Pulled along by the war on terrorism, themultinational corporate campaignto deregulate the global economy seems back on course--at least for the moment.By shrewdly buying votes and appealing to patriotism, the Bush administrationengineered the jump start of a stalled new round of trade talks at the WorldTrade Organization in mid-November. Three weeks later, the White House squeakedthrough to a one-vote victory in the House of Representatives to put trade dealson a legislative "fast track." Unfortunately, the result of both events will beto bury the real issue: competent and accountable governance of the globalmarketplace.
In Doha, Qatar, the World Trade Organization finally found a safe place tohold a meeting. The tiny Persian Gulf sheikhdom is only 1,000 miles fromAfghanistan. But it is a 9,000-mile flight from Seattle, where two years agostreet protestors frustrated the WTO's attempt to further liberate globalinvestors from government restrictions in trade and investment. This time, onNovember 14, protected by a detachment of U.S. marines in a desert theocracysealed tight against outsiders, U.S. Trade Representative Robert Zoellickbrokered a deal on the list of topics that 142 countries will bargain over forthe next several years.
And just in time. Failure would have reinforced growing doubts among bothcritics and supporters as to the WTO's credibility. Just a few years ago, RenatoRuggiero, who was then the organization's director general, could say withconfidence that the WTO's rules for global trade were the "constitution of asingle global economy." Today, disenchantment with the idea of a global societyorganized around laissez-faire values is spreading beyond the trade-union,environmental, and other activists of the Seattle coalition to politicians andscholars--and even some businesspeople. The head of DaimlerChrysler recentlyestimated that only 10 percent to 20 percent of the world's people have benefitedfrom globalization. Nevertheless, failure would have caused severe discomfort inmost 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 theywant WTO tribunals to override any country's domestic laws that can be shown torestrain trade.
With protestors barred from Doha's streets, Zoellick could safely ignoredemands to give human rights, labor, and environmental standards parity withinvestor protections. He could, therefore, concentrate on dealing with thecomplaints of the ministers from the third world: to wit, that their economieshad gotten very little from the last trade deal--the Uruguay Round, whichconcluded in 1994.
Indeed, with the end of the Cold War, the third world lost muchof its international bargaining leverage in the 1990s. Successive U.S.administrations cut back foreign aid and bluntly told poor countries that theycould develop only by offering up their natural resources and cheap labor toglobal private capital. If they resisted, there would be no more loans from theInternational Monetary Fund or the World Bank. There was little choice. In someimpoverished places, the new order created export jobs and made localentrepreneurs rich. But more often than not, the result was a massive dislocationof rural peasants, the blowing away of domestic industry by multinationals, andthe growth of a discontented urban proletariat.
The United States' post-September 11 need for allies in the war againstterrorism somewhat strengthened the hand of the developing countries at Doha.Moreover, with most of their economies tanking from the global recession and fromplummeting rawmaterial prices, trade ministers from the third world could not gohome empty-handed. During the meeting, 25,000 people jammed the streets of NewDelhi to protest against the WTO--an event not unrelated to the militant rhetoricof the Indian delegation.
Business's New Deal
To get agreement, Zoellick made a series of concessions togive further access to the already quite open U.S. market. The global businesspress was delighted. The Wall Street Journal approvingly reported: "In aneffort to keep poorer nations on their side in the war on terrorism, U.S. andEuropean negotiators went further than anyone expected to meet the demands of thedeveloping world." The Economist called the meeting "a big win for thedeveloping countries."
How good the deal is for anyone is not yet completely clear. Tradeagreements are enormously complicated, and the compromised language of the Doharesolutions is especially vague. Indeed, many of the delegations did not have thetechnical expertise to know what they were actually agreeing to.
Additionally, the question of who gained and who lost cannot be answered withreference to nation-states alone. WTO rounds are largely driven by multinationalfinancial interests in both rich and poor countries determined to escaperesponsibilities of any national citizenship. Thus, to a large degree, the keydecisions at Doha were about what interests within each nation would betraded away in order to accommodate the next stage of global deregulation. In theUnited States' case, Zoellick's choice of whom to sacrifice mirrored thepolitical strengths and weaknesses of U.S. domestic economic interests.
