Attacking Free Trade

Stop. What's that sound? Could it be a street protest, circa 1968, that's coming down? Perhaps. At the end of this month, government trade ministers from around the world will gather in misty, caffeine-laced Seattle, Washington. There, with the help of bureaucrats from the World Trade Organizaton, they'll try to launch a multiyear cycle of talks--some are calling it the Millennial Round--aimed at further liberalizing global trade. Trade conclaves are notoriously dull, but this one promises to be a raucous affair. Around 20,000 protesters will throng the Emerald City to greet the pinstriped set--and most intend to complain loudly about what they regard as the ugly downside of global trade. Environmentalists, labor groups, feminists, farmers, students, the Ruckus Society (from Berkeley, California), four nuns from Wisconsin (who aim to promote a human-rights resolution for their state): they'll hold an outdoor rally at Memorial Stadium, then all march through downtown Seattle on Nov. 30, the first day of the conference. Ralph Nader, longtime corporate scourge, will speak. Sweet Honey in the Rock will provide the folk music. What a field day for the heat: the Seattle Police will be working with the FBI, the Bureau of Alcohol, Tobacco and Firearms, and the Secret Service, closing downtown streets and keeping security tight. Arrests are expected to be for civil disobedience, not violence. But Seattle hospitals are gearing up to handle injuries that may result from "guerrilla tactics."

U.S. President Bill Clinton will be there to address delegates on the value of free trade. But he'll have to speak up: more than 1,200 nongovernmental organizations (NGOs) will be in Seattle expressing their displeasure over everything from genetically modified crops to fishing subsidies to child labor. Clinton, of course, has had some major successes in trade liberalization. But lately U.S. leadership has faded--one reason why very little may be accomplished in Seattle. Clinton is a lame-duck president who has domestic political problems; the U.S. Congress has twice defeated administration efforts to gain so-called fast-track negotiating authority for trade issues. Beyond that, public perceptions have shifted around the world. Ever since the global trading system got started in 1947, it has been preoccupied with border issues--lowering tariffs and quotas, mainly. That effort has been successful--so much so that the WTO has lately turned its attention to settling disputes and enforcing rules. But telling Americans they can't block Asian shrimp and Europeans they must accept American beef has pushed the trade body into sensitive issues like environmental regulations and food safety.

The American president, to an extent, has met the critics on their own ground. In recent weeks Clinton has talked frequently of the need to "put a human face on the global economy"; the president spent last week trying to drum up support for U.S. policies. He donned a leather jacket and toured a Harley-Davidson plant (which exports one quarter of its famous "hogs"). Meanwhile his top trade and economic officials were in Beijing, trying to hammer out a last-minute deal that would allow China to join the WTO (box). Both sides are keen to sign an accord, and they were still talking early Sunday morning.

In a way, the WTO's goals for Seattle seem modest. The trade mandarins just want to figure out what they should spend the next few years negotiating. But that's no easy thing for a group with 134 member countries. Already, the WTO has received more than 220 negotiating proposals. Agricultural and service-sector reform are definitely on the agenda--but after that chaos reigns. No one is even sure how long the talks should last, though the working assumption is three years.

At WTO headquarters in Geneva last week, delegates struggled to put together a draft declaration for Seattle. (Outside the trade body's headquarters, Greenpeace demonstrators paraded around in white condom outfits, waving banners that read practice safe trade.) Many developing countries don't really want any new market-opening talks; in fact, their chief goal is to get relief from some of the obligations heaped on them during the last (Uruguay) round of talks. Europe is pushing for a broad agenda--the better to divert attention from demands by the United States and other food exporters that it open up its agricultural markets. The preliminary discussions have been so divisive that Mike Moore, the WTO director-general, warned last week that the new trade round might die aborning. He appealed to the members for "more flexibility, sensitivity and vision."

Given the trouble Moore had winning his job, he might have seen it coming. The former New Zealand prime minister took office only last September, after months of wrangling and a compromise that calls for Thailand's Supachai Panitchpakdi to succeed him in three years. Moore runs a modest-size rule-making and enforcement body, formed in 1995 as the successor to the General Agreement on Tariffs and Trade. The WTO's annual budget is just $80 million, and most of its negotiating sessions are long and technical. The Uruguay Round took eight years to complete--not surprising, given that the WTO operates by consensus. That is hard to come by given fundamental conflicts between rich countries and poor, exporters and importers, nations that are committed to free trade and those that continue to have a hankering for protectionism tendencies. "You can see how complicated our work is, and the jams we get into," says a WTO spokesman.

Protesters headed for Seattle are not terribly sympathetic. They contend that the WTO is undemocratic and operates in secrecy, that it is controlled by big business interests who exploit cheap labor abroad and that it has begun to encroach on the rights of countries to protect their environment and restrict imports of unsafe foods and hazardous materials. "The WTO has overstepped its boundaries," says Lorri Wallach, director of Global Trade Watch (an offshoot of Nader's consumerist Public Citizen lobby). "What we have now is not free trade, it's managed corporate trade. If we had free trade, the WTO would have one page of rules rather than 22,000." In her view, the WTO should stop thinking about making new rules and start "reviewing and repairing" the current system.

