Ref. :  000038289
Date :  2015-04-27
Language :  English
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Economic Diplomacy as a weapon


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War is a continuation of political intercourse carried on with other means.
Klaus von Clausewitz (Vom Kriege)



I think we are already in a Third World War that will decide whether the future is an Anglo-Saxon unipolar one or a multipolar one. The military aspect of the fight is done by proxies, because a direct confrontation between the main players would result in mutual defeat. Money is the nerve of war (Thomas More), the strategy is to economically exhaust adversaries; the weapon of choice is economic diplomacy.

Putin proposes sharing with Europe the resources of the Euro-Asian Economic Union, to create an economic entity from Lisbon to Vladivostok. That is the worst Anglo-Saxon nightmare, because the world economy based on the dollar would cease to be and continental Europe would return as a major power. Such an advantageous proposal for Europe should have awakened European enthusiasm, but its political class serves interests distinct from those of their peoples. Therefore it collaborated in the coup in Kiev, which destabilized Ukraine, its neighbour, and jeopardized its most convenient energy connection.

The United States took over from Britain to serve the same financial interests and also inherited the same policy of sowing conflicts, that justify military bases and invasions everywhere. The excesses committed, with an unbridled emission of inorganic dollars that fuel the rise of stock market values, disassociated the financial sector from the rest of the economy, which shows negative indicators. The dollar must maintain its exceptional and indispensable currency role, because its use is a worldwide tribute paid to the United States. The network of free trade and now partnership agreements the US proposes has a vital role to maintain the use of the dollar as a reference value. It is to maintain that seigniorial advantage, that today the US proposes two ambitious agreements, negotiated in secret: the Trans-Pacific Partnership Agreement (TPP) and the Trans-Atlantic Trade and Investment Partnership. In the first, the US excludes China; in the second it excludes Russia.

This week has seen a wave of popular protests against these two initiatives of American economic diplomacy. On April 21, in Washington, unions and many House Democrats protested against the Trans-Pacific Partnership (TPP). On April 19, all across Europe people protested against the Transatlantic Trade and Investment Partnership (TTIP), just after the US Congress authorized, on April 17, the so-called Fast Track, to negotiate it.

Such a Fast Track, of which the official name is "trade negotiating authority", came this time with a curious condition. Section 8, on Sovereignty, says that all US trade agreements are not binding on the United States, if they contradict any American rule, present or future. Whereupon the agreements are binding only for US partners, but for the US it is only when it wants to. To better ensure such an exception, Congress granted itself the power to decide if a case is part of international law. The vassals only have the rights that their master is good enough to recognize to them.

China, for its part, has been very successful with its own network of FTAs and EPAs, where trade can also be done in remimbi; in particular the Regional Comprehensive Economic Partnership, which excludes the United States, but includes important Pacific economies such as Japan, India, South Korea, Australia and Indonesia. Another Chinese initiative is a USD 40 billion fund to build transport infrastructure and industrial cooperation among all Asian countries that the land and maritime versions of the New Silk Road goes through.

In the financial area of economic diplomacy, strategic moves are also taking place. Since the Bretton Woods Conference in 1944, the US had veto power in the International Monetary Fund, the World Bank and in regional development banks. Their loans impose measures inspired in neoliberal philosophy favourable to the interests of big business. Countries like China, now the world's largest economy, want to update the value of the individual vote in these international financial institutions, but the US vetoes it. Such rigidity led to the creation of two new financial institutions: the New Development Bank (USD 40 billion) of the BRICS and Asian Infrastructure Investment Bank (57 countries, USD 50 billion) of which all financially important countries are part, but for Japan and the US.

The content of the Association Agreements

Although negotiated in secret, the content of the agreements proposed by the United States to the Pacific Rim and to the European Union are well known, because there is nothing actually negotiated, but to adhere to a prewritten text for membership, as in contracts with banks. The United States has imposed on its partners the same text since NAFTA, with Mexico and Canada in 1994. It has been the same model for Jordan, Chile, Central America (CAFTA), Morocco, Colombia and a long etcetera. When the US wanted to expand it regionally, with the FTAA, it was firmly rejected in Buenos Aires, by Mercosur countries, plus Bolivia, Ecuador and Venezuela.

