States — a move only averted by the of the Common Market countries. Moves to free trade were a cornerstone of the post-war economic boom of the EXACTLY ONE hundred years ago, the Birmingham manufacturer radical social retormer JOACO Chamberlain embarked on a course which was to overturn the most sacred canon of nineteenth century English capitalism its unshaken commitment to the doctrine of 'Free Trade'. The policy of trade protection with which he proposed to replace it, known as 'Imperial Preference' was destined to turn British politics upside down.
With all due allowances made of the enormous historical differences between both the centuries and countries involved, the choices now being imposed on US capitalism seem destined to work changes as protound, as longlasting as dangerous for humanity — as Chamberlain's. Step by step, US capital is deserting the commercial policy on which it sailed to leadership of the capitalist world, opening a new and unstable period of interimperialist rivalry. It is abandoning the flagship of free trade. Talks On 9 February this year, the latest round of talks under the General Agreement Tariffs and (GATT) reopened in Geneva following a chily start in Uruguay last September. GATT, when founded in 1963, was a vital institution of postwar economic cooperation. Its stated aim was the gradual dissolution of all barriers to trade. This objective of US capital after the war was dictated on their part by an obvious mouver goods cheaper than anyone else's. The less their rivals could restrict their markets, the more profit they would make.
For the US's partners the quid pro quo wasac of US capital had been made available to rebuild their shattered economies. imperialist countries set out in 1945 to build a stable economic world order on the foundation superior technology, estimated by 1950 to be nearly three times as productive as its European rivals. The US would export capital to the world to buy its products and acquire its technology: with the profits of trade, it would maintain reserves sufficient to back this capital. By tying the dollar to the gold standard the dollar, 'as good as gold', could become the trading currency o tne world and the repository of its wealth. And, finally and most convincing, the marines and the nuclear umbrella were on hand to back up the whole new order against any untoward accidents.
GATT's proceedings dominated by two issues which illustrate more clearly than anything the crisis into which this world order has fallen: the dollar, and agricultura.
US agriculture has for decades been the most prodigious in the world. As late as 1981, US farm exports at $44 billion made up 19 per cent of all exports. Thirty per cent of its farm produce was exported and it was even able to engage in "corn politics', using its vast grain surplus to try and extract ponucal concessons mron uie oler countries. Its 1981 trade surplus was $26.6 billion.
In May, June and July 1986, for the US domestic economy — and how the United States. political and economic muscle to turn the screw on its comptetitors.
first time in modern history, the US imported more agricultural goods than it exported. Its 1986 billion has fallen 40 per cent in five years, and its share of the world market from 59 per cent to 41 per cent.
US reaction to this was an indicator. of the shape of things to come. Three months before the GATT preliminary discussions began it threatened a two hundred per cent tarift on a range of spirits, food and drink from Europe. It went to GATT demanding that Spain and Portugal agree to US quotas of 2 million tons of corn and 300,000 tons of wheat respectively, and for Portugal to drop its policy of buying 15 per cent of its grain imports from the EEC. It won its demand.
For several years now the Reagan administration has gradually been raising tariff barriers against its rivals while at the same time demanding that they droo their own trade barrers against it.
Originally this crusade took the guise of a 'liberalisation' campaign, protesting against other countries' barriers and threatening retaliatory action. The latest proposals Democrats, now the hawks on trade protection, drop this mask and simply call for barriers against any country having a trade surplus with the USA. This covers almost every country in the The case of the GATT negotiations show that this process has now reached a new stage: The 200 per cent tariff was an instrument of economic blackmail to acquire the trade terms which US caola necaco. redaroress oi wno erse were got hurt. The administration's fouryear arive lol against its commercial rivals — all of whom are its political allies — has turned into a more or less naked drive, through political force and economic blackmail, The favourable to US capital.
Muscle US This doctrine is, in effect, Imperial Preference by another name. It is an attempt to use the financial and political muscle of US capital to conquer, and retain by political means guaranteed markets and spheres of influence which are slipping from its economic grip. This means that the economic rivalry between the USA and its imperialist partners is being shifted to ine ponucal spnere calculable consequences.
Agriculture is not an isolated case. All areas from the highest to lowest technology are affected. Only last year were the US concluded a trade pact with Japan to stabilise the price of silicon chips because its own producers were literally being driven out of the market. International Business Week on 13 OC tober reported fears that 'the entire US semiconductor maustry, memory-chip producers, will sag into second-rate status by the early 1990s. A $2 billion deficit in high-tech trade is forcast for 1986.
In traditional staple industry the story is the same. By 1990 nearly 5 million US cars — nearly S0 per cent — will have Japanese transmissions. Were it not for trade protection, the figure in completed cars would be the same. In mid-1986 the US is using its 2.04~ output at $26.5 2.02 2.00 1.98 1.96 1.94 1.92 L DEC. 8 T5 1986 AWEST GERMAN MARKS the cent below those in the US' vanished 11 of manufactured goods ports by a liberalisation' cent. During llauc panies have gone out of business.
these weaknesses is deticit. doubled in Yen and 48 per cent against the D previously ple means: foreign borowing.
