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The Struggle for the Third World

In spite of the fierce United States backlash, the challenge to its jealously guarded economic hegemony in Latin America remains strong. But by 1978 there were other factors intensifying the atmosphere of competition. One was the arrival on the scene of newly emerging “semi-industrialized” or middle-range countries, such as Brazil, which also had to find outlets for their surplus industrial capacity. In 1978 Brazil launched an all-out drive to increase its trade in the Middle East and Africa.42 This inevitably brought it into competition with the EEC, particularly with France, which already by 1972 was the largest exporter of industrial equipment to the Arab world and was engaged on a concerted campaign to supply capital goods to Iran and other major Middle East oil-producing countries.43

The second factor was the increasingly acrimonious dispute between Japan, the United States, and the EEC over Japanese export surpluses, and insistent European and American pressure for restrictions on Japanese exports. These disputes are perhaps the most prominent feature of the current disarray, and one result has been to turn Japanese attention to alternative outlets, particularly in Southeast Asia.44 If Japan is to compensate for the closing, or at least for the freezing, of European markets, it is here that its opportunities lie.

It can count on a sympathetic audience. For one thing, the so-called “Common Agricultural Policy” of the EEC—which means, in effect, a protective barrier for inefficient French producers and is one of the main bones of contention between the EEC and the United States—was a body blow to Australia and New Zealand. Following the British entry into the Common Market, both countries were given five years, until 1978, to cut down, if not actually eliminate, their traditional exports of relatively cheap farm produce (butter, cheese, meat) to the United Kingdom.45 One might wonder how any British government, even that of the egregious Edward Heath, would lend its name to so disadvantageous a deal. In any case, the result was to build up resentment, which erupted last April when the Australian prime minister, Malcolm Fraser, denounced the EEC as “a narrow self-interested trading group trying to make the world dance to its tune.”46

At the same time Australia and New Zealand drew closer to the Association of Southeast Asian Nations (ASEAN), which also were suffering from the growing wave of protectionism in Europe and the United States.47 By 1978 discriminatory restrictions on textile imports, in flagrant contradiction of the principles of the General Agreement on Tariffs and Trade (GATT), were provoking bitter reactions throughout the region. The Common Market, the chairman of the Hong Kong Cotton Spinners’ Association said, was imposing its will on its “weaker trading partners” by force, and at the ASEAN Trade Fair in Manila President Marcos called upon the ASEAN group to “look within itself to absorb the market displacement” caused by “protectionism in the region’s traditional trading partners” and to “search aggressively for new markets.”48

Even more serious in its implications was the hostility of the United States and the EEC to the efforts of developing countries to reduce their dependence on light industry and build up their investment in capital goods, particularly steel and shipbuilding. By 1978, at a time when world shipbuilding was in the throes of a prolonged slump, Third World shipbuilders, South Korea among others, were winning 30 percent of new orders.49 The hostile reaction of the United States and Western Europe to this “threat” and to the parallel threat from Third World steel, was noted in an earlier article.50 It also had the result of widening the already existing discord among the industrial countries, Japan in particular declining to participate in a proposed regulatory organization because of its belief that “any such body would simply be used by Western ship-building nations to attack developing countries’ industrial policies.”51

Underlying this Japanese reaction is the fact that the Western attempt to clamp down on Third World industrialization also indirectly affects Japan, already hit by the severe import restrictions imposed by the United States, Great Britain, and other European countries. The implications for Japan of the American plan to restrict exports of steelmaking facilities and technology from advanced nations to developing countries were spelled out last April by the Japanese Ministry of International Trade. “If realized,” it said, “the American bid would have a serious impact on Japan’s national policy to help in the industrialization efforts of developing nations.” It would also check, if not halt, Japanese exports of steel-manufacturing equipment, such as it had provided in the past for Brazil and Malaysia, was now supplying to Qatar, and the prospective assistance it hoped to extend to China.52

Faced by increasing discrimination in the West, Japan has in fact embarked on a policy of taking a lead in the economic development of the ASEAN region. This was the purpose of the tour undertaken by the minister of international trade and industry at the beginning of May, during which he promised financial and technological cooperation to the Indonesian and Malaysian state-owned oil companies and the completion of a petrochemical complex in Singapore.53 Hitherto Japanese investment in Southeast Asia had mainly gone to labor-intensive light industry. Now, it was announced, it would shift to “capital-intensive industries,” including steel, aluminum, and chemicals. And the whole effort would be underpinned by a $20 billion “cooperation fund,” parallel to the European Development Fund in Africa.54

At the same time Japan has come out openly in support of the developing countries’ criticism of GATT, the IMF, and the whole economic system based upon them. This system, the president of the Japanese Federation of Employers’ Associations announced at a highlevel conference last May, “favors the advanced countries,” handicaps the industrialization of the less developed countries, and has created a situation which is simply “not acceptable.”55 Coming from such a source, this statement, with its implicit attack on American trading policy, is extremely significant.

It also shows the direction in which Japanese policy is veering. By championing a revision of the GATT system to take account of the interests and requirements of the developing countries, Japan is evidently placing itself in a position to assume the leadership of the Third World against the West. Its efforts are concentrated, for obvious reasons, on Southeast Asia, but it is ready to lend its support to developing countries elsewhere. “We will extend economic and technical aid to the Arab oil ‘have-not’ countries,” the Japanese foreign minister declared a short time ago, announcing a plan to build a $3 billion petrochemical plant in Saudi Arabia, as well as a desalination plant and “oil refineries worth billions of dollars.” 56

What we are witnessing today,” Helmut Schmidt, then finance minister of the Federal Republic, wrote in 1974, is “a struggle for the world product.”57 Subsequent events amply bear him out. When times are good, it is a struggle for raw materials; when times are bad, it is a struggle for markets. Given the level of unemployment and of unused productive capacity in the advanced industrial countries today—given also their failure, from Rambouillet in 1975 to Bonn in 1978, to reconcile their differences and take effective steps to put their own house in order—the competitive struggle to capture Third World markets is now an essential ingredient of their political strategy.