One major concession was unavoidable. Going into the WTO meeting, U.S. drugcompanies had become a public-relations liability for the cause of preservingpatent protection for multinational corporations. Headlines at home and abroaddepicted them as heartless profiteers that charged dying, impoverished Africansexorbitant prices for AIDS medicines. Zoellick's task was to keep the outrageagainst the drug companies from contaminating the intellectual-propertyprotections for other multinational firms in such industries as software,communications, and entertainment. He succeeded by keeping the dispute over drugpatents defined as a public-health issue, which was then resolved at the modestprice of a nonbinding resolution allowing poor countries to override patentprotection in order to combat AIDS, malaria, tuberculosis, and certain otherdiseases when they reached epidemic levels. The drug companies were miffed; butBristol-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: WhichU.S. basic industry--steel or clothing and textiles--would be sacrificed to thedemand by third-world countries for more access to U.S. markets? By agreeing toput 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 domesticmanufacturers sell here at below the cost of production and thereby drivecompetitors out of their own home markets. Although the anti-dumping laws areslow and cumbersome, they are the last line of defense for U.S. industries likesteel. The decision to bargain them away in order to obtain benefits forfinancial services and high-tech firms is another assault against heavymanufacturing in America.
Zoellick put up somewhat more resistance to demands by India, Pakistan, andothers for accelerated phaseout of U.S. import quotas on clothing and textilesthat are scheduled to expire in 2005. The apparel industry--which is centered inNew York and Los Angeles and employs large numbers of minorities andimmigrants--does not pull much weight at the Republican White House. Textiles,however, are concentrated in southern states that have supported the GOP inrecent presidential elections. Members of Congress from textile districts hadbeen persuaded to support the North American Free Trade Agreement (NAFTA) in 1993by assurances that the making of cloth, because it was more high-tech, wouldremain in the United States, even though the sewing of apparel might move toMexico. 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 puton the agenda some further opening of the U.S. textile market.
Zoellick also made a deal on agriculture. Here he seems to have beenoutwitted by Pascal Lamy, the European Commission's trade commissioner. Europeanfarmers enjoy the highest subsidies in the world. But with the expected extensionof the Common Market to Poland, which has a large agricultural sector, the costof Europe's program will be prohibitive. Thus, some reductions in European farmsubsidies 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 includingpayments to U.S. farmers--which heretofore were not classified as exportsubsidies--on the agenda as well.
At the insistence of the Europeans, Zoellick also agreed to some languagethat appeared to be a nod toward environmental concerns. For example, they addeda negotiating objective to reduce barriers against trade in environmentalservices. As several U.S. environmental groups have pointed out, however, thecorporate intent is to remove restrictions on waste disposal and privatizepublicly owned water systems.
But the thread Zoellick used to sew up the WTO round at Doha caused a furtherunraveling of support for fast track among Republicans in Washington fromtextile, steel, and farm districts. Since it had lost the support of more than adozen pro-free-trade Democrats by its unwillingness to make any concessions onworkers' rights and environmental standards, the White House needed anoverwhelming Republican vote to pass fast track. So, after having promised thethird world free trade in steel, textiles, and agriculture, Zoellick left Dohaand returned to Washington to promise wavering members of Congress protectionismin--you guessed it--steel, textiles, and agriculture! Even so, when the votingtime expired, fast track had been defeated 204 to 206. But the GOP leadershipstopped the clock while they twisted arms. Finally, on a promise to require thatimports from Latin America under certain trade preferences be manufactured withU.S.-made cloth, they persuaded Congressman Jim DeMint of South Carolina toswitch 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 ourpresident 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 DuncanHunter told The Wall Street Journal. "But I like less the idea ofweakening my president [during wartime]." The Senate, which has always supportedtrade 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 forthe "party" of neoliberalism--the multinational corporations and theirideological supporters in the academic and policy communities. The major weaponof the opposition--the embarrassing street demonstrations--had already beendefused by public distaste for dissent and disorder after September 11. And nowthere is an open field for Zoellick and company to enlarge the powers of the WTOto override national social contracts and to negotiate the Free Trade Agreementof the Americas that would expand NAFTA to all of the Western Hemisphere. Whenthese deals are brought back to Congress on a fast track--that is, no amendmentsallowed--it will be hard for Congress to flatly reject them. Thus, we can expecta further shift of power over trade to the executive branch, despite the factthat the U.S. Constitution gives Congress the responsibility "to regulatecommerce with other nations."
