The hypocrisy at the heart of America's banana war

World trade has always been managed by the biggest, most powerful bullies on the block

THE GROWING sense of outrage at America's bully-boy tactics in the banana wars is no doubt leading a lot of people to question what benefit Britain gets from its so-called "special relationship" with the US.

Here we are, risking the lives of our pilots every day as they go off to bomb Iraq at Bill Clinton's request, while the very same Bill Clinton is zapping our cashmere sweater industry and destroying jobs in the Scottish borders. And if this isn't bad enough, there's the threat of even more severe sanctions against Europe because we have not been persuaded that eating growth-hormone-saturated US beef is good for our health.

Let me make it clear that I am in favour of trade. Since 1945, the successive waves of negotiation that have reduced tariff barriers around the world have seen the growth of trade create both work and prosperity on a global scale. Those nations that tried to shelter their declining industries behind tariff walls merely poured vast subsidies into resisting the inevitable, rather than using those subsidies to create new jobs in more modern industries.

The old Soviet economy became increasingly arthritic because the Communist bloc was excluded from world trade. Through their planned economy structure, the old Soviet leaderships were able to create their own domestic industries which, in terms of quantity of output, came close to rivalling the West. But the products never equalled Western alternatives in terms of sophistication, reliability or marketability. They had no competition.

But to leap from the recognition that trade is a vital part of global prosperity to the oxymorons of free and fair trade, parroted ad nauseam by politicians and financiers as they move from one well-oiled global summit to another, has no logic.

No nation in the world has ever risen to become an economic success story by following the strictures of the IMF or the World Bank in favour of so-called free trade.

The oldest capitalist nations, such as Britain and the US, refused to accept the principles of free trade as they built themselves up into economic giants.

Britain's rise to global economic power came about because we were the first nation in history to invest 5 per cent of our GDP per annum. The new industries created by this investment were protected and cosseted by being given preferential access to the British Empire, which in its heyday comprised one-third of the world's population.

Throughout the 19th century American governments constantly complained about the exclusion of their corporations from being able to compete on equal terms in the British Empire. It was not until the Second World War, when Britain was finally on its knees, that America was able to wrest major concessions from Churchill's government. During this era, British politicians demanded that the world adhere to the principles of free trade while excluding our rivals from the third of the world that we still managed to control. While denouncing the British, America erected massive tariff barriers.

The hypocrisy of both Britain and the US continues. At each new round of Gatt negotiations to reduce tariffs, Britain and the US have demanded that their high-quality finished goods have free access to markets around the world while erecting effective trade barriers to prevent Third World nations from selling their much more cheaply produced food here and in the US.

The simple fact is that American, Japanese and European agriculture are isolated from global competition while Third World nations that dare to try to protect their embryonic manufacturing industries suffer sanctions and financial penalties. Japanese households could purchase their rice for one-tenth of the price they would currently have to pay if the rice producers of South East Asia were allowed the right of free trade.

The billions of pounds, dollars and yen spent protecting our farmers from free trade could be used to create new, high-skilled employment, or even be spent restoring our countryside to health by removing the all-pervasive deposits of pesticides and fertilisers that have poisoned our soil and water.

Over the past two centuries, the nations that have been able to break through Britain and America's rigging of international markets in order to catch up, all have one thing in common. Germany, Japan, South Korea, Taiwan and now China have all made huge strides to close the gap between themselves and the English-speaking world, but only by protecting their domestic markets from the impact of free trade. It was only when those domestic industries were strong enough to withstand international competition that these nations then lowered their barriers.

The one country that has followed the IMF and World Bank strictures about opening its markets to free trade is the country that has done most spectacularly badly.

Russia's industries, which were weak when Yeltsin came to power, have almost without exception been eliminated by a flood of sophisticated Western goods.

By contrast, Communist China maintains a whole range of regulations, and has state intervention and a vast public sector. It has also seen its economy grow more rapidly in the past 20 years than any other country in history.

On current trends it should become the largest economy in the world within 10 to 20 years. Suggest free trade to a Chinese leader, and he will laugh in your face.

The reasons behind the banana dispute are simple. Although the US, of course, does not produce any bananas of its own, Carl Lindener, the boss of Chiquita (formerly the United Fruit Corporation), was one of the largest donors to Mr Clinton's re-election campaign.

Now he is calling in his favours. Mr Clinton is prepared to risk a global trade war rather than defend his monopoly backers, even though he knows that if the US gets its way the Caribbean states, who are his target, will be tipped into an almost permanent recession in which drug production may well replace the banana trade.

In a world in which three global corporations control 80 per cent of trade in bananas, three control 83 per cent of cocoa, five control 77 per cent of cereals and 10 control 94 per cent of the market in agro-chemicals, the idea of Adam Smith's invisible hand of the market is a joke. World trade has always been managed, and usually by the biggest and most powerful bullies on the block. They know what they can get out of a special relationship.