http://www.foreignpolicy.com/articles/Spring2000/wallach/lori1.html
Foreign Policy Spring 2000
Lori's War by Moisés Naím
Not many people have heard of Lori Wallach. But millions of people around the world saw the results of her work in organizing massive protests against the meeting of the World Trade Organization (WTO) last November in Seattle. In 1997, many people were similarly ignorant about the Multilateral Agreement on Investment-a set of rules about international investment then being negotiated by representatives of the world's largest economies in the Organisation for Economic Co-operation and Development. But after Wallach and her collaborators started their campaign against the treaty, many government ministers came to wish that they had never heard of it either.
These are just two of the battles that the 36-year-old Wallach has won in the war she has been waging for more than a decade against what she disdainfully calls "the system of corporate-managed trade.'' While most of her Harvard Law classmates were making the big money at white-shoe investment banks and law firms, Wallach started her career working with Public Citizen, the public interest group founded by consumer advocate Ralph Nader. While lobbying the U.S. Congress on consumer protection issues, she realized that many of her legislative causes conflicted with the international commitments that the United States had undertaken as a member of the General Agreement on Tariffs and Trade, the international body then in charge of setting and enforcing the rules governing trade among nations. This realization led her to focus on reforming trade's rules and institutions and, eventually, to become the director of Public Citizen's Global Trade Watch.
Wallach is widely regarded as an intelligent, well-informed, and media-savvy political organizer. She is also highly controversial. One senior WTO official told foreign policy that dealing with her is nearly impossible because "her criticisms and attacks on the WTO constitute a subtle blend of legitimate concerns, deliberate or partly deliberate misinformation, and populist rhetoric." Her supporters instead view her as an indispensable leader with a unique vision.
Wallach's achievements illustrate the dilemmas and opportunities created by globalization. While she crusades against the current system of international trade and investment, the sharp drops in the costs of communication and transportation produced by technology and economic liberalization have dramatically increased her influence and effectiveness. Her informal, decentralized, and nonhierarchical network of committed activists has proven more nimble and effective than the bureaucratic, centralized, and unwieldy institutions that she opposes. Indeed, even as globalization has endowed some nations and organizations with unprecedented power, it has also allowed the emergence of leaders like Lori Wallach, who do more than just talk about bending the will of these powerful entities-they succeed in forcing them to change their ways. Recently, foreign policy's editor, Moisés Naím, sat down with Wallach to have the first of what we hope will be many dialogues with people you may not know but should. What follows is an edited and abbreviated version of their conversation, which took place on January 24, 2000.
Rewriting Globalization's Rules
Moises Naim: Trade usually brings disputes and frictions. It is normal in commercial life to have disagreements and disputes. Therefore, you need rules, and an entity that defines the rules and that enforces them and eventually resolves disputes. How would you describe the governance system that would ensure that these functions were carried out fairly and efficiently?
Lori Wallach: It's not just taking the rules out; it's either depowering the WTO relative to other institutions, international ones, or empowering institutions such as the International Labour Organization (ILO), which right now is toothless and useless. Let me step back
There are two ways it's going to go, because it's not going to stay as it now is. One possibility is that there's going to be a system where the big institutions like the WTO are dramatically pruned back, and there are no international rules in a lot of areas and nations will be setting up those rules themselves. They would, for instance, set up the terms of access to their markets. They wouldn't be allowed to discriminate on the basis of where something was made, but as long as you banned child labor, you could ban goods made with child labor, and each country would set up those rules. You would have a lot less trade, and you would have a more fragmented system. That is option one. Option two is one where you would have international standards that would serve as a "floor" of conduct. There would be a basic requirement, the minimum conditions that would have to be satisfied for a country to gain access to another country's market. Ideally, those standards or conditions would be established and enforced through institutions other than just the one with the commercial interest.
MN: So essentially your answer is that the WTO needs to be shrunk-depowered, you called it-with some of its powers pruned, and some of its powers transferred to organizations like the ILO. Are you therefore in favor of creating a global organization to deal with environmental issues?
