Financial Times - October 11 1999
US accused of trying to rig WTO agenda By Guy de Jonquières in Berlin
The European Union, Japan and other countries have accused the US of trying to rig the agenda for a new world trade round to suit its own interests.
Diplomats said the conflict threatened to sour the political atmosphere and set back preparations for the World Trade Organisation's ministerial meeting in Seattle next month, which the US will host. Plans have already been delayed by months of disagreement over the choice of a WTO director-general.
Trade officials from several governments are accusing Washington of unfairly exerting pressure behind the scenes to try to exclude from the Seattle agenda proposals with which it disagrees, and to restrict the proceedings to issues that appeal to the US.
A senior Japanese official attending a meeting of EU and Asian trade ministers in Berlin said the US was guilty of "outrageous" behaviour. A senior EU official accused the US of making "a major tactical blunder" that had dashed hopes of agreeing quickly to launch substantive trade talks.
Another European official said the US seemed to view the Seattle meeting largely in terms of domestic politics and was doing little to try to forge consensus in the WTO. Canada, India and Korea are also said to be angry with US conduct.
The dispute flared on Friday, when leading WTO members rejected as unbalanced a draft of the proposed ministerial declaration for Seattle that was presented to them at a meeting chaired by Sue Esserman, deputy US trade representative.
Diplomats said the text differed substantially from a version widely leaked earlier in the week, to which the US had strongly objected. They said the later version played down proposal for negotiations on anti-dumping regulations, investment rules and competition policy, which the US opposes.
However, the paper gave a high priority to talks on liberalising trade in agriculture and services, which the US wants. It also omitted sections of the earlier draft calling for rich countries to allow poor ones more flexibility in fulfilling their WTO obligations. Washington has long opposed waiving WTO rules for poor economies.
Several diplomats accused Washington of applying strong political pressure on Ali MChumo, chairman of the WTO's ruling general council, and on other officials, to have the text changed. "Nobody said this at Friday's meeting, but lots of people are saying it privately," one trade diplomat said.
Some diplomats also accused Ms Essermann of trying to steer Friday's meeting away from debate about the substance of a new world trade round into a discussion of proceedings in other groupings, such as the Asia Pacific Economic Co-operation forum.
Diplomats attending the meeting instructed Mr Mchumo to redraft this week the proposed ministerial declaration, and to ensure that it reflects more fairly the views of all the WTO's 134 members.
----
WTO: Free trade under fire
The World Trade Organisation must find a way to respond effectively to the protectionist pressure groups that are winning the battle for public opinion, says Guy de Jonquières
Ever since Adam Smith published The Wealth of Nations, more than 200 years ago, free traders have seen themselves as natural champions of consumers in a struggle to curb the market power of producers. But suddenly a radical shift in alliances is redrawing the battle lines.
No longer are protectionist industry lobbies the only - or even the main - obstacle to open markets. In sectors such as telecoms, computing and car manufacturing, the need to compete globally is prompting companies to press for elimination of tariffs and other barriers that they once fought hard to maintain.
But as rapidly as businesses warm to trade liberalisation, other sources of opposition are springing up. Ironically, much of the resistance is mounted by, or in the name of, sections of society long supposed to gain from free trade.
Last month, Consumers International, a federation of 247 consumer groups in 111 countries, joined a chorus of critics calling for liberalisation to be halted or reversed. The federation blamed the world trade system for abetting economic exploitation by multinational companies, undermining consumer rights and marginalising poor countries.
Similar attacks are levelled by labour unions, environmental and human rights campaigners, development lobbies, religious groups and populist politicians, as well as by extremists dedicated to spreading anarchy and defeating capitalism.
Charlene Barshefsky, US trade representative, says there is worldwide distrust of trade, stemming from anxiety that it is destroying jobs, lowering living standards and causing a global "race to the bottom". "The single greatest threat to the multilateral trade system is the absence of public support," she says.
Her concern is shared by officials at the World Trade Organisation, the main target of the backlash. They have been unnerved by the speed at which it has spread across borders, thanks in part to anti-free trade activists' use of the internet to co-ordinate their campaigns.
Fears are growing that mass demonstrations at the organisation's ministerial meeting in Seattle next month will overshadow - and may even derail - plans to launch a new trade round. Mike Moore, the WTO's new director-general, says countering such attacks is one of his most urgent tasks.
The onslaught on the global trade system may seem surprising at a moment when it appears, in other ways, to be riding high. It has sailed through last year's turmoil in emerging markets, confounding predictions that the upheavals would trigger a protectionist reaction, while the WTO has attracted a queue of more than 30 would-be members.
