The Case Against the WTO

The Progressive magazine, January 2000


In Seattle, we witnessed an event of historic importance: the first coordinated mass revolt in the United States against global capitalism in the modern era. No less than that.

Here was an event that united labor unionists, environmentalists, consumer advocates, human-rights activists, farmers, organic food lovers, AIDS activists. From Jimmy Hoffa Jr. to the Sierra Club, from steelworkers to people in sea turtle costumes, thousands of people took to the streets to denounce the World Trade Organization (WTO).

We oppose the violence of self-styled anarchists. The breaking of windows and looting and trashing that went on we cannot condone. But neither do we condone the violence of the police. Nor do we condone the suspension of civil liberties in downtown Seattle.

And we insist on pointing out, contrary to the media images, that the vast majority of the protesters were nonviolent.

The protest proves that if governments leave the people out of the decision-making process, if governments set up an institution like the WTO, which favors the rights of multinational corporations over everybody else's, at some point people aren't going to take it anymore. They're going to say enough is enough, and they're going to rise up.

That's exactly what happened in Seattle.

This is new for the United States. But it's not new for England or France or Germany. And it's not new for Indonesia, Malaysia, South Korea, Argentina, Colombia, Mexico, and dozens of other Third World countries, which for years have faced the wrath of multilateral institutions like the International Monetary Fund (IMF) and the World Bank.

Now, finally, the lash of the slave-masters of the world economy is coming down on the backs of U.S. citizens, and they are not liking the feel of it.

Now, finally, Americans understand what it's like to have a multilateral institution pressure us to weaken our own standards.

Now, finally, Americans are appreciating that when multinationals call the shots, many of the things we hold precious are in jeopardy.

The fight against the WTO is a crucial one. This agency has enormous power, and it uses that power to penalize countries that do anything that could be even remotely construed as standing in the way of free trade.

"Since it was created in 1995, the WTO has ruled that every environmental, health, or safety policy it has reviewed is an illegal trade barrier," Public Citizen notes in a recent report entitled "Whose Trade Organization? Corporate Globalization and the Erosion of Democracy."

The fundamental policy of the WTO is that the laws and regulations of member countries need to be the least restrictive to trade as possible. Laws or regulations that protect the environment, labor rights, food standards, or human rights can be deemed improper restraints on trade.

If the unelected, three-person WTO panel judging these disputes rules that they are improper restraints, then the "offending" country has a choice: Either change its law, or face costly duties on its own exports.

Here's what this means in practice. On the environment:

In 1996, Venezuela brought a claim against the United States, alleging that the Clean Air Act unfairly discriminated against Venezuelan gas imports to the U.S. The Clean Air Act required foreign gasoline sold in the United States to be no more contaminated with additives than the average 1990 level of contaminants in U.S. gas. Venezuela said the law allowed a fraction of U.S. producers to sell gas with higher levels, and thus claimed it was being discriminated against. The WTO agreed. It said the United States either had to dilute EPA standards or pay $150 million in trade sanctions for not allowing Venezuelan oil with high levels of contaminants into this country. The U.S. chose to dilute the standards and allowed the importing of gas that can cause more air pollution and lung disease.

The U.S. Endangered Species Act prohibits the sale of shrimp caught in nets that aren't designed to let endangered or threatened sea turtles escape. The nets kill as many as 55,000 of these turtles a year. India, Malaysia, Pakistan, and Thailand challenged the law. And the WTO agreed.

"It was not our task to review generally the desirability or necessity of the environmental objectives of the U.S. policy on sea turtle conservation," the WTO judges wrote. "In our opinion, members are free to set their own environmental objectives. However, they are bound to implement these objectives in such a way that is consistent with their WTO objectives."

In other words, you better do what we say-or else.

This prying away of environmental protections may continue. The United States is trying to use the WTO "nearly to eliminate tariffs on lumber and other logging products," according to a story in The Wall Street Journal on November 24. Environmentalists fear that getting rid of these tariffs "will stimulate so much demand that logging will intensify in the world's remaining ancient forests, which they say serve as habitat for complex ecosystems that otherwise cannot survive intact," the Journal added. "Indeed, the Clinton Administration recently issued a report that acknowledges the tariff measure would adversely affect some of the forests.... Logging would jump significantly in places such as Indonesia and Malaysia, where virgin forests are already under siege."