LW: I think that there are merits to that.
MN: If Lori Wallach had her way, would she like the United States to pull out of the WTO?
LW: Well, I speak for a whole coalition of people, where we're talking about that very question for all of their countries, not just the United States
and I think that half of the people think the WTO is not fixable. From my perspective, it has given every indication that it is an institution that will break itself by its inability to bend. I hope that's not how it is, but that's how it has looked to me. Either it is going to be something that everyone gets out of-and half of the international activists are for that right now-or it's going to have to be transformed. And where the international activists, the network that brought you Seattle, is going, on consensus, is to say all right, Seattle was the wake-up call of all time. For 10 years, they should have been paying attention and they didn't. But okay, Seattle really woke them up. Between now and the next meeting of the world's trade ministers, there is a list of things the WTO must do-not talk about, like they did for five years about transparency, and nothing happened. Things that must be accomplished, that are concrete changes, in the World Trade Organization, both in its substantive rules and its own procedures. And if those changes aren't made at the end of those 18 months or so before the next ministerial, then, not only should the United States get out, but, in fact, all of the country-based campaigns, and there are 30 of them at least, will launch campaigns either to get their countries out or to withdraw their funding. Because at that point, if they don't change, the institution will have been thoroughly proved to be unredeemable.
Making Trade Work
MN: Let's move from governance and institutional factors to actual outcomes. In 1994, you wrote that "some trade-for instance, bringing coffee to the United States or U.S. medical technology to the rest of the world-is useful and perhaps even necessary." What, then, distinguishes in your mind "good" trade from "bad" trade?
LW: Good trade is activity that, ironically, really meets the theory of why free trade should make everyone happier. Things that you can't make or grow in any vaguely economically feasible way in one place can be traded for things that are not available or doable in another place.
MN: So are exports of blue jeans from China to the United States good trade or bad trade?
LW: Well, it's bad trade, in the sense that, ironically, what I'm for is comparative advantage, not absolute advantage. That is, when a country or region truly has an advantage in something, it should be able to supply the rest of the world with that thing.
MN: What do you call absolute advantage?
LW: An example of absolute advantage is when a company can make an arrangement with the Chinese government to have at a People's Liberation Army work camp a bunch of Tiananmen Square college kids who are incredibly smart, and literally under the gun, making blue jeans or toys, at no expense to the company, except whatever it costs for the contract with the People's Liberation Army. The profits are enormous.
MN: So you would be, for example, in favor of putting high tariffs on blue jeans from China?
LW: I wouldn't. What I would do is I would try to change the conditions under which those jeans are produced in China.
MN: And if that's not possible in the short run?
LW: Then I would keep them out.
MN: With high tariffs?
LW: No, I'd probably use some of the WTO's Article 20 exceptions, which unfortunately have never been applied because they've been interpreted in ways that make them useless. But for instance, there are some that have to do with issues of morality, and slave labor in a prison camp is immoral. So I would do it as an embargo in the same way you do it as a matter of national security. I wouldn't use tariffs. I would just say: Until these conditions change, these goods are not sellable here.
Making Trade Work II
MN: Let's talk also about NAFTA. You have been very critical of NAFTA, and you have said that the track record of NAFTA now has helped you persuade people to support you. What do you say to people who tell you that NAFTA has been a success, both for Mexico and for the United States, that lost employment to NAFTA in the United States is minimal, compared with the impact of technology, for example.
LW: Well, I don't think anyone argues that anymore. I mean, it's hard to do that with a straight face. Even the greatest boosters of NAFTA, unless they are super-NAFTA ideologues, have basically just given up on trying to say it was a success. The Clinton administration documents call it a wash that's been overdramatized and didn't really do much of anything either in creating or destroying jobs. I think that's an understatement of its damage. It's pretty accurate about its benefits. The bottom-line answer is this: Show me the data. In 1996, when we filed a Freedom of Information Act (FOIA) request for data by the Commerce Department documenting job creation, it was the most amusing government document I have ever gotten under FOIA. Literally, there are about 800 jobs that you could see were created.
