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The row between the European Community and America over trade is a dangerous sign of the times, says Sharon Clarke

Trade war between America and Europe? But that is all supposed to be a thing of the past. Trade wars belong in the 1930s, don't they? They're all mixed up with protectionist blocs, imperialism, and the road to a shooting war itself. Surely those times are not coming back?

Then again, as it suggests at the start of the Manifesto Against Militarism, 'what was unthinkable yesterday seems to happen quite often today' (see page 16). The Great Depression was also supposed to be sealed up in the thirties vault as an historical artefact. The Western world was meant to have entered an indefinite age of prosperity. Yet now we are enduring acapitalist slump at least as serious as the one of 60 years ago.

The threat of a trade war between the USA and the EC followed the breakdown of the latest round of talks about the General Agreement on Tariffs and Trade (Gatt). The problem has been ascribed to various causes.

More than Delors

Some described it simply as a row over exports of rape-seed oil. Many others, including most of the British press, accused European Commission president Jacques Delors of causing the trouble by putting the narrow interests of French farmers before broader concerns about world trade. But the problem goes much deeper than any of this.

The return of 'trade war' to the language of modern diplomacy is the first public expression of what has been an underlying trend for some time. It is a trend towards more direct economic rivalries and open conflicts among the major capitalist powers. The difficulties they have experienced in cobbling together a Gatt deal, even over matters such as oil seeds, is a sure sign that the old arrangements for papering over the cracks and keeping these tensions below the surface no longer work very well.

Many observers have expressed fears that failure to find agreement would lead to a multi-billion dollar loss of trade all round, and plunge the world into a deep and damaging economic slump. This is getting things back to front. The truth is that the world economy is already in slump - and that is why the Gatt talks have run into so much trouble.

Exports of goods and services from the seven biggest industrial economies currently total around $3000 billion a year. These figures represent a real increase of something like three quarters over the past decade. That might sound like a symptom of healthy economic growth. In fact, it reflects the unhealthy state of the leading capitalist economies.

Secret war

As each country has slipped into recession and then slump at home, they have fought harder to compensate by making more profit from trading in overseas markets. With the Europeans, Americans and Asians all trying to get a bigger piece of world trade, tensions have inevitably risen among the major players.

For some years, a sort of secret trade war has been fought out, as governments take steps to protect their national economies against fierce competition from foreign trade. They have rarely imposed old-fashioned tariffs on foreign imports - which is one reason why the Gatt agreement, which deals with such things, has survived for so long. Instead, governments have sought to boost their nation's trade by subsidising exporters, or by using administrative regulations and standards to keep imports out - for example, by banning a foreign aircraft or foodstuff on 'safety' grounds. However these measures are justified in public, the real motive is protectionist.

A more serious development has been the consolidation of regional trading blocs. The moves to form a single market in the EC mark the development of a German-led European bloc. Japan is encouraging the formation of an informal trade bloc in Asia. And the recent formation of the North American free trade zone (free trade inside the zone, protection from the outside) indicates that the USA is making similar arrangements. The Americans were always the champions of global free trade when they ran the world economy; now they too are retreating towards a defensive bloc, under pressure of competition from the EC and Japan.

Cut-throat world

Until now, the underlying trends towards trade war have been shielded behind formal worldwide agreements such as Gatt. The recent public rows show that this arrangement is getting seriously strained. It is becoming more and more difficult for the rival trading powers to keep up the facade that all is well around the conference table, when the reality is that they are at each other's throats in the slump-hit markets of the world.

The governments of the EC, the USA and Japan do not want a trade war. They suffered too much in the thirties, and have benefited too much from the economic cooperation of the post-1945 era, to relish a return to cut-throat competition. That is why the mere mention of possible US sanctions against the EC had them running around in an effort to cobble some sort of deal together.

But whatever paper deals they might be able to do, the real trend in world trade is now clear for all to see. And the deeper the depression becomes, the more difficult it will be for them to prevent all of their old arrangements from coming apart.

Are we in for a rerun of the thirties? Of course not. Things change, and history never repeats itself like an old movie, frame for frame. However, the threat of trade war does confirm that we are in for a dangerous new era of international conflicts, global slump and instability. And it's not over oil seeds.
Reproduced from Living Marxism issue 50, December 1992

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