On food and safety:

The WTO ruled in 1997 in favor of U.S. beef and biotech industries and against European nations that wanted to ban artificial-hormone-treated beef. As a result, the EU was hit with $116 million in tariffs on its goods.

The WTO told Japan that it had to face sanctions if it didn't lift its import ban on certain fruits that might bear dangerous insects, even though to get rid of those insects Japan needed to use heavy doses of harmful pesticides.

The United States has threatened to take Denmark to the WTO for proposing a domestic ban on lead compounds in pigments and chemical processes to reduce the threat to children's health.

Sometimes, the threat itself is enough to coerce an other country to lower its standards. The United States threatened to take South Korea to the WTO in 1995, saying it had too stringent regulations on fruit inspections and too short a shelf life for meat products. Rather than spend the money to fight the challenge, South Korea capitulated, reducing inspection time from twenty-five days to five days and upping the shelf life for meat products from thirty to ninety days.

Canada took France to the WTO last year to protest France's ban on products containing asbestos. Canada is the second largest asbestos producer in the world. The WTO has yet to rule on this, but what's a little asbestos among friends?

Now the United States is pushing the WTO to rule against countries that impose restrictions on bioengineered foods or even wish to put labels on such foods so that consumers can know what they are eating. The Clinton Administration considers such things to be a restraint on trade.

On pharmaceuticals:

The United States threatened to take South Africa to the WTO because Nelson Mandela passed a law that enabled South African companies to produce cheap AIDS drugs if they pay royalties to the drug developers. The Clinton Administration, in the person of Al Gore, went to bat for the U.S. pharmaceutical companies, which didn't like Mandela's law. "Obviously, the Vice President's got to stick up for the commercial interests of U.S. companies," one of Gore's senior aides said at the time. (Gore has since modified his position after vigorous protests by consumer groups and ACT-UP earlier this year. And at Seattle, Clinton agreed to give ground on the marketing of pharmaceuticals.)

On human rights and labor rights:

In 1996, Massachusetts passed a law banning state contracts with companies that invest in or trade with Burma because of that country's abysmal human rights record. Japan and the EU challenged that law before the WTO, claiming it was an impermissible restraint on trade. (A U.S. court threw out the law, saying it was interfering with the foreign policy of the U.S. government; the Supreme Court just agreed to review that opinion.)

In 1998, Maryland was considering a similar bill to prevent state contracts with companies doing business in Nigeria. The Clinton Administration prevailed on the state legislature to drop it because the United States was concerned about losing a challenge at the WTO.

China is now well on its way to becoming a member of the WTO, despite its horrible human rights record and labor repression. These are "externalities" that do not concern the WTO.

So, too, is child labor. A country can exploit child labor and still be in the WTO and compete against other countries that have long since abolished it. In fact, under current rules, if the United States were to enact a bill by Senator Tom Harkin, Democrat of Iowa, banning the import of goods made by child labor, the United States would be vulnerable to a challenge before the WTO.

Conceivably, even living wage ordinances passed by municipalities or states could be construed as restraints on trade and challenged before the WTO.

Clinton, in his usual weather-vane manner and with an eye on Al Gore's political base, came to Seattle, condemned child labor, advocated more openness in WTO proceedings, and praised the idea of incorporating tough labor standards into the WTO. But his proposals didn't fly with many developing nations, which sensed that Clinton was pulling the rug out from under them.

Proponents of free trade, such as Thomas Friedman of The New York Times, say that it's "a fool's errand" to pressure the WTO to impose sanctions on labor, environmental, or other non-economic issues. Their argument is that these standards would dampen international trade, reduce living standards around the world, and potentially lead to trade wars.

But they are wrong on several counts.

