WTO 101: Myths about the World Trade Organization
Smith, Jackie & Moran, Timothy Patrick
Jackie Smith and Timothy Patrick Moran BEFORE NOVEMBER 1999, few Americans knew what "WTO" meant, much less understood its workings. The World Trade Organization evolved from the...
...Indeed, the WTO proudly proclaims that the central purpose of the multilateral trading system is to ensure that "trade flows as smoothly, predictably, and as freely as possible...
...At the same time, developing countries that largely lack such subsidies are prohibited from establishing them...
...The Dispute Settlement Process within the WTO gives it the strongest enforcement capacity of all international organizations...
...Even in established democracies, there is little role for public debate about international trade...
...We must name it, describe it, analyze it, understand it and change it...
...In practice, the corporate monopolies protected by TRIPs have, for example, undermined South Africa's efforts to make low-cost AIDS medications available to its people...
...Thus on behalf of its powerful pharmaceutical industry, the United States has challenged South Africa's Medicines Law, which promotes the importation and licensing of lower-priced generic versions of these and other life-saving drugs...
...Stone, the best-remembered speech came form Students for a Democratic Society president Paul Potter: "The incredible war in Vietnam has provided the razor, the terrifying sharp cutting edge that has finally severed the last vestige of illusion that morality and democracy are the guiding principles of American foreign policy . . . . What kind of system is it that justifies the United States or any country seizing the destinies of the Vietnamese people...
...I think of small island states that have to form governments for a few thousand people...
...JOSHUA B. FREEMAN DISSENT / Spring 2000 n 69 MYTHS ABOUT THE WTO issues under the same fundamentally flawed and yet powerful Dispute Settlement Process and further reinforce the power of rich countries over poor ones...
...The initial concern was tariff reduction...
...In practice, WTO rules have allowed ICs to restrict imports from developing countries while they force the latter to accept market liberalization rules that primarily benefit Western corporations...
...The much discussed 1999 "banana war" between the EU and the United States (not one banana grown for export between them) was brought to the WTO almost single-handedly by Carl Linder, top man at the world's largest banana distributor, Chiquita...
...The Quad then uses its considerable economic and political influence to build "consensus" around these decisions made without participation from the full WTO membership...
...The success of Seattle protests in derailing negotiations to expand the WTO generated hope that the "end of history" might have to be delayed...
...Michael Moore, December 1999) The WTO claims to "help the poor" on two levels...
...Patent holders are guaranteed a minimum of a twenty-year monopoly on the marketing of their product...
...In short, the "liberalization" promoted under the WTO is highly skewed to the advantage of the ICs and the transnational corporations based in these countries...
...Sectors important to the Southern Countries (SCs) remained selectively more protected, especially with regard to agricultural products and other commodities...
...Smith is a co-editor of Transnational Social Movements and Global Politics: Solidarity Beyond the State...
...Current members span the spectrum of the world economy, from the poorest (Sierra Leone at per capita GNP of around $140 in 1998) to the wealthiest (Switzerland at $40,080), from the largest democracy on earth (India) to the smallest dictatorship (Cuba...
...The Seattle meetings were intended to produce an agenda for a new "Millennial Round" of negotiations...
...67 MYTHS ABOUT THE WTO trade bureaucrats and corporate lawyers who are assigned without regard to potential conflicts of interest and who deliberate in secret...
...The United States, the European Union (EU), Canada, and Japan (dubbed "the Quad") have routinely hammered out agreements in informal, "green room" meetings, named after the site of these secret conferences at the WTO's Geneva headquarters...
...We consider them as six key myths of the multilateral trading system...
...Is this free trade...
...ICs have also maintained quotas on imports of developing country products such as textiles and clothing...
...As the returns to skill and education continue to increase, and high-wage manufacturing jobs shift to the South, countries like the United States and Great Britain are becoming bipolar societies with respect to work and wages...
