeking both to protect and preserve the environment and to enhance the means for doing so”. 

It further recognises the “need for positive efforts designed to ensure that developing countries, and especially the least developed among them, secure a share in the growth in international trade …”

The ITAC’s objective is to “foster economic growth and development in order to raise incomes and promote investment and employment in South Africa … The commission’s core functions are: customs tariff investigations, trade remedies, and import and export control.”

And, now, to the real world. 

There was little need for double talk in the late 1500s. Undisguised and unprovoked conquest on unchristian lands had the official approval of kings and popes. Probable conquest of trade rivals, plunder and the expansion of empires was all that was needed. 

By 1731, things had changed; but the longstanding conflict between England and Spain over foreign spoils had not. As a pretext, England declared war on Spain in 1739 in retaliation to Spanish sailors who sliced off the left ear of the English sea captain, Robert Jenkins. The episode is now known as the War of Jenkins’ Ear.

Contrast this with the argument made in 1577 by one of the Queen’s advisers, Sir Humphrey Gilbert, in A Discourse How Hir Majestie May Annoy the King of Spayne. Such annoyance would not only deprive Spanish merchants of ships and the “great revenues” they obtained from the cod fishing, but would prevent Newfoundland cod from reaching Spain, causing “great famine.”

(And Israel has now outraged the world for doing the same, causing great famine.) 

In exchange for 20% of any gold or silver he might find, the queen gave Gilbert a six-year licence “to discover, finde, search out, and view such remote, heathen and barbarous lands, countreys and territories not actually possessed of any Christian prince or people.” He would personally own all land within two hundred leagues of any permanent settlements he established by 1583 and could “take and surprise by all maner of meanes whatsoever … as of goode and lawful prize” any ship that entered that area without his permission.” (Information for this paragraph is taken from Ian Angus, The Fishing Revolution & the Origins of Capitalism).

Carl von Clausewitz, the celebrated 19th-century military theorist, is best known for his 1831 aphorism about war being the continuation of politics by other means. I want to suggest that trade is the continuation of the politics of war by other means. 

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Hostile: Ningbo, One of the Five Ports Opened by the Late Treaty to British Commerce, China, 1847, by JW Giles. The Treaty of Nanking in 1842, after the First Opium War, established five treaty ports in China. Photo: The Print Collector/Print Collector/Getty Images

According to one of its own websites, the WTO’s “main function is to ensure that trade flows as smoothly, predictably and freely as possible”. In the name of free trade, Britain, in 1839, and then France, in 1856, declared war on China, in what became known as the Opium Wars.

These wars are little known today because they are so shameful. But they exemplify the unspoken founding principle of international trade: might is right, an ethic that shapes trade as the continuation of the politics of war by other means. This warrants more being said about the Opium Wars.

Britain’s love of Chinese tea created a huge trade deficit with China. To plug the gap, Britain began exporting Indian opium to China, despite knowing that the selling of opium was illegal in China. The Chinese government’s campaign to enforce its prohibition of opium, which included destroying opium stocks owned by British merchants and the British East India Company, resulted in the First Opium War of 1839 to 1842. 

After almost a year of skirmishes, the British government, in 1840, sent a military expedition to impose reparations for the financial losses experienced by opium traders. 

The war ended with the Treaty of Nanking in 1842. The treaty ceded Hong Kong and surrounding smaller islands to Britain, and established five cities as treaty ports open to Western traders: Shanghai, Canton, Ningbo, Fuzhou and Xiamen. The treaty also stipulated that China would pay a $21  million payment to Britain as reparations for the destroyed opium, with $6  million to be paid immediately, and the rest through subsequent specified instalments. 

Another treaty the following year gave most favoured nation status to Britain and added provisions for British extraterritoriality, making Britain exempt from all Chinese law, including the right to set import tariffs. France secured several of the same concessions from China in the Treaty of Whampoa in 1844, as did the US, also in 1844, in the Treaty of Wanghia

But this was insufficient. According to the official US history “the United States and the European powers grew increasingly dissatisfied with both the terms of their treaties with China, and the Qing government’s failure to adhere to them. The British forced the issue by attacking [a] Chinese port city.” 

And so began the Second Opium War (1857–1858), which ended in Chinese defeat. Under the most-favoured-nation clause of the ensuring treaties, all foreign powers operating in China were permitted to seek the same concessions that Great Britain achieved by force. 

