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ECONOMY: WTO Chief Reassures U.S. on Benefits of Free Trade

Emad Mekay

WASHINGTON, Feb 26 2004 (IPS) - The chief of the World Trade Organisation (WTO) defended the body’s role in the global economy Thursday, and argued for free trade in the United States, a country witnessing an unprecedented debate over the "export" of U.S. jobs overseas.

"The real issue is the relevance of a multilateral trading system," said WTO Director Supachai Panitchpakdi. "It is true that as the WTO’s importance to the world economy increases, so too does the challenge of making it work. There are more countries, more issues. Trade is in the spotlight as never before."

Supachai, who was speaking from Washington, is now engaged with trade ministers from around the world in trying to get the latest series of WTO negotiations, known as the Doha round, back on track.

The talks collapsed in Cancun, Mexico in September, after developing nations protested against rich countries’ failure to compromise on the billions of dollars that the United States, Europe, Japan and other industrialised nations pay in subsidies to their agricultural sectors.

Farmers from poor nations say the subsidies depress prices and render them unable to compete, eventually putting them out of work, while farmers in rich countries say that ending such pay-offs would make them unemployed and destroy their way of life.

Since the mass demonstrations that halted a WTO meeting in Seattle in 1999, the Geneva-based agency and the concept of free trade have both become punching bags for protest groups, some economists and some developing nations.

Environmentalists complain the organisation promotes lax pollution rules while labour unions say the WTO encourages shipping jobs around the globe in a never-ending corporate hunt for the least paid workers.

Developing nations complain that under its rules they are asked to open up their economies to investors while rich nations are free to erect barriers to protect their economies.

The WTO now has 146 members, up from just 23 in 1947, and that could easily rise to 170 or more within a decade.

But the free trade championed by the organisation is being battered heavily in the most unlikely place, the United States.

The country is witnessing a huge debate on the role of free trade in shipping jobs overseas, or "outsourcing", with even pro-trade advocates stepping back to reconsider the policy.

The two leading Democratic Party candidates, one of whom will face off against President George W. Bush in November’s presidential election, have criticised the administration for sending jobs overseas and for initiating numerous free trade deals that threaten U.S. workers.

More and more economists here are also voicing concerns about the job loss that accompanies the deals.

Clearly trying to influence the debate here, Supachai said that back-pedalling on free trade could derail U.S. authority in the world.

"The fiction that there is an alternative to the WTO or to U.S. leadership is both naive and dangerous," he said.

"Naive because it fails to recognise that multilateralism has become more, not less, important to advancing U.S. interests; dangerous because it risks undermining the very objectives the U.S. seeks – freer trade, stronger rules, a more open and secure world economy."

The WTO chief said that successfully advancing the Doha agenda would also confirm the WTO as the focal point for global trade negotiations, and as the key forum for international economic cooperation.

"But if the Doha negotiations stumble, doubts may grow, not just about the WTO’s effectiveness, but about the future of multilateralism in trade as a whole," Supachai added.

"This should be a major concern to the U.S."

The WTO head argued that the United States is now integrated into the world economy as never before, and cannot go back on free trade.

One-quarter of U.S. gross domestic product (GDP) is now tied to international trade, up from 10 percent in 1970, the largest such rise of any developed country over this period. Trade has also generated one-third of U.S. growth since 1990, according to Supachai.

U.S. trade is increasingly global in scope – 37 percent with Canada and Mexico, 23 percent with Europe and 27 percent with Asia. Last year alone, exports to China rose by almost 30 percent, he added.

"The point is this: even the U.S. cannot achieve prosperity on its own," Supachai said. "It is increasingly dependent on international trade and the rule-based economic order that underpins it."

Alluding to the debate here, the WTO head said the United States faces a challenge within.

"In America’s current debate about trade, jobs and globalisation, we have heard a lot about the costs of liberalisation," he said. "We need to hear more about the opportunities."

The WTO says that for every U.S. job threatened by imports, a growing number of high-paid, high-skilled jobs are created by exports.

Exports supported seven million U.S. workers a decade ago; that number is approaching 12 million today. Many of those jobs are in aerospace, finance and information technology, jobs that pay 10 percent more than the average U.S. wage, it adds.

Supachai estimated that over the next decade, the United States will create an average of more than two million new service jobs yearly, compared to roughly 200,000 services jobs that will be "outsourced".

But Josh Bivens, an economist with the Economic Policy Institute here, says that focusing on one sector of the job market does not produce an accurate indicator, and that free trade remains a threat to jobs.

"I think it’s a strange way to look at it," he said of the WTO job predictions.

"The economic case for trade in general is not about creating employment. It is about making existing employment more efficient, so the employment impact of trade is essentially a zero-sum game – if one country runs a trade deficit and is losing employment that means another country is running a trade surplus and is generating jobs," Bivens said.

The U.S. trade deficit is now equivalent to about five percent of its GDP.

"So it’s seems really hard for me to argue that trade, on net, is creating U.S jobs. I think that’s 100 percent wrong," Bivens added.