A Deal Built on Sand

Pulled along by the war on terrorism, the
multinational corporate campaign
to deregulate the global economy seems back on course--at least for the moment.
By shrewdly buying votes and appealing to patriotism, the Bush administration
engineered the jump start of a stalled new round of trade talks at the World
Trade Organization in mid-November. Three weeks later, the White House squeaked
through to a one-vote victory in the House of Representatives to put trade deals
on a legislative "fast track." Unfortunately, the result of both events will be
to bury the real issue: competent and accountable governance of the global

In Doha, Qatar, the World Trade Organization finally found a safe place to
hold a meeting. The tiny Persian Gulf sheikhdom is only 1,000 miles from
Afghanistan. But it is a 9,000-mile flight from Seattle, where two years ago
street protestors frustrated the WTO's attempt to further liberate global
investors from government restrictions in trade and investment. This time, on
November 14, protected by a detachment of U.S. marines in a desert theocracy
sealed tight against outsiders, U.S. Trade Representative Robert Zoellick
brokered a deal on the list of topics that 142 countries will bargain over for
the next several years.

And just in time. Failure would have reinforced growing doubts among both
critics and supporters as to the WTO's credibility. Just a few years ago, Renato
Ruggiero, who was then the organization's director general, could say with
confidence that the WTO's rules for global trade were the "constitution of a
single global economy." Today, disenchantment with the idea of a global society
organized around laissez-faire values is spreading beyond the trade-union,
environmental, and other activists of the Seattle coalition to politicians and
scholars--and even some businesspeople. The head of DaimlerChrysler recently
estimated that only 10 percent to 20 percent of the world's people have benefited
from globalization. Nevertheless, failure would have caused severe discomfort in
most corporate boardrooms. Multinational firms are counting on a new WTO "round."
Among other objectives, they want more access to third-world financial markets,
they want privatization and foreign ownership of government services, and they
want WTO tribunals to override any country's domestic laws that can be shown to
restrain trade.

With protestors barred from Doha's streets, Zoellick could safely ignore
demands to give human rights, labor, and environmental standards parity with
investor protections. He could, therefore, concentrate on dealing with the
complaints of the ministers from the third world: to wit, that their economies
had gotten very little from the last trade deal--the Uruguay Round, which
concluded in 1994.

Indeed, with the end of the Cold War, the third world lost much
of its international bargaining leverage in the 1990s. Successive U.S.
administrations cut back foreign aid and bluntly told poor countries that they
could develop only by offering up their natural resources and cheap labor to
global private capital. If they resisted, there would be no more loans from the
International Monetary Fund or the World Bank. There was little choice. In some
impoverished places, the new order created export jobs and made local
entrepreneurs rich. But more often than not, the result was a massive dislocation
of rural peasants, the blowing away of domestic industry by multinationals, and
the growth of a discontented urban proletariat.

The United States' post-September 11 need for allies in the war against
terrorism somewhat strengthened the hand of the developing countries at Doha.
Moreover, with most of their economies tanking from the global recession and from
plummeting rawmaterial prices, trade ministers from the third world could not go
home empty-handed. During the meeting, 25,000 people jammed the streets of New
Delhi to protest against the WTO--an event not unrelated to the militant rhetoric
of the Indian delegation.

Business's New Deal

To get agreement, Zoellick made a series of concessions to
give further access to the already quite open U.S. market. The global business
press was delighted. The Wall Street Journal approvingly reported: "In an
effort to keep poorer nations on their side in the war on terrorism, U.S. and
European negotiators went further than anyone expected to meet the demands of the
developing world." The Economist called the meeting "a big win for the
developing countries."

How good the deal is for anyone is not yet completely clear. Trade
agreements are enormously complicated, and the compromised language of the Doha
resolutions is especially vague. Indeed, many of the delegations did not have the
technical expertise to know what they were actually agreeing to.

Additionally, the question of who gained and who lost cannot be answered with
reference to nation-states alone. WTO rounds are largely driven by multinational
financial interests in both rich and poor countries determined to escape
responsibilities of any national citizenship. Thus, to a large degree, the key
decisions at Doha were about what interests within each nation would be
traded away in order to accommodate the next stage of global deregulation. In the
United States' case, Zoellick's choice of whom to sacrifice mirrored the
political strengths and weaknesses of U.S. domestic economic interests.

One major concession was unavoidable. Going into the WTO meeting, U.S. drug
companies had become a public-relations liability for the cause of preserving
patent protection for multinational corporations. Headlines at home and abroad
depicted them as heartless profiteers that charged dying, impoverished Africans
exorbitant prices for AIDS medicines. Zoellick's task was to keep the outrage
against the drug companies from contaminating the intellectual-property
protections for other multinational firms in such industries as software,
communications, and entertainment. He succeeded by keeping the dispute over drug
patents defined as a public-health issue, which was then resolved at the modest
price of a nonbinding resolution allowing poor countries to override patent
protection in order to combat AIDS, malaria, tuberculosis, and certain other
diseases when they reached epidemic levels. The drug companies were miffed; but
Bristol-Myers Squibb and Pfizer had to take a hit in order to protect Microsoft,
AOL Time Warner, and Disney.

