Elizabeth Balbachevsky - Editor

Michel Henry Bouchet-"Global Finance Chair"-CERAM-Sophia Antipolis- France

A European viewpoint on the WTO's Millenium Round

135-member nations could not even agree on a final communiqué, not to mention the launching of a new all-round trade liberalization negotiation, at the December 1999 Ministerial Conference of the WTO in the port city of Seattle. The objective, in a climate of rising tensions in the multilateral trading system, was to promote more competitive and efficient markets for goods, services and technology. The violent eruption of the civil society, including demands by NGOs and unions of a more inclusive, transparent and accessible WTO, reflects the growing politicization of trade issues. As such, the Seattle meeting turned out to be a warning signal and a wake-up call.

The Seattle Round was crucial for three reasons: One, trade will remain the engine of growth in both developed and developing nations, the latter being relatively more open and therefore more vulnerable than the former, with a trade to GDP ratio of over 30% compared to 23% in the OECD. The current downturn in world trade volume and value, thus, is a threat that can affect sustainable development in many countries. Second, doubts about the fairness of the global trading system are on the rise in developed as well as developing countries that question the merits of trade and financial liberalization. Third, there are new complex issues to be tackled that are contentious between Europe and the United States as well as between industrialized and developing nations, including electronic commerce, investment and competition policy, services market liberalization, labor rights and cultural diversity. The harsh debates regarding the content of the agenda and the very process of negotiations hid a key stake, namely, the rules of the game in the global economy or, more specifically, the distribution of risks and opportunities, costs and benefits of globalization.

Why such a stunning fiasco? There are at least five reasons. First, too much was demanded of the WTO. The EU group, alone, had three main goals to be promoted by its Trade Commissioner, Mr. Pascal Lamy of France:

1. The EU (and Japan) wanted a broad and comprehensive agenda, including environmental, regulatory and social issues, compared with the US preference for narrowly focused tariff cuts. Wide-ranging trade talks would allow countries to balance concessions in some areas (i.e., agriculture) with gains in others (e.g. minimum social standards).

2. The EU wanted to preserve existing trade preference agreements with developing nations that would coincide with the current Lomé negotiations, which expire in 2000. In addition, while the US push for rapid financial liberalization, with lower trade barriers in banking, insurance and securities, the EU favors phased market opening along with institutional strengthening in the developing economies.

3. The EU wants to preserve and develop its cultural diversity. Clearly, this means containing the forceful intrusion of US audiovisual goods in the old continent, the so-called "MacDo culture". France, Belgium and other European countries see themselves like White Knights defending the cultural identity of other nations threatened by the "bulldozer" of the US' profit-driven media industry. Culture cannot be tackled like beef or soy.

Considering this wish-list of only 15 out of 135 countries, the WTO could not be reasonably expected to promote worldwide trade liberalization of goods and services while also sanctioning social norms and labor rights, and acting as the environmental police and the cultural referee! Over-expectations led to deadlock.

Second, the concern of citizens is that global issues are too important to be handled in ministerial talks. The WTO, like other UN agencies such as the IMF and the World Bank, is a state-driven organization that is supposed to address transnational issues in the global economy Ten years after the fall of the Berlin wall, the scenes of teargas firing police and anti-free trade protesters in Seattle will mark the fall of the post WWII state-centered decision-making process.

Third, the deadlock of the trade talks illustrates the eroding legitimacy of international forums based on senior (US, Europe and Japan) versus junior (developing nations) partners. Developing countries consider they should no longer be marginalized and taken for granted. They claim that whereas the OECD’s take-off was predicated on sheer labor exploitation in the XIX° century, the OECD’s current focus on labor rights boils down to disguised protectionism. With half of the world population still living on less than $2/day, developing countries matter not simply as trade markets but also as development partners to be integrated in the global economy.

Fourth, global negotiations require global vision. The irony today is that the US occupies a position of undisputed worldwide monopoly in military, diplomatic, financial and economic matters, while its stance is ultimately driven by pressure groups on Capitol Hill. Orange County politics intrudes into US global leadership policy. The US position in the Millenium Round was influenced, if not dictated, by the unprecedented anti-trade campaign against globalization that was spearheaded by a blend of NGOs including partisan domestic lobbies, consumer groups, unions, and other free-trade protesters. More significantly for the WTO's future, the collision course between the worldwide stance that is rooted in the White House's global ambitions and the provincial, grassroots driven demands for a pause in free trade is well illustrated by the "short leash" the US Congress keeps on Mr. Clinton whose authority is limited to completing unfinished business from the Uruguay Round. The double track in the US approach between global ambitions and domestic political motivations is also illustrated by the EU complaint against the Helms-Burton anti-Cuba law, where the US claims the WTO has no jurisdiction because the matter involves national security. US elections next year rule out any substantive negotiation. Similarly, the White House's hardest challenge remains to convince a suspicious Congress to endorse the recent trade agreement with China.

Last, the aim of regulating globalization goes beyond the WTO as it goes beyond the current international architecture. The backlash is a symptom of anxiety over the market economy and of resistance against social change. The onward march of globalization might not be much affected by the WTO's fiasco. But the failure of the Millenium Round means another setback in the credibility of multilateral forums that will lead to the demise of the global power monopoly of the US-Europe and Japan triad. And the latter’s stubborn arrogance is about to achieve what even the Vietnam war did not produce, namely, the convergence of forces between developing countries, unions, students, and NGOs towards a fairer world system.