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Economic injustices... the greatest threat to world stability (revised -4th edition)

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The patchwork affair of economic systems and tying tariffs to wages

(4th edition - October 2010) by A.O. Kime
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There are countless issues worthy of attention today from one corner of the globe to the next. Of these, human rights would top the list followed closely by the world economy. Further down the list, but not far, would be globalization concerns such as sovereignty, jurisdiction and trade issues. While concerns over globalization have been frequently addressed, less-so as it relates to economic injustices.

While economic injustices can cover a lot of ground, this article is mostly about the World Trade Organization (WTO), the use of economic leverage, globalization, human rights, tariffs and why tariffs should be tied to wages.

In some respects, the world economy is as important as human rights. After all, if starvation was rampant all other issues would be effectively irrelevant. While the complexity of the world economy would normally call for an in-depth analysis considering the numerous currencies, rates of exchanges and countless trade issues, a brief overview can still be enlightening. And, as is the case within, a perspective from someone who is not an economist might hold value as well.

After all, outside perspectives can best see the forest.

Trade negotiations

It is said the world economy is so incredibly complex that only a handful of people can fully comprehend it. The most difficult part is fathoming the ripple effects for every action. If that is true, then it follows many policymakers are probably pushing buttons without fully realizing the consequences. Compounding the difficulty is that the world's economic policies, collectively and jurisdictionally, are based on a ‘patch mentality’... that is, just keep plugging holes and make corrections.

In lieu of a foundation with solid footing, substituting instead are those international trade agreements and understandings. Until uniformity comes into play (i.e., single currency, equal pay scales, etc.), a solid foundation isn't possible. Until then, it's all on shaky ground, a house of cards.

Yet, at this particular stage of development as a civilization, that is, with all the various currencies still in circulation and with the various authorities and ideologies, a situation practically unchanged since the Stone Age, there is simply no choice but to patch, bargain and make adjustments… which means negotiations over trade and currencies will still be necessary for quite some time.

However, due to the precariousness of this patching process, negotiations can produce countless inequities and sometimes create pitfalls. The reason? It's the natural tendency to jockey for position, make the best deals and ultimately… to ‘win’. To win is a natural desire, something humans strive for everyday in one way or another. And, we see this in action within the WTO. Every advantage is sought and the biggest exporters, always trying to out-muscle each other, has the effect of forcing everyone else (third-world countries) into the same arena, forced to compete at the same competitive level. It's a situation whereby the disadvantaged third-world countries, which, without equal footing (economic clout), are losing out and falling further behind. Some can't even afford to field a bargaining delegation.

Positioned somewhere in the wrestling match between the U.S. China, Japan and the EU are Canada, India, Australia, Russia, South Korea and Brazil. Among other factors, the muscle a country brings to the table often depends on their trade deficit or creditor status. In short, these inequities can make a mockery of fairness.

So, could something be done to overcome the resulting inequities as seemingly allowed within the current system? Assuredly it’s possible and assuredly the third-world countries are trying to solve their dilemma every waking minute. After all, they’re up against tough negotiators with a basketful of advantages. As said, it boils down to something more basic... it’s because we live in a world where everyone wants to win. Winning too often however, can be dangerous.

The current mandate under which the WTO operates, that is, to enforce the agreed-upon rules to insure stability worldwide - and purportedly 'fairness' - the facts say instead not much has changed. it's still a situation whereby the rich countries are getting richer and the poor, poorer. While the WTO does provide 'breaks' for the less-developed countries, apparently something is still amiss.

But, lest we forget, even the mighty can fall victim.

Perhaps at the root of the problem is because the rules of the WTO are only the negotiated agreements. The WTO doesn't make the rules, through their agreements the membership does. But when large groups try to arrive at an agreement, the process itself - which began as just paper and pencil - becomes an intimidating force to get them all headed in the same direction. Once it has built up a head of steam, it's hard to say no. Either one goes along or be left out of the negotiating process altogether. For some, it's like a shotgun wedding.

