A Trade Deal Built on Sand

The World Trade Organization finally found a safe place to hold a meeting. Doha, a city in the tiny Persian Gulf sheikhdom of Qatar, is only 1,000 miles from Afghanistan. It is a 9,000-mile flight from Seattle, where two years ago street protestors frustrated the WTO's attempt to set an agenda for another "round" of negotiations over rules for global trading and investment. But this time, on November 14, protected by a detachment of plainclothes U.S. marines in a desert theocracy sealed tight against outsiders, U.S. Trade Representative Robert Zoellick engineered an agreement on an agenda over which 142 countries will negotiate during the next three 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, the organization's director general at the time, could say with confidence that its rules for global trade were the "constitution of a single global economy." Today, the WTO is reviled by trade union, environmentalist, small business, and other activist groups in both developed and developing countries. More important for the Bush administration -- and for Zoellick's future -- failure would have caused severe discomfort in the boardrooms of multinational corporations that are counting on a new WTO round to liberate them further from national regulation: They want more access to third-world financial markets. They also want a new rule to permit corporations to challenge any country's labor, environmental, public health, or public-safety laws that can be shown to restrain trade. Another objective is a requirement that all government services be subject to privatization and foreign ownership.

With protestors barred from the city, Zoellick could safely ignore demands to give human rights, labor, and environmental standards parity with investor protections. This allowed him to 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.

With the Soviet Union gone, the third world lost much of its Cold War 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, there was a massive dislocation of rural peasants, the blowing away of domestic industry by multinationals, and the growth of a discontented urban proletariat.

At Doha the poorer nations' hands were somewhat strengthened by the sudden need of the United States for allies in the war against terrorism. Moreover, with most of their economies tanking from the global recession and from plummeting commodity prices, trade ministers from the third world could not go home without claiming some victories. 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.

Finally, Zoellick made a series of concessions that saved the talks and brought kudos from the global business media. The Economist called the meeting "a big win for poor countries." The Wall Street Journal 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."

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 actually know what they were agreeing to.

Moreover, the question of who gained and who lost cannot be answered with reference to nation-states or groups of 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 will 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 domestic U.S. economic interests.

One major concession was unavoidable. Going into Doha, U.S. drug companies had become a public relations liability for the cause of preserving patent protection for corporations. Headlines at home and abroad depicted them as heartless profiteers that charged dying, impoverished Africans exorbitant prices for AIDS medicines. Zoellick's main job was to keep the outrage against the U.S. drug multinationals from contaminating the intellectual property protections for other technologies -- in such industries as software, communications, and entertainment -- that represent hundreds of billions of dollars in U.S. investments. Since the problem was defined solely as a public-health issue, those other protections were preserved at the price of a non-binding resolution allowing poor countries to override patent protection in order to combat certain epidemics, including AIDS, malaria, and tuberculosis. The U.S. 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.

The 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 immunize U.S.-based industries against nations whose domestic manufacturers sell in other countries below the cost of production and thereby drive competitors out of their own home markets. In the 1980s, U.S. steel firms became the most efficient steel producers in the world by downsizing dramatically, slashing costs, and reorganizing work. Still, they could not compete with the Japanese, Korean, and Brazilian companies whose home market protections allowed them to sell in this country below cost. As a result, employment and production in U.S. steel have plummeted, and the industry is seeking anti-dumping relief.

Although anti-dumping laws are slow and cumbersome, they are about 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 hi-tech firms is another nail in the coffin for heavy manufacturing in America.

Yet for both economic and political reasons, the Bush administration resisted demands by India, Pakistan, and others for accelerated phase-out of U.S. import quotas on clothing and textiles that were originally scheduled to expire in 2005. U.S. textile production, which has been decimated by imports over the past seven years, is concentrated in Southern states that have supported Republicans in recent presidential elections. Zoellick did, however, agree at Doha to lower future textile tariffs -- a concession that angered at least a few GOP members of Congress from the South.

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. This benefit is part of the series of intricate deals upon which the European common market is based. Under pressure from his own multinational firms to achieve a new trade round, Lamy agreed (in somewhat vague language) to put European farm subsidies 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.

Zoellick's maneuvering saved the WTO round. But it could end up being a Pyrrhic victory for the corporate globalizers. For one thing, Zoellick's concessions undercut the Bush administration's effort to get back the authority for putting trade agreements on a congressional "fast track." Even before Doha, Bush did not have enough votes in the House to pass fast track; and if anything, the concessions on anti-dumping, textile tariffs and agricultural subsidies lost more votes. Moreover, Zoellick ignored two resolutions that Congress passed just before he left for Doha: One directed him not to put anti-dumping laws on the WTO agenda; and the other, to negotiate for a group on workers' rights at the WTO. He achieved neither mandate, a performance that is unlikely to inspire further congressional trust.

But whatever happens to fast-track authority, the WTO itself looks increasingly inadequate for the task of organizing the world's economic constitution. The delegates at Doha were able to ignore the critical issues of human and labor rights. But these issues will not go away, even though the Seattle coalition may continue to be intimidated by the war on terrorism. Even among fervid globalizers, there is a growing recognition that the answer to the question "Why do they hate us?" has something to do with the worsening of an already unfair distribution of income, wealth, and power in our world. An economic constitution with nothing to say about that issue is not sustainable.

Neither did the Doha meeting give much comfort to environmentalists. For example, reducing barriers against trade in environmental services does not represent progress, despite efforts to hype this as a gain for the environment. Rather, the intent is to remove restriction on waste disposal and privatize water systems in ways that could prevent localities from conserving aquifers and other water resources.

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 southeastern Asia. Already, even without WTO privileges, China has been relentlessly expanding its share of U.S. imports while shipments from Japan and the fabled Asian tigers -- Hong Kong, South Korea, Taiwan, and Singapore -- have shrunk dramatically. Having bet their future on the growth of exports to the United States, many developing countries will be faced with politically explosive joblessness.

History may record that WTO delegates came from all over the world to the desert sheikhdom of Qatar. There -- oblivious to rising inequality, social injustice, and a depressed world economy -- they deftly negotiated a trade agenda that turned out to be built on sand.

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