Empires Apart (76 page)

‘Fairness' is a difficult concept when it comes to international law. There was anger in the UK when the Blair government signed a treaty allowing the US to extradite suspects from Britain without first proving that there existed a
prima facie
case against them, but did not give the UK the same rights over extraditions from the US. Many newspapers
and parliamentary opponents of the agreement attacked the inherent ‘unfairness' of the American position, but this is to miss the point: the US negotiators were not trying to produce a fair accord; they were aiming to gain as much as possible for the United States while giving as little as possible away. That is how businesses negotiate. The US government is often negotiating on behalf of its corporate citizens, as when in 2007 it pressured the European Union to allow US airlines to operate routes within Europe, while European airlines continued to be banned from routes within the United States.

The 2008 financial crisis demonstrated once again the underlying America-first imperialist ideology that permeates American thinking. It is a basic tenet of financial regulation, in the European Union enshrined in law, that banking regulators must provide an equal degree of protection to all creditors worldwide. When Lehman Brothers went bankrupt the Financial Services Authority in the UK naïvely assumed that their American counterparts would live up to this obligation, and were stunned when the SEC and the Federal Reserve refused to hand back $8bn that had been moved from Lehman's London operations to its New York headquarters just days before the collapse. Effectively the US authorities allowed Lehman's British reserves, supposedly there to underpin its London trading, to be used to settle claims in New York, leaving British claimants in the lurch. The FSA have since announced they will change the rules to make US banks hold in Britain the reserves they need to support their British operations, but the surprise is that they ever imagined that in a crisis the US would do anything other than look after its own.

In terms of its relationships with the rest of the world American legal theory resembles less the British concept of equity than the traditional Russian belief that the law is not about achieving justice but about maintaining order, with the United States maintaining the privileged position once reserved for the Russian tsar. Nowhere is this seen more clearly than in the Monroe Doctrine and the Olney Corollary, which laid down that the United States had the right to supreme authority
in the Americas. The Olney Corollary was formulated when Britain refused to agree to American arbitration in a dispute with Venezuela, the British prime minister pointing out not unreasonably that the Monroe Doctrine was a unilateral declaration with no standing in international law. President Cleveland's response was unambiguous: it may not have been added ‘in so many words to the code of international law', but the US had the right to supremacy ‘as certainly and securely as if it were specifically mentioned'.

US legal theory is predicated on the absolute certainty that its own actions are beyond reproach. As an example, when Admiral Doenitz, Hitler's U-Boat commander, was accused of war crimes, the American Admiral Nimitz testified that German submarines had done nothing that US submarines had not done. The American-led tribunal declared that by definition the US navy could not have committed war crimes, and so found Doenitz not guilty. A corollary to this belief is that American law is superior to foreign law. When two European charities providing aid to Palestine were investigated by the French and British governments they were completely cleared of any link with terrorism; on that basis National Westminster and Credit Lyonnais provided them with banking services. Despite the fact that the charities had absolutely no connection with the US, a New York judge allowed the banks to be sued there by lawyers claiming to act for victims of terrorism, declaring that the investigations by the British and French governments were irrelevant. This view underlies the US approach to the UN. The United Nations is to be supported only as long as it supports the United States. When it does not it is to be ignored, even to the extent of not paying the membership fees. (The USA's billion dollar arrears led British prime minister John Major to invert the famous slogan of the American Rebellion and quip that the United States sought ‘representation without taxation'.)

The basic commitment to one law for Americans and another for foreigners is long established. Land ownership laws in the United States were for many years heavily biased against foreigners, who were often labelled as vile speculators at a time when American speculators were
amassing vast riches in the frontier territories. In 1885 the
New York Times
thundered against ‘an evil of considerable magnitude – the acquisition of vast tracts of land in the territories by English noblemen'. Two years later the federal Alien Property Act prohibited the ownership of land in the territories (that is in areas not yet incorporated into states) by aliens or by corporations in which aliens owned more than 20 per cent of the shares. A dozen states enacted similar legislation, the New Hampshire legislature declaring, for example, that ‘American soil is for Americans, and should be exclusively owned and controlled by American citizens.' At the same time a number of states imposed punitive tax rates on foreign-owned corporations. When foreign governments complained, as for example when the state of Iowa levied special taxes on foreign fire insurers, the state department merely replied that it was nothing to do with the federal government. In 1887 the Indiana legislature even withdrew court protection from foreign companies.

New York owed its dominant position in global finance in part to laws enacted in the 1880s aimed at preventing foreign competition. The minimum paid-up capital of foreign insurance companies was set at 250 per cent of that required for American companies; foreign banks were prohibited from engaging in ‘banking business' such as taking deposits and in 1914 foreign banks were banned from establishing branches in New York at all.

Such laws and values exist in many, probably most, countries. They certainly exist in Russia, and there is nothing particularly sinister or unexpected about them. What makes them significant is that the United States achieves its global dominance in large part by denying the validity of such values when expressed by others. When other nations restrict the ‘right' of American corporations to operate they are condemned; when other nations ignore international law or UN resolutions they are attacked; when protective tariffs are erected against American exporters they are threatened with retaliation. Examples are numerous; here are just four.

America is the world's largest exporter of raw cotton, and yet a 2005 study found that although the world market price for cotton was
48 US cents per pound US cotton cost 78 cents per pound to produce. The explanation for the amazing success of high-cost American cotton farmers lay in the state aid they received from the US government: subsidies of $3.9bn per annum (more than three times the aid given by the US government to Africa). The direct result of these subsidies was to destroy the cotton industries in countries like Benin in west Africa, which depended on cotton for 60 per cent of its exports. In 2002 alone, when the US Farm Bill raised American subsidies to $250 per hectare, Benin's exports fell 9 per cent and its GDP was cut by 1.4 per cent as a direct result of the American policies.

