Mr. Rajamoorthy is a Specialist on International Law, Third World Net Work, Malaysia.

“Globalization” has become the buzzword of our times. More importantly, globalization is being held out by its advocates as the panacea for all our economic woes. The only path to prosperity, we are constantly told, is by adherence to free-market principles. The nations of the South, in particular, are being urged to deregulate and open up their economies to free trade and foreign investment to ensure their speedy transition to the status of developed economies. In a word, globalization has become synonymous with “development”.

Taking this logic to its conclusion, any attempt to resist the process of globalization is, by definition, reactionary and constitutes an anti-development response. In any case, according to the proponents of globalization, resistance is futile. Globalization is being portrayed as an inexorable and almost divinely ordained process. Like the 19th-century proponent of free trade, Sir John Bowring, who is reputed to have remarked “Jesus Christ is free trade, free trade is Jesus Christ”, the proponents of globalization appear sometimes to invest the whole process of globalization with a quasi-religious status.

Its more sober advocates have, however, attempted to provide a mundane explanation as to why globalization is an inexorable and inevitable process. Globalization, they contend, is the result of the inexorable march of science and technology. This claim, however, will not bear any real scrutiny. Scientific and technological development may have facilitated the process of globalization, but no one (other than an extreme technological determinist) will seriously suggest that it has propelled us, against our will, into the process.

The simple truth is that the process of globalization is being pushed by the governments of the North. In so doing, these governments are merely responding to the pressures of their corporations, in particular, the TNCs. To appreciate this point, one need only recall that during the Uruguay Round negotiations of the GATr, representatives of the TNCs chaired and staffed all the 15 advisory groups set up by the Reagan administration to draw up the US negotiating position. It was these corporations that were instrumental in shaping and determining the US policy and stance at these crucial negotiations which have accelerated the whole globalization process.^l

If it is clear that it is the Northern governments, responding to the pressures of corporations and businesses, that are pushing the process of globalization, it is equally clear that they are doing so through certain agencies and organizations. In the words of James Petras, globalization is “the product of state policies linked to international economic institutions”². The most important of these institutions are the IMF, the World Bank, and most crucially, the WTO.

So far as the IMF and the World Bank are concerned, the loans granted by them are always conditioned by the requirement that the debtor country comply with certain policy conditions (i.e. conditionalities). In practice, what this means is that the debtor country must strictly adhere to a Structural Adjustment Programme (SAP) drawn up by the IMP/World Bank. A standard and regular component in such an economic programme is that the country in question must liberalize and deregulate its economy.

With the advent of the Asian financial crisis, the condition that the debtor country must open up its economy to foreign investors has now become an even more significant element in IMF economic adjustment programmes. The case of South Korea is particularly significant. Before the crisis, there were strict limits on the extent of foreign ownership in the Korean economy. Thus, before the IMF deal, the shareholding limit for foreign individuals in a Korean company was 7% while the aggregate foreign ownership in a Korean company was limited to 26%. Under pressure from the IMF, South Korea has now agreed to abolish nearly all restrictions on foreign investments in its financial markets and banking sector. It also agreed to allow foreign investors to acquire 55% of listed companies from December 31, 1997 onwards and 100% by the end of 1998. What was particularly astonishing about this economic programme for South Korea was the fact that there was little attempt by the US to hide its hand in the drafting of the programme. According to a report in The International Herald Tribune (December 19, 1997), some of the toughest conditions (particularly those pertaining to the opening up of the economy) were the handiwork of Robert Rubin, the US Treasury Secretary.

While the IMP and the World Bank have played an important role in pushing the process of globalization, it is the WTO that is today playing the leading role in this process. While the power of the IMP (and the World Bank) to impose economic liberalization programmes is limited to only those impecunious states which seek financial relief from it, all the WTO members are committed, by virtue of their membership of the organization, to its goal of a world free of tariff barriers. With a potential membership of 152 states, its capacity to push forward the process of globalization is enormous.

When a country Joins the WTO, it enters into a contractual obligation to honor its commitments to the goals of the organization. There is a provision for periodical review by the body of the trade policies of individual countries. The organization has the power to enforce its will and decisions by a variety of means, ranging from expulsion (and thus loss of MFN status), to “cross-sectoral retaliation’. There is also a dispute settlement mechanism. In all these respects, it is a far more comprehensive and unique body than the Bretton Woods ‘twins’.