MN: The framing of NAFTA as a job issue was probably wrong, and the evaluation of NAFTA mostly in terms of job creation or job losses is also wrong. NAFTA is about the economic integration of three countries.
LW: Right. The question, though, is under what rules and with what incentives and outcomes? And although you can't show job creation in the United States under NAFTA, what you can show is that despite an enormous, long economic recovery, you only now have real wages starting to grow at all. And they're still below the levels of 1972. The real effect jobwise of NAFTA is on wages. It's on the quality of jobs, more than the number of jobs. So typically, when someone in the Clinton administration tries to say, "All right-NAFTA, we oversold it. But you know something? Even if NAFTA's had some downsides, the overall economy as we've managed it has created so many jobs, how upset can you be?" And I say, excuse me, the Labor Department says the top areas of job creation are janitorial, waiters and waitresses, retail clerks and cashiers. What kind of jobs are those that we are creating?
When you talk about the recovery in Mexico, in macroeconomic terms there is growth, there are increased exports. But in terms of what the real measure of an economy is, which is the standard of living of the majority of the people there, actually Mexico has gotten it the worst under NAFTA, by far.
Getting to No
MN: Let's talk about Seattle. There are people who say that you or your coalition allies exaggerate the influence you had in derailing the Seattle ministerial meeting. That Seattle was, in fact, dead from the beginning because of a lack of preparation, due to the absence of a WTO director general for so long. That the agenda covered too many issues. That developing countries, for example, were still trying to implement some of the provisions coming out of the last round. That Seattle was the wrong place to hold the WTO ministerial. That it was a mistake to have it in the United States given the election-year political climate
LW: And particularly, there was the issue that God had heartburn that day. I mean, these are ridiculous, post hoc, revisionist spins of people who lost. All of those "facts" are contributing factors. So let's say there's a 30 percent karma factor that takes into account all of that stuff. I mean, the jinx of not being able to get a director general, or the choice of Seattle-the day Seattle was picked, the same people who are now saying that holding it in Seattle was really stupid were saying Seattle, what a great idea! Home of the new economy, a big export engine, a coastal city attached to the Pacific Rim. The fact is that more important than anything that happened in Seattle was a yearlong campaign conducted by 30 multisectoral coalitions like the one we have in the United States. And it was the No New Round Turnaround campaign.
MN: You have put together a very odd coalition of labor, Greens, environmentalists, Gray Panthers, progressives . . .
LW: Church groups, Tibetan monks, small businesses . . .
MN: What holds that coalition together?
LW: I would say two things. One, philosophically, the notion that the democracy deficit in the global economy is neither necessary nor acceptable. The second is that they're all directly damaged by the actual outcomes of the status quo, in different ways. And so you have family farmers, for instance, who've seen a huge increase in the volume of exports of U.S. agricultural commodities, in the exact same decade that farm income has crashed.
MN: How many countries are members of this coalition?
LW: Well, there are country-based campaigns, and there are basically 30 of them, 25 of which are really quite operational.
MN: You had a year of preparation or more?
LW: Yeah, it wasn't the week on the ground, it was the work that happened beforehand. Perhaps there was an enzymatic effect, where all of the work to that point was cooked, ultimately, by some reaction that was sparked by what was going on on the ground. But that was just the final stop. As soon as the European Union and Japan announced their agreement in 1999 to push for a millennium round, the ngos around the world that had been working together since the Uruguay Round negotiations, and that certainly had just come out of the campaign against the Multilateral Agreement on Investment, basically said, "Listen, we sort of thought maybe the MAI would send the message that we are not going down that road anymore." But it's like that shell game in a carnival. With the MAI, we smashed the shell that was the OECD. So they just took the pea and put it in another shell. And now it's in the WTO shell, and we're going to just have to smash that one.
