In
this comment thread came the question "Why is the World Trade Organization such a bad thing?"
Although I don't know too much about the WTO, Paul Krugman says that it is not as evil as we all think, and I guess I would agree with him. It is more how it has been implemented than anything else, but I think I have to learn more about it.
Growing up, I never thought I'd be an activist, but my research into the structure and dynamics of the WTO and US trade policy convinced me to march in the streets in Seattle in 1999. So I feel compelled to answer this. What follows are a lot of thoughts and arguments that rarely make it into the discussion about so-called "free trade". It's a bit of a brain dump, but you might find it interesting. MORE BELOW...
Well, the
idea of having a global trade organization is not bad. But the organization and power dynamics of the WTO make it anti-democratic and anti-sovereignty. It effectively sets international law regarding the environment--based only upon the considerations of trade.
A BAD thing about having one umbrella trade group is that countries have no choice... they must opt in regardless of the rules that have been made, or suffer substantial and harmful exclusion from international trade. Exclusivity is a key reason why the International Monetary Fund (IMF) is too powerful: when a nation is having liquidity problems, they used to have several options about where to go for loans. Now, if the IMF won't loan to them, no one will, and so nations have no choice but to accept the IMF's 'structural adjustment' provisions.
More quick examples: Judicial decisions made under the WTO are made by an appointed tribunal in secrecy.
The rule-making in the WTO is supposedly by consensus, but in practice the text is prepared by a small set of the economically most powerful countries ahead of time, and economic pressure is used to get countries to comply (esp. with aid money... kind of like the way the US was pushing countries to support the war in Iraq).
One example of limiting sovereignty, at the expense of the environment: under the WTO, standards can be set on the quality of goods and products, but no discrimination can be made on how the products were produced. This means the whole idea of "dolphin safe tuna" collapses. Likewise, sea turtles are needlessly killed because countries like Malaysia don't want to put turtle excluder devices in their nets. With the WTO, the US can't say "we don't want that".
But what really mobilizes me in opposition is the way that the WTO is used, and the how trade policy is set in the United States.
In the U.S., corporations have exclusive, close access to the US Trade Representative (USTR). Before the 1999 Seattle WTO meeting, the US was pushing to have all timber and lumber product tariffs and trade barriers removed nationwide. This was an egregious move in my view because 1) there's a very serious crisis of deforestation in the world, especially in the tropics, where huge and important forests are being lost and 2) tariffs can compensate for externalities (e.g. environmental effects of deforestation). The removal of tariffs would speed global deforestation.
But was this really being considered in setting the US trade policy? Well, there were two boards advising the USTR on the issue, with a total of 24 advisors. Every single one of the 24 represented corporate interest... Weyerhauser, Georgia-Pacific, the American Plywood Association, etc, etc. Two environmental groups sued to be admitted to these advisory boards, and a judge ruled that under a certain law, there must be broader representation, and declared one environmentalist each should be put on the boards. The Clinton-Gore administration appealed, marring my opinion of them forever.
The WTO isn't as bad as NAFTA and the proposed Free Trade Area of the Americas. Those are also anti-democratic, but also give some really crazy rights to corporations (look up Chapter 11 lawsuits if you're interested). And some good comes out of the WTO: for instance the pressure on the US, Europe, and Japan to lower their agricultural subsidies.
But don't fall for the line that opponents of the WTO are all anti-trade protectionists. That's hardly the case. But trade should be regulated with people and healthy communities in mind, not the interests of corporations.
Despite the rhetoric, honest economists will must admit that unregulated trade is not always good. In the current global environment, speculative trading can play havoc on national economies. If economic figures start looking less than rosy, investors flock out of the country to put their money elsewhere--like a run on a bank, but worse. It's better for a country to tax investment that's taken out of a country too quickly (i.e. under a year or two)... it plays the same role as giving a penalty on early withdrawals from CDs (certificates of deposit) ensuring more stability. Chile successfully included such a provision in its bilateral trade agreement with the US, but they were able to only because they have sufficient bargaining power.
Another way that volatility can hurt national econmies is with price volatility. Take coffee, for example. Many nations across the world shifted their economies towards producing coffee, because it looked like a good investment. But since over 100 nations made the same move, the price dropped substantially. The expected investments were not realized. Dogmatic economists will say that this will just make the market correct itself. But in the mean time, other sectors of the economy were abandoned and the local population suffers. In a nutshell: Unregulated trade ("Free Trade") can force a nation to specialize in one product. Any financial planner in the world will tell you that to be safe you should diversify your portfolio, but some of these agreements preclude that.
What else? Some of these agreements don't even stand up to their supposed names. NAFTA isn't really "free trade", because their are side provisions. The United States sells subsidized corn to Mexico at prices below the production in either country. At the same time, using a side agreement that Mexico doesn't even recognize as being valid, the United States only allows in a third of the sugar in that Mexican farmers would like to sell us. Just like that, we push Mexican corn and sugar farmers into poverty. Why? How? Because we're a 900-pound negotiating gorrilla. And Mexico accepts this not because it is good for all of Mexico, but because it benefits Mexico's elite. You can't go around talking about nations like they're unified beings.
I took a year and a half of economics at the graduate level. I learned something. There is validity to economic modelling. You could construct a model to account for bargaining differences, price volatility, speculative trading, and negative externalities like global warming. But it makes the models almost intractably complicated, and so as a rule, they aren't included. I learned something else: there is incredibly strong dogma within the discipline of Economics. Factoring in the above issues, you would get a much more nuanced and cautious answer to the question "Is unregulated trade good?" But economists aren't really allowed to do that. Free Trade is good, not because of models, but just because it is. It's like, "Of course Africa never was joined with South America. This whole plate techtonics idea is idiocy!"
We need post-autistic economics.
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