What has made the WTO even more formidable is the fact that, notwithstanding its name, its jurisdiction now extends beyond the domain of trade proper. This extension of its areas of concern was the result of the Uruguay Round talks held under the GATT, the predecessor of the WTO. The talks concluded on December 15, 1994 and, as a result, the WTO was established on January 1,1995 to replace the GATT.

While the GATT was mandated to deal solely with trade in merchandise goods, the scope of its successor body, the WTO, was enlarged as a result of these talks to include four new areas: trade in agriculture, trade and investment in services, intellectual property fights and investment measures. As a consequence of this enlargement of its mandate, the conduct and decisions of the WTO are bound to have far-reaching repercussions upon the people of the South.

To take one example: while agriculture employs less than 5% of the people of the North, it is a sector that employs more than half the population of many developing countries. By bringing “trade in agriculture” within the ambit of the WTO and giving the latter the authority to dictate the policies that should govern in this crucial sector, the power to determine the life and death of many communities in the South is, in effect, being vested in the WTO. The crucial question of global food security will be determined and shaped largely by this single body’s deliberations.

The choice of agriculture for inclusion within the framework of the WTO was not fortuitous. Northern governments are plagued by huge surpluses which their highly subsidized agricultural sectors generate. The opening up of the agricultural sector of Third World countries affords an opportunity to dispose of these huge surpluses. The real beneficiaries will be the small number of TNCs (such as Cargill) which, between them, control over three-quarters of the world trade in cereals. These companies will now be able to have access to the subsidized agricultural surpluses in the North and export them to the South.

Strictly speaking, the liberalization of the agricultural sector in the North should have resulted in an end to the huge subsidies paid to the European farmers. Under the GATT rules, governments in the industrialized world are required to reduce their “trade-distorting” subsidies by 20% and to lower export subsidies by 36% in value terms and 21% in volume terms.

However, during the GATT negotiations, by an act of legal sophistry, the North managed to retain almost intact most of its subsidies to its farmers. The US and the EU, the two dominant players at the negotiations, made a deal between themselves and determined, to their satisfaction, that “direct payments” to farmers (e.g. “set-aside payments” where farmers are paid for withdrawing land from production) are not ‘‘trade-distorting’’ subsidies since they are not paid to promote agricultural production. Hence, both the EU and the US claimed that such payments should be exempted from the agreed subsidy cuts.

The upshot of this is that while Southern countries will be obliged to bring down their subsidies to their farmers, Northern agriculture will continue to be subsidized ³. The dumping by TNCs of this highly subsidized food into Southern markets is bound to destroy Southern agriculture, as farmers in the South will be unable to compete. The whole problem of food security is bound to become a serious problem. The move to include trade in services within the mandate of the WTO was again not fortuitous. This is a sector of the world economy in which the North is dominant. Here again, the pressure exerted on Northern governments by their corporations was clearly decisive. This can be illustrated by the case of telecommunications. Very soon after the conclusion of the Uruguay Round talks, and the inclusion of services within the ambit of the WTO, there was pressure from the North to treat the liberalization of telecommunications as a “priority”. The country which exerted the most pressure in this regard was the USA where, as a result of the policies of deregulation in the 80s, there had emerged a string of wealthy regional telecoms operators (known as “Baby Bells”.) As the US market became saturated, these companies began to put pressure on the US government to press for the international liberalization of the telecommunications sector.

Northern pressure at the WTO finally resulted in the liberalization accord of February 1997. A total 69 countries controlling more than 80% of the world’s telecommunications signed a binding agreement at the WTO. This accord commits these countries to open up most of their local markets to competition from 1998 onwards.

Even as these moves were proceeding, Northern telecommunication companies began to position themselves to take advantage of the rich pickings by a series of mergers and acquisitions. Among the global alliances that have emerged as a result are Concert (which brings together British Telecom and the US company MCI), Global One (consisting of Deutsche Telekom, France Telecom and Sprint of the USA) and World Partners, a coalition of a number of companies, including the US mega-corporation, AT&T. In a briefing paper, the NGO, Panos, warns: “The danger is that liberalization, far from heralding a new era of cheaper, more accessible communications, could foreshadow the emergence of a handful of monolithic, unaccountable, multi-sectoral communications transnational Big Brothers who will control the bulk of communications traffic from telecoms to television and a shift in resources from the poor to the rich”⁴. For the nations of the South, there is the added fear of a loss of their sovereignty as Northern-based corporations gain control of this crucial and vital sector of the economy.