Guns, Textiles, and Steel

The Bush administration was faced with another choice: Which
U.S. basic industry--steel or clothing and textiles--would be sacrificed to the
demand by third-world countries for more access to U.S. markets? By agreeing to
put the elimination of U.S. "anti-dumping" laws on the agenda, Bush chose steel.
Anti-dumping laws protect U.S.-based industries against nations whose domestic
manufacturers sell here at below the cost of production and thereby drive
competitors out of their own home markets. Although the anti-dumping laws are
slow and cumbersome, they are the last line of defense for U.S. industries like
steel. The decision to bargain them away in order to obtain benefits for
financial services and high-tech firms is another assault against heavy
manufacturing in America.

Zoellick put up somewhat more resistance to demands by India, Pakistan, and
others for accelerated phaseout of U.S. import quotas on clothing and textiles
that are scheduled to expire in 2005. The apparel industry--which is centered in
New York and Los Angeles and employs large numbers of minorities and
immigrants--does not pull much weight at the Republican White House. Textiles,
however, are concentrated in southern states that have supported the GOP in
recent presidential elections. Members of Congress from textile districts had
been persuaded to support the North American Free Trade Agreement (NAFTA) in 1993
by assurances that the making of cloth, because it was more high-tech, would
remain in the United States, even though the sewing of apparel might move to
Mexico. In fact, textile production followed apparel south of the border. Still,
in order to keep the Indians and Pakistanis at the table, Zoellick agreed to put
on the agenda some further opening of the U.S. textile market.

Zoellick also made a deal on agriculture. Here he seems to have been
outwitted by Pascal Lamy, the European Commission's trade commissioner. European
farmers enjoy the highest subsidies in the world. But with the expected extension
of the Common Market to Poland, which has a large agricultural sector, the cost
of Europe's program will be prohibitive. Thus, some reductions in European farm
subsidies are inevitable in any case. So Lamy agreed (in somewhat vague language)
to put them on the table, but not before he talked Zoellick into including
payments to U.S. farmers--which heretofore were not classified as export
subsidies--on the agenda as well.

At the insistence of the Europeans, Zoellick also agreed to some language
that appeared to be a nod toward environmental concerns. For example, they added
a negotiating objective to reduce barriers against trade in environmental
services. As several U.S. environmental groups have pointed out, however, the
corporate intent is to remove restrictions on waste disposal and privatize
publicly owned water systems.

But the thread Zoellick used to sew up the WTO round at Doha caused a further
unraveling of support for fast track among Republicans in Washington from
textile, steel, and farm districts. Since it had lost the support of more than a
dozen pro-free-trade Democrats by its unwillingness to make any concessions on
workers' rights and environmental standards, the White House needed an
overwhelming Republican vote to pass fast track. So, after having promised the
third world free trade in steel, textiles, and agriculture, Zoellick left Doha
and returned to Washington to promise wavering members of Congress protectionism
in--you guessed it--steel, textiles, and agriculture! Even so, when the voting
time expired, fast track had been defeated 204 to 206. But the GOP leadership
stopped the clock while they twisted arms. Finally, on a promise to require that
imports from Latin America under certain trade preferences be manufactured with
U.S.-made cloth, they persuaded Congressman Jim DeMint of South Carolina to
switch his vote. The final tally was 215 to 214.

Trade and Terror

The war on terrorism itself was the margin of victory.
Speaker of the House Dennis Hastert made a passionate plea "not to undercut our
president at the worst possible time," an appeal that a number of Republicans,
including those who had never before voted for a trade bill, said was decisive.
"I don't like fast track, and I don't like free trade," California's Duncan
Hunter told The Wall Street Journal. "But I like less the idea of
weakening my president [during wartime]." The Senate, which has always supported
trade deregulation, is expected to pass fast track early next year.

So, what does all this mean for the political debate over globalization?

The votes in Doha and Washington are clearly at least a temporary victory for
the "party" of neoliberalism--the multinational corporations and their
ideological supporters in the academic and policy communities. The major weapon
of the opposition--the embarrassing street demonstrations--had already been
defused by public distaste for dissent and disorder after September 11. And now
there is an open field for Zoellick and company to enlarge the powers of the WTO
to override national social contracts and to negotiate the Free Trade Agreement
of the Americas that would expand NAFTA to all of the Western Hemisphere. When
these deals are brought back to Congress on a fast track--that is, no amendments
allowed--it will be hard for Congress to flatly reject them. Thus, we can expect
a further shift of power over trade to the executive branch, despite the fact
that the U.S. Constitution gives Congress the responsibility "to regulate
commerce with other nations."

