Development & Aid, Economy & Trade, Financial Crisis, Global, Global Geopolitics, Global Governance, Headlines, Human Rights, North America | Analysis

TRADE: A Lost Decade for the WTO?

SEATTLE, Dec 7 2009 (IPS) - Ten years ago, the Seattle Ministerial of the World Trade Organisation (WTO) flashed over into a ‘Battle of Seattle’ before the eyes of a startled world.

Throwing the prosperous home of Boeing and Microsoft into turmoil, large demonstrations led by labour and environmental groups were complemented by widespread civil disobedience in the streets. This resonated with a revolt by delegates from developing countries against the strong-arm tactics of the WTO leadership and the United States. The convergence precipitated the rancorous collapse of the WTO’s efforts to inaugurate a “Millennium Round” of trade talks.

In the decade since, the trade body has sometimes seemed afflicted by the institutional equivalent of post-traumatic stress disorder. This may be because many of the forces that surfaced in Seattle are still protagonists in the current impasse over the “Doha Round” of trade negotiations, launched in 2001 in the capital of Qatar.

In each round of talks, which can last many years, representatives of member countries meet periodically to discuss how to bring new arenas of commerce under WTO regimens and increase the scope of commitments to trade liberalisation by member countries.

Doha was branded as the “Development Round”, dedicated to the economic advancement of poor countries through trade. But the supposed beneficiaries’ mistrust of U.S. and European dominance of the organisation has led to the growth of a counterbalance led by China, India, Brazil, Indonesia and South Africa.

And GATT Begat the WTO

The World Trade Organisation (WTO) is built on the foundation of the General Agreement on Tariffs and Trade, established in 1947. A member of the new generation of international bodies launched after World War II, GATT was a sibling of the United Nations, the International Monetary Fund (IMF) and the World Bank. It grew up in an era when Keynesian economics and a strong government role in economic management were broadly accepted.

But the new avatar of international commerce, critics say, reflects the ascendancy of market fundamentalism over values such as sustainable development, environmental protections, public health and safety, labour rights, transparency and accountability. The WTO, in this view, has grown into an undemocratic and opaque force that advances the interests of wealthy countries and transnational businesses, coercively enforcing unfettered trade as an end in itself rather than a means to human well-being.

WTO Secretary-General Pascal Lamy, for his part, defends his organisation as a critical component of the global governance system. "You have subscribed to the principles of advancing and defending open trade within a non-discriminatory and transparent framework," Lamy told the Geneva Ministerial. "You are united in the belief that trade can contribute to sustainable development in the widest sense. That it can generate growth. That it can help provide decent jobs. That trade can be a powerful tool for developing countries to fight poverty."

Free trade under GATT was defined primarily by two basic principles of non-discrimination: "national treatment" and "most-favoured nation". National treatment means that imports from other countries must be treated no differently than domestic products. Most-favoured nation status requires that all trading partners be treated equally. Together, the two principles encouraged trade that treated goods from all foreign countries and domestic goods equally.

In practice, however, many restrictions on trade were allowed or persisted under GATT, and most countries maintained tariffs and subsidies on numerous goods. One reason was that under GATT, trade disputes between nations proceeded slowly and incrementally. The parties had to sort them out through patient negotiation and consensus, as both sides had effective veto power over the outcome.

Despite some Cold War disruptions, global economic integration proceeded steadily for most of the period from World War II through the opening of the former Soviet Bloc, China, and many other countries to international markets.

Bargaining on new rules for trade and changes in existing ones has for many decades been conducted in "rounds" that continue for many years and span numerous conferences in sites around the world. Each successive round of trade negotiations under GATT and the WTO has pushed to liberalise more areas of the world economy and expand the reach of trade rules. The implicit assumption behind these rounds has been that peeling away more layers of national regulations that may impose even indirect limits on commerce, while increasing the leverage of enforcement, bring benefits to all countries.

After failures to agree on the Doha agenda at ministerial-level meetings in Cancún in 2003 and Hong Kong in 2005, negotiations on the substance of WTO expansion were relegated to lower-level meetings.

In July 2008, the talks foundered on the rocks of agricultural trade and tariffs. When the U.S. rejected demands by India and other developing countries for a “special safeguard mechanism” allowing them to protect domestic farmers against surges in imports, India and its allies threatened to abandon ship.

Nevertheless, efforts by the WTO to salvage Doha continue. In a speech in Geneva, WTO Director-General Pascal Lamy affirmed that the economic crisis has demonstrated “that trade is the stimulus package available to developing countries and that it has to be part and parcel of the economic recovery effort for growth to be sustainable.”

