KUALA LUMPUR & SYDNEY, Dec 4 2018 (IPS) - In criticizing the ‘free trade delusion’, UNCTAD’s 2018 Trade and Development Report proposes an alternative to both reactionary nationalism, recently revived by President Trump, and the corporate cosmopolitanism of neoliberal multilateral discourse in recent decades by revisiting the Havana Charter on its 70th anniversary.
From ITO to WTO
Instead, it urges reconsideration of lessons from the struggle from 1947 for the Havana Charter. Although often depicted as the forerunner of the General Agreement on Tariffs and Trade (GATT), the Charter was far more ambitious.
Initially agreed to 70 years ago by over 50 countries — mainly from Latin America, as much of the rest of the developing world remained under European colonial rule — it was rejected by the US Congress, with GATT emerging as a poor compromise.
As envisaged at Bretton Woods in 1944, over 50 countries began to create the International Trade Organization (ITO) from 1945 to 1947. In 1947, 56 countries started negotiating the ITO charter in Havana following the 1947 United Nations Conference on Trade and Employment in Havana, eventually signed in 1948.
The idea of a multilateral trade organization to regulate trade — covering areas such as tariff reduction, business cartels, commodity agreements, economic development and foreign direct investment — was first mooted in the US Congress in 1916 by Representative Cordell Hull, later Roosevelt’s first Secretary of State in 1933.
However, the US Congress eventually rejected the Havana Charter, including establishment of the ITO, in 1948 following pressure from corporate lobbies unhappy about concessions to ‘underdeveloped’ countries. Thus, the Bretton Woods’ and Havana Charter’s promise of full employment and domestic industrialization in the post-war international trade order was aborted.
In their place, from 1948 to 1994, the GATT, a provisional compromise, became the main multilateral framework governing international trade, especially in manufactures, the basis for trade rules and regulations for most of the second half of the 20th century.
The Uruguay Round from 1986 to 1994, begun at Punta del Este, was the last round of multilateral trade negotiations under GATT. It ended the postwar trading order governed by GATT, replacing it with the new World Trade Organization (WTO) from 1995.
Developmental fair trade?
The UNCTAD report urges revisiting the Havana Charter in light of new challenges in recent decades such as the digital economy, environmental stress and financial vulnerabilities. So, what lessons can we draw from the Havana Charter in trying to reform the multilateral trading order?
In light of economic transformations over the last seven decades, it is crucial to consider how the Havana Charter tried to create a more developmental and equitable trading system, in contrast with actual changes in the world economy since.
After all, the Charter recognized that a healthy trading system must be based on economies seeking to ensure full employment while distributional issues have to be addressed at both national and international levels.
Profitable, but damaging business practices — by large international, multinational or transnational firms, abusing the international trading system — also need to be addressed.
The Charter recognized the crucial need for industrialization in developing countries as an essential part of a healthy trading system and multilateral world order, and sought to ensure that international trade rules would enable industrial policy.
The GATT compromise exceptionally allowed some such features in post-war trade rules, but even these were largely eliminated by the neoliberal Uruguay Round, as concerns about unemployment, decent work and deindustrialization were ignored.
Paths not taken
The evolution of the international trading system has been largely forgotten. Recent and current tensions in global trade are largely seen as threatening to the post-Second World War (WW2) international economic order first negotiated in the late 1940s and revised ever since.
But the international order of the post-WW2 period ended in the 1970s, as policymakers in the major developed economies embraced the counter-revolutionary neoliberal reforms of Thatcherism and Reaganism against Keynesian and development economics after Nixon unilaterally destroyed the Bretton Woods monetary arrangements.
Besides international trade liberalization as an end in itself, financial liberalization and globalization were facilitated as financial markets were deregulated, not only within national economies, but also across international borders.
Industrial policy, public enterprise and mixed economies were purged by the new neoliberal fundamentalists as the very idea of public intervention for healthy, equitable and balanced development was discredited by the counter-revolution against economic progress for all.
With multilateralism and the Doha Development Round under assault, retrieving relevant lessons from the Havana Charter after seven decades can be crucial in steering the world between the devil of reactionary nationalist ‘sovereigntism’ and the deep blue sea of neoliberal corporate cosmopolitanism or ‘globalism’.