Similarly the US is the world's third largest rice exporter, thanks to subsidies of well over $1bn a year, which allow US producers to sell their product in world markets at 30 per cent below what it costs to produce.

In 2007 the US imposed swingeing import tariffs on Chinese paper, alleging exactly the sort of government subsidy being given to American rice and cotton growers.

Despite its own high-tariff tradition, in the mid-1990s the US successfully appealed to the World Trade Organisation to force the European Union to end its tariff support for small-scale Caribbean banana producers in favour of US multinationals operating out of Central America, bringing enormous economic distress to islands like St Lucia.

The World Trade Organisation declared the American cotton subsidies illegal but the United States simply ignored the ruling. The casual disregard for international law appears to contrast strongly with the legalism at home, but throughout American history legal niceties have been readily abandoned when considered ‘necessary'. During the civil war Lincoln even suspended the writ of habeas corpus, defying the Supreme Court in the process (and it is worth remembering that he did this not to control enemy infiltrators but to suppress the anti-war movement in the north).

International law is very often upheld or ignored depending on whether it provides economic benefits to the United States, and with the rise of corporatism this has come to mean benefits for US corporations.
The cotton subsidies that devastated poor producers in countries like Benin went overwhelmingly to large agribusinesses, some receiving tens of millions of dollars a year (and overwhelmingly to corporations in Texas, the home state of President Bush II); 60 per cent of US growers received no subsidy at all. (Interestingly the largest beneficiary of the rice subsidies was Riceland Foods, based in Arkansas, Bill Clinton's home state.)

The ideology of corporatism – the philosophy that abstract corporations have transcendent quasi-human rights – has as yet had limited appeal outside America, but an indication of how it might develop has been provided by an obscure legal case in Mexico. In 1987 the first treaty was signed that gave corporations the power to challenge the decisions of foreign governments and courts. Under the US-Canada Free Trade Act (extended seven years later to include Mexico) corporations were empowered to sue for non-compliance with the treaty. The implications of this legislation became apparent when a US waste disposal company was stopped from building a plant in Mexico after surveys found that it would pollute local water supplies: the corporation successfully sued the Mexican government for $16.7m compensation. Such environmental regulation, it argued, was tantamount to ‘an indirect expropriation' and thus prohibited under the treaty. Protecting the property rights of US corporations was held to take priority over the right of the elected Mexican government to protect its environment in whatever way it thought fit.

Such arcane matters as trade agreements are important because of the way that the ideologies of democracy, imperialism and corporatism have been conflated. A notion has developed that what the United States does to maintain its commercial empire is not an expression of economic self-interest but an expression of some higher ideal. This idea can be traced at least as far back as the first Pan-American Congress, convened by the US in 1889. Billed as a conference to prevent the frequent wars that ravaged the hemisphere, the US lobbied vigorously, but unsuccessfully, for a customs union that would keep out European exporters. The argument was that free movement within and customs barriers without
would create a prosperous Latin America, which would be less likely to engage in internecine wars. As the Latin Americans realised, it would also create a massive market for US business to exploit. Virtually identical arguments were put by Bush II 110 years later: ‘The case for trade is not just monetary, but moral. Economic freedom creates habits of liberty. And habits of liberty create expectations of democracy.' America has not been expanding its commercial empire but acting as a beacon of liberty, demonstrating to the rest of the world that free markets are the very cornerstones of freedom. And yet the European and Asian press repeatedly report the limitations that in practice the United States places on free markets. ‘British songwriters are losing millions of pounds in royalties', claimed
The Times
. ‘America will not pay European composers for music played in bars, clubs and restaurants despite World Trade Organisation obligations.'A reader who had booked a cruise from New York to Canada and then back to Florida complained to the travel pages of the
Observer
that he been made to leave the ship in Quebec City and travel overland to Montreal. The reason, it transpired, was that the US Jones Act (technically the Passenger Services Act) makes it illegal for passengers to travel from one US port to another on a non-US vessel. To avoid this protectionist legislation foreign cruise operators have to break their voyage into separate unconnected legs, each starting or terminating outside the US.

The theory of corporatist democracy might say that free trade and free elections are two sides of the same coin, but the imperial values underlying such sentiments ensure that their application is governed primarily by national self-interest. In 2006 an Arab-owned company tried to buy control of a number of US ports previously owned by a British company and the matter was referred to the presidential committee on foreign investments, which must approve any foreign takeover of a US company. A bitter dispute broke out, not about whether in a free market economy the state should be allowed to block foreign takeovers but whether, if the committee did allow the takeover, Congress would be able to overturn its ruling. The point that the United States had repeatedly
argued for the right of its corporations to operate in Arab countries was hardly mentioned.

When it comes to the realm of international relations it is clear that the claim that America is somehow more just is false. The claim that America's business is more efficient than most of its competitors looks at first sight to be far more soundly based.

Although the so-called Asian Tigers have come to dominate some key industries, American corporations remain overwhelmingly powerful. It seems obvious, therefore, that their competitive edge implies they are considerably more efficient than their foreign competitors. However, for every cogent argument in economics there is usually an equally cogent refutation. Even issues that non-economists might regard as matters of fact are endlessly disputed. The superiority of American over European business methods has long been widely accepted, but a number of respected authors have started to question whether this superiority has any basis in reality. Books like
The European Dream – how Europe's vision of the future is quietly eclipsing the American dream
by the American Jeremy Rifkin and
An UnAmerican Business – the rise of the new European enterprise model
by Dutch business school professor Donald Kalff suggest otherwise. Does the typical large American corporation, with its emphasis on hierarchy and short term results, massive salary differentials between top management and shop floor, use of simplistic ‘key performance indicators' and more or less arbitrary target-setting really generate better economic performance?