Relevance of World Trade Organization under scrutiny amid US president-elect’s protectionist stance
The sting of teargas was a price worth paying, said Michael Dolan, as he looks back on the Battle of Seattle and how the World Trade Organization’s attempt to break down the barriers to international trade was derailed by anti-globalisation protesters.
“The WTO has never recovered, it really hasn’t,” he said.
Dolan was one of the organisers of the blockades and marches that brought the Pacific coast city to a standstill in 1999 and plunged all attempts by WTO officials to construct a free trade agreement among more than 150 countries into disarray.
Developing world farmers and industrial workers in the US united against the move, which they saw as a neoliberal initiative in support of multinational corporations and an attack on their basic employment rights.
The WTO is under fire again, though this time from Donald Trump, whose return to the White House threatens to become an existential crisis for the global trade body.
Trump rejects the postwar mission to reduce barriers to free trade, including cuts to import tariffs, and argues they have mostly benefited China to the detriment of US businesses and workers.
Illustrating how much he believes a surcharge on imports will help US businesses, about three weeks before he secured a second term in the White House, Trump told an audience at the Economic Club of Chicago: “To me, the most beautiful word in the dictionary is tariff. It’s my favourite word. It needs a public relations firm.”
According to many WTO watchers, a rescue mission for the Geneva-based organisation is impossible since Trump gained control of the president’s executive powers and a Republican majority was confirmed in the US Senate and House of Representatives.
Within hours of taking office on 20 January next year, he could impose protectionist measures in breach of WTO rules on a host of countries, including China, the UK and the EU.
Last month he announced that he would sign an executive order placing a 25% tariff on all imports from Canada and Mexico, and a 10% duty on China, on top of existing duties, blaming drugs and migrants crossing US borders.
Dolan, who in 1999 was deputy of the Ralph Nader-funded pressure group Global Trade Watch, is happy to embrace Trump as a fellow critic of the way the WTO has put the price of goods above other criteria, such as the protection of homegrown jobs and decent wages.
China’s dominance of trade based on huge subsidies for its industrial base, undercutting US and European jobs, is another issue where Dolan and Trump see eye to eye.
“It is difficult to reconcile our victory in 1999 with the WTO decision to grant most favoured nation (MFN) status to China. It was like letting the fox into the hen house,” he says.
Only two years after abandoning its 1999 meeting in Seattle, the WTO met and agreed to bring China into the mainstream trade system, giving it the same MFN status that was designed for the poorest developing world nations.
From one perspective, it ushered in an era of cheap produce that lowered inflation to the benefit of consumers in the rich west. From another, it undermined jobs and living standards in countries that relied on a strong manufacturing base.
The overwhelming vote in favour of opening the door to communist China was widely seen as an emotional response to the 9/11 attack on the World Trade Center a few months earlier to unite the world against Islamist terrorists. It is one that many US Republicans and Democrats have come to regret.
Seeking to usher in a new era of global trade, the WTO met in Doha a year later to restart the Seattle talks and liberate agriculture, among other things, from protectionist rules. But the warm feelings had evaporated and objections from India, Brazil and US farmers prevented the “Doha round” from ever making progress. Despite a series of make-or-break meetings in the intervening 22 years, little progress has been made.
Alan Winters, a trade expert at the University of Sussex, says Trump has been a longstanding critic of China’s preferential treatment and will sign the death knell of the WTO whether he imposes tariffs or breaks from the multilateral WTO system to sign one-to-one sweetheart deals with his favoured nations.
“It is clear that multilateralism is very sick. The Doha round hasn’t yet been killed off, but it is deadlocked,” he says.
“And when the solution to avoiding tariffs is bilateral deals that lie outside the WTO system, it doesn’t look like getting better for the WTO any time soon.”
Julian Hinz, a trade expert at Germany’s Kiel Institute, said: “WTO rules still govern a big chunk of world trade. But the shift to protectionism means there is a risk the WTO declines into irrelevance.”
The nearest the organisation has come to recognising how Beijing’s massive manufacturing subsidies breach the rules can be found in a statement earlier this year that said there was an “overall lack of transparency” in the Chinese government’s financial accounting.
WTO rules are grouped into three main areas: goods, services and intellectual property
Created in 1995, the WTO is the permanent incarnation of the general agreement on tariffs and trade (Gatt), a set of regulations governing multilateral trade relations that had evolved since the 1940s.
WTO rules are grouped into three main areas: goods, services and intellectual property. According to the principle of the “single undertaking”, WTO members must accept all multilateral rules, ensuring they operate on an equal footing, although there are many clauses allowing countries to go their own way, especially if it means lowering protectionist barriers.
One reason for the failure of the Doha round is the need for all – now 166 members – to achieve a consensus, giving the director general, Ngozi Okonjo-Iweala, a headache whenever agreements need to be hammered out.
The first woman and first African to hold the position, she was blocked by Trump in his first presidency from taking office before an approving nod from the incoming Biden administration allowed her to ease past rival candidates.
In the past four years she has struggled through the pandemic and the inflation crisis that followed the Russian invasion of Ukraine to keep developing world organisations onside.
Considered a dealmaker rather than a smooth diplomat based on her former job as Nigeria’s finance minister, her main attempt to make some progress was a deal to share the intellectual property behind vaccines used in the pandemic. This was high on the wishlist of many developing world countries and championed by South Africa but was scuppered by the EU and UK, which sought to protect the interests of domestic pharmaceutical companies.
Okonjo-Iweala must also cope with a decision made by President Trump in his first term to block the appointment of judges to WTO courts, preventing the resolution of trade disputes.
In response to the latest threat from Trump, WTO officials met last month to reappoint Okonjo-Iweala, unopposed, for a second term before Joe Biden leaves office.
“What for?” asks Dolan. “Why does she want to do the job. The organisation is nothing more than a thinktank these days.”
Source: https://www.theguardian.com/world/2024/dec/03/can-the-worlds-trade-police-survive-trump-ii
