WTO beached in Cancún
The collapse of negotiations at the ministerial meeting of the World Trade Organization (WTO) in Cancún last weekend is neither surprising nor lamentable. It is mostly a case of perception catching up with reality.
The WTO was sold to the congresses and parliaments of the world in 1994 as an organization that would establish and enforce global trade rules, with the goal of liberalizing trade. But those who read the agreement from the beginning knew that a very different project was in the works. In fact, it is doubtful that the WTO agreement could have passed our own Congress, as well as many others, if the public had been aware of what was being created.
The breakdown in Cancún occurred when some of the poorer countries refused to move forward on a set of "new issues" that-like much of the WTO agenda-have little to do with trade. These proposed rules would make it more difficult for developing countries to make foreign investment work for their own benefit. For example, they could forbid countries from requiring that foreign firms transfer technology or hire local skilled workers or managers.
The representatives of the rich countries also seek to establish brand new rights for their companies overseas-rights that they could not win within their own borders. One of these is the right of corporations to sue governments for actions that reduce their profits, including environmental regulation.
These rights were established under NAFTA before most people knew what was in that agreement. A Canadian company is currently suing the state of California under NAFTA rules, for banning a gasoline additive that has contaminated thousands of groundwater sites. A similar action by the US Ethyl Corporation in 1997 forced Canada to rescind its import ban on another gasoline additive, and pay damages.
It was the targeting of environmental regulation as a "barrier to trade" that brought environmental activists into the streets of Seattle in 1999. They were joined by thousands of workers - the other half of the "Teamster-Turtle" alliance that first exposed the dark side of the WTO to the U.S. public.
But the Seattle negotiations also broke down from the conflict between developing countries-who were expected to take most of the pain from the new rules-and the rich countries that made the major decisions in "green rooms" where representatives from the global South were not invited.
Agriculture was the focus of the North-South divide in Cancún, and a major cause of this session's collapse. But the issue has been misrepresented in the press. It is true that some farmers in developing countries are hurt by subsidies to U.S. and European agriculture, as well as by barriers to the rich countries' markets. But others are helped-for example, by cheap food or the higher prices that their exports can earn when they sell products in markets protected by quota restrictions.
The World Bank has estimated the net gains to low and middle-income countries from removing all subsidies, and allowing complete access for all of their merchandise exports-including manufactured goods-to the markets of rich countries. It does not amount to much: a country that now has an annual income of $1000 per person would, with such liberalization, move up to $1006.
Far more threatening to tens of millions of poor farmers in developing countries than any subsidies or barriers is the WTO's goal of forcing open their national markets. Corn farmers in Mexico cannot compete with U.S. agriculture, subsidized or not. Nor should they have to. The idea that simply eliminating the rich countries' few remaining trade barriers, as well as subsidies, will create a "level playing field" is a strange fantasy.
The rich countries are also using the WTO, with much bullying, to restrict trade in generic medicines-a life-and-death issue for many developing countries. If we add up the costs and benefits, it's not hard to see that the current version of the WTO is a net loss for the vast majority of people in the world.
In short, the WTO was doing fine so long as its negotiators could operate in the shadows. But it has trouble getting past "the Dracula test," as Public Citizen's Lori Wallach has described it. The increasing exposure to daylight over the last four years has nearly done in this ambitious undertaking. And the future looks bright.
Mark Weisbrot is co-Director of the Center for Economic and Policy Research, in Washington, DC (www.cepr.net).
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