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#679 - Making Sense Out of the WTO, 08-Dec-1999

As everyone now knows, the World Trade Organization's (WTO)
meeting in Seattle was interrupted by protestors who were mostly
peaceful. Over-reaction by local police led to the "Battle of
Seattle." As an acknowledgment of this over-reaction, the Seattle
chief of police has now resigned.[1]

The main goal of the WTO's Seattle meeting was to begin a new
round of international talks, the so-called "millennium round,"
which was expected to last 3 years. That goal was thwarted.
Emboldened partly by protestors in Seattle's streets, Third World
envoys to the WTO rejected a new round of talks.[2] So the
millennium round will not begin, at least not right away.
Delaying the new talks was a sweet victory for the protesters and
an important assertion of independence by Third World countries.

But we should not fool ourselves. The WTO is still entirely
intact. It was not changed in any fundamental way by the
protests. More importantly, the goals and the power of those who
created the WTO remain untouched.

The people who created the WTO have one main goal: an integrated
global economy unencumbered by government restrictions. This
economic goal has two parts: globalized and unencumbered.

The globalization of the world's economies is proceeding steadily
and cannot be stopped. The world's economies are being laced (or
yoked) together by communication technologies (radio, TV,
telephones, fiber optic cables, satellites and computers, among
others). A flood of invention is inexorably weaving (or chaining)
the strands of the world's economies into a single huge network
of relationships.

No one can stop globalization from happening. However,
governments could take many steps to reduce the harmful
consequences for human societies.[3] Unfortunately the people who
created the WTO are ideologically opposed to any government
involvement. They have their own utopian vision, a globalized
economy unencumbered by government restrictions -- global free
trade. Economists have a name for such an economy: LAISSEZ FAIRE.
In a LAISSEZ FAIRE economy, the owners of capital are free to
make all the important decisions -- they decide what to make, how
to make it, where to get the raw materials, whom to employ (under
what conditions and at what wages), and where to sell their
products or services. In a LAISSEZ FAIRE economy, the role of
government is limited to enforcing property rights, assuring a
stable currency, providing a system of justice for resolving
disputes, and maintaining a military apparatus to enforce civil
and international peace.

Government has one other key role in a LAISSEZ FAIRE economy: to
maintain such an economy, government must relentlessly thwart
democratic tendencies among the governed. (For example, When
President Reagan destroyed the Air Traffic Controllers union in
1981, he was using the powers of government to bolster a wannabe
LAISSEZ FAIRE regime.) If governments don't relentlessly oppose
democratic tendencies, people will soon direct their government
to (for example) limit the length of the workday, guarantee their
right to form a trade union, insist that everyone deserves health
care, and set minimum wages, all of which doom laissez faire.
This is why laissez faire economies are incompatible with
political democracy: laissez faire economies do not arise
spontaneously and can only be sustained if the state aggressively
suppresses democratic tendencies.

In sum, the WTO isn't mainly about trade. It is mainly about
establishing the kind of economy, worldwide, in which the owning
class gets to make all important decisions without interference
from governments or from anyone else. Today the key institution
of the owning class is the corporation, so the aim of the WTO is
to ensure that corporations are empowered to make all the
important decisions without interference.

To put it another way, the main work of the WTO isn't promoting
world trade -- it is getting rid of rules made by governments,
rules that restrict the freedom of corporations to make decisions
affecting production and labor. Government rules are described as
"restrictions on trade" but this "trade" language is a euphemism
for "restrictions on corporate freedom." To summarize, then, the
WTO isn't chiefly concerned with trade -- it is chiefly concerned
with "Who gets to decide?" When governments are weakened,
corporations are strengthened. The WTO was set up to weaken
governments.

There are two other realities that we need to remember, if we
want to make sense out of the WTO: (1) The developed countries
have exhausted many of their reserves of raw materials, and (2)
they have built too much productive capacity, so there aren't
enough customers for all the goods they can produce.[3] Thus, to
maintain reasonably profitable operations, corporations need to
mine the Third World's raw materials, and they need to sell goods
and services to people in the Third World.

Take the U.S. as an example. The U.S. has depleted many of its
domestic reserves of raw materials, such as petroleum, chromium,
cobalt, manganese, nickel, and tin, among others.[4] Therefore,
it is important for U.S. corporations to be free to extract such
materials from Third World countries and ship them elsewhere.
Furthermore, the U.S. produces far more food each year than
Americans can eat. So agribusiness corporations need to "open new
markets" in the rest of the world to sell our excess production,
competing head-to-head with local farmers abroad.[5] When foreign
governments are reluctant to import hormone-treated meat, or
genetically-modified corn oil from the U.S., our agribusiness
corporations insist that those governments are restricting their
corporate freedoms and they turn to the WTO to whittle those
governments down to size.

And of course the U.S. is not alone in this need: Japan, Canada,
and the European Union (EU) have exhausted many of their own raw
materials and/or have built excess capacity, so they too need
access to the mineral reserves and markets of the Third World.