Since Seattle, however, citizens and governments of many member countries have grown more sceptical about the benefits of some existing WTO rules and more hesitant to expand them.

In many developing countries, small farmers and rural communities have become increasingly concerned that poverty could be worsened and development undermined by WTO expansion. Their organisations are pushing to erect buffers against destructive spasms in commodity markets and damage caused by rich countries’ agricultural subsidies. Governments of some wealthy countries, however, have criticised such protections as violations of trade rules.

According to Martin Khor of the non-governmental South Centre, the founding objectives of the WTO included raising standards of living and ensuring full employment in the service of “sustainable development”; reduction of trade barriers and eliminating discriminatory treatment between nations were means to those ends. However, Khor argues in a recent paper, that the trade-promotion measures have “in effect become ends in themselves rather than the means.” Trade liberalisation has elbowed aside development and the broad sharing of economic benefits.

Many labour, environmental and public health organisations worldwide have continued to oppose expansion of the WTO’s scope as well. They are fighting what they see as the use of trade rules to force nations to deregulate expanding sectors of the economy and strip away hard-won public safeguards.

Recently, in the wake of the global financial crisis, continuing efforts to expand the WTO’s remit in the deregulation of international financial services have also been widely called into question.

At the 7th Ministerial of the WTO, which met from Nov. 30 through Dec. 2 in Geneva, organisers limited the proceedings to a “housekeeping” meeting where no major decision-making efforts would be made.

“The proponents of the WTO have been afraid for four years to call a negotiating ministerial,” asserted Lori Wallach of Global Trade Watch, a U.S. non-governmental organisation. The U.S., the European Union, and some big multinational corporations fear an explosion, she told IPS, because they have continued in the face of opposition from the majority of WTO members to push the same “radical WTO expansion agenda that was originally brought up and rejected at Seattle”.

Wallach compared bringing trade ministers together without confronting the underlying issues to “not talking about war while working on the Versailles Treaty” [which ended World War I]. Some developing countries, she says, are calling Geneva the “Muzzle Ministerial”.

In contrast, U.S. Trade Representative Ron Kirk, speaking in Geneva, congratulated the WTO for passing “a fairly strenuous test” presented by the financial crisis. “The continued health of the trading system,” he observed, “is due in part to many of our own individual efforts in the face of domestic pressure to turn inward.”

Kirk highlighted the WTO’s Aid for Trade program, which provides targeted aid to assist developing countries to increase their capacities, and noted that the U.S. is the largest provider of trade-related technical assistance. Citing a recent WTO report that found that the least-developed countries were exporting increasingly to newly important economies such as China and India, he called on these new trade powers to make increased “market-opening contributions… commensurate with their role in the global economy.”

As Doha languishes, the foundations of the world economy and much of the world’s understanding of them have indeed shifted and settled. Two enormous speculative bubbles and the most destructive downturn since the Great Depression have led many across the political spectrum to question the gospel of laissez-faire and deregulation.

Challenges to the orthodox trade doctrine undergirding the WTO have emerged as well. New historical critiques such as “Kicking Away the Ladder”, by Ha-Joon Chang of Cambridge, argue that in their early years all the now- wealthy countries adopted tariffs and other trade barriers to protect their young industries, but now deny the use of the same shelters to today’s developing countries.

Most modern versions of economic theory recognise that trade produces losers as well as winners: whether it is effective in reducing poverty, though, has been a subject of sharp debate. A recent WTO review found that, while increased trade is positively correlated with economic growth, there is not a clear causal link between trade and poverty reduction. Trade may even exacerbate inequality, the study found, because it tends to benefit wealthier sectors in both developing and industrialised countries.

One force in the trade debate that had its coming-out party at the Seattle Ministerial – the “global justice movement” – has become a regular at international economic events over the intervening years.

In Geneva, “Our World Is Not For Sale”, a network of 216 organisations, called for a halt to negotiations on the Doha Round, the reversal of WTO commitments, and the adoption of different approaches to the multiple global crises.

Among analyses of the legacy of Seattle, a surprising one came from an erstwhile antagonist of that movement, the then-mayor of Seattle who lost the next election partly as a result of his handling of the protests. “The first introduction to the issues of the 21st Century happened in Seattle,” Paul Schell told a Seattle television station. “We need to become much more sensitive to our impact on the world and the world’s impact on us. Nobody wants to talk about it, but we can’t maintain our standard of living at the expense of the standard of living of the rest of the world. We really need to rethink how much we are consuming the world’s resources, and we are going to have to find our values in something other than more stuff.”

*Peter Costantini was one of the IPS correspondents covering the 1999 Seattle Ministerial.

Republish | | Print |