Posted on 1-5-2003

Cold War 21
by Alan Marston

The influence of the USA in the so-called global economy has been one of leadership based on raw economic power. As that economic power weakens, which it is, so the business and soon after that the political power goes too. We are now witness to the loss of leadership and influence that the USA exerts and the first signs of that are appearing in the most sensitive of all international relations, trade.

Anti-American sentiment in wake of the war in Iraq, fused with the harsh winds of strained international relations and a weakening US economy, are hurting the always ambitious global-trade agenda, written and promoted within the context of a now long-gone `Washington Consensus'. New Zealand's economy, based as it is on a large trade sector and a recent history of getting rid of trade-barriers will find itself the vulnerable weakling on the bloc if NZ politicians don't respond quickly, re-establishing protective trade rules for domestic business. New Zealand's right will almost inevitably take the side of whoever is on top in Washington, which happens to be the neo-conservatives at the moment. The muddy waters of liberalism are clearing, the lines sharpening. Right wing will be those for Washington and left wing those against.

Hot wars are followed by cold wars, a euphemism for the use of politics and trade as weapons rather than as instruments of mutual gain. The cold political and economic weather front is looming large, it would be stupid to ignore it. Look at the evidence for an approaching depression.

Washington has signaled its displeasure with Chile's antiwar stance by delaying the planned April signing ceremony of a U.S.-Chile trade agreement. The Brazilian press is reporting that diplomats expect the proposed Free Trade Area of the Americas to miss its 2005 deadline, perhaps for years, even as Miami's trade community is gearing up to host a regional trade ministers meeting in November. And difficult negotiations for a round of multilateral trade and investment liberalization have been buffeted by new waves of transatlantic discord, throwing into question the success of a World Trade Organization summit scheduled for September.

Even the bright spots have clouds. U.S. trade officials say negotiations for a Central American Free Trade Agreement is on target to be wrapped up by the end of the year, but, two weeks ago, trade negotiators meeting in San Salvador were greeted by protesters shredding the American flag and waving Iraqi and Salvadoran banners. And on top of the political issues is the threat of SARS, severe acute respiratory syndrome, which has grounded U.S. executives, accustomed to frequent flying to southern China to inspect products coming off America's newest factory floors there. But, even without SARS, the U.S. war on terrorism and the growing distance with key European allies have combined to undermine global-trade talks, analysts say. "My view is that the Western security alliance is broken," said Gary Hufbauer, a senior fellow at the International Institute for Economics. "It may be papered over but not fixed. All the economic institutions grew up under this umbrella of common security concerns. Now these economic-cooperation institutions have to stand on their own."

Helen Clark, PM of New Zealand is currently in Europe. My impression is that she has seen Tony Blair as a latter day Chamberlain, appeasement is the order of the day in the UK in respect of a rogue USA, and Clark doesn't buy that, which I think makes sense when sitting on the fence is no longer an option. The new cold war global economy was unequivocally declared by the USA in its `for us or against us line', so Clark is against, and in Europe building relations with the much more powerful against side, Europe minus the UK.

New Zealand is in the `against Washington camp, lets have no doubts about that. The next election in NZ will be based on that, those for the USA will find themselves classified as right and will therefore vote right and those against, left. Will the Labour Party be left, we'll see.

Meantime, forget `free trade'. It was the first casualty of the new cold war. Most New Zealanders need a government that will defend us, economically, where the real war is and always was. As trade ministers from the 146 member nations of the WTO are slated to gather in Cancun, Mexico, in September to showcase advances on brokering rules to liberalize trade and investment, a series of negotiations known as the Doha round is still going on. NZ should dumpt Doha, its history. Some of the big decisions were supposed to be behind the Doha group, but WTO members have missed four negotiating deadlines on issues including agricultural negotiations, trade-related aspects of intellectual-property rights and the promised access for poor countries to inexpensive medicines like AIDS drugs, implementation issues and special treatment for developing countries.

Washington will continue to draw fors away from the against camp, starting at the top with Paris. To the extent they achieve that, NZ must move its trade regulations to defend itself in a tactical battle where no country can be 100% relied on.

In economic war New Zealanders need political leadership that doesn't shirk from defense of that which we define as our livelihood, trade.