Having bounced back from the disaster in Seattle, neoliberalinstitutions--from the World Bank and the IMF to the business-run Davosforums--now may be less inclined to pursue open "dialogues" with nongovernmentalorganizations and even labor unions. This may exacerbate tension within theSeattle coalition between advocates of "insider" and "outsider" strategies, withsome arguing for more compromise in order to get a seat at the table and othersarguing for more confrontation.
Still, in the arena of American politics, a one-vote margin on aforeign-policy issue for a wartime president with an almost 90 percent approvalrating suggests that the question is far from settled. There is now even strongerconsensus among Democrats on the need for enforceable labor and environmentalstandards in trade agreements. Bush's intransigence on this issue deeplyalienated pro-trade Democrats whose hope for some compromise was dashed. One ofthem, a bitter Charles Rangel, ranking Democrat on the House Ways and MeansCommittee, denounced the GOP's last-minute vote-buying as a "deal with thedevil."
More important, the deals made at Doha and undercut in Washington areinherently unstable. Although it was scarcely mentioned either at the WTO meetingor in the fast-track debate, the implicit assumption underlying the decisions inboth places is that American consumers can indefinitely be the engine of growthfor the rest of the world. With the U.S. trade deficit rising relentlessly alongwith foreign debt, it is a matter of simple arithmetic that the assumption cannothold. Ultimately, in the absence of mechanisms for global economic governancethat can create enough consumer demand to employ the world's growing labor force,further deregulation of trade and finance will just exacerbate trade conflict andeconomic instability. Spurred by excess capacity and growing competition, capitalwill be freer to roam the world in search of yet cheaper labor and more pliablegovernments--hardly a formula for lasting prosperity.
The war on terrorism will add even more pressure by returning to the Cold Warpractice 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 theWTO. The combination of an almost infinite supply of labor and an authoritarianpolice state that keeps labor costs low is likely to make China an exportsuperpower over the next decade; this will devastate manufacturers in LatinAmerica, Africa, and Southeast Asia. Already, even without WTO privileges, Chinahas been relentlessly expanding its share of U.S. imports while the share ofshipments from Japan and the fabled Asian tigers--Hong Kong, South Korea, Taiwan,and Singapore--has shrunk dramatically. Mexico, once the poster child for freetrade, is now facing a shrinking U.S. market and a growing shift of productionand jobs to China.
The close vote on fast track reflects a growing suspicion of the vision of atwenty-first-century global marketplace based on nineteenth-century economicdogma. Even among fervid U.S. globalizers, there is a recognition that theanswer to the question "Why do they hate us?" has something to do with theworsening 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 inWashington were political sandboxes in which politicians played at buildingagreements that cannot hold together--ignoring the harder problems of globalgrowth and the fashioning of a cross-border social contract.
But in the near term, is there enough cohesion among the groupings that makeup the Seattle coalition to reverse the momentum of neoliberals' recent tacticalvictories? Certainly, the celebrated bonding of the Teamsters and turtles inSeattle has loosened. Ralph Nader's candidacy still sticks in the craw oforganized labor. And support by the Teamsters and the building-trade unions forGeorge W. Bush's proposals to open up the Alaska preserves to oil drilling hasoutraged environmentalists. Still, labor and the NGOs need each other to lift theenergies of the Seattle coalition from the street demonstrations to grass-rootspolitics. Much is therefore riding on next November's election. In order torestore their credibility, labor and the NGOs will have to work together todefeat at least some of those members who voted for fast track against theinterests of their districts.
We are also seeing positive instances of labor and NGOs working acrossborders. In Mexico, for example, the AFL-CIO and United Students AgainstSweatshops combined to force a major Nike supplier to recognize an independenttrade union after its leaders had been persecuted for protesting againstabominable working conditions. And in Pôrto Alegre, Brazil, organizers ofthe World Social Forum--an annual grass-roots counter to the Davos meetings ofthe global business elite--expect some 3,000 delegates from around the world toparticipate in a five-day series of seminars on globalization starting January31. Of course, the war on terrorism and the slowdown in economic growth have madetheir task much harder. They now need to expand their vision of the globalmarketplace to include political and economic stability as well as socialjustice.
Certainly, we are learning that we cannot expect much help in the visiondepartment from the current management of the U.S. government and its clients.History will record that both in Doha and in Washington powerful people gatheredlate this year to make decisions about the world's economic future--and stucktheir heads firmly in the sand.