...After all, a country's wealth depends much less on ease of trade then it does on what is actually traded...
...Myth #4: It's Good for the World's Poor The longer we delay launching the [next round of] negotiations, the more the poorest among us lose...
...As the Seattle protest took shape, and it became clear that the ceremonial unveiling of an enlarged WTO mandate was far from a done deal, the Economist was forced to admit that "globalization is not irreversible...
...law requiring that all stakeholders be represented on federal advisory panels...
...Although this strategy might appease big labor at home, it is unlikely to bear any fruit in multilateral negotiations given resistance from the majority of developing country members who claim that their "comparative advantage" is in cheap labor...
...On the international level, trade is supposed to spur economic growth (thus helping poor nations...
...We need to incorporate these issues into research agendas, classroom curricula, and popular discourse...
...Though the program included such celebrities as Joan Baez, Bob Moses, and I.F...
...WTO members are required to standardize their patent laws "upward" to ensure that patent holders can recoup their investments in research and development (even if such R&D involves collecting and patenting plant specimens indigenous to developing countries...
...The protests created new political space for citizens to expand their economic literacy and demand a voice in decisions regarding the alternatives for the future of economic development...
...In theory, any member state can bring a dispute to the WTO, but in reality the vast majority of challenges have come from wealthy nations...
...A rain forest in Brazil, a library in Philadelphia, a hospital in Alberta...
...Critics of the 1994 Uruguay Round argue that many of those agreements liberalized trade only when that was in the interest of Industrialized Countries (ICs...
...On November 30, 1999, in Seattle, Washington, at the first major national demonstration against corporate-controlled globalization, Gerald McEntee, the president of the American Federation of State, County and Municipal Employees—best-known for his unbridled enthusiasm for Bill Clinton and Albert Gore—told twenty thousand protestors, "The system turns everything into a commodity...
...It's clearly not inevitable, either...
...More than five hundred corporation and business representatives were given official credentials as "trade advisors" to the U.S...
...Across the developed world, and especially in Latin America, persistent poverty remains an intractable problem...
...In many ICs global trade is certainly raising incomes, but mostly at the top, generating unprecedented polarization...
...70 • DISSENT / Spring 2000...
...Contrary to WTO and U.S...
...But among specialists, connections between trade liberalization, economic growth, and poverty reduction are much more hotly disputed than free-trade advocates would have us believe...
...Trade Representative propaganda, these issues are far from resolved...
...Cultivating the public awareness and civic skills for such democratic participation is a fundamental challenge for the left at the beginning of the twenty-first century...
...Within a week of the Seattle meetings, the WTO completely overhauled its Web site, incorporating a new "global town hall" and Letterman-like "Top 10 Lists" extolling the "benefits" and de-fogging the "common misunderstandings" of the WTO...
...More blatant corporate protectionism is evidenced in efforts of the ICs to regulate trade related to intellectual property rights, or TRIPs...
...For many of these claims, the best evidence is contradictory...
...Then there's the question of trade's relationship to poverty reduction...
...As a result, unprotected farmers in the South are forced to sell their goods in "free markets" where prices are distorted by dominant, heavily subsidized Western agricultural firms...
...But Potter himself never did name that system...
...This is why "strategic trade policy" and "free trade policy" are largely synonyms—everyone knows the latter exists only in theory...
...Defendants in WTO disputes, moreover, must face a panel of DISSENT / Spring 2000...
...Myth #2: It Promotes Equitable Access to a Rulebased Trading System Many developing countries have looked to the WTO to facilitate greater access to IC markets, since the system (in theory) prohibits unfair restrictions on trade, such as high tariffs or quotas...
...WTO rules run interference for multinational corporations against the potential obstacles of national and local laws and competition...
...In practice, the WTO and its member countries adhere to a policy of lopsided MYTHS ABOUT THE WTO liberalization easily infringing on the ideology of openness to protect their markets or their products...