Governments' determination to keep markets open appears to reflect a growing realisation that trade is now such an important contributor to growth that the economic cost of imposing import restrictions outweighs any relief these may bring.
Many businesses seem to agree. Industry lobbying has provided much of the impetus for recent WTO agreements to liberalise trade in telecommunications, financial services and IT equipment. European car makers, meanwhile, want vehicle tariffs abolished worldwide.
But if the free-trade gospel is winning converts in ministries and boardrooms around the world, why does public opinion appear increasingly sceptical?
The paradox is partly explained by the end of the cold war. The collapse of Communism led to near-universal acceptance of market principles. But it robbed the multilateral trade system of its most powerful source of political legitimacy: US patronage.
Washington was happy to act as the system's main champion; while promoting prosperous democracies as bulwarks against Communism was US foreign policy's over-arching aim. But when Communism crumbled, so did the historic rationale and domestic support for America's commitment to multilateralism.
Since then, US trade policy has drifted. The once-solid bipartisan free trade coalition in Congress has fragmented, while the influence of environmentalists and other pressure groups has grown. Many have a big voice in Democratic party politics and some rival the lobbying clout wielded in Washington by big business.
Although protectionist pressures have remained subdued in the US, thanks to robust economic growth, the dwindling political constituency favouring further liberalisation has left Bill Clinton without the "fast track" authority needed to participate in a trade round.
To some extent, the leadership vacuum created by the US retreat has been filled by the WTO's expanded authority to adjudicate disputes. Washington has used the procedures aggressively, hoping that winning cases would shore up shaky support for the WTO in Congress.
However, the tactic is proving a double-edged sword. The WTO's power to enforce multilateral rules firmly and fairly has tough ened world trade disciplines. But, in laying down the law, the organisation has sown the seeds of its own unpopularity.
Its rulings against US regulations designed to protect endangered species and cut vehicle pollution have enraged environmentalists there. In Europe, the organisation has been vilified for condemning the EU's ban on hormone-treated beef and for restricting its freedom to block imports of genetically modified foods.
These events have helped fuel accusations that trade is to blame for problems ranging from exploitation of child labour to global warming and even sexual discrimination. "The WTO seems to be copping the abuse for the failures of every other institution in the world and for everything that goes wrong," says Mr Moore.
However, the WTO's assailants are split over what should be done about it. Some want the organisation cut down to size or even abolished. Many others want it charged with new responsibilities largely unrelated to trade liberalisation, such as global enforcement of labour or environmental standards.
Ironically, such demands are often pressed most vigorously by groups that also denounce the WTO for being undemocratic and already wielding too much power over sovereign governments. Their stance is obviously inconsistent. But it offers an important clue as to why they are focusing so much fire on the WTO.
The reason is that the organisation has proven uniquely effective at writing and implementing global rules. No comparable international forum exists for environmental policymaking, while the International Labour Organisation's efforts to improve labour standards have been largely ineffectual. For many of the WTO's frustrated critics, its powers are as much an object of envy as of anger.
Talks began in the WTO several years ago on the links between trade and environmental rules, and the US and some EU governments want it to discuss labour standards. But there is little chance the organisation will decide to seek to regulate national policies in these areas: developing countries, which make up most of its membership, reject the idea as disguised protectionism.
Such rebuffs, though, are not likely to make the WTO's assailants to go away. The question is how best to deal with them.
Trade policymakers are still searching for satisfactory answers. At US urging, the WTO is trying to make its procedures more transparent and engage in wider public consultation. But that has not noticeably silenced allegations that it is secretive and unaccountable.
Some observers think the US and EU could lower the temperature by asking the WTO to adjudicate fewer tough trade disputes and trying harder to negotiate settlements. However, many politically contentious cases end up in the WTO because bilateral diplomacy has failed.
Others say the WTO could defuse criticisms by doing more to help poor countries. Mr Moore has backed calls for a "development round" aimed at removing barriers to exports, such as agriculture and textiles, of interest to developing economies. But the US and the EU are reluctant to take on their powerful protectionist lobbies in these sectors.
But the biggest problem facing the WTO may not be public hostility but complacency and short memories. Free traders say campaigners against globalisation ignore, or take for granted, the huge boost trade liberalisation has given to prosperity over the past half-century.
Mr Moore believes the key to winning the political battle lies in hammering home the message that liberalisation is a force for good, and that its job is far from finished. "We have to make the case that the WTO is about raising living standards," he says. "If living standards rise, environmental standards rise, families are better off and children normally have a better education. That is why we do what do."
The recent behaviour of governments around the world suggests many implicitly accept that argument. Whether they can sell it to sceptical electorates with the force and conviction needed to keep trade liberalisation moving forward is another matter.