While negotiations are considered a healthy function basic to the principles of free enterprise... but is it really healthy if the use of leverage is commonly applied? Or is it a matter of how much 'pressure' is fair pressure? Or can legalese even describe it?

Here's what the WTO is generally all about (in their own words):

The WTO says it is:"—the only global international organization dealing with the rules of trade between nations. At its heart are the WTO agreements, negotiated and signed by the bulk of the world's trading nations and ratified in their parliaments. The goal is to help producers of goods and services, exporters, and importers conduct their business"

While such an organization can serve a purpose, nonetheless it seems apparent something must be inherently wrong with the WTO. Far too many claim it's an unfair system. After all, nations such as India, Argentina, Venezuela and even Brazil have been threatening to pull out. While 'negotiations' are the underpinning and poster-boy for the WTO, psychologically representing fairness, apparently that isn't the reality. It seems the unfair use of leverage is the culprit... the limits of which legalese cannot describe. No, legalese can't describe how much you love your spouse either. It's amazing how much mankind must rely on good faith, honor, fair-mindedness and ethics.

So, is taking advantage of a bargaining position an ethical matter? Perhaps it depends on the extent ... which brings up intimidation. Is this another matter legalese cannot describe? It would even seem unfair for a nation to 'imply' to another that a disputed position could negatively affect other trade issues they have together. But to whatever degree pressure is applied, it's still economic blackmail. Even if Rightfulness herself were to say trade issue and programs should stand on their own, could the WTO membership ever agree to this?

Ah, but tying things together is commonplace... the habit of probably every single government. For example, if some American state won't do what Washington wants in some unrelated matter, the federals respond by withholding their highway money. As a result of this common international habit, the WTO will never regulate economic blackmail. The membership won't let them.

The WTO dilemma is that leverage-possessing countries will surely not cede their advantages voluntarily because it's effectively 'disarmament'. As a result, many less-advantaged countries will pull out of the WTO upsetting the entire world economy… by regionalizing it. However, perhaps not a bad idea, it may turn out to be a healthy situation in the long run. To everyone's delight, it ought to strangle those unconscionable labor-exploiting transnational corporations out of existence. Taking advantage of a financially-strapped (desperate) work force is, after all, unconscionable. It doesn't matter if low wages are 'state sponsored' (China, etal) or not.

Slave wages... the ignored elephant

Nor does the WTO address wages... only 'labor conditions' have been on their agenda. While lower tariffs worldwide in the past few decades has been what the WTO views as 'accomplishments' except... low tariffs are primarily benefiting those countries with cheap labor. So, in the interests of fair trade, tariffs need to be pinned to labor costs. There would be various ways this could be done. As one example, the exports of countries paying good wages to produce them should be 'rewarded' with lower tariffs by the importing country. Conversely, the exports of countries paying low wages to produce them should be 'penalized' with higher tariffs by the importing country.

Of course, a wage baseline would need to be established which could either be universal or the higher of the minimum wage of the two trading countries. The wage a country pays for items that are not exported would remain their business. However, in the spirit of helping the less-developed countries catch up to the rest of the world, they could be exempted.

In China's case, the value of their currency must first be allowed to float freely (not now happening).

The beauty about tying tariffs to wages is that it would equalize (or greatly help equalize), labor costs worldwide. It would also have the effect of forcing the whole world into paying decent wages. The low-wage exporters would have a choice... either 'pay' in the form of wages or 'pay' in the form of tariffs. Of course, they'd rather pay in the form of wages. For those who pay more than the established baseline to produce their exported products, it would be offset (all or some) by lower (or no) tariffs.

A recipe for inflation? Sure, there'll be a jump in prices initially but will quickly stabilize. It's the non-negotiable price to pay to eliminate the scourge of slave wages and to wipe out this trade advantage. We should be aware cheap labor is the poison always given great societies by the lesser ones.

