The global crisis, solutions, and implications for EU Trade Policy
Talk of the dangers of trade protectionism is used by European politicians to obscure the need for protection from transnational corporations whose control of European trade policy continues to cause negative social and environment impacts.
Susan George has amended and clarified the transcript of this video. Please use this text version for any references.
Thank you for being here. Thank you to Gie Goris and the Commission officials and MEP for taking us seriously, as most of the audience comes from the civil society NGO world, so thank you for this dialogue.
I agree with virtually everything that Mr Gaspar Frontini has said. Let me perhaps broaden the framework a little but in support of what he said by quoting someone we all know. In mid-November, this eminent person said:
“The world economy cannot grow beyond the limits of its real production, and feeding it by debt and liquidity may only provoke severe corrections”. That’s the view of Pascal Lamy, only three months ago.
My reaction was, “Now he tells us”.
ATTAC and various other organisations, have been saying for years that this highly leveraged economy based on credit and on finance that does not reflect what is really produced in the real economy, was necessarily going to lead to this type of a crunch. Now people are sometimes listening to us, just as they are listening to economists like Nouriel Roubini and others who predicted what was going to happen.
For anyone thinking seriously about the global economy and global finance, it was perfectly obvious that you could not go on forever. Marx explained that the economy went from finance to commodities to finance to commodities etc and and that you could not go forever from finance to finance making profits. I wish Pascal Lamy and many others had thought more about this question before November of last year.
Next I’d like to say that when we talk about a subject in Europe, we cannot always respect the lines that are drawn by the various EU Directorates. There’s one for Trade, for Environment, for Energy, for Overseas Development and so on, but one cannot in a situation of crisis entirely respect those lines although one understands the reasons for them.
Now we are faced not just with a financial crisis which has pushed everything else off the front pages but also with a crisis of inequality, that is, a social crisis that has been building up for 25 years or more, from the time that n neo-liberalism became an enormous economic force in the world, dating from the mid eighties.
Eurostat tells us that the shares of capital and labour in value added has shifted seriously between 1985 and now, so that labour was previously receiving 68% of value added and capital the rest, whereas now the share of labour has been pushed down by 10 to 11 points to 57%.
Other statistics give even more drastic figures showing that capital in the mid-1970s had a share of 26 percent and now has 40 percent. Economists calculate these value added shares on different bases so let us simply accept Eurostat’s figures showing that that labours share is down from 68% until 57%.
What does this mean?
Obviously it means a compression of demand. Working people are receiving less so there is less demand for the goods that are being produced and traded. As Henry Ford said-- not a very nice man, but right on this point—“ I pay my workers so they can buy my cars”. If you don’t pay your workers well enough that they can buy your cars, or your telephones, or washing machines, etc then you will of course have a crisis of overproduction and that is partly where we are today.
One could give many figures about inequality, both within and between countries. Those figures are serious, they are growing and they are not going to change so long as we continue to practice neoliberal policies.
The second crisis, to me the most important one, is climate change and the environmental crisis which includes biodiversity and all the related phenomena. I will not go into the science which everyone here probably knows, but it is more serious than finance and even more serious than the social crisis, because once it takes hold, it is irreversible.
The social, financial and trade crises we can do something about. Climate we can’t - unless we do it now. That’s why I say the climate crisis is most serious and why we must worry about it and integrate it into every single policy in the European Union or indeed elsewhere.
Along with the others comes the food crisis which struck last year and it is largely the result of financial speculation and the very rapid shift into agro-fuels. The oil crisis of last year is also largely a matter of financial speculation, of moving out of one bubble and going into another area seen as more profitable. Or as Gaspar Frontini said, moving away from the developing economies and going towards the dollar, etc etc.
These shifts have not been entirely a bad thing for Europe in the sense that euro has gone down in value and this has helped sales of European exports, but we ought to be listening to a wake up call, particularly on climate change and integrate that into trade. More about that in a moment.
When the Director of DG Trade, Mr O’Sullivan or Commissioner Ashton speak about “Trade”, at the most basic level they are talking about the imports or exports of transnational corporations. It is true that DG Trade is more concerned than a few years ago with Small and Medium Enterprises (SME’s), which as Ms Ashton says are 23 million in Europe. They represent 99% of all European business and provide 70% of all European employment but only 8% of them trade and most of that is in intra-European. Only 3% of SMEs take part in trading activity beyond Europe. Since we know that that intra-European trade is more than 70% total European trade, this is an important point.
Recently some programmes for SMEs have been added by DG Trade but on the whole we should be able to agree that since the time of Commissioner Peter Sutherland and Commissioner Leon Brittain, EU trade programmes have been of, by and for the transnational corporations.
These corporations are always mentioned in the same breath as growth and environment and sustainable development, but I think that that is just rhetoric tacked on to what we can show to be their real interests.
Some rather obscure American president, I think Coolidge, said “the business of America is business. I would say “the business of the European Commission and the EU is transnational corporate business”.
