WTO failure worries; Wolf cheerleads

Doug Henwood dhenwood at panix.com
Wed Nov 24 06:48:00 PST 1999

[You have to wonder if they're playing a game of lowering expectations for the talks, and raising expectations for the demos - both falsely.]

Financial Times - November 24, 1999

World leaders side-step call to join WTO talks By our international and UK staff

The US last night dropped last-minute efforts to persuade world leaders to join President Bill Clinton at next week's World Trade Organisation meeting in Seattle.

The failure of the US initiative came as WTO envoys finally abandoned attempts to agree a draft agenda for the talks. The US initiative appears aimed at injecting high-level political impetus into the Seattle meeting, amid growing signs that deep disagreements are threatening plans to launch a new trade round.

US officials said Mr Clinton's initiative had been floated as a means of giving added momentum to the Seattle talks but had proved impractical. Some non-US officials, however, saw the proposal as a precautionary move to share the political blame if, as seemed increasingly likely, the meeting went badly.

Pascal Lamy, European Union trade commissioner, said yesterday there was a serious risk that the meeting would be unable to launch a world trade round. However, Mike Moore, WTO director-general, said he was still confident that next week's talks would not fail. Weeks of negotiations in the WTO have been unable to bridge deep disagreements, particularly over agriculture and developing countries' concerns about the burden of meeting their existing WTO obligations.

Diplomats said the US first suggested about two weeks ago that it might invite other world leaders to the talks. A US official accompanying Mr Clinton on his visit to Kosovo said Washington had envisaged asking "some dozens" of leaders to attend.

But although no invitations had so far been issued, initial reactions in many capitals to informal diplomatic soundings by Washington were unenthusiastic. In Paris, a senior French official called the US initiative "pure folly" and said his government and its EU partners had tried to talk Washington out of pushing ahead with it. He said European leaders were reluctant to cancel other engagements "to fly a long way for an unnecessary photo-call".

In Brussels, a spokesman for Romano Prodi, president of the European Commission, said the US had recently raised through "diplomatic channels" the possibility of his going to Seattle. But he said the short notice and a heavy schedule of other commitments made his attendance at Seattle impossible. "Seattle is not just around the corner from Brussels," he said.

Another EU official said Brussels was still considering the US proposal. "Our initial view has been fairly sceptical, because we cannot see what the meeting would be for," said one EU official.

In London, a Downing Street spokesman said Tony Blair, the prime minister, had received "no formal approach" about attending the WTO meeting but that there was "never a question" of his going.

Gerhard Schroder, the German chancellor, and Keizo Obuchi, the Japanese prime minister, were also said to be unlikely to fly to Seattle, because both had important prior commitments at home.

Diplomats said the US had indicated that it wanted to organise a one-day meeting of between 30 and 40 world leaders next Wednesday.

No firm agenda had been proposed, although some US officials had suggested they might discuss ways of helping developing countries.

The provisional guest list would be based on the 40 governments represented at a trade ministers' meeting in Lausanne last month, which sought unsuccessfully to generate momentum for a round. Participants included the EU, Japan, Australia, Switzerland, Hong Kong, Egypt, Brazil and other developing countries.

Trade diplomats in Geneva said the US had initially sought to persuade Mike Moore, WTO director-general, to invite the government leaders to Seattle. The US apparently decided to pursue the idea itself after WTO ambassadors objected to Mr Moore being involved.

Reporting by Guy de Jonquières and David Wighton in London, Robert Graham in Paris, Mark Suzman in Washington, Haig Simonian in Berlin and Stephen Fidler at Camp Bondsteel, Kosovo


WTO: Trade envoys fail to agree talks agenda By Frances Williams in Geneva and Mark Suzman in Washington

Amid recriminations on all sides, trade envoys yesterday abandoned their attempt to forge agreement on a draft agenda for new World Trade Organisation talks due to be launched next week at a ministerial meeting in Seattle.

Big divergences over agriculture and implementation of existing agreements finally scuppered all chances of accord on a draft text, which would only have laid out a set of choices for ministers to make on the scope and objectives of the negotiations.

