Roller Coaster of a Decade for the World Trade Organization

by Walden Bello*

Our world is not for sale, my friend,

Just to keep you satisfied.

You say you’ll bring us health and wealth,

Well, we know that you just lied.

(Song to WTO delegates of NGO activists in Cancun in Sept. 2003, sung to the tune of the Beatles’ “Can’t Buy me Love”)

When the WTO came into being this month 10 years ago, following eight years of arduous negotiations known as the Uruguay round, it was seen by the global establishment as the “jewel in the crown of multilateralism,” as a future director general, Mike Moore, was to later put it.

The moving force behind the founding of the WTO was the United States, which had effectively vetoed the establishment of the International Trade Organization (ITO) nearly forty years earlier in favor of the much weaker system of governing international trade known as the General Agreement o­n Tariffs and Trade. In the intervening years, US corporations had become more dependent o­n global markets, giving them a stake in a system of global governance of trade that would protect their interests.

Nearly five years after the founding of the organization, the third ministerial of the WTO collapsed in Seattle in late November-early December 1999. The collapse was fueled by three developments: failure of the US and EU to agree o­n a common formula for retaining their massive agricultural subsidies; alienation o­n the part of most developing countries from a multilateral trading system that sacrificed their development o­n the altar sake of free trade; and resistance o­n the part of global civil society to the process of corporate-driven globalization spearheaded by the WTO.

Stampeded into ratifying 19 separate agreements as a “single undertaking” to qualify for inclusion in the new organization in 1995, developing countries belatedly discovered that the Uruguay Round Agreement was anti-development through and through. For instance,

– by agreeing to eliminate import quotas and signing the Agreement o­n Trade Related Investment Measures (TRIMs), which declared such mechanisms as local-content policies and trade balancing requirements illegal, developing countries discovered that they had signed away their right to use trade policy as a means of industrialization.

– by signing the Agreement o­n Trade-Related Intellectual Property Rights (TRIPs), countries realized that they had given high tech transnationals like Microsoft and Intel the power to monopolize innovation in the knowledge-intensive industries via restrictive patent rights, and provided biotechnology firms like Novartis and Monsanto the go-ahead signal to privatize the fruits of aeons of creative interaction between human communities and nature such as seeds, plants, and animal life

– by signing the Agreement o­n Agriculture (AOA), developing countries discovered that they had agreed to open up their markets while allowing the big agricultural superpowers to consolidate their system of subsidized agricultural production that was leading to the massive dumping of surpluses o­n those very markets, a process that was, in turn, destroying smallholder-based agriculture. The figures spoke for themselves: the level of overall subsidization of agriculture in the Organization for Economic Co-operation and Development (OECD) countries rose from $182 billion in 1995 when the WTO was born, to $280 billion in 1997, to $362 billion in 1998! Instead of the beginning of a New Deal, the AOA, in the words of o­ne developing country trade minister, “has perpetuated the unevenness of a playing field which the multilateral trading system has been trying to correct. Moreover, this has placed the burden of adjustment o­n developing countries relative to countries who can afford to maintain high levels of domestic support and export subsidies.”

The crisis of the WTO after the Seattle collapse was temporarily arrested during the fourth ministerial in November 2001 in Doha, Qatar, where no more than 60 genuine civil society organizations were present owing to tight restrictions imposed by WTO and Qatari authorities and developing countries were pressured into signing a declaration that put the priority o­n making sure trade was not subordinated to development, as they wanted, but o­n a Northern agenda prioritizing the so-called “New Issues”; that is, extending the jurisdiction of the WTO to the areas of investment, government procurement, competition policy, and trade facilitation.

While Doha was trumpeted as inaugurating a “Development Round,” in fact, developing countries were very resentful of having been blackmailed and procedurally maneuvered into approving a ministerial declaration negotiated by a handful of member countries.

Coming into the fifth ministerial in Cancun, Mexico, the developing countries were better organized. The Group of 20 led by Brazil and India blocked a new AOA with no significant reduction of the high level of protection and subsidization of agriculture in the EU, US, and other developed countries. The Group of 90 refused to allow negotiations to proceed o­n the so-called “New Issues” of investment, competition policy, government procurement, and trade facilitation. Meanwhile, the suicide of a Korean farmer Lee Kyung Hae during an outdoor demonstration transmitted the anger of civil society to delegates inside the Cancun Convention Center. The result was the second collapse of a WTO Ministerial in less than four years.

US Trade Representative Robert Zoellick blamed what he called the “won’t do” countries for the Cancun debacle and Washington proceeded o­n a two-track strategy of pursuing bilateral trade agreements outside the WTO while trying to destroy the G 20. With this approach failing to yield results and realizing that a multilateral legal order institutionalizing free trade continued to be an indispensable condition for global corporate hegemony, the US shifted tactics early in 2004 and worked with Brussels to salvage the WTO.

First, Washington and Brussels brought Brazil and India , along with Australia, as key partners in devising a framework of negotiations for a new AOA. Second, worried about the unpredictability of ministerials brought about by the presence of civil society organizations and the press, the key trading powers pushed to have the General Council that meets regularly in Geneva assume the powers of a ministerial. The upshot of this maneuvering was the so-called “July Framework Agreement.”

The EU-US drive to restart the WTO succeeded brilliantly. The US and EU were the main beneficiaries of an agreement to cut non-agricultural tariffs (NAMA). Both the EU and the US scored a victory by getting the developing countries to agree to begin talks o­n trade facilitation, o­ne of the New Issues that the developing countries had rejected in Cancun. But it was the US that scored the biggest gains, getting as it did an expanded “Blue Box” (a set of subsidies exempted from elimination or significant reductions) in which to house a considerable portion of the subsidies legislated under the US Farm Bill of 2002.

The key to the victorious US strategy to bring the WTO back o­n its feet after Cancun was the cooptation of India and Brazil in agriculture. India’s key concern was to avoid a formula that would require it to bring down its agricultural tariffs substantially. The EU and the US readily conceded this. Removing agricultural subsidies in the North was the main Brazilian concern, and here it seemed to get its way. The final text affirmed the phaseout of export subsidies, making Brazil the big gainer, with some estimates placing its gains as some $10 billion.

The other developing countries got hardly anything, which resulted in much consternation and accusations from other developing countries that Brazil and India had betrayed them.

What are the implications of the July Framework Agreement for the sixth ministerial in Hong Kong to be held in December of this year? According to a recent assessment of the United Nations Conference o­n Trade and Development (UNCTAD), “The fact that the [July] Framework was decided at the GC (General Council) level with some Ministerial participation raises interesting questions with regard to the relative role of Ministerial Conferences. Taking into account the setbacks at Seattle and Cancun, the future role of Ministerial Conferences may be increasingly geared towards stocktaking, the injection of momentum, and putting a political seal o­n deals already worked out in the GC.”

Nevertheless, the GC usurpation of ministerial power has tenuous legitimacy and many of the agreements o­n the modalities of negotiations contained in the July Framework are vague and fragile. The WTO is supposed to work o­n the principle of “consensus” among its members, and the current consensus around the July Framework is very weak indeed. Many developing country governments and civil society networks are putting their energies into derailing the WTO a third time. If that happens, putting Humpty Dumpty together again will be extremely difficult.

*Walden Bello is executive director of the Bangkok-based Focus o­n the Global South