Even so, it would be a mistake to exaggerate its importance. By comparison with the insistent problems of inflation, stagnation, and unemployment, which face them at home, and the disarray of the international monetary system, the Third World still does not rank high among the priorities of Western governments. Nevertheless, this is where the action is taking place, and for that reason it is where any realistic assessment of the current state of “North-South relations” should begin.

III

If we attempt at this point to draw the threads together, the first thing to say is that they do not make a neat and tidy package. Since 1975 things have been going around in circles, not advancing in any easily recognizable direction. They have also been characterized by divergence rather than convergence. All we can safely say, on the evidence to date, is that progress in North-South relations is going to be more halting, slower, and more uneven than seemed likely three years ago—if there is any progress at all, which is certainly not assured.

It also has to be admitted that the results to date have been meager and disappointing from the point of view of the developing countries. Whatever expectations may have been aroused by the New International Economic Order, they certainly have not been fulfilled. On the other hand, we are not at the end of the road; and there is a good chance, when the failure of the policy of negotiation to produce substantive results is recognized—sooner, probably, rather than later—that the developing countries will revert to the policy of “self-reliance” which was put in cold storage in 1975. They may not do so with enthusiasm; but they will be driven to do so if, as seems probable, it is the only option left open to them.

It might be different if the West were ready to come forward with a workable alternative, but of that there is no visible sign. Hardheaded Western economists have argued with force that it is in the rich countries’ own best interest to help the poor, and in 1977 the London Economist called for a “Marshall Plan for the Third World” as the most effective means to get world trade moving again.58 The message does not appear to have reached Washington, or Bonn, or the City of London. Even Albert Fishlow, who a couple of years ago pinned his hopes for a peaceful evolution of North-South relations on trade expansion, has apparently changed his mind and agrees that “a liberal trade regime capable of absorbing the increasingly competitive exports of manufactures from developing countries now seems more remote than ever.”59

It might also be different if the developing countries had seriously attempted to implement the policy of “self-reliance” put forward in 1974 and 1975. Of this, unfortunately, there is little sign. There is now agreement across a wide political spectrum that the “central development problems for most LDCs are internal,”60 or, as the Algerian minister of industry and energy has put it, that “the real solution of the development problem lies primarily in the capacity of each of the developing countries to mobilize its resources and energies.”61 Nevertheless, there is no doubt that most developing countries still rely on trade with the West and export earnings, “supplemented by financial transfers from the developed countries,” to provide “the financial resources needed for development.”62

Some of the reasons for the retreat from the strategy of self-reliance have been examined in an earlier article.63 In addition, it is often argued that to expect the governing elites in the developing countries to undertake fundamental reforms is like asking them to saw off the branch on which they are sitting.64 This cynical view is perhaps exaggerated.65 But the fact remains that the two most effective methods of mobilizing internal resources—viz. the systematic improvement of agricultural conditions and a high level of saving—require reforms which, almost certainly, could only take place at the expense of privileged, wealthy minorities.

  1. 42

    Financial Times, April 20, 1978.

  2. 43

    Financial Times, May 15 and 29, 1976; cf. Kaldor, Disintegrating West, p. 158.

  3. 44

    The early phases of the Japanese trade offensive in Southeast Asia are described, unsympathetically but with an abundance of detail, by Jon Halliday and Gavan McCormack, Japanese Imperialism Today (Penguin Books, 1973).

  4. 45

    Evans, Politics of Trade, pp. 70-71. Other Commonwealth countries (e.g., Cyprus) were, of course, also similarly affected.

  5. 46

    Financial Times, April 15, 1978.

  6. 47

    Daily Yomiuri (Tokyo), May 9, 1978.

  7. 48

    Daily Yomiuri, May 9 and 11, 1978; Financial Times, May 27, 1978.

  8. 49

    Times (London), April 20, 1978; Asahi Evening News (Tokyo), May 10, 1978; cf. The New York Times, July 9, 1978.

  9. 50

    The New York Review, October 26, 1978.

  10. 51

    Financial Times, April 20, 1978.

  11. 52

    Mainichi Daily News (Tokyo), May 13, 1978.

  12. 53

    Mainichi Daily News, May 7, 1978.

  13. 54

    Japan Times (Tokyo), May 10, 1978.

  14. 55

    Daily Yomiuri, May 11, 1978.

  15. 56

    Asahi Evening News, May 11, 1978.

  16. 57

    The World Economic Crisis, edited by William P. Bundy (Norton, 1975), p. 110.

  17. 58

    Michael Harrington, The Vast Majority: A Journey to the World’s Poor (Simon and Schuster, 1977), pp. 243-244.

  18. 59

    Foreign Policy, no. 30 (Spring 1978), p. 141.

  19. 60

    Díaz-Alejandro, Rich and Poor Nations in the World Economy, p. 156.

  20. 61

    Towards a New International Order: An Appraisal of Prospects, Report on the Joint Meeting of the Club of Rome and of the International Ocean Institute held in Algiers on October 25-28, 1976 (Algiers, 1977), p. 21.

  21. 62

    Ibid.

  22. 63

    The New York Review, October 26, 1978.

  23. 64

    These arguments are summarized by Richard R. Fagen in Rich and Poor Nations in the World Economy, pp. 188-199.

  24. 65

    Cf. Roger D. Hansen’s comments, Rich and Poor Nations in the World Economy, pp. 246-247.

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