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TRADE: A Democratised WTO in Pause Mode

Analysis by John Vandaele*

BRUSSELS, Oct 29 2008 (IPS) - The breakdown of the July talks on a trade agreement, for the third time in a row, is testimony that the World Trade Organisation(WTO) has changed.

September 2003, in the Mexican tourist city Cancun. A few days after the South Korean farmers leader, Lee Kyung-hae, committed suicide during a protest meeting, the ministerial conference of the WTO breaks down: there is absolutely no agreement on the so-called Doha Development Agenda, and the 150 members head home.

When I arrive back home in Europe, practically all media speak of disappointment. The Economist put the typical poor African child on its front page and calls it 'the victim' of the failure of the WTO talks. That was very much a western way of looking at things.

The ministers of the Group of 20 developing countries received a standing ovation from their journalists when they entered the press hall at the end of the conference. That's usually not the way you celebrate failure.

In fact, the Cancun meeting was groundbreaking. A few days before the onset of the meeting, the G20, a group of 20 developing countries, with India, China, Brazil, South Africa, Egypt… put a paper on the table where they asked a date when rich countries would phase out their export subsidies. As long as they didn't have that date, there would be no WTO agreement.

At first I heard European officials say that the G20 wouldn't last the conference because India and Brazil had such diverging agricultural interests that it would be easy to play them off against each other. But that proved to be a miscalculation: the G20 lasted, and the talks broke down.

At Cancun ministers from Malaysia and South Africa said the trade talks would never be the same because from now on developing countries would be prepared. In effect, through cooperation and capacity building developing nations have learnt how to manage the very complex WTO negotiations, and use the relative democratic build-up of the WTO – one country, one vote. Supachai Panitchpakdi, WTO director-general at the time, said world trade talks would be much more difficult now because the WTO would have to reckon with all its members.

Supachai was right. Five years on, nobody knows whether and how the Doha round will end. The Quad – Japan, the U.S., the EU and Canada – which used to 'make' trade agreements, has been replaced by the G4 – the U.S. and the EU, India and Brazil. In July China, Japan and Australia joined that core negotiating group.

The WTO ministerials from 1999 till 2005 were hotspots of international activity with all kinds of NGOs attending the conference and explaining to the world what is at stake with world trade. The summits became a podium for the critics of globalisation, and rightly so because trade talks are not merely technical questions but touch upon the foundations of societies.

Still, the base line of hard line anti-globalists – that world trade had nothing to offer developing countries – has been proved wrong.

In fact, the positions on free trade have changed somewhat: at times the emerging countries 'emerged' as the defenders of free trade in some fields. In the rich countries support for free trade is under pressure, from the farmers lobby but also from labour, since it became clear that labour – certainly low-skilled labour in the rich countries – has not much to gain from globalisation.

Year after year the labour share – the sum of all wages relative to the gross domestic product (GDP) is diminishing. In the U.S. real wages of low-skilled workers are now 30 percent lower than in the 1970s. Several studies show that globalisation is one of the factors that explains this shift in the relation between capital and labour.

The Doha Development Round is only a development round in name. Eric White, director and principal legal advisor of the trade team of the EU admits as much. "This is a traditional trade round that concentrates on tariffs, and an exchange in lowering tariffs. Why not have a round where development is really central and the many issues that developing countries have put on the table can be discussed?"

The WTO is also changing in other ways. It has started a dialogue with civil society groups and with parliamentarians, who in the past felt completely excluded from the trade negotiations that are so central to globalisation. Not that everything is crystal clear now. The way the organisation works, its procedures, are still not very clear.

Pascal Lamy as EU commissioner for trade earlier, called the WTO at Cancun a "medieval organisation". He said that during ministerial conferences "there are no procedural rules except that the president of the conference decides. That's no way to conduct such complex negotiations." Now that Lamy heads the WTO, his critics ask what the procedural rules are that lead him to invite a limited number of countries to certain talks. The fact that since 2005 the big ministerials have been replaced by mini-ministerials in July is not good for democracy: the ministerials woke up societies to the importance of the trade talks.

So while the judicial machinery of the WTO is still humming – making sure existing WTO rules are being respected – many ask whether the WTO will ever be able to produce a new global agreement. Not only has the organisation democratised, it also deals with many more issues than before.

Its predecessor, the General Agreement on Tariffs and Trade, only dealt with industrial goods; the WTO is also about agriculture, services and intellectual property rights. More members, more topics, renders any new agreement a very complex puzzle. That's why some suggest that it would be better to strive for partial agreements, and forget about global agreements.

There's no reason to be apocalyptic about the recent failure of WTO talks. For the time being, resistance against more globalisation is stronger than support for it. There's nothing wrong with that. Globalisation and trade are about people. If globalisation goes too fast, putting too much pressure on societies, creating too many losers, it will fade anyhow.

The previous globalisation of 1870-1914 proved that much. In the U.S. now only one-third of the people believe free trade is good for them. Could that, together with their refusal to lower their massive cotton subsidies, explain why the U.S. didn't really want a new agreement in July.

In July, China and India demanded large safeguards for their hundreds of millions of small farmers. That's understandable: more than half of their population lives in the countryside. Good governance implies that they defend those interests.

So it seems to be time for a pause in the rhythm of globalisation. Globalisation has contributed to global growth. Still, there's general agreement that the fruits of this growth have been distributed very unevenly. Governments have to amend that if they want to bolster support for globalisation in the long run.

The dirty air above Beijing and many other Chinese cities suggests another priority for the world community: protect the environment. Is it not more important to have a new climate treaty by 2009 than a new trade agreement?

*This is one of a set of four articles on the global institutions by John Vandaele, journalist with the Belgian magazine Mo*, and author of several books on globalisation, most recently 'The Silent Death of Neoliberalism, 2007.