As in the case of agriculture and services, the push for the inclusion of intellectual property rights (a move legitimized by the use of the term “Trade-Related Intellectual Property Rights” or TRIPs) also betrays the desire of Northern and TNC interests to consolidate and expand their dominant position in the world economy. While the idea of a patent as a legal protective device designed to reward and safeguard an investor’s ingenuity is highly attractive, the point to note is that the regime of intellectual property rights which WTO members are all being pushed to legislate and adopt is designed more to confer monopoly rights upon TNCs and corporations rather than to protect any inventor. The extension of patent protection to cover the product, rather than the process by which it was produced, is calculated to serve the interest of corporations which seek to retain monopoly control of their products. By entrenching such an intellectual property rights regime worldwide, the WTO will, in effect, be freezing the North-South technology gap. There can be little hope of technology transfer under such a regime and TNCs are bound to insist on higher licensing fees and tighter conditions of licensing. The new patent regime will make drugs and medicines even more expensive and place them beyond the reach of many of the poorer people of the South. Moreover, the extension of the scope of what is patentable to include genetic material and seeds poses a threat to agriculture. If peasants are compelled to pay royalties for the use of seeds, the threat to social stability will be very real.

While the North has pushed to incorporate into the WTO those economic areas that are beneficial to it and has pushed some of these, e.g. telecoms, on to the “fast track” to ensure that it reaps the benefits speedily, it has done everything to slow down, delay or stagger the liberalization in those sectors in which it will have to bring down its own tariff walls and quotas. The most glaring example of this is textiles, which is of crucial importance to many Third World countries. According to an estimate by the 1994 GATT Secretariat, liberalization of textiles under the WTO would increase the value of the clothes trade by as much as 69% and would result in a 14-37% increase in exports, much of which was calculated to accrue to developing and transitional economies. However, when the Agreement on Textiles and Clothing which integrates textiles into the WTO framework was finally concluded, it emerged that these benefits would be spread over a 10-year period (1995-2005) and 49% of the products to be liberalized would only be liberalized in the year 2005 (or more precisely January 1,2005). In other words, the North is scheduled to remove its quotas and tariffs on nearly half the textile items only at the very end of a 10-year phased-out period.

While the present enlarged mandate of the WTO threatens to have serious repercussions for the South, there appear to be new attempts by the North to extend its mandate even further. The most serious of these is the attempt to incorporate within the framework of the WTO a foreign-investment treaty. Known as the Multilateral Investment Agreement (MIA), the proposal amounts to bringing within the framework of the WTO the whole issue of investment policy - a further radical departure from the original concept of the WTO. If the proposed treaty is adopted, all its signatories would be obliged to grant unfettered access to foreign investment with 100% equity in all sectors of the economy (other than those relating to security). They would also be obliged to confer “national treatment” to foreign investors, granting the same rights to foreign capital as local capital. They will also have to take all “accompanying measures” to facilitate such investment by permitting full profit repatriation, and changing tax and other laws which hinder the entry and operation of such capital.

The implications of this proposal are very disturbing for the countries of the South. The power to regulate the entry, establishment and operation of foreign investment has been a useful tool in domestic capacity-building and to ensure balanced development. In Malaysia, for example, it was skilful regulation of foreign investment that enabled the equity share ownership of Malaysians in the modern sector to increase from 30% in 1970 to nearly 70% in 1990. Further, given the multi-ethnic make-up of the society, it was also desirable to ensure that the share capital ownership was equitably spread out among the different communities. This was made possible by the power vested in the government to regulate and impose conditions on foreign investment to ensure that the growth generated by it accrues to all the communities. More importantly, the need to regulate such investment stems from the belief that political independence is meaningless if it is not backed by economic independence. Having experienced the full horrors of colonialism, the countries of the South are naturally apprehensive in opening up all sectors of their economy to the unfettered entry and operation of foreign investment. If the crucial and commanding sectors of the economy are all in foreign hands, the very sovereignty and hard-fought independence of these countries will be at stake.