The Next Targets
MN: What is the next shell to smash?
LW: Well, I think there are two in the United States. One is a continuing fight to stop any further expansion of the WTO. I mean, the folks who wanted to expand the WTO's agenda have now shifted to wanting to expand the WTO's membership. And the biggest country that is missing, the biggest economy, is China.
MN: You want to prevent China from joining the WTO?
LW: No. Basically, our goal is to prevent the granting by the United States of permanent most-favored-nation trading status to China.
MN: Why?
LW: Because we believe that the U.S. Congress needs to have its annual review of China's conduct in a whole array of issues, particularly after eight years of the Clinton administration's constructive engagement strategy toward China, which was the notion that increasing liberalization of the economy would bring about liberalization in human rights, increased democracy, etc. This strategy has been a total bust. This year, the State Department in its annual human rights report noted that conditions in China have deteriorated yet further. This year, they have finally certified that basically every Chinese democracy activist and labor activist is either in jail or in exile. And so during this period when the free market would allegedly enhance their freedoms, we've seen the opposite. And ironically, during that same period, we've seen the economics of the relationship deteriorate as well. First, with a trade deficit that has literally quadrupled during that period, but also with China more and more not following its obligations under bilateral agreements, the intellectual property agreement, the insurance agreement, the auto parts agreement.
MN: What would you consider to be a sensible U.S. policy toward China?
LW: I would describe it as principle-based reciprocity. There would be a bilateral agreement between the two sovereign nations that would go to the terms of trade between those countries, that would include some basic rules of the road about prison labor, about basic human rights, political right to organize, freedom of religious expression, freedom of communications, access to information-the things that you really need to make a capitalistic society work in the long term.
MN: What is a second campaign that you have in mind?
LW: The second campaign we're going to run is called the "WTO: Fix It or Nix It" campaign. The WTO No New Round Turnaround campaign was successful. There was no new round, but the status quo itself is unacceptable. So the second part of our original campaign was the turnaround part-basically, to give the WTO, if you will, its last chance to show itself to be an international organization for the next century. There will be a list of specific things that must concretely be accomplished before the next ministerial, which we are discussing among all of these broad-based coalitions.
MN: Do you have any other campaigns planned?
LW: Well, we're still working with a coalition of African American ministers who are passionately opposed to the NAFTA for Africa bill. And so we're also working with them, to support their work, to make sure the U.S. Congress doesn't pass the NAFTA for Africa.
MN: Are many of your criticisms of the WTO also applicable to the International Monetary Fund (IMF) and the World Bank?
LW: Yes.
MN: You would also like to see the World Bank and the IMF shrunk in their scope of activity, essentially transferring some of the power they have now to governments and states?
LW: Yeah, well, that's one approach. I've not worked on those institutions very much at all. My colleagues from around the world who have are arguing at this point that those institutions are really not reformable and should just be abolished. Jim Wolfensohn has done some things as president of the World Bank, but when the rubber hits the road, a lot of it has just been basically to mollify the critics instead of to make fundamental changes. And the IMF has just been an unmitigated disaster, to the point where you have U.S. Treasury Secretary Larry Summers saying, hmm, maybe we should look at what it was meant for. It wasn't supposed to be giving out long-term loans with conditionalities to all of its potential poor-country beneficiaries, or to organize a one-size-fits-all solution for their economies.
MN: Are you planning a march or a rally at the annual meetings of the WTO and the World Bank in the fall in Prague?
LW: The place where an interesting set of protests will occur is at the April 16 meetings of the World Bank and the IMF in Washington.
MN: What are you planning for that?
LW: Well, nothing on the scale of Seattle. I think that there will be a lot of church-based groups, some of whom were involved in the WTO effort and are incredibly serious about debt relief. They see the World Bank and the IMF as not just failed and flawed institutions, but literally as immoral ones. The faith-based groups are planning a lot of protest events. Smaller scale, but I think quite passionate.
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