...Efforts to construct a world based on social justice and ecological sustainability depend on democratic participation...
...Michael Moore, director-general of the WTO, September 1999) In theory, the WTO was to promote greater democracy and transparency in global trade negotiations by allowing each member country a single vote in contrast to the financially weighted voting systems used in the World Bank and the International Monetary Fund (IMF...
...delegation in Seattle...
...But lately the system has expanded to include governments' uses of "non-tariff barriers to trade," including anti-dumping measures, environmental and safety regulations, humanitarian sanctions against a country's products, and restrictions on foreign investment...
...Indeed, if it's just about free trade, why did it take so many years to negotiate the rules of the system, and a more than nine-hundred-page treaty to define it...
...The panel possesses far-reaching sanctioning powers over member countries, which it uses to ensure compliance with WTO commitments...
...In the course of talks in Seattle, representatives from developing countries grumbled about the lack of democracy in the WTO negotiating process, which contributed to the breakdown of negotiations...
...Even advocates of labor rights and the environment should oppose the "side-agreement" approach to "fixing" the WTO...
...But to presume that these relationships hold universally represents a giant leap of faith in the face of mounting evidence to the contrary...
...In the real world, though, competition is not conducive to profit, and capitalists (and the governments representing them) know this...
...In other words, the assumed links between liberalization, distribution, and growth may exist for particular countries in particular times...
...And how is this for democracy...
...TRIPs protect holders of recognized copyrights and patents, allowing them to reap economic rewards for intellectual property in all member countries...
...What distinguishes the WTO among international agreements is its Dispute Resolution Panel...
...In practice, however, there is little evidence of democracy within the WTO operations...
...What kind of system . . . consistently puts material values before human values...
...But the winners are those who can conceal (or create) monopoly price situations, maintain comparative advantages, and deflect competitive pressures...
...The aim was to expand the WTO's mandate to cover a wider range of goods and services, including financial investments, education, and health care...
...It would bring new Finishing the Thought 0 N APRIL 17, 1965, the first major demonstration against the war in Vietnam took place in Washington, D.C...
...Some commentators would go farther...
...for others, it's simply nonexistent...
...Myth #6: There Is No Alternative As the above discussion shows, the definition of "free trade" promoted by the WTO consists of selective protection of ICs' special interests— like Florida orange growers and large pharmaceutical companies—coupled with a radical and quick opening of developing economies to global markets...
...The twin themes being advanced by the newly image-conscious WTO are global economic successes, combined with assurances of newfound transparency...
...In addition, the WTO Agreement on Agriculture instructs ICs to merely reduce their historically heavy agricultural subsidies by 20 percent...
...Unlike judicial systems in most democratic institutions, access to evidence on the case is strictly limited, and amicus briefs from stakeholders are only allowed at the discretion of government parties to the case...
...WTO rules, for instance, restrict tariffs on manufactured goods, but they allow higher tariffs on many commodities that developing countries export...
...Unlike many agreements in the United Nations, WTO provisions are binding on governments, and states that fail to bring their national laws into compliance with WTO provisions face a wide range of trade sanctions...
...it is to extract profit from your particular location in them...
...What makes this so inevitable...
...Even if one accepts the 135 governments in the WTO as legitimate representatives of the people within their borders, can we then assume that the trade policies pursued by most governments are products of democratic participation and deliberation...
...No other international body has such strong enforcement capabilities...
...66 . DISSENT / Spring 2000 In the United States, trade officials now talk of "educating constituents" on the benefits of free trade...
...tariff on orange juice is 31 percent, while the average for industrial tariffs is below 5 percent...
...The game is called "free trade...
...But maybe we're dealing with a fundamental misunderstanding about what democracy actually is...
...Limited in their ability to maintain vigilant teams of skilled legal advisors, poor countries typically abandon laws that might be considered WTO-illegal rather than risk costly legal battles...