The main disadvantage of these agreements, which pretend to be several and are always the same, is that they impose neoliberal economics as the only policy and look only to the gain of Big Business. Their most salient features are four.

On trade they require an indiscriminate openness to US subsidized agricultural exports - even including OGMs - that destroy local agriculture. That also destroys a source of national culture and causes a peasant exodus to cities where their overcrowding generates misery and crime or pushes them to desperate migration. Such is the case of Mexico and Central America.

On Intellectual Property, they impose norms that prolong patent monopolies on production of pharmaceuticals and agrochemicals. The manufacture of cheap generic pharmaceutical drugs is delayed and public health care becomes more expensive. In agrochemicals, it postpones the use of new products to the detriment of agricultural productivity and performance.

On foreign investment, they consider it such by the mere purchase by a foreign entity of equity in a domestic company, without any new contribution, be it a capital increase, new infrastructure, new technology or new jobs. The host State must open the door and guarantee the success of the foreign investments and will respond before foreign arbiters for any change that may affect their profits. For example, Occidental Oil obtained a ruling against Ecuador for $ 2.3 billion, because Ecuadorian courts applied Ecuadorian laws against corruption.

On trade in services, those agreements change the approach used at WTO of a 'positive list', which opens access only for the sectors mentioned in a list, for the approach of a 'negative list' where what is not formally excluded remains open. That opens all future services and removes the right to favour any future national development policies. It is remarkable that in those services agreements the US explicitly excludes all the states and only subscribes for the District of Columbia and Puerto Rico.

A Perspective of Economic Diplomacy

Since the sixteenth century, Anglo-Saxons, under the label of free trade, practised economic imperialism. Such is the case of the English East India Company, the first Big Corporation, that imposed its rule to the lords of India, Pakistan, Bangladesh, Myanmar and Sri Lanka. It is meaningful that the US flag is identical to the one used by the BEIC, but for upper quadrant where the Union Jack is replaced by stars.

What is negotiated today at multilateral forums, such as WTO, WIPO, IMF, World Bank, WHO or ILO, almost always involves an erosion of sovereignty; a reduction of space for autonomous social and economic policies. Harsher demands are made in all bilateral agreements under free trade, economic cooperation or in regional partnership tags.

The classic perception that international agreements reflect and consolidate a Status Quo does not apply to Economic Diplomacy. The initiative here tends to alter the Status Quo. It is altered by negotiating international standards which have political, economic and social consequences within countries. The rules do not always deal with economic issues. The negotiations on trade in services are about changes in internal legal codes. The WIPO negotiations are on future private privileges and monopolies. The ILO moves along under coalitions of governments, employers and unions. International financial institutions often impose economic agendas with their loans. The Doha Round of the WTO, launched to stop subsidizing agricultural exports, now turns around the future opening in agriculture, industry and services.

The use of economic strategies to weaken the enemy before starting a war is ancient. In later times, diplomacy negotiates application of economic sanctions since the League of Nations. What is a novelty is to compel a group of sovereign countries to impose economic sanctions on another when it also harms their own economic interests. Such is the case of the European Union imposing economic sanctions on Russia and it is a clear case of "killing two birds with one stone." Cui bono?

Pillage, plunder, taxes and credit have always been used as economic tools to maintain supremacy. Emmanuel de Waresquiel says in his Fouché (2014), that Napoleon financed his wars with plunder while the English financed theirs with debt. The US uses both.

Conclusion

Economic diplomacy deserves much more attention from foreign ministries, because its role and influence in international politics is real, concrete and decisive; it is the main weapon in the ongoing war. In their struggle to prolong their hegemony, the US use their large military force, but there are opponents to whom it cannot be applied. Their power has a weak point in the dollar, essential to maintain their arsenal operative and vulnerable due to lack of real value backing and a gross accumulation of debt. Therefore, they negotiate a web of economic agreements that impose the use of the dollar, along with their own system of wealth distribution. Countries that prefer a modern multipolar world, other than the Bretton Woods model, are building a parallel economic order and waiting for results, while modernizing their armies. Si vis pacem, para bellum

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