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Rethinking Trade - Season 1 Episode 8: Crisis at the World Trade Organization

Today, the World Trade Organization is in a major crisis of its own making, with its over-reaching enforcement regime derailed, its Director-General abruptly announcing his resignation and legislation introduced in both chambers to terminate Congress’ approval of the organization. 

When the WTO was launched in 1995, we were promised by an array of corporations and politicians that it would usher in a new era of win-win globalization that would deliver higher wages and good jobs. Instead, as activists and union members warned, the WTO has facilitated a race to the bottom in wages and mass job outsourcing, especially after China joined in 2001. The WTO has ruled again scores of U.S. policies, including environmental and consumer protections. 

What happens next at WTO affects us all. In this episode Lori digs in the history of the organization and describes the significance of its current crisis.

Transcribed by Kaley Joss

Ryan:

You’re listening to Rethinking Trade with Lori Wallach. Welcome back to Rethinking Trade, where we don’t just talk about trade policy, we fight to change it. I’m Ryan and I’m joined once again by our in-house trade expert Lori Wallach. So Lori, the World Trade Organization protests in 1999, the Battle in Seattle, that was my gateway into political activism. And we just celebrated the 20th anniversary of that event a few months back, but today we’re going to be talking about the WTO right now. Because it’s facing a significant crisis. Before we get into that, maybe you could just tell us what the World Trade Organization is, where it came from, and what some of the major issues have been in the fight against it. 

 

Lori: 

So, the WTO is an international commercial agency. It sometimes gets called a trade agreement, but most of its contents have nothing to do with trade. It is the global commerce agency that replaced an agreement called the General Agreement on Tariffs and Trade, which was a global trade agreement created in the fall of 1947. It was one of the so-called Bretton Woods agreements that came after World War II and the economic and social crisis that followed, where actually a bunch of Keynesians sat around and tried to come up with some good rules. They had a thing called the “International Trade Organization,” it had labor standards, it had currency disciplines, it’s not totally different than the agreement we’ve been fighting for these days. But the U.S. Senate objected—we got the GATT. The GATT was really about trade, border tax cutting, and quota cutting. And that’s what we traded under for many decades. It worked pretty well for the U.S., until in the ‘80s Ronald Reagan and the folks around him who were uber-deregulatory, big about corporate power and rights, wanted ways to get around the fact that there was a durable Democratic majority in Congress. 

 

In Germany, a neoliberal chancellor wanted to deal with busting up his unions, Margaret Thatcher was in cahoots in the same mindset as Kohl and Reagan. And they came up with this really elegant, but rotten, but effective strategy of shifting out of democratically accountable public venues like parliaments to close door trade negotiations, and the Uruguay Round of GATT negotiations was launched in 1982. It resulted in replacing the entire GATT. The GATT becomes one of twenty-plus agreements in force by this gargantuan new World Trade Organization which suddenly sets top-down, one size fits all rules for all kinds of stuff, totally unrelated to trade. 

 

So to start with, there are a bunch of just flat out corporate protectionism. New monopoly protections, classic sort of rent-seeking protectionism for patents and copyright monopolies—monopolies in a free trade agreement. Every country is required to make in their domestic laws certain guarantees for corporate rights and all kinds of new limits on behind-the-border type policies on food safety, product safety, energy policy, banking regulation. In one fell swoop, basically like some quiet, corporate coup d’etat. This thing labelled “free trade agreement” gets rolled in like a Trojan Horse. And actually, what’s on the inside is an enforceable system of global governance literally by, for, and to a large degree (given the revolving door of the staff), of multinational corporations. And every signatory country was obliged to conform it’s domestic laws to these rules. And if they didn’t, they faced indefinite trade sanctions, fines, cash, it was suddenly an enforceable system of governance. And if this sounds like I’m exaggerating, let me actually read the key clause in the agreement established in the WTO. “Each signatory country shall conform its domestic laws, regulations, and administrative procedures to the attached agreements,” and the attached agreements are a whole bunch of rules limiting service sector regulation, food and product safety regulation, giving new corporate rights for investors, for intellectual property, that every country was supposed to make its domestic laws meet. That’s the WTO. It started on January 1st, 1995. 

 

Ryan:

And since the WTO was launched, they’ve tried several times to launch new rounds of talks to expand their power and scope and it hasn’t quite worked out the way they wanted it to. It's becoming increasingly clear now that they’re in a real serious crisis. But there have been a few things recently that have happened as well. What’s going on over there and how significant is the situation at the WTO?