The WTO has established numerous ground rules that facilitate
extraction and marketing in Third World countries. Under WTO
rules,

(1) governments are not allowed to pass laws that favor local
firms and discriminate against foreign-owned corporations;

(2) governments are not allowed to prevent foreign nationals from
buying a controlling interest in local companies;

(3) governments are not allowed to subsidize domestic industries.
For example, Canada is considering asking the WTO to outlaw the
U.S. food stamp program because Canada views the U.S. program as
a government subsidy to U.S. farmers. (Food stamps create a
market for food among poor people that would not exist in a true
LAISSEZ FAIRE economy).[6,pg.164] For its part, the U.S. is
demanding that the WTO outlaw subsidies to farmers in many
European countries. These various claims before the WTO may seem
contradictory, but they all serve to weaken governments, thus
enhancing the freedom of corporations. That is the key idea that
elucidates the purpose and behavior of the WTO.

(4) The WTO's tariff schedules provide for rising tariff rates as
value is added to a product. A tariff is a tax on imported goods.
The lowest tariff rate is set for a raw material. The tariff rate
increases for processed and manufactured goods.[6,pg.137] Thus,
furniture manufactured from local timber in a Third World country
faces a relatively high tariff when it is imported into a
developed country. On the other hand, raw logs exported from a
developing country face a relatively low tariff when they cross
the border into a developed country. Thus the WTO's tariff
schedule promotes policies of "rip and ship" in Third World
countries, and discourages those countries from manufacturing.
These WTO tariff schedules can be viewed as a way of
"recolonizing" nations that had won political freedom in recent
decades.

(5) Governments are not allowed to pass laws that would provide
favorable terms of trade to particular trading partners. For
example, through the Lome Convention the European Union (EU)
created favorable terms of trade for some of its former colonies
in Africa, the Caribbean, and the Pacific. Now this arrangement
has been successfully overturned by the WTO. Here are the
details:[6,pgs.141-147]

The EU agreed to buy 8% of all its bananas from Caribbean
countries. These banana sales are crucial to the economies of
some of the Caribbean nations involved. For example, in the
Windward Island nations of St. Lucia, Dominica, St. Vincent and
the Grenadines, 94% of all banana exports go to the EU and
bananas account for 63% to 91% of all export earnings. Caribbean
bananas are grown on small family farms set on hilly terrain, so
they are more costly than bananas grown by low-wage labor on huge
Central American plantations.

The Chiquita company -- a U.S. firm which produces no bananas in
the U.S. but employs thousands of people at rock-bottom wages on
plantations in Colombia, Costa Rica, Honduras and Panama --supplies 50%
of the EU's banana imports each year. But Chiquita
wanted even more market share, so the corporation donated
$500,000 to the U.S. Democratic Party. A few days later the
Clinton/Gore administration filed a complaint with the WTO on
behalf of Chiquita.

St. Lucia and St. Vincent did not have local experts they could
send to Geneva, Switzerland to argue their case before the WTO,
so they hired outside counsel to represent them. The WTO ruled
that only official government representatives -- not hired
experts -- could appear before WTO tribunals. So St. Lucia and
St. Vincent were unrepresented in the WTO proceedings.

To no one's surprise, the WTO ruled in favor of the U.S. The EU
initially refused to comply with the WTO ruling, insisting it had
a right and a moral duty to aid its former colonies by providing
a market for their bananas.

Chiquita then donated $350,000 to the Republican Party and the
Republican-dominated Congress prepared legislation to impose
tariffs on goods imported from the EU as punishment for refusing
to comply with the WTO's ruling. Not to be outdone by the
Republicans in currying favor with corporations, the Clinton/-Gore
administration then pressured the EU into revoking its
Lome Convention preferences for Caribbean bananas.

The Caribbean nations that produce bananas are democratic
countries with long-established traditions of human and worker
rights. They have been good friends to the United States. Now
their economies have been devastated and destabilized by
"globalized free trade," basically sacrificed on the alter of
LAISSEZ FAIRE economics and corporate freedoms.[6,pgs.141-145]

--Peter Montague (National Writers Union, UAW Local 1981/AFL-CIO)

=====

[1] Sam Howe Verhovek, "Seattle Police Chief Resigns in Aftermath
of Protests," NEW YORK TIMES December 8, 1999, pg. A13.

[2] Joseph Kahn and David E. Sanger, "Seattle Talks on Trade End
With Stinging Blow to U.S.," NEW YORK TIMES December 5, 1999,
pgs. A1, A14.

[3] Paul Krugman, THE RETURN OF DEPRESSION ECONOMICS (New York:
W.W. Norton, 1999), ISBN 0-393-04839-X. Krugman recommends
controls on the flow of capital under certain circumstances -- a
heresy among the global free trade cult.

[4] U.S. Geological Survey, MINERALS YEARBOOK; METALS AND
MINERALS 1996, VOLUME I. (Washington, D.C.: U.S. Government
Printing Office, 1998).

[5] David Barboza, "Is the Sun Setting on Farmers?" NEW YORK
TIMES November 28, 1999, pgs. C1, C14.

[6] Lori Wallach and Michelle Sforza, WHOSE TRADE ORGANIZATION?:
CORPORATE GLOBALIZATION AND THE EROSION OF DEMOCRACY (Washington,
D.C.: Public Citizen, Inc., 1999). ISBN 1582310017; telephone
(202) 588-1000.

Descriptor terms: free trade; wto; corporations; economics;
laissez faire; bananas; globalization;