APEC and the festival of globalisation

20 November 2016

It was billed as a festival of globalisation, and so it turned out to be. The APEC summit in Lima, which took place on 19-20 November, brought together leaders from around the world, reflecting rather different traditions of capitalism, as if it was an attempt to mitigate the narrow nationalism of Donald Trump’s US presidential victory. The presence of people like Mark Zuckerberg, the CEO of Facebook, provided icing on the cake for international connectivity.

For President Pedro Pablo Kuczynski, the summit was a golden opportunity to be seen hob-nobbing with world leaders and to reassert both his core beliefs in the virtues of international business integration and the need to bin harmful regulatory obstacles to the free-flow of capital.

Rather like Tony Blair and his three priorities (education, education and education), he enunciated his three priorities, expressed on the eve of the APEC summit in Lima, as trade, trade and trade. The subtext here, of course, was that if the United States no longer believes in the virtues of free trade, then let’s bring in the Chinese. No doubt President Xi of China is relishing the apparent death of the Trans-Pacific Partnership (TPP) and the opportunities this brings for China to launch its own free trade diplomacy around the Pacific basin, with or without the United States.

Peru, of course, is no stranger to (so-called) free trade. Of the 21 members of APEC, it has a trade agreement with no less than 14, among them China and the United States. Like its Chinese equivalent, the Peruvian government hopes that the APEC summit will result in the whole Asia-Pacific area becoming a free trade area in which investment will flow in what amounts to a thoroughly deregulated environment.

But it is worth stopping a moment to reflect seriously on the lessons of the US elections, as well as those closer to home with Brexit. Does free-wheeling capitalism generate the sort of society in which all can participate and enjoy? When those who are trampled upon outnumber those who benefit, the rejection is just waiting to happen. Peru provides plentiful evidence of this. Peru has repeatedly witnessed the anger of those who have lost out from globalisation. The election of Humala was one instance, the near-election of Keiko Fujimori earlier this year probably another.

For years (if not decades), globalisation in Peru has provided a source of inspiration for the country’s business elites in Lima, whose gaze is outward, towards Miami, Silicon Valley, Shanghai if not even further afield, rather than towards the interior of the country. Most other Peruvians have gained less than the elites from the globalisation of trade and investment. It is often assumed that the benefits of trade-led growth will bring benefits to all, but this is palpably not so.

The effects of trade liberalisation, in force since the time of Fujimori in the 1990s, have further increased both Peru’s dependence on commodity exports (especially minerals) and the all-important place of Lima in the national economy. What Peru urgently needs is a more balanced model of development that reduces rather than increases regional inequalities.

Trade liberalisation, if not combined with a serious development strategy, simply reinforces Peru’s position in the world system of comparative advantage as an exporter of commodities while its own industries are placed in jeopardy because of the influx of cheap imports from a variety of Asian sources. The Peruvian textile industry, for one, has borne the brunt of foreign competition. Moreover, the capital intensive nature of much of the foreign investment that has gone to Peru has meant that it has led to little by way of skilled job creation. The trickle-down effects have been limited.

Similarly, the commodity-driven model of development further accentuates inequalities between regions, with Lima (and other coastal centres) much better placed to benefit from a trade-based model of development than towns and regions of the interior.

The problem with free trade areas is that, while all parties may wish to maximise their trading relations, not all of them enjoy the same economic or diplomatic muscle when it comes to negotiating them. Similarly, when it comes to defining the relationship between Lima and the interior of the country, it is the limeño business groups with their influential lobbyists that write the rules in their favour. Not all are able to protect their own interests to the same degree.

Perhaps rather than celebrating globalisation in the Lima Convention Centre, Kuczynski needs to focus his attention a little bit more on how respond to the needs and desires of less fortunate Peruvians than himself.

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    The Peru Support Group exists to promote social inclusion, sustainable development and the observance of human rights in Peru. To that end the PSG highlights shortcomings in observance of established norms, whether international or local in nature, in its research, advocacy and publications. In so doing, it underscores the relationships that exist within the political system, how institutions work, and the effectiveness of policies that aim to reduce poverty and inequality within the context of sustainable development.

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