News Release

As G-8 Leaders Gather, “Free Trade” Arguments Rage in U.S.

Critics Say That Even Prominent Foes of IMF Fail to Grasp Problem

WASHINGTON-While President Clinton and leaders of seven other industrialized nations gather in Britain, debates over key global economic issues continue to rage back in the United States.

On the eve of the annual G-8 summit, which will consider the International Monetary Fund’s role in the economic crisis roiling Indonesia and other Asian countries, the Heritage Foundation released a position paper urging Congress to block further appropriations for the IMF. The influential think tank contended that the IMF has “failed to demonstrate the ability to promote economic stability and economic growth.”

Heritage added: “If Congress is interested in promoting sound policies that bolster agricultural exports, it should support fast-track trade negotiating authority for the president and the efforts of organizations like the World Trade Organization.”

But some other analysts critical of the IMF quickly challenged that assessment.

“Fast-track authority would be a disaster,” said Peter Rosset, executive director of the Institute for Food and Development Policy, based in Oakland, Calif. “Trade agreements like NAFTA-which fast track would extend-have impacts that are too far-reaching to forgo serious debate in Congress and in the society at large. Poll after poll shows that the American people are unhappy with NAFTA. It would be unconscionable to extend it without broad-based discussion-yet that is just what fast-track authority would do.”

Rosset continued: “I agree with Heritage that we should be against further funding of the IMF, but for different reasons. The IMF is bad because it furthers the interests of large corporations and the wealthy, both in the U.S. and the Third World, at the expense of small and medium-sized farmers.”

Rosset, an expert on agricultural policies, said that “Third World countries are forced by the IMF to eliminate barriers to the dumping of surplus food by U.S. grain cartels, driving local food producers-small farmers-out of business. So in the Third World, the impact of the IMF is to favor wealthy exporters, often foreigners, at the expense of small farmers and the rural poor.”

In the United States, “the effect is much the same,” Rosset added. “Large grain companies like Cargill benefit from the ability to penetrate Third World markets with U.S.-government-subsidized grain. But U.S. farmers do not reap the benefits of these new markets, as our complicated farm programs make farmers sell cheap to the grain companies, who then get windfall profits at the expense of farmers both here and in the Third World.”

Some critics condemn the track records of both the IMF and the World Trade Organization in terms of environmental impacts. “The IMF is virtually blind when it comes to the environment,” says economist Lyuba Zarsky, co-director of the Nautilus Institute for Security and Sustainable Development. “The IMF claims that it promotes sound economic management but it ignores impacts on economically fundamental resources like soil and water.”

During the last 20 years, Zarsky argues, “structural adjustment policies in Asia have contributed to deforestation and soil erosion. Asian agricultural exporters might get a short-term boost-but at the cost of long-term agricultural sustainability.”

Zarsky maintains that “the U.S. needs to integrate domestic trade and environmental policy-and link its international economic policies with its environmental diplomacy. Rather than simplistically waving the banner of ‘free trade,’ the U.S. should promote ecologically sustainable trade in agriculture. And it should insist that all IMF loans include environmental as well as social objectives.”

The Institute for Public Accuracy is a nationwide consortium of policy experts.