Because of the resistance of countries of the South at the INTO Ministerial Conference in Singapore in December 1996, the issue of the foreign-investment treaty was assigned to a working group “to examine the relationship between trade and investment”.

However, even as the working group was being assigned to study this question, moves were already afoot to force this issue and present it as a fait accompli upon Third World countries. It has now emerged that since May 1995, the trade ministries of the OECD countries have been secretly negotiating the text of a treaty designed to achieve the same ends as the MIA, known as the MAI (Multilateral Agreement on Investment). This treaty has been dubbed variously as a “Bill of Rights for Corporations”, “a Corporate Rule Treaty” and “a Capitalists’ Charter” in view of the far-reaching powers it seeks to confer upon corporations.

Like the MAI, this treaty has some very disturbing implications. Under its terms, a foreign corporation will be empowered to establish itself in any sector of a host government’s economy and be entitled to receive “national treatment” from its hosts. Any policy or regulation which seeks to promote local enterprises at the expense of foreign investors or provide them with preferential treatment will be illegal. By the same token, any regulation which seeks, on any grounds other than national security, to reserve any sector of the economy for local investors will be a violation of the treaty.

The treaty will also bar any government from pursuing any policy which will constitute a threat to foreign investors or merely hinder their free and unfettered business operations. This rules out not only the classic nationalist response of nationalization or expropriation without compensation, but also, given the broad and elastic definition of “expropriation” under the treaty, any measure having an equivalent effect. This includes any move that results in an investor “suffering a lost opportunity to profit from a planned investment”. As for the bar on restrictions that hinder businesses, this effectively abolishes the right of governments to regulate capital flows, including the speculative flows which have wreaked so much havoc in the financial crisis that has gripped Asia and some other parts of the world.

The treaty seeks not only to confer power to corporations at the expense of governments and communities, but also to secure such power by providing a new and unique avenue for legal redress. Foreign corporations will now be entitled not only to sue governments in domestic courts, but also to seek legal relief in international tribunals for alleged violations of the MAI. Given the wide ramifications of some of the treaty provisions, the opportunities for foreign corporations to hold Southern governments to ransom, by instituting multi-million dollar legal claims against them, are enormous. Clearly, the MAI is designed to wrest power from states, governments and communities and to empower corporations. While some of the governments and NGOs in the South which viewed the MAI as another battering ram to open up their national economies to Northern corporations were the first to express concern at this treaty, the protests against it have now become worldwide. The realization that it is a threat not only to the South but to communities and citizens everywhere has given rise to an international campaign against it.

As protests by citizens’ groups, environmental groups and other NGOs against the treaty mount, some help has come from an unexpected quarter. The US has, for reasons of its own (including fears that the treaty can pose a challenge to such laws as the Helms-Burton law and the D’Amato law which seek to penalize foreign corporations which trade with or invest in Cuba, Iran or Libya), declared that it would not accept the treaty in its present form. As a result, although the treaty was scheduled to be completed by the end of April, 1998, the OECD Ministers meeting in Paris on April 28, in effect, admitted that because of the widespread opposition, the work has yet to be completed. It directed the negotiators “to continue their work with the aim of reaching a successful and timely conclusion of the MAI” but specified no deadline for the work to be completed.

Human rights violations

Globalization has brought in its train, great inequities, mass impoverishment and despair. It has fractured society along the existing fault lines of class, gender and community while, almost irreversibly, widening the gap internationally between the rich and the poor nations. While it has enriched a small minority of persons and corporations within nations and within the international system, it has marginalized and violated the basic human rights of millions.

Globalization has resulted in gross human rights violations for millions of workers (particularly women workers), peasants and farmers, and indigenous communities. It has also resulted in serious impairment of the Right to Development of countries and peoples of the South.

(a)  (i) So far as workers are concerned, globalization has resulted in the violation of the fundamental right to work. In their drive for profits, companies, in particular TNCs, have been restructuring their operations on a global scale. The result has been massive unemployment. In 1995, the ILO announced that one-third of .the world’s willing-to-work population was either underemployed or unemployed, the worst situation since the 1930s. In its latest available report (1996/97), the ILO notes that the world unemployment situation still remains “grim”⁵. The goal of full employment, which was one of the pillars of the social consensus that prevailed after the Second World War, has been jettisoned by nearly all governments.