...Inequities inherent in the WTO's regulation of North-South trade are readily apparent in the organization's dense and convoluted rules and procedures...
...On the national level, it is alleged that trade raises incomes and cuts living costs (thus helping poor people...
...Myth #5: Labor and Environmental "Side Agreements" Can Solve the Current Crisis Bill Clinton's response to protests against the WTO both before and during the Seattle meeting has been to push for a labor working group within the framework of the WTO...
...That way, already established international human rights and environmental agreements could not be "trumped" by WTO rules...
...In contrast, environmental advocates had to sue the federal government to enforce a U.S...
...In the United States, "iron-triangle" politics has meant that industry trade groups enjoy direct and often uncontested access to trade officials...
...The idea is not merely to be integrated into global commodity chains...
...This finicky relationship the WTO and its members have with trade liberalization has come under increasing scrutiny, particularly as trade critics have exposed the implications of the agreements for particular industries and countries...
...In a Financial Times interview, Moore registered his irritation with the fact that NGOs (nongovernmental organizations), which "never [sell] a product, never [get] a vote and [don't] actually do anything can come out and attack [the WTO for being undemocratic...
...In what follows, we look critically at some of the claims and assumptions made by the WTO and its supporters, ideas presented by the WTO as accepted knowledge, when, in fact, deep polemics surround these issues...
...Despite the rush of poor countries to radically open their economies, it's far from clear that their poor citizens will benefit...
...Wide and growing disparities in economic growth rates and the distribution of income among nations have caused 68 n DISSENT / Spring 2000 MYTHS ABOUT THE WTO many analysts to become skeptical of the links between import liberalization and economic performance...
...Hardly...
...A more productive approach to promoting labor rights and environmental protection would be to make global trade law subordinate to the United Nations and the International Labor Organization...
...It's as democratic as it gets...
...Apparently, unelected, nonprofit, do- nothing advocacy groups have no role in the democracy defined by the WTO's new world order...
...A big donor to both political parties, according to the Economist, he "lobbied the Clinton administration assiduously" to stop the EU's practice of favoring bananas from ex- colonies in the Caribbean, effectively assuring monopoly rights for his company in Europe...
...So the U.S...
...The Seattle events pushed open the closed doors of global trade negotiations...
...Long pause, strange times, changing weather...
...For the first time, people around the world have the chance to become better informed about WTO-style globalization, and to demand more democratic participation and accountability in future negotiations...
...This is their institution...
...We must name that system...
...It is vitally important that we expand that space...
...JACKIE SMITH and TIMOTHY PATRICK MORAN are assistant professors of sociology at the State University of New York at Stony Brook...
...We have to name that system: it is corporate capitalism...
...Membership has now reached 135 nations and another 32 have applied for accession, including China and the former Soviet Republics...
...The United States alone initiated more than 50 of the 117 challenges brought by late 1999...
...Myth #3: It's Democratic "When I see [the WTO] being told it's undemocratic, I think of the ambassador of India, the greatest democracy on earth...
...In a recent editorial in World Development, Michael Lipton concludes, "there is strong evidence for the consensus view that [the fate of a] country's poor is not systematically affected by either its growth rate or its pace of liberalization...
...The World Trade Organization evolved from the General Agreement on Tariffs and Trade (GATT) and was officially created in 1995...
...The protests successfully derailed (at least temporarily) the next round, and the WTO and its supporters have been practicing serious spin control ever since...
...At the very least, the WTO's simple assumption that openness is superior to any alternative is hasty, if not wrong...
...Myth #1: It's About Free Trade One of the greatest economic illusions, proclaimed since Adam Smith, is that capitalism works best (that is, profits are highest) when markets are free and fair...
...Our job on the left is to project a critique of WTO-style trade liberalization and economic liberalization more broadly...
...Countries and their corporations (especially the rich and powerful of each) do not want to liberalize markets so much as selectively protect them...
Vol. 47 • April 2000 • No. 2