You may recall that Leon Brittain set up the European Services Forum (ESF) of Transnational Corporations because he was jealous that the Americans had a Services Forum for their transnationals and Europe had none.
Recall the fifteen thousand people lobbying here in Brussels. Europe is becoming a laughing- stock with its voluntary registry for lobbyists. Even on the very conservative French TV channel TF1 last night was a segment showing how ridiculous this was in terms of knowing what anybody is spending on lobbying.
Recall how thanks to Olivier Hoedeman, present today, we were able to obtain through the EU Ombudsman the correspondence of the EU with the water companies at the time of the GATS’ request offer process. All the correspondence going to the transnationals was asking “what do you want, what openings, what services, what countries?” This resulted in requests made to 73 countries, often quite poor ones, to open up water services to our corporations. There is no parallel concentration on the environment or on worker rights which are completely passed over.
The newest, highest items on the EU agenda are now market access and access to raw materials. Let me quote Energy Commissioner Piebalgs who was speaking about the Arctic and other environmentally delicate areas. He declared, “You can’t say this is a sanctuary, otherwise it wont work, and if we don’t go in and explore, how are we going to get our energy?” That is generally the attitude. Environmental concerns should not stop commercial activity.
The Commission says that the dependency on imported oil and gas is now 54% and likely to become 83 to 94 % by 2030 and we are also very dependent on metals. So access is at the top of the list. Peter Mandelson before he left said we are in “a race to access raw materials” and we are. Other European institutions like the European Investment Bank also emphasise fossil fuels. The EIB has four times more fossil fuel projects than renewables projects and is also concentrating on a great shift into agrofuels.
Agrofuels are the EU argument for claiming : “we are becoming very environmental.” But as Paul Crutzen, the Nobel Prize- winning atmospheric chemist showed in a paper published last year, agrofuels in fact, if one considers their whole cycle, create three to five times more greenhouse gases than even fossil fuels, so that is not much of a response from the EU.
Raw material access is a priority, it’s a kind of more polite colonialism; and according to Ms Ashton, Commissioners Gunter Verheugen [Industry] and Louis Michel [Overseas Development] have been closely involved.
But there is no development dimension at all in this race for access.
One can confidently predict that unemployment is going to increase with the new EU market access strategy. It is based of course on the WTO, which is in a state of stasis and will probably remain so for a long time, which personally I don’t regret. But employment is not going to increase through the activity of transnational corporations pursuing EPAs, Economic Partnership Agreements, people here know about these.
Using the UNCTAD figures, I looked at transnational corporations’ employment practices and in summary they show these corporations in all areas except fast foods, are reducing their total employment while increasing their sales. They rely on much higher productivity which they can summon, they can afford to invest in productivity, to the point that each of their employees, from the CEO down to the floor-sweeper, is responsible for between 300 and 400,000 dollars worth of sales turn over. You cannot get that with an SME.
TNCs are not increasing employment. Instead they are very often destroying employment and when they go into weaker, more fragile economies. Obviously they are more efficient and will wipe out the local competition very quickly.
The EU emphasis is not just on market access, but on access to government procurement. This is also an extremely worrisome element of the EPAs and the many bilateral agreements in the pipeline. They are concentrating obviously on “behind borders barriers” although we in Europe are not removing our own behind borders barriers to exports from weaker economies.
Let me point out that in the WTO negotiations, we would do well to accept all agricultural products from poor countries as “special products”. It has been calculated that this would only cost Europe about a billion euros a year and it would create a much better climate for trade between the North and the South.
Tax evasion by transnational corporations protected by Europe is an enormous problem. It represents a drain of about 800 billion dollars a year, mostly investment flowing out .
What we call “trade” occurs for about 60% between the affiliates of transnational corporations. As has been pointed out here, one Sony telephone may have 25 different arrows pointing to different countries – so how many for a car? According to the best calculations available, such transactions undertaken by transnational corporations account for about 60% of world trade.
In Europe, we are protecting these kinds of operations. When one has 25 or more countries involved in so-called “trade” to make a single telephone opens up enormous opportunities for transfer pricing and for avoiding taxes.
Let me quote the accounting firm Ernst and Young, who say, “Transfer pricing affects almost every aspect of a transnational corporation and can significantly impact its worldwide tax burden. Our professionals help MNEs [ multinational enterprises], to address this burden… Our multidisciplinary team helps MNEs SMEs develop transfer pricing strategies, tax effective solutions, and controversy management approaches that best fit their objectives.”
If that needs translating, it means that you and I, because we are small people and we have fixed addresses, will be paying our taxes and the transnationals will not. Therefore in both the North and South, national budgets will be much smaller for health, education, and so on.
Let me end by saying that the dread word “protectionism”, I think is a false word, a screen word. If we want to protect ourselves from something or someone, we should not be thinking about other countries, most of which are subject to the dictates of these companies and have very little bargaining power. Enterprise by enterprise, we should rather be protecting ourselves against doing the will of transnational corporations in every regard, because with regard to workers, to the environment, and to democracy - they are a threat to us all. Thank you.