Having bounced back from the disaster in Seattle, neoliberal
institutions--from the World Bank and the IMF to the business-run Davos
forums--now may be less inclined to pursue open "dialogues" with nongovernmental
organizations and even labor unions. This may exacerbate tension within the
Seattle coalition between advocates of "insider" and "outsider" strategies, with
some arguing for more compromise in order to get a seat at the table and others
arguing for more confrontation.

Still, in the arena of American politics, a one-vote margin on a
foreign-policy issue for a wartime president with an almost 90 percent approval
rating suggests that the question is far from settled. There is now even stronger
consensus among Democrats on the need for enforceable labor and environmental
standards in trade agreements. Bush's intransigence on this issue deeply
alienated pro-trade Democrats whose hope for some compromise was dashed. One of
them, a bitter Charles Rangel, ranking Democrat on the House Ways and Means
Committee, denounced the GOP's last-minute vote-buying as a "deal with the

More important, the deals made at Doha and undercut in Washington are
inherently unstable. Although it was scarcely mentioned either at the WTO meeting
or in the fast-track debate, the implicit assumption underlying the decisions in
both places is that American consumers can indefinitely be the engine of growth
for the rest of the world. With the U.S. trade deficit rising relentlessly along
with foreign debt, it is a matter of simple arithmetic that the assumption cannot
hold. Ultimately, in the absence of mechanisms for global economic governance
that can create enough consumer demand to employ the world's growing labor force,
further deregulation of trade and finance will just exacerbate trade conflict and
economic instability. Spurred by excess capacity and growing competition, capital
will be freer to roam the world in search of yet cheaper labor and more pliable
governments--hardly a formula for lasting prosperity.

The war on terrorism will add even more pressure by returning to the Cold War
practice of using access to our markets as a foreign-policy pawn. Inasmuch as
"trade, not aid" is now the established mantra for dealing with poor countries,
this implies a level of import absorption that not even the American
"shop-till-I-drop" consumer culture can support.

The Doha meeting also ignored the looming shadow of China's entry into the
WTO. The combination of an almost infinite supply of labor and an authoritarian
police state that keeps labor costs low is likely to make China an export
superpower over the next decade; this will devastate manufacturers in Latin
America, Africa, and Southeast Asia. Already, even without WTO privileges, China
has been relentlessly expanding its share of U.S. imports while the share of
shipments from Japan and the fabled Asian tigers--Hong Kong, South Korea, Taiwan,
and Singapore--has shrunk dramatically. Mexico, once the poster child for free
trade, is now facing a shrinking U.S. market and a growing shift of production
and jobs to China.

The close vote on fast track reflects a growing suspicion of the vision of a
twenty-first-century global marketplace based on nineteenth-century economic
dogma. Even among fervid U.S. globalizers, there is a recognition that the
answer to the question "Why do they hate us?" has something to do with the
worsening maldistribution of income, wealth, and power in the world. An economic
"constitution" with nothing to say about that issue is not sustainable.

In a sense, therefore, the meeting in Doha and the fast-track debate in
Washington were political sandboxes in which politicians played at building
agreements that cannot hold together--ignoring the harder problems of global
growth and the fashioning of a cross-border social contract.

But in the near term, is there enough cohesion among the groupings that make
up the Seattle coalition to reverse the momentum of neoliberals' recent tactical
victories? Certainly, the celebrated bonding of the Teamsters and turtles in
Seattle has loosened. Ralph Nader's candidacy still sticks in the craw of
organized labor. And support by the Teamsters and the building-trade unions for
George W. Bush's proposals to open up the Alaska preserves to oil drilling has
outraged environmentalists. Still, labor and the NGOs need each other to lift the
energies of the Seattle coalition from the street demonstrations to grass-roots
politics. Much is therefore riding on next November's election. In order to
restore their credibility, labor and the NGOs will have to work together to
defeat at least some of those members who voted for fast track against the
interests of their districts.

We are also seeing positive instances of labor and NGOs working across
borders. In Mexico, for example, the AFL-CIO and United Students Against
Sweatshops combined to force a major Nike supplier to recognize an independent
trade union after its leaders had been persecuted for protesting against
abominable working conditions. And in PĂ´rto Alegre, Brazil, organizers of
the World Social Forum--an annual grass-roots counter to the Davos meetings of
the global business elite--expect some 3,000 delegates from around the world to
participate in a five-day series of seminars on globalization starting January
31. Of course, the war on terrorism and the slowdown in economic growth have made
their task much harder. They now need to expand their vision of the global
marketplace to include political and economic stability as well as social

Certainly, we are learning that we cannot expect much help in the vision
department from the current management of the U.S. government and its clients.
History will record that both in Doha and in Washington powerful people gathered
late this year to make decisions about the world's economic future--and stuck
their heads firmly in the sand.

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