Mike Moore, WTO director-general, said last night that officials had made important progress in a number of areas but differences over agriculture and implementation had prevented a consensus text emerging.

"I believe we can still do this at Seattle," he said after a meeting of the WTO's ruling general council. "Seattle will not fail. It is political willpower and horsepower that will drive this through."

He noted that previous ministerial meetings had not had an agreed text before them either. "We're maintaining an old tradition," he joked.

Rita Hayes, US WTO ambassador, also said she was optimistic about the chances of agreement in Seattle, despite the Geneva impasse. However, the informal group of developing countries in the WTO said the task was daunting.

Though talks continued up to yesterday morning, Mr Moore told WTO envoys yesterday that on the key issues positions had if anything hardened in recent days.

The EU is said to have backed away at the weekend from a deal on agriculture with the US and the Cairns Group of agricultural exporting countries.

Meanwhile, developing countries complained that their implementation concerns had not been taken seriously. They also attacked the US and EU for trying to put the issue of labour standards on the Seattle agenda, saying this was unacceptable and divisive.

Five negotiating groups will be set up in Seattle, open to all ministers, on agriculture, implementation, new issues such as investment and competition policy, market access and WTO rules.

Charlene Barshefsky, US trade representative, said that while some differences remained real progress had been made on agriculture and other issues and she was confident a successful outcome would still be reached. "I don't think the divisions are all that deep," she said.

Ms Barshefsky stressed that breakdowns are a frequent part of trade negotiations and said she was confident talks would resume.


WTO: Lamy warns of Seattle failure By Neil Buckley in Brussels

The European Union's trade commissioner acknowledged for the first time yesterday there was a serious risk that next week's WTO ministerial meeting in Seattle might fail to launch a new trade round.

Pascal Lamy added that even if agreement was reached, but the agenda was too narrow, this could leave talks without sufficient momentum to reach a successful conclusion - and store up problems for the future.

Speaking shortly before negotiators in Geneva said they had all but given up hope of agreeing on an agenda before Seattle, Mr Lamy called on all trading partners to be flexible and take a longer-term view.

"We are concerned that we might leave Seattle without a decision on a new round," he said. "What has happened in Geneva is not sufficient to allow us to embark on a new round. We had a lot to do and unfortunately we didn't succeed in doing it."

Mr Lamy defended the EU's insistence on a broad round, suggesting that the more elements included in negotiations, the better the chance of a productive final deal. European Commission economists published a study suggesting liberalisation on the basis of the EU's proposals could boost the world economy by $400bn a year.

But the commissioner added that if issues such as competition and investment rules were not included in a new round, groups concerned about globalisation could later use the lack of rules as an excuse for "kneejerk protectionism."

He criticised the "short horizon" of the US, hinting that Washington was too preoccupied with looming presidential elections.


Stand up for trade, Mr President [by Martin Wolf]

Attempts to impose inappropriate standards on the world trading system should be opposed at all costs

Willie Sutton, a celebrated American felon, robbed banks because, as he explained, that was where the money was. For the more rational protesters, similar reasoning explains why they will besiege the ministerial meeting of the World Trade Organisation, in Seattle, at the end of this month. They will be there because the WTO is where the power is.

The trading system was not built on the economically correct perception that imports are a benefit in trade and exports a cost. It was founded, instead, on the mercantilist assumption that market opening is a 'concession', given in return for export opportunities. The way to control backsliding by a trading partner is withdrawal of these supposed concessions. Thus the WTO's system of reciprocal liberalisation is enforced by the willingness of countries to retaliate against imports.

With this structure, free traders made a pact with the mercantilist devil. Alas, he has now spawned. The extension of the trading system beyond the explicit goal of trade liberalisation began, in the Uruguay round, with the enforcement of supposedly trade-related intellectual property rights. Nowadays, however, commercial interests are no longer alone in recognising the clout they can gain by employing WTO-authorised sanctions against imports. A rich assortment of activists have realised the possibilities of the WTO's enforcement mechanisms for their own varied purposes.

The ability to formulate trade policy has become a three-sided struggle among free traders, traditional commercial interests and proponents of a new agenda for trade, the environment and labour standards. This creates a profound dilemma for policymakers.