 

Lori:

So the WTO’s actual outcomes have helped doom it. It hasn’t helped that it’s tried to grab more power and scope, but it’s the record of what’s actually happened. So, during the period since the WTO went into effect, just for instance with the US, we’ve lost a quarter of our manufacturing jobs, nearly 5 million, with 60,000 factories shuttered. This really took off after the 2001 entry of China into the WTO. The U.S. went from a goods and services trade deficit before the WTO of 125 billion, which was not great but now, it’s 617 billion, as in almost a 400% increase. And then, add to that all of the WTO’s obscene corporate protectionism and bans on common sense consumer safeguards, we have seen law after U.S. law challenged in WTO tribunals. We’ve lost 93% of the WTO attacks against our public interest policies and that’s led to roll backs of country of origin labelling for consumers of meat, rollbacks of protections of dolphins, clean air act regulations and gasoline cleanliness, endangered species acts, sea turtle safeguards and more. And this system is so lopsided that you know, we’ve lost 93% of the public interest cases but we’ve lost 90% of the 79 cases brought against the US at the WTO. Which just is a perverse irony, the U.S. was the biggest pusher of establishing the WTO, and we’re the number one target of the WTO enforcement actions. Just under a third of all the WTO cases are against U.S. policies and laws. So, the WTO didn’t deliver on the glorious and great gains that were promised certainly to people in the U.S. and Europe. And for developing countries, like some of the developed countries, there have been some major problems. 

 

So we’ve seen this gutting out of middle class jobs and the attack on environmental laws, but the attack on public interest laws have been worldwide. So for instance, India Ghandian-era law constitution and laws that forbid the patenting of seeds and medicines were ruled to be a WTO violation. Of course, those policies are about trying to keep a country with a billion poor people being able to have seeds to plant to feed themselves and have access to medicine. Attacks on policies such as Europe’s ban on the use of artificial hormones on raising meat or Europe’s labelling and approval process for genetically modified organisms. There have been attacks on development policy like the banana trade policy that was basically a development policy that Europe had with its former colonies in the Carribean and Africa. So time after time the WTO rules against people-policies for corporate policies, but also how now there is in Congress a new wave growing of bipartisan upset about the WTO. The WTO’s unelected, unaccountable tribunal started also just making up policies, making up laws, and then enforcing them against countries. And that was irritating when it started to actually cause problems for some businesses who had been WTO boosters and then saw the WTO just making up rules and enforcing them that no country ever signed onto. 

 

Ryan:

And what has all that added up to today?

 

Lori:

Well, pretty much a meltdown at the WTO. So, starting with the Obama administration the U.S. you know, was furious with the WTO making up policies and sticking them on countries and was criticizing the enforcement system for not being very transparent, or timely or fair, and the Trump administration came in and stepped that up a level yet. Actually, the Bush two administration kinda started it, Obama stepped it up, then Trump went into overdrive. And the Trump U.S. Trade Representative Robert Lighthizer just flat out refused to appoint more judges to the final tribunal of the WTO, and he basically put it out of business at the end of 2019. So right now the WTO enforcement system is derailed, which given how bad its ruins are, is nothing to be too upset about actually. And the WTO hasn’t been able to complete any major negotiations basically since it was established. You know the Seattle Round obviously melted down, there was a 10-year skirmish over what was called the Doha Round of WTO expansion, but that was ultimately derailed. So it’s not negotiating, it’s not enforcing a lot of the rules that are locking in really crazy, extreme neoliberal 1980’s ideas. Meanwhile things that are at the cutting edge of concern, things like climate change, and issues around income inequality and in this COVID crisis access to essential medical goods, are either not covered in the WTO or covered in a way that makes things worse. So given the deadlock on enforcement and the deadlock on negotiations, it was not totally surprising but totally shocking when, just recently, the guy who was the head of the World Trade Organization, which is kind of a coveted position (and the guy still had a couple years on his term—a Brazilian diplomat named Roberto Azevedo) he announced he was leaving this fall. Almost two years early. Now that body that is very jammed will also be headless, so to speak. 

 

Ryan:

Recently Representative Defazio and Senator Hawley introduced a bill to withdraw the United States from the World Trade Organization. Can you talk about that a little bit?

 

Lori:

So when the U.S. Congress voted on what was called the Uruguay Round Agreements Act, which gave Congress’ approval to the WTO, it was so controversial that then-Senator Bob Dole (generally a free trade guy) insisted, given all the sovereignty implications of all the non-trade policies being imposed by the WTO, that every fifth Congress have a report on the outcomes and activities of the WTO and a privileged guaranteed vote to reverse the U.S. approval of the agreement. And a privileged vote means the kind of cloture and other rules in the Senate that block things up don’t apply... you get a vote. It gets pushed out of committee after a certain number of days, so the committees can’t block it. It gets a vote. And the agreement, the legislation, Article 125 of the Uruguay Round Agreements Act, has this five year option of withdrawing congressional approval. So first a conservative Republican Senator from Missouri named Josh Hawley put it in the Senate, and then shortly after two Democratic House full committee chairs, Congressman Peter Defazio and Congressman Frank Pallone, submitted the House version. 

