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What next for the WTO?—Viewpoints | EPI

Opinion pieces and speeches by EPI staff and associates.


What next for the WTO? 

by Jeff Faux

A New Grand Bargain
The failure of the WTO to come up with an agenda for a new round of trade negotiations at its Seattle meeting in early December was a stunning defeat for the Washington Consensus — the U.S.-led, worldwide coalition of corporate and political elites that have so far made unregulated trade and finance the single goal of global economic policy.

The Clinton Administration’s original script for Seattle called for trade ministers to sign on ceremoniously to an agenda negotiated by lower-level staffs a month earlier in Geneva. But the Geneva meeting fell apart. Neither European nor Japanese governments were ready to take the domestic political risks attendant on dismantling farm export subsidies, as sought by multinational agribusiness. And in the wake of the Asia financial crisis, the developing countries were not eager to further deregulate their banking sector to accommodate Citibank or to give up the right to tax the Internet in order to improve AOL’s bottom line–at least not without getting something in return. Specifically, they wanted the United States to abolish its antidumping laws and to accelerate elimination of its quotas on apparel. These would have been two more nails in the coffin of American manufacturing, which has lost almost 300,000 jobs in the past two years.

Still, coming into Seattle, the administration hoped to broker just such a deal with the trade ministers themselves. “Failure,” said U.S. Trade Representative Charlene Barshefsky, “is not an option.” But Barshefsky and Clinton became trapped by a rising tide of anti-WTO sentiment among labor and environmental activists that eventually rose to flood out their plans. In late October 1999, the White House had persuaded AFL-CIO President John Sweeney to support a new WTO round if it included a “working group” to study the link between labor standards and trade, which the world’s free trade unions see as a first step toward getting trade rules to protect workers’ rights as they now protect the rights of investors. But three weeks later, President Clinton announced an agreement to bring China into the WTO. Given its current government’s dismal record on labor and human rights, China’s huge presence in the WTO would doom the labor effort. An angry Sweeney denounced the China deal as “disgusting” and vowed to fight it.

Anxious not to further alienate labor in the coming election year, the administration raised its rhetorical support for the working group. At one point, the president even said that he favored the use of trade sanctions to enforce minimum labor standards. Because the U.S. delegation had been assuring the others that they had no such intention, trade ministers from Egypt, India, and Mexico cried foul, and the already slim chance of getting a working group was gone.

Meanwhile, some 40,000 well-organized trade unionists, environmentalists, religious leaders, civil society activists, students against sweatshops, and other protesting corporate dominance of the WTO clogged the Seattle streets, delaying the meetings and diverting the attention of the delegates, who had only four short days to get 135 nations to agree on the specific topics for the new round. The delegates — many coming from nations where the exercise of free speech lands you in prison — were outraged. Under pressure from embarrassed city leaders, the ill-prepared Seattle police overreacted to the fringe violence, creating television news images that looked like Chicago in the summer of 1968.

Ironically, the chanting against the undemocratic WTO in the streets began to resonate with developing countries’ trade ministers in the suites. Although contemptuous of the demonstrators’ causes, they had long resented the authoritarian dominance of trade policy by the United States and its first world allies, and in Seattle were galled by American lectures on the importance of transparency and inclusiveness in trade talks. When, racing against the clock, Barshefsky called a small, closed-door meeting of its usual partners to cut a deal, the excluded majority was livid. With third world delegates angrily denouncing the proceedings to the press, the Europeans unrelenting on agriculture, and the conference center anxious to prepare for an incoming convention of optometrists, Barshefsky finally threw in the towel. The AFL-CIO, Public Citizen, the Sierra Club, and the hundreds of other organizations, here and abroad, that form the loose global party in opposition to the Washington Consensus, claimed sweet victory.

In theory, negotiators can resume their talks at a January meeting in Geneva — a bastion of gray bureaucrats, less hospitable to political expression than Seattle, the most unionized city in America, and a major center of ecotopic thought. But after the last protester boarded the last bus home, the last broken window at McDonald’s was replaced, and the tear gas had dissipated into Puget Sound, it became clear that globalization politics would never be the same — either at home or at the WTO.

At home, the Washington Consensus is being challenged in both political parties — by a Democratic left concerned with social justice and environmental protection and a Republican right uneasy about ceding sovereignty. The immediate problem is for the Democrats, who face a newly energized internal opposition to the admission of China into the WTO. The deal with China requires that Congress make permanent trade concessions that are now voted on annually. A drawn-out legislative fight next year will divide the party and drain resources needed to compete with the well-heeled Republicans. Thus, it is in the Republicans’ interest to drag it out as long into next year as possible — and they control the legislative calendar.

The labor/green/student solidarity forged in Seattle is still fragile. Beyond their critique of the WTO, much remains for Teamsters and turtle protectors to sort out. But at the very least, the experience transcended the old divisions between labor and liberals that still lingered from the 1960s. After years of being dismissed by political pundits as relics, the various legions of opposition have created in Seattle’s wet streets a new populist politics around the unlikely, but very twenty-first-century, issue of social rules for the global economy.
Remarkably, this issue is now respectable, even at the WTO. Free trade champion Barshefsky acknowledged several times that the notion that labor conditions are not linked to trade is “intellectually indefensible. ‘ The president’s comment on the use of trade sanctions, which he did not recant, was simply following the common-sense logic that if labor standards should be in the rules, they should be enforced. From here on, it will be much harder for free trade Democrats to ignore this obvious point. The European Union, which has also accepted the principle of a social clause in trade deals, win feel increased pressures from its own labor/green coalitions to give it some teeth. During the WTO meetings, protesters demonstrated in London, Paris, and Berlin — also, perhaps a sign of things to come, in New Delhi and Manila.

Yet the 135-nation WTO remains a consensus organization, and the introduction of enforceable social standards is sternly opposed by the developing countries’ elites. In the post-Cold War era, foreign aid has been drastically cut; the IMF and World Bank, which epitomize the Washington Consensus, lend money to poor countries on the condition that they give priority to increasing their exports. As a result, these nations are under brutal global pressure to make their cheap labor even cheaper. Within the rather narrow framework of WTO negotiations, it is virtually im
possible to imagine a serious compromise.

Within a larger framework, however, one can imagine a “grand bargain” in which the developing nations agree to enforceable social standards in exchange for guaranteed commitments of long-term development aid and debt relief. There is no institution of global economic governance broad enough to encompass this kind of negotiation. Jacques Delors, former head of the European Commission, has suggested the formation of a global economic security council. But without a new policy agenda, the world hardly needs another supranational bureaucracy.

Only the United States has the capacity to organize such a discussion. But does it have leaders with the requisite imagination? Bill Clinton, to his credit, has now correctly defined the problem: how to build a social dimension into the rules of a global economy that does not have a political constitution. Unfortunately, it is too late for his lame-duck presidency to move us toward some solution. If the crisis of global economic governance that was exposed in Seattle is to be resolved, the world will have to be very lucky in who it is we select to be the next president of the United States.


Jeff Faux is the president and co-founder of the Economic Policy Institute.

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