If tariffs and wages cannot be tied together, then America should withdraw from the WTO and return to protectionism. In fact, the whole world would probably be better off withdrawing and begin making their own deals. When was making your own deals not a good idea? When was flexibility not a good idea? As it is, the WTO has a choke-hold on how countries do business which makes it difficult to quickly adapt (as the situation now demands). America should 'un-sign' all their ignorant agreements forthwith... just like George W. Bush 'unsigned' America's commitment to the International Criminal Court. At least begin phasing them out (if an abrupt change would put in peril American businesses).

Who cares if negotiators who have worked on trade rules since 1948 are mortified? Saving face certainly doesn't justify sacrificing a nation, much less the greatest nation. By not tying tariffs to wages 20-25 years ago was a serious mistake and has created a very threatening situation. Besides, the WTO is just a gentleman's club of avariciousness... sure to sink soon in their sea of half measures and half-hearted ideals.

There's too much intercontinental trading going on worldwide anyway... it should be discouraged, not encouraged. Overseas trade has a stupid quality to it especially on a massive scale. It's what the market-grabbing transnationalists promote and feed upon and all the shipping back and forth just consumes (wastes) fuel. If allowed to flourish, local competition would take care of price and quality concerns. For more see Trade deficits, tariffs and protectionism revisited

Who needs a bigger market than that of their own country anyway? Ain't it a bit greedy? That's especially true for Americans. We certainly don't need those damn transnationalists ruining our small businesses. Yet, our trade negotiators continually ignore the interests of small businesses in order to pacify those scoundrels. The family farmers have been ignored as well... even during the Tokyo Round of negotiations (GATT-1973) which was billed in advance as the 'farmers turn'.

Human rights opportunity

Within the process of creating what could end up being a distasteful single-world authority - which is where globalization is now headed - there exists a great opportunity for egalitarianism. If a number of countries should pull out of the WTO and set-up their own regional economies, it would send a powerful message… that the concerns of all must be taken into account before globalization can succeed.

As it stands now, globalization, as an ideal, is nothing more than a house of cards. While it likely won't survive under the present arrangements - perhaps also for being a premature idea (money still sits on the highest pedestal) - let's take a quick look at the obstacles and opportunities.

If the powers-that-be truly want to see globalization become a reality, they need everyone onboard... and we common folk would be more receptive to the idea in exchange for guaranteed human rights. A one-world government doesn’t have to be a bad thing; it could be a very good thing for world justice and peace. However, we first need a ‘perfect’ constitution prepared beforehand for that occasion... one perfectly clear with teeth whereby encroachments upon human rights would carry the harshest of penalties. Penalties, by the way, are something the American Constitution lacks. In other words, no perfect constitution, no globalization. For more see Globalization and Constitution of a One World Government

However, the most likely scenario for the next 100-200 years is not an ‘official’ one-world government but rather a de facto one-world government. And, dependent upon economic positions and the outcome of wars, countries might take turns being the head honcho. Unfortunately this would have the effect of stringing out the prospects for human rights as should universally exist today. America's chances? Not so good since (1) Adam Smith's tenet 'all new wealth comes from the soil' was dismissed as folly and abandoned and, (2) not since most manufacturing jobs were sent to China and, (3) not since America began bean-balling its farmers aground. In 1950 there were 5-1/2 million family farmers in America, now there is less than 2 million... less than the pre-Civil War days of 1860.

Conversely, Brazil seems to understand this relationship between soil and wealth (aggressively promotes farming) and could be, within 50 years, the next and biggest economic powerhouse. In addition, Brazil isn't stupidly emasculating her industries. After all, sending jobs overseas is like loaning out your prized golden goose... except you'll play hell getting her back. At least not while still belonging to the WTO.

As long as the American leadership continues to ignore the fact quitting the WTO and cancelling unfair agreements would create millions of American jobs almost instantly, beans will be our primary diet. As a consequence, of course, it would send China back to the Stone Age... a good reason for China to except the idea of tying tariffs to wages.

If that was the case, then less reason to quit the WTO. We'd still gain a lot of jobs just not as many.

A.O. Kime

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A.O. Kime is the author of two books plus 70+ articles on ancient history,
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Last modified: 03/06/16