 

Now, the way it’s written, both the House and Senate have to send it to the President within 90,what are called, legislative days. It’s not calendar days, it’s a little bit longer. And if they do that within 90 days when the report that’s required gets sent, then it would withdraw the U.S. Congressional consent for the WTO. Now, there are all kinds of complications with that because the House can’t get the 90 days vote in, given when the resolution was submitted. And even if Congress’ approval of the legislation was withdrawn, it’s not clear that it actually gets the U.S. out of the WTO, and that’s assuming Trump wouldn’t veto it. And that’s assuming it would pass, all of which are things that I think you can’t assume. But, the bottom line of the whole situation is, there is a decent likelihood there will be House and Senate votes where members of Congress are going to have to express what they think about the WTO. It’s kind of a free vote to express your concerns without any potential liability. Because of the timing, the technical problems, it’s not a vote to get out of the WTO even if, actually, the House and the Senate both supported the resolution by majorities. 

 

Ryan:

So let’s say that the US did leave the WTO or that the WTO did fall apart. What does the alternative to it look like? You kind of wrote the damn book on it—what could an alternative system look like?

 

Lori:

Well first of all, folks can still get that book Whose Trade Organization?. I think the best way to think about it is “what are the rules we want?” So, “what are the goals we want?” Is the first question, and then you think about the rules. Versus the way the WTO was created was: here’s a model, the whole neoliberal smorgasbord of policies, of corporate rights, of corporate protections, of intellectual property rules, of limits on regulation, and service sector and financial deregulation, and let’s see what happens! No, you go the other way around, so what do you want? You want living, family supporting jobs and wages. You want labor and human rights so that people can advocate for themselves. You want an agreement that is compatible with a living planet and doesn’t exacerbate climate crises, in fact, as part of a transition to a lower carbon economy. You want to make that sure food is safe and the services we rely on are reliable and affordable and safe. 

 

So if you think about it that way and you look at the WTO, basically in a certain way, you kinda want to go back to the ITO, the International Trade Organization. Which is, you take all of those WTO agreements, you just whack and bury a bunch of them. You don’t need a trade-related intellectual property agreement. There shouldn’t be protectionist patent and copyright monopolies in a trade agreement—they do not go there. That is just pharma and the content industry trying to ride on the good name of trade. You don’t need rules limiting what kind of food safety or environmental standards or product safety standards—you know the basic rule is as long as you treat domestic and foreign goods the same, the democratic process in the country that’s going to have the stuff in their market decides whether or not it can have pesticides and how much, and whether there should be GMOs and how they should be labelled. That’s not a trade issue. The discrimination treating foreign goods worse, that could be a trade issue. But as long as you don’t discriminate, the level of protection, the level of consumer information, that’s a democratic choice. So a bunch of those things need to get cut out of the system, then the stuff that’s missing needs to be put in. Which comes back around to the ITO. 

 

So that old International Trade Organization connected to the International Labor Organization’s conventions on labor rights- that needs to be the floor on which trade happens. It didn’t have an environmental component—it would be very easy to use the kind of language that’s now in the revised NAFTA that talks about multilateral environmental agreements that countries have, as sovereigns signed onto, becoming the floor on environment that countries have to meet to get the benefits of the trade agreement. Equally, there are human rights standards through the United Nations. We have international rules on the people’s side that should become a floor on which trade is predicated. And then things like currency manipulation—there were rules against currency manipulation in those days relating to the IMF, which had a different kind of function then, that were in the ITO. We definitely need to make sure there are currency rules. There were also antitrust rules to break up anticompetitive practice, which obviously in the global economy we need. And we need rules (and there are various versions of these in some places) to stop tax cheating and the use of tax havens to get an advantage and starve governments. So if you take out the stuff that shouldn’t be in there and you put in the stuff that should be in there, it focuses mainly on trade—trade and what the terms should be for when trade happens. Those are the kind of agreements that could really get the benefits of trade without all the corporate baggage attached. 

 

You know, when I think about what’s happened to the WTO and what we want, it makes me think back of walking around the Senate building with Ralph Nader during the fight in 1994 about approving the WTO. And he used to say to Senators, “if this darn agreement were ever fully implemented, the results would be so outrageous that people would want to get the hell out of it. And hopefully we don’t have to go through all the pain and suffering that’s going to ensure before we know it was a bad idea and we get out.” Well, it’s been 25 years and it is overdue to get out. But the other thing he said regularly was, “it’s not that there is no alternative, there are many alternatives. We just need rules that actually work for people and the planet, not corporations.” So stay tuned to the news about what’s going to happen with the WTO, could be at a turning point, sure would be overdue time to see something different as the rules of the global economy. 

 

Ryan:

That’s all for today, thank you all for listening. Rethinking Trade is produced by Public Citizen’s Global Trade Watch. I would encourage you to visit rethinktrade.org as well as tradewatch.org to educate yourself, as well as find out how you can get involved in the work we’re doing to fight for fairer and more equitable trade policies.

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