Dialogue: Of free trade and having a haircut

By JOHN ROUGHAN

Rod Donald, the Green MP, is nothing if not brave. He is willing to be the oddball who will stand up in the middle of a convocation of corporate cardinals and say free trade is unfair.

In fact he did, back in August, under the glow of the Sheraton ballroom. Having listened to Singapore's Minister of Trade extol the New Zealand-Singapore agreement to the Knowledge Wave conference, Mr Donald stood and flourished figures which showed the trade balance running in Singapore's favour.

There wasn't much the Singaporean could say to that. You don't tell someone who thinks he is a loser that he is better off anyway, at least not when you are a guest in his country. So the conference coughed politely and moved on.

Mr Donald was possibly not the only person there who thought his question devastating. The idea that countries should balance their bilateral trade is one of those widespread beliefs that constantly confound the effort to organise a better world.

It is curious belief because nobody applies the same principle to trade between companies or individuals.

When I think about it, I suspect my trade with my barber is running seriously against him. He is an avid reader of the Herald and I am not sure my haircuts balance the ledger. On the other hand, the woman who sells me takeaway roasts must be well ahead.

None of us needs worry about that. The only people who need to worry are those who, for some reason, sign up with a bartering cooperative. Greens are fond of those.

What a bore it must be to keep track of every transaction with every member and try to agree on how many carrots equal a crocheted shawl. Little wonder we read that a barter exchange soon finds it necessary to become a crude bank, issuing coupons that work a little like cash.

Once it develops a cash economy the cooperative is well on the way to reinventing capitalism. The larger it becomes the more goods and services the members can buy and sell and the better off they become.

All of them, in fact. Voluntary trade by definition leaves both sides of the transaction better off; the exchange wouldn't happen otherwise.

There is no dispute that trade increases welfare overall; the argument with free trade, and free markets in general, has been that it does not increase everybody's wealth equally, or sufficiently equally.

Markets reward leadership much more than labour, employment more than motherhood, entertainment more than art. They find brand recognition more valuable than whatever it is Naomi Klein is selling.

For much of the 20th century equality was regarded as more important than maximum prosperity. But countries geared to equality proved to be neither pleasant nor prosperous.

Since then countries have been lining up to join the largest trading co-op they can find. Developing countries now make up the majority of members of the World Trade Organisation and on the evidence from Doha last week, they have transformed it.

Ten years ago, when the most extreme experiments in equality were collapsing, I looked inside the Geneva headquarters of the organisation then known as the Gatt. It was a comfortable European establishment. A tired British press attache was hospitable but not accustomed, you could tell, to working overtime.

The Uruguay Round was grinding on, a year past its deadline. It took two more years to end, just as previous rounds had done, when the United States and the European Union, with Japan and Canada in tow, finally went into a backroom and did a deal.

It was the natural order of things. The US and the EU, each already a vast free trade zone, contain far more wealth than the rest of the world and most of their foreign investment goes to each other.

They don't need access to the rest nearly as much as the rest need access to them. Practically every country bordering the EU wants to join it and many in the Pacific, New Zealand included, are anxious to make a free trade agreement with the US.

For the poorest - Africa, the Indian subcontinent, most of Asia - there is only the World Trade Organisation, and Mike Moore.

He is the first director-general of Gatt or the WTO who is not from Europe. I have been on the organisation's mailing list since that 1991 visit and the change Mike Moore has made to its tenor and thrust has been marked.

From his first utterances in September 1999, two months before Seattle, he has been lending his weight to the claims of undeveloped member countries for priority in any millennial round.

The real story of Seattle was not on the streets but in the negotiating rooms, where a now-organised bloc of poorer countries refused to agree to a round that threatened to bring labour and environmental protections into the mix.

They wanted special treatment - early access to rich markets and time to adjust their own to the next phase of liberalisation. Last week they got agreement to negotiations for that, and more.

The Doha agenda is going to be interesting. It aims to be more consensual than any round before. This one might be less fixated with bilateral balances and reciprocal concessions. You never know, it might just concentrate on the global good and reinvent freedom.