WIln Hu- trading currency of the world.
of the dollar.
Blackmail just ald Far Many previous government.
engines government income THE DOLLAR IS FALLING FASTEST AGAINST THE MARK :163 U.S. DOLLAR'S VALUE - 162 - 161 • 160 - 158 J 157 JAN. 5 1987 JAPANESEA YEN -DATA: BW forced the Canadian government to impose a 15 per cent export tax on lumber and paper and the government recently revived an 1891 law to prevent US publishers putting out work overseas, where 'costs run an estimated 20 per February, The previous US surplus of $45 billion in capital equipment trade has five years, following a doubling of foreign imports. Imports exceeded ex- tually valued record $12.7 billion last November. Imports of machine tools now account for 43 per cent of the US market. Five years ago they were 25 per the bast four vears a quarter of all US machine-tool com- Rivals The accumulated expression of all of course, the dollar. In 1982 the US ran its first trade This deficit trebled in 1983, 1984 and by last year estimated at the staggering total of $175 billion. This is what lies behind the sixmonth slide in the dolar's value, which has now fallen 42 per cent against the continuing Mark. It has been financed by one sim- minisummits Why is US capital able to do this? enough yet?" The dollar is a unique currency. It is the then boom, That pichligs means the US possesses unique financial power, because the fate of every capitalist, throughout the world, is tied up in one way or another with the value concerned It also permits a unique financial blackmail which we can understand by looking at what Reaganomics actually from turning its back on Keynesian policies of pumping money delining dollars, into the economy, it pumped more monev into the Us economy to acheve the explosive growth of 1981-1984 than But instead of financing this with LanCo tinanced it by toreign borrowing. in short, it got the rest of the world's capitalists to finance its own expansion — the exact opposite of what happened during the postwar years. Now, however, it can force the rest of the world's capitalists to pay the price.
According to the Economist of 7 every worll of dollar-dominated debt purchased by the Japanese since 1985 has lost 36 percent of its Yen value. If the US debt was denominated in foreign currencies, that debt would now be $580 billion. It is ac- US at $410 billion. The devaluațion of the dollar, without any change in trade relations, has made the United States $170 billion - almost an entire year's trade deficit.
The value of the dollar, once 'as the good as gold', has thus become an weapon in the armoury of US capital against its rivals. Business International explains it pithily: 'A statement by US Commerce Secretary Malcolm Baldridge last week makes it quite clear that the US is not satisfied with efforts to date ... the markets will have to endure series OIL economic - long-distance phone calls where Baker says "You guys had If the answer is "No", another five or ten The forces involved are not just economic but directly political. That is, it is the state policy of the governments which increasingly inuchcc crouc cauwus uciwcc. the major political powers. According to David Hale of Kemper Financial Services, foreign governments bought fully 40 percent of US securities — IC debt. 'It is hard to believe this is simply the invisible hand beckoning Japanese investors to a sate haven of steadily comments Robert Kuttner, Economics correspondent of the New Republic. 'More likely, it is the guiding hand of the Japanese Finance Ministry, desperate to avert a collapse of US markets for Japanese exports.
It is an ironic epitaph to Reaganomic philosophy, which co-authored a world assault on government spending, that the administration is now, with a new world slump setting in, crusading to force West Germany and Japan to spend money to reflate their economie: in order to stimulate demand for US CADUILS.
West Germany Japan unsurprisingly, have so resisted the US demand that they prop up the ailing United States economy not simply by donating their savings but by sucking ir goods. The US has therefore decided to wield the big stick. threatens, first, a devaluation of the dollar that will force West Germany and Japan out of the US market and US goods'into theirs, and then, if that does not work, trade protectionism tha would cut down Japanese and West German exports, 'Squeeze them until pips squeak' the current philosophy of US trade officials.
The danger in all this for the US Japan and West Germany is that the free trade system which marked the international capitalist economy since 1945 will collapse. And if that happens there will be a recession which would make the present level of unemployment look like an era of prosperity. It would also threaten to bring crashing down most of the interimperialst aliances that have beer built up since World War II.
What is now taking place is like a The United deadly game ot poker States threatens its rivals with a degree of protectionism sutticient to make them submit. On the other hand if it is actually forced into full-blooded pro. tectionism the entire capitalist world order as it exists will disintegrate. The stakes are literally enormous.
Pressures Worse still the entire mechanism is under no one's control. Huge competitive pressurcs. rational calculations, dictate the positons taken by imperialist governments. Indeec nothing in the world today shows the deadly logic of capitalist competition as clear v as the looming trade war: across the Atlantic and Pacific Oceans. They threaten to throw capitalism into the greatest crisis in its entire history
Socialist Action 6 March 1987