First, the benefits of free trade are overblown, especially in the developing world. "In almost all developing countries that have undertaken rapid trade liberalization, wage inequality has increased, most often in the context of declining industrial employment of unskilled workers and large absolute falls in their real wages, on the order of 20 to 30 percent in Latin American countries," according to a report by the U.N. Conference on Trade and Development. The crash two years ago in the Asian economies, "caused in part by the very investments and financial service sector deregulation that WTO rules intensify," has taken a terrible toll, Public Citizen's report adds. In South Korea, for instance, "the crisis has quadrupled unemployment and precipitated a 200 percent increase in absolute poverty."

Second, many nations may serve their own people better by shielding some of their basic industries and subsidizing the essential items their citizens need: food, shelter, and fuel. But Third World countries have been losing their right to economic sovereignty ever since the IMF and the World Bank effectively took over their economies, transformed them into export-oriented platforms, and enforced the hoary theory of comparative advantage. That theory says that if your work force is cheaper than your neighbor's, then you should keep wages low and lure companies there to exploit your workers.

And third, the risks of a trade war are exaggerated. The United States is by far the biggest economy in the world, and countries are going to want to trade with us, whether we insist on protecting the environment or not, whether we ban goods made with child labor or not, whether we insist that workers get paid a living wage or not.

The issue is not globalism versus isolationism. For what we have today is not globalism but corporate globalism. The rules of the world economy serve the interests of the multinational companies; they do not serve the interests of the vast majority of the people on this planet.

Member nations at the WTO are often serving as mere unpaid lawyers for the largest companies in their land. For instance, Chiquita didn't like the EU's preferential purchasing of bananas from former European colonies, so the Clinton Administration filed a complaint at the WTO against the EU. The business of America is not the business of Chiquita, but in the WTO, it sure is. Public Citizen notes, incidentally, that "the Clinton Administration filed a WTO complaint on bananas-a crop the U.S. does not grow for export-days after the U.S.-based multinational Chiquita gave $500,000 to the Democratic Party."

We have, in short, a global system of the multinationals, by the multinationals, and for the multinationals.

There are several alternatives to this setup. Pat Buchanan offers the traditional isolationist one, replete with all the nativist rants about U.S. supremacy, the horrors of one-world government, and the thinly veiled prejudices against Jews and Third World people.

But much as the likes of Tom Friedman try to toss all WTO critics into the same hot tub with Pat Buchanan, most of us don't want any part of him.

Progressive critics of corporate globalism tend to fall into three camps: institutionalists, confrontationalists, and localists.

Institutionalists, like those in the new leadership of the AFL-CIO, want to reform bodies like the WTO so that they will include labor rights, human rights, and environmental protections in their rule-making. They want a regulated system of world trade so long as it is more responsive.

But many activists doubt that an institution like the WTO will ever adequately meet these demands. "When the WTO was established," says Lori Wallach, director of Public Citizen's Global Trade Watch, in the December 6 issue of The Nation, "many environmentalists pushed for an environmental working group in the WTO. They got one, and after five years, many of its most energetic proponents are now saying that this working group has turned into a trade-dominated entity where environmental laws are studied not to safeguard them but rather to figure how to get rid of them."

Many activists conclude that rather than vesting our hopes in global bodies like the WTO, we should instead organize our own forces and rely on international labor strikes or boycotts to ensure that our rights are honored. "Labor should be taking on the multinationals on a worldwide scale," says Kim Moody of Labor Notes in that same issue.

Progressive localists contend that the answer is not so much in building a global movement as it is in ensuring the sustainability of local economies, whether in regions of the First World or in countries of the Third. These critics, from Wendell Berry to Walden Bello, put more faith in developing small, healthy, and largely self-sufficient communities.

Whether we identify as progressive internationalists, confrontationalists, or localists, we all insist that the current rules and institutions of the world economy- embodied by the WTO, the IMF, and the World Bank-are undemocratic and unjust. These institutions have turned free trade into a golden calf.

But we don't have to worship that golden calf. And as the protests in Seattle showed, there are thousands upon thousands of people willing to take to the streets to make clear that there are things more important than profit, things more important than free trade.

They have struck at the hollow core of capitalism, and they will strike again until their legitimate concerns are addressed.

World Trade Organization