France, Russia, and the United States all quickly signed treaties with China in 1858. These treaties granted the Western powers still more rights and privileges. The number of treaty ports increased, with new ports opened to Western trade along the Chinese coast, on the islands of Taiwan and Hainan, and along the Yangtze River. 

The opening of the Yangtze River gave foreigners full freedom to travel and conduct business or missions anywhere in China. The agreements also set a new, low tariff for imported goods, giving foreign traders an important advantage. “Frustrated by irregularities in Chinese customs services,” — as the as the US state department puts it — British and US merchants established the Imperial Maritime Customs Service, which regulated trade “for the benefit of foreign merchants”.

The Opium Wars, the most blatant of the trade agreements and an egregious display of war being the continuation of politics by other means, set the pattern still being followed. 

The very language of “civilised” trade negotiations is the language of war. Among trade negotiators — and at South Africa’s National Economic Development and Labour Council too, where I was once a representative of labour federation Cosatu — the standard approach is to view matters in terms of what is openly referred to as offensive and defensive interests, the very language of hostilities. 

Once concluded, the trade agreements give way, with astonishing cynicism, to the language of deception. Thus, for instance, the heavily one-sided trade agreement between the new South Africa and the European Union is called the Trade (wait for it) Cooperation and Development Agreement. 

Similarly, the European Union’s shameless attempts to entrench its colonial privileges are called Economic Partnership Agreements. These so-called EPAs are like a partnership between a rider and an unwilling donkey.

This is to say, trade reflects global power with all its imbalances, inequities, and hypocrisies. Trade, in other words, is an international dimension of unequal power relations. This was well captured by our then finance minister, Trevor Manuel: “The problem is not that international trade is inherently opposed to the needs and interests of the poor, but that the rules that govern it are rigged in favour of the rich.” (Mail & Guardian, 21 January 2005)

The WTO was created to rig the rules in favour of the rich and so perpetuate inequality. Its only difference from the Opium Wars is that actual warfare is no longer used. It uses instead the double-speak of the civilised. What is thus needed is knowing what lies behind such a seemingly innocuous sentence as: “Producers and exporters know foreign markets will remain open to them.”

Although the limits of this article preclude any elaboration, foreign markets have been forced open by a host of one-sided WTO agreements — except in South Africa where the major WTO agreements were welcomed by all governments since 1994. 

This includes such innocent sounding ones as the General Agreement on Trade in Services (Gats), which, for its recipients, is among the most pernicious of all WTO agreements. (Ask Donald Trump. When it unexpectedly got in the way of some sectors of the US economy, he just ignored it, knowing that such was the might of the US that few would even question what he was doing.) 

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Trade rigged in favour of the rich: Former finance minister Trevor Manuel

Indeed, Gats was among the many issues still unresolved from the WTO’s 4th ministerial conference in Doha, in 2001. Consensus — a WTO requirement in decision-making — was the impediment. 

And it’s the likely abandonment of consensus at the WTO’s 13th Ministerial Conference, which ended at the beginning of March 2024, that has commendably upset Ayabonga Cawe. it is encouraging that the issue for him was the move to make permanent the moratorium on e-commerce transmissions that South Africa strongly opposed. 

This moratorium has been repeatedly extended since first introduced in 1998, when the internet was still relatively new. The conference extended the moratorium until 2026. 

More worrying, however, are the concurrent meetings, being held with the full knowledge of the WTO, by the major producers of e-commerce to get around the nuisance of consensus. These “plurilateral” meetings have been held since 2019 and now include countries responsible for more than 90% of world trade. Their intention is to issue their own Joint Statement Initiative that makes the moratorium permanent. 

It’s easy for those who formed the WTO and write its agreements to find ways to circumvent those agreements when required. This includes bilateral, euphemistically called, Free Trade Agreements now containing the permanence of the e-commerce moratorium. [Personal email trade law Professor Jane Kelsey, 1  February 2024]. 

These agreements involve a sizable amount of money, especially for those countries opposing the moratorium, like South Africa. A 2022 United Nations Conference on Trade and Development study estimates that in the period 2017-2020, developing countries and LDCs lost $56 billion of tariff revenue as a result of the moratorium.

Very few South Africans know about trade. Yet they know about their poverty, unemployment, hunger, ill-health, shocking housing, increasingly disastrous water and electricity supplies, appalling education and non-existing public transport. And they can see wealth on ostentatious display all around them. 

This is to say they know without knowing the role trade agreements play in South Africa’s world-beating inequality. They experience — without knowing it — the reality of trade being the continuation of the politics of war by other means. 

*This Opinion Piece was first published by the Mail & Guardian

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