It has also become a very personal dilemma for Bill Clinton. It was his decision to invite the ministerial meeting to Seattle. It is his intention to attend. If the meeting ends in confusion, the president will stand condemned, before the bar of history, for damaging the legacy not just of his own success in completing the Uruguay round, but of half a century's effort by far-sighted Americans.

What then should the president do? First, he must deliver a bold defence of the benefits of liberal trade. Second, he needs to support a broad agenda for a new round of trade liberalisation. Third, he must explain that attempts to incorporate the activists' concerns are misconceived and misdirected. This course would take courage. It would be detested by many in his own party. Yet it would still be the right thing to do.

This is not a universally shared view. A well-informed and sensible observer of US trade politics, I.M. Destler, has argued, in a co-authored pamphlet for the Washington-based Institute for International Economics, that 'successful passage of any bill to renew executive branch fast-track negotiating authority is unlikely without a workable compromise on environmental and labour standards.' *

The pamphlet argues that any new negotiation should ideally include changes in WTO rules on product labelling and production processes and methods, and require labour or environmental impact statements. Above all, it should allow use of trade restrictions to enforce multilateral labour and environmental accords.

These suggestions sound innocent. They are not. He who rides on the tiger will end up inside her.

Consider, for example, just one aspect of labour standards: child labour. Everybody accepts that, ideally, children would not work. Accordingly, most countries have laws restricting the age at which they can do so. In India, for example, the minimum age is 14. But, given the many pressing concerns of public administration and its ineffectiveness, these are barely enforced.

According to the World Bank, perhaps 100m children under 15 years of age work. ** More than 40m work in India alone. Why do they do so? Is it because their parents are simply wicked? Hardly. It is because children are a productive asset to the poor, just as they were in today's advanced countries a century or more ago. If children do not work, they and their families starve.

Since child labour is also illegal, it is almost entirely restricted to the informal sector or to agriculture. The notion that labour-intensive manufactured exports from developing countries are made by children is, with very few exceptions, absurd.

The assumption that the alternative to child labour is school is also wrong. On the contrary, in poor countries it is often necessary for children to work if their families are to afford school. According to the World Bank, a study of Bolivia found, for example, that children who did not work had the lowest educational attainment.

What then would the proposed use of trade restrictions achieve? Nothing good is the answer. Would it make the country richer? No. Would it stop children working? Again no. To the extent that children do work in export industries, it would lower their wages. The fear of such harassment would also lower exports from developing countries. The truth is that the proposed remedy would achieve nothing or, more probably, would make a very bad situation worse.

Child labour is just an example of the potential for misdirection of trade restrictions that are used to enforce standards agreed, in the past, merely because potential violators knew that they could not be enforced. Yet this is not the only objection to the idea. If trade restrictions are to be addressed at objectives that have little, or nothing, to do with commerce, where does one stop? What about trade and the dire impact of the US war on drugs? Or trade and chain gangs? Or perhaps even trade and capital punishment? The answer is that nobody would dare link trade restrictions to such sacred totems of US internal politics. But a global trade regime that becomes a machine for exporting the ethical preferences of the world's richest societies cannot be made globally legitimate. It will founder.

If Mr Destler and his co-author are right, the US administration will never be able to obtain a negotiating authority without these dangerous new objectives. If so, the choice is between no negotiation and an undesirable one. Yet as of today that is still uncertain.

So let Mr Clinton stand up for what he must know to be right. It will then be up to his successor, after the election, to deliver on his commitment. Let the trading system be aimed at the great goal of liberalisation rather than at the imposition of standards which make no direct contribution to prosperity and comprise no universal set of moral principles. If the liberal trading system is to go down, let it at least go down fighting.

* I.M. Destler and Peter J. Balint, The New Politics of American Trade: Trade, Labor, and the Environment, Policy Analyses in International Economics 58, Washington DC, Institute for International Economics, 1999;

** Faraaz Siddiqi and Harry Patrinos, Child Labor: Issues, Causes and Interventions, www.worldbank.org

Contact: Martin.Wolf at ft.com

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