(ii)  Globalization has also engendered or accentuated the process of the casualization of labor and the informalization of labor. Employers are increasingly resorting to employing workers on part-time, short-term, contracts. They are also resorting to the informal economy by farming out or sub-contracting work, e.g. in textiles and electronics. More ominously, many factories which were previously part of the formal economy have moved their operations entirely to non-unionized workforces in new locations and/or sub-contracted units. Here, not only are the wages low, but the legal protection of workers is minimal.

To obtain some idea of the size and scale involved in this process of informalization, we need only turn to India. A mere 8% of the labor force is in the formal economy while over 90% work in the informal economy. The latter are not unionized, have little or no legal protection or security and are subject to ruthless exploitation. Significantly, more than 50% of the workers in this sector are women.

When the Indian Government adopted a policy of economic liberalization in 1991, many companies (including TNCs) with factories in the high-wage city of Mumbai (formerly Bombay), got rid of their unionized labor force (mostly male workers) by a variety of insidious means and moved their operations to low-wage and depressed areas to avail themselves of the large supply of unorganized and unprotected, mainly female, labor.

This trend is not peculiar to Bombay but is a fact of life under globalization in all the major industrial areas in India. Amrita Chhachhi, an activist, describes the problems of women workers in the electronics industry in Delhi thus: “As a result of the current economic policy, even well known TV firms [are] sub-contracting industrial work. This has resulted in a large number of small ancillary units where women are employed at below minimum wages. These units are so flexible that they can close down operations and relocate them at short notice. As a result, all attempts at organizing women laborers have been failures. It has become extremely difficult to even trace the movement of these units from location to location. Unionization is impossible in this scenario”⁶.

(iii) Globalization, with its demand for “flexible” labor, has resulted in the “feminization of labor”. The point is that the overwhelming majority of female labor in the South is concentrated in low-wage industries such as textile, clothing and footwear production. Workers in such industries are not only inadequately protected as regards health and safety, but they also do not enjoy security of employment in view of the tendency of such investors to move offshore to cut costs. Thus, textile workers in South Korea have been retrenched as a result of the relocation of their factories to countries such as Bangladesh and Vietnam.

(iv) Mention must also be made here of the fact that the impact of globalization on traditional cottage industries has also adversely affected women workers. Thus, cheap imports have resulted in the closure of a number of such industries in India and Pakistan and the retrenchment of their largely women workers.

(v) Finally, globalization has, by intensifying the tendencies towards uneven development within countries and within regions, intensified the development of the phenomenon of migrant workers. Such workers (especially those who cross national frontiers) are subject to a whole range of human rights violations - discrimination, absence of labor protection, low wages, and physical and (in the case of women) sexual abuse.

(b) Globalization poses a serious threat to the right of livelihood of millions of traditional farmers in the South. As the hitherto protected agricultural sector of the South is, in compliance with the requirements of the GATT Final Act, opened up to imports (mainly from the North) and as land laws are revised to facilitate corporate farming, there will inevitably be large-scale displacement of such communities. Fears have also been expressed that the patenting of seeds by multinationals such as Cargill will result in traditional farmers being displaced. This concern has given rise to massive demonstrations by farmers, particularly in India.

All these developments, and in particular the drive under the WTO regime to make access to food mainly dependent upon market mechanisms, are a threat to food security - the most fundamental of all human rights.

(c) Globalization has provided a new impetus to the destruction of the habitat and livelihood of indigenous communities in many countries of the South. The continuing displacement of such communities as a consequence of the intensification of such economic activities as mining and logging is a grim reminder of such violations of human rights.

(d) Where the mechanism for promoting globalization has been the IMP/World Bank SAP, it has resulted in a massive violation of human rights. Analyzing the impact of such programmes on the realization and enjoyment of selected economic, social and cultural rights. Danilo Turk, a Special Rapporteur for the Commission on Human Rights, in a report prepared for the UN, pointed out that these programmes had resulted in a violation of the right to work, the right to food, the right to adequate housing, the right to health, the right to education and the right to development ⁷. The combined effect of the violation of the right to food and the right to health has had devastating consequences. According to Davison Budhoo, an economist who had worked with both the World Bank and the IMP before he quit the latter in protest against its policies, on the basis of the figures released by UNICEF, it is estimated that those policies led directly to the death of 70 million children under 5 years in the Third World between the years 1982-1990 and indirectly to the destitution and impoverishment of several hundred millions more ⁸.