Many labor groups, who tend to view trade accords suspiciously, agree. "We want to see workers' rights incorporated into the WTO," says Thea Lee, assistant director of pubic policy for the AFL-CIO, the biggest labor group in America. "That way, trade benefits can be withdrawn from countries that violate worker standards, just like the business community uses trade measures to protect their interests." Lee says that recent free-trade accords have shifted the balance of power from labor to capital. As a result, she claims, jobs have moved from high-wage Western countries to low-wage Latin and Southeast Asian nations, where workers have fewer legal protections. "If the U.S. government wanted to ban the import of goods produced by child labor, it wouldn't be able to do so under WTO rules," says Lee. "That is ridiculous."

The classic case for free trade rests on the idea that it favors specialization--so that each country produces the goods and services it is best suited to--and hence raises overall welfare. After market-opening measures take effect, there may be some "losers"--those, for example, whose jobs are threatened--but typically far more "winners"--like those with increased access to more, better or cheaper products. Trade boosts economic growth, creates jobs and fosters a higher standard of living for everybody. In the United States, exports have been soaring, and so has job growth. America's unemployment rate is at an all-time low. And yet the prosperity message does not resonate loudly with the U.S. public. "Our strong economy is due in part to trade," says a U.S. trade official, "but the public sometimes can't connect the dots on this issue."

That's true. One reason for the public outcry, says Jeffrey Schott of the Institute for International Economics in Washington, is that the focus of trade policy has changed. Increasingly, domestic regulatory policies on public health or the environment are affecting the flow of goods, services and investment between countries. As that happens, national laws have clashed with trade rules, and public grievances have grown. France, for example, has restricted the import of asbestos because it is a hazardous material. Canada, which has companies that want to sell asbestos abroad, claims the French have violated its trade rights, and taken its case to the WTO court. Who's right?

Schott and others who espouse the traditional case for free trade concede that there are some grains of truth in the complaints of NGOs. But they contest key aspects of the protesters' case; for example, that the WTO is an unaccountable bureaucracy. "That is nonsense," says David Woods, editor of a newsletter called World Trade Agenda. "Most of the delegations are representatives of democratically elected governments, and they sound out their electorates on issues they pursue in Geneva." Woods points out that the WTO is "a legalistic system that rests on enforceable agreements: that's why it has credibility. Everybody should be careful about throwing the baby out with the bath water."

There are points of agreement between NGOs and those who advocate free trade. Even the U.S. Chamber of Commerce argues that WTO sessions ought to be more transparent. The United States has proposed the establishment of a working group on trade and labor at the WTO, which Lee calls "a small first step" toward linking trade and workers' rights. One day before the Seattle conference opens, NGO leaders will meet with the WTO's Moore to present their viewpoints (and lots of petitions). But making any significant changes to WTO procedures is sure to invite dispute. Right now WTO negotiations are off-limits to anyone but official delegates. "You could make a case that people other than government representatives should have the opportunity to attend sessions," says Woods. "But many would soon run for the door."

The NGOs save most of their vitriol for the WTO's dispute-settlement process. If a country believes that a trade rule has been trampled, it can take its case to binding arbitration in Geneva. Legal arguments are made, and a decision is made by a three-person tribunal. The United States has hauled several countries before the tribunal, winning some cases and losing others. A few rulings have infuriated WTO critics. In 1998, the United States enacted a law banning the import of shrimp caught in encirclement nets, because many endangered sea turtles were getting caught with the shrimp and dying. Indian, Pakistan and Thailand took a dim view of America's sea-turtle law, claiming that it discriminated against their shrimp exports. They took the case to the WTO, and won: environmentalists howled.

It will be the Asians' turn to be outraged if a WTO working group on labor issues goes forward. Asian governments view the Western desire to connect labor rights and trade as simply a tactic for eroding their competitive advantage--cheap labor. Back in May, Othman Haron Eusofe, Singapore's minister for Manpower, warned an ASEAN gathering about "the probable misuse of the linkage as a form of veiled protectionism." Green concerns meet similar objections; an Indian trade official last week complained about "new protectionism under the garb of environmentalism."

At least the WTO has picked the perfect spot to try to sort all this out. Washington is America's most trade-dependent state, with one out of every three jobs tied to exports. Many of those jobs are at Microsoft and Boeing (Microsoft's Bill Gates and Phil Condit, the Boeing CEO, are on the WTO host committee). But others are in the apple business--thanks to the WTO. Washington apple growers fought for 20 years to get Japan to import their fruit. The Japanese kept stalling, claiming that Washington's apples might contain parasites. Two years ago the WTO stepped in, examined the issue and concluded that the state's Macintoshes and Granny Smiths were safe for export. Thanks to the opening of the Japanese market, Washington's apple exports jumped to $288 million in 1998. "Washington state is a microcosm of the U.S. economy and the world," says Patricia Davis, president of the Washington Council of International Trade.

To which Han Shan, WTO action coodinator for the Ruckus Society, replies: hooray for our side. He's dreaming of thousands of people in the Seattle streets, singing songs and carrying signs, in a "Ghandi-esque mass protest that will shut down the WTO"--if only for one day. Han says his group is as American as (Washington state) apple pie, composed of students, workers and "retired grannies." He rails against overdevelopment, fat-cat finance ministers, greedy executives and WTO bureaucrats "who don't know anything about how most people live. In short we are worried about the planet." That, and possible police actions when the rallies begin. Han says, "There has been a lot of talk about the money spent on pepper spray and new batons. That makes us nervous, but the standoff can't be put off any longer." Paranoia strikes deep, all right.