Sense and Nonsense in Seattle

The world is getting a crash course in international trade this week as it ponders the clash of visions and interests at the meetings of the World Trade Organization (WTO) in Seattle. Meshing the interests of the 130-plus governments at the meetings would be hard enough, without the added complexity of the kaleidoscope of interest groups and activists that have turned the streets of Seattle into a mix of protests, political muscle-flexing and violence. The WTO is portrayed by its supporters as protector of the poor and bulwark of global prosperity, and by its foes as an unaccountable, secretive body riding roughshod over workers rights and the environment.

There is a considerable amount of confusion and posturing in this debate, but there are also some deeper reasons for the confusion. The WTO is in fact a mix of high principles of importance to a stable world, combined with narrow interests masquerading as high principles, and leavened with a host of unsolved conundrums about the ways we should cooperate in a globalized society and economy.

First some facts. The WTO is basically a framework of international trade agreed among its member governments, together with a nascent dispute settlement mechanism for enforcing those agreements. It is much less an international bureaucracy. The Geneva headquarters hosts a mere 500 workers, including support staff. This staff mainly supports international negotiations, analyzes trade patterns and manages the dispute settlement process. Contrary to charges on the streets of Seattle, it does not write international trade rules: the member governments do that in the course of negotiations.

The high principles behind the WTO are that a global set of agreed principles on trade and related matters will facilitate economic growth and will protect the poor from the power of the rich. These basic points are unexceptionable, except to people who know nothing of history or economic development. Expanded world trade is indeed an engine of development, for rich and poor countries alike. And the rule of law surely beats the rule of the jungle, especially for the weaker countries. The collapse of trade in the Great Depression taught us that lesson in brutal terms.

The WTO (and its predecessor before 1994, the General Agreement on Tariffs and Trade (GATT)), have indeed been helpful in expanding trade on a broad front. But trade policy has its low side as well--a battle of narrow interests posturing as national or even international interests. The AFL-CIO is keen to keep out manufactured goods that developing countries can successfully export to the U.S., whether textiles from very low-wage countries or steel from Korea, Brazil and Russia. It marches in Seattle under the hypocritical (or to be more generous, simply erroneous) claim that it represents the interests of the world's workers, when it is in fact mostly representing its own members at the direct cost of much poorer workers in the developing world, and at the cost of U.S. consumers that would like to buy those less expensive goods from abroad. When President Clinton, in his inimitable way, feels their pain, he is of course feeling the pain of a powerful lobby which may decide the vote for Al Gore '69 in the swing states in the heavily unionized Midwest.

The conclusion that the world, and the WTO negotiations, are a mix of principle and cynicism is pretty commonplace, but takes us only part of the way to understand the complexity of the debates in Seattle. There are a series of truly unsolved problems. Anti-WTO activists are wrong, as a point of fact, to see the WTO as a faceless bureaucracy setting the world's rules, but they are right that the negotiating process, by which the U.S. and other countries bargain over trade standards, is opaque and mostly hidden from view. Its not the WTO's bureaucracy per se that's the problem, it's the behavior of the member governments, including, or perhaps especially, our own. The first problem, therefore, is how to achieve greater democracy in international negotiating contexts.

The second problem is one of standards. The activists are incensed that the WTO dispute settlement boards can rule that duly enacted U.S. laws are contrary to the WTO. This they claim is undemocratic on its face. But the critique is foolish: the whole point of international trade agreements is to bind the parties to a set of shared standards (that they have mutually adopted), so that they don't engage in unilateral actions to the detriment of others. The fact that such unilateral actions are democratically enacted within a member country is beside the point.

The right question is whether the WTO standards--to which the U.S. Congress agreed in 1994 --are appropriate. The environmentalists say no, because under WTO rules a country generally can't stop the import of goods from countries on the basis of whether or not we like how those goods have been produced. The U.S. and European trade unions say no, because under WTO rules we generally can't stop the import of goods from countries on the basis of how the workers are treated or how much they earn.

The developing countries say, in part, thank goodness for the rules, because they can't afford the environmental standards of the U.S. or the wage levels of U.S. and European workers. On the other hand, the developing countries say that U.S. practices are unfair--particularly those regarding intellectual property rights (which indeed deprive the poorest countries of drugs that are available only at monopoly prices protected by patents), and the use of trade barriers against products produced in low-wage countries (such as anti-dumping rules, set not by the WTO, but by the U.S. itself).

In short, standards are in the eye of the beholder. We have a real and continuing puzzle as to where to draw the line on what individual countries can choose to do, and what they should agree to set according to a single international standard. These issues need further debate, but we should take care not to let narrow interests manipulate or undermine open trade.

The U.S. wants to press the WTO to adopt labor standards and environmental standards, but refuses to discuss standards on intellectual property and anti-dumping rules. The developing countries want it just the other way around. In a fair world, we'd consider all of these questions in a serious, transparent and careful way, with a deep attention to the concerns of the poorest countries, who live at just one hundredth of the dollar incomes enjoyed by Americans.

These issues will not be solved in Seattle. At most the Seattle meeting will agree to launch a new round of negotiations over many years to solve these issues in the future. We'll see in the next few days whether the world can hold itself to standards of fairness, efficiency and transparency --the high principles that underpin the WTO--or whether the melee on the streets will be mirrored in an ongoing melee among the world's governments.

Jeffrey D. Sachs '76 is Galen L. Stone professor of international trade, and director of the center for international development.