As for the violation of the Declaration on the Right to Development, which was adopted at the UN General Assembly in 1986, the Report of the UN Global Consultation on the Realization of the Right to Development as a Human Right observes:

Failure to take into account the principles of the right to development in agreements between states and the World Bank, IMP and commercial banks with regard to external debt repayment and structural adjustment frustrates the realization of the right to development and of all human rights. The prevailing terms of trade, monetary policy, and certain conditions tied to bilateral and multilateral aid, which are all perpetuated by the non-democratic decision-making processes of international economic, financial and trade institutions, also frustrate the full realization of the right to development⁹.

If the proposal by the EU for an MIA within the framework of the WTO or the proposal for an MAI by the OECD is adopted, then the Right to Development, so far as countries of the South are concerned, will be further whittled away.

The Right to Development “implies the full realization of the right of peoples to self-determination”, which includes “the exercise of their inalienable right to full sovereignty over all their natural wealth and resources”. The same right also includes the right of peoples and nations “to freely pursue their economic, social and cultural development.” As the adoption of the MIA or the MAI will result in the loss of countries’ right to regulate the entry, behavior and operations of foreign investment in the interests of their own people, it is not difficult to appreciate why it is bound to result in an impairment of the Right to Development.

Conclusion

It is clear that, more than ever, the cards are stacked against the South. When these countries attained political independence in the 50s and 60s, the whole question of the path of development open to them came into question. After some fitful starts, it became evident that it was not possible for the countries of the South to embark on the path of industrialization (which was perceived as the only way to escape from the blight of underdevelopment) by integrating themselves into the international capitalist system. The only alternative open to them was to opt for the path of independent self-sustained development, with the state taking the leading role.

This whole thesis was, however, challenged by the recent phase of globalization when a small number of countries in East Asia began to display dramatic economic results by opening up and deregulating their economies and integrating them with the international capitalist system. The North paraded these countries as models which the rest of the countries of the South should emulate. As a result, country after country began to queue up in the quest for “Tigerhood”.

With the onset of the financial crisis in Asia, the illusion that globalization is the way out for the countries of the South is now being laid to rest. Clearly, the whole question of the path of development which nations of the South should opt for is as open as ever. It is hoped that this crisis will provide an opportunity for some re-thinking, debate and hard decisions.

Notes:

1. Watkins, K.: “Global Myths”, Red Pepper, June 1996, p.14.

2. Petras, J.: “The Process of Globalization”, Links, No. 7.

3. Watkins, K.: “Free Trade and Farm Fallacies: From the Uruguay Round to the World Food Summit”, The Ecologist, Vol. 26, No. 6, Nov/Dec 1996, p.244.

4. Deane, J. and A. Opoku-Mensah: “Telecommunications: Development and the market: The promises and problems”, Panos Briefing No. 23, March 1997.

5. It is only fair to add that the ILO Report does not attribute this “grim” unemployment situation solely or even mainly to globalization, arguing that “economic liberalization” will bring far greater gains as compared to the alternative of protectionism. While conceding that there is “some basis” for concerns about “the negative social effects of globalization”, it contends that it is “not true that globalization is an overwhelming supra-national force that has largely usurped national policy autonomy ...” It asserts that “national policies can, and should, give priority to mitigating negative effects on globalization” of financial markets), and the desperate and helpless attempts by the national regimes to come to grips with the soaring unemployment situation in the face of the continuing onslaught of the “supra-national” financial markets, the above bland assertion about “national policies” has an air of unreality about it.

6. Hensman, R.: “Minimum Labor Standards and Trade Agreements: An Overview of the Debate”, Economic & Political Weekly, 20-27 April, 1996.

7. Cited in Danilo Turk, “How World Bank - IMF policies adversely affect human rights”, Third World Resurgence, May 1993, p.23.

8. Budhoo, D.: “IMF-World Bank wreak havoc on Third World”, Third World Resurgence, July 1992, p.17.

9. Cited in Turk, ibid.