The Multilateral Trading Regime Is a Force for Good: Defend It, Improve It

The vicious Versailles Treaty after the First World War gave way to the most generous and visionary idea in history—the Marshall Plan, whereby the victors decided to rebuild the vanquished and integrate a broken Europe into a single economy. It worked. A peaceful Europe is a force for good. That economic union is still at work extending itself, thereby raising living standards, labor standards, environmental standards, and human rights. The same principles of an open society and an open market have worked for Japan, as well. Japan is now a force for good. It is a great nation, a great exporter and a great importer. Harry Truman, George Marshall, and Ernie Bevin did not conduct opinion polls on the Marshall Plan. They decided what was right, what was wrong, and what was achievable. Why have those lessons of the twentieth century been lost?

I’m stumped by the misunderstandings about the WTO. A guy like Ralph Nader can say unchallenged, “The WTO is a secret cabal run by some insiders unaccountable and unelected.” As you know, governments own the WTO, the WTO does not own them. The WTO now has 140 members. It operates by consensus. There is no WTO Security Council. Our agreements must be ratified by parliaments and congresses. So why the controversy?

In the absence of anything to hate, globalism and globalization are now the targets. “Globalization” is a horrible word. Strangely enough, a couple of generations ago, “internationalism” and “solidarity” were fine, non-threatening, idealistic words, lifting people to a higher plane. But somehow the brand of globalization is crushed down on those who should lead. It’s not a policy or a plan hatched by the Trilateral Commission or wealthy people in Davos. It’s a process that started probably when the first person walked out of a cave. Many economists and historians argue that trade as a percentage of GDP was higher before the First World War than it is now. Certainly, there was a greater movement of people then than now.

Information technology and financial flows have accelerated the process. The great difference is that now everyone can see what is happening. There is debate and that’s a good thing. Too often people confuse technological change with globalization. Some even argue that, if you abolish the WTO, there would be no globalization. The fear people have about science is a bit scary. Technology has been the best friend of our species. India and China were faced with frequent famines through the 1960s. Then came a science-driven “green revolution” and the authors of such great blessings as super-rice and super-wheat got the Nobel Peace Prize. Now those ideas would be met with protest and resistance. Anyone is a globalist only when their child is sick. Then they want the best medicine the world can provide.

We ought to get out and explain how costs relative to income have dropped. When I was a kid, it took a year’s pay for a working-class family to purchase the Encyclopedia Britannica. My parents couldn’t afford it. Now it takes less than one week of unemployment benefits to buy a compact disc—or nothing to get it on the internet. Alas, too many politicians and business people have lost their nerve. It is time for the business community and political leaders to fight for the values and successes of the past few decades and explain to workers and shareholders that there is no shame in profit, only in losses, and that the best security a working family has is a business that is profitable. We ought to face these challenges with humor and some humility. Anti-globalization groups, such as e-hippie and antiglobalization.com, miss the splendid irony in their titles. We need to point out again and again the overwhelming evidence that trade boosts economic growth. A study by Jeffrey Sachs and Andrew Warner of Harvard University found that developing countries with open economies grew by 4.5 percent a year in the 1970s and 1980s, and those with closed economies grew by less than one percent.* At that rate, open economies double in size every sixteen years; closed ones must wait one hundred years.

A New Multilateral Round Is the Best Way to Improve the Trading Regime
Of course, we need to improve the trading regime. I can’t think of any institutional structure that cannot be improved. And if people believe the present system is unsatisfactory (and it is), and unjust (and it frequently is), and imperfect (and it certainly is), what should we do? I say to the critics, the best thing we can do is start a new trade round so we can negotiate and attack those injustices. We can improve the trading regime and gain through further success the moral authority we lack.

Robert Stern of the University of Michigan suggests that cutting barriers to agriculture, manufacturing, and services by one-third would boost the world economy by over $600 billion—the equivalent of adding another Canada to the world economy. If all trade barriers were abolished, that would boost the world economy by nearly $2 trillion—the equivalent of adding two more Chinas to the world economy. It is no wonder the kids and others protest when OECD agricultural subsidies alone equal the entire gross product of all of Africa. Abolishing these subsidies would deliver to developing countries three times more than all the official development assistance combined.

We ought to heed the words of those locked out. Alec Irwin, the South African Trade Minister, said recently, “The danger of not having a multilateral round is to further exacerbate the development problem. For us in the developing world that would be disastrous.” It is marginalization from globalization that those who legitimately lead the developing world fear the most. Why is it that Singapore gets more investment than all of Africa? Why is it that London has more internet connections than all of Africa? What does this teach us?

Of course, we ought to change the way we do things at the WTO and we are. We spent one hundred hours in open Council meeting in three months at the end of last year on issues of implementation. Ten years ago we would spend fifty hours in twelve months on everything. We are delivering up a package on market access for least-developed countries and I pay tribute to those political leaders who fought with their domestic constituents over it. It is an injustice when the least developed countries, who account for half of one percent of world trade, find that the toughest and highest trade barriers are in their areas of excellence. There are thirty member-nations that cannot afford the resources to have a mission in Geneva, but we have found new ways of connecting them to our process.

“We the People” or “We the Governments”?
Let’s not lose our nerve, because the trading system offers one of the best chances for the poorest amongst us. Let’s remind ourselves that, of course, the UN, the Bank, the Fund, the ILO, and the WTO are imperfect, but the world would be a less stable, less predictable, and more dangerous place without them. Over the last twelve months, the WTO has welcomed Jordan, Georgia, Albania, Croatia, Oman, Lithuania, and Moldova to membership—almost thirty million people. While there may be a few thousand protesters outside the meetings in Washington and Prague and Seattle, there are millions queuing up to join the WTO because they believe a rules-based system is an opportunity for their people. They are inspired by such leaders as in Yugoslavia, who said, “Membership in the WTO is part of our democratization movement.”

I don’t want to underestimate the depth of feeling and alienation of protesters, though we ought to better connect ourselves with our true owners—the governments. We are taking action in that regard through, for example, conferences with the Inter-Parliamentary Union and the European Parliament, and by making ourselves available more often to the governments and parliamentary and congressional committees. Of course, I’d like to see the WTO more transparent, and it is becoming so. The NGOs are not always wrong, but they’re not always right, either. They represent the best and the worst of our species—from the young men and women who get their university degrees and then go into the bush to help the poor, to entrepreneurs and marketers feeding off the anxieties of others. I confess to uneasy feelings when some NGOs and even some international institutions start questioning the legitimacy of our real owners, the governments. The debate must be held. It is profound and it is painful. Do the international agencies represent “We the People” or “We the Governments”? I guess I’m old-fashioned and shaped by a parliamentary experience whereby legislators create the laws and the rules, and the people create the legislators.

However, this we know to be true: No nation can enjoy clean air or water, manage a tax system, or manage airlines without the cooperation of others. We all depend on our neighbors’ success for our own success. As governments contract out to international institutions and agreements—whether the WTO, the ILO, the Antarctica Agreement, the Law of the Sea, etc.—those governments have an obligation and a duty to insist on greater oversight to make those institutions and agreements more accountable, to give them the resources they need to be more transparent, and thus more accountable to the real owners of both international institutions and governments—the people. And finally, when we talk of labor, environmental, indigenous, or gender issues, we need to think not just about the principles involved, but the jurisdictions of those institutions we created.

The gaps in the international architecture are glaring. They will not be fixed by the odd seminar or assembly of NGOs, pressure groups, or lobbyists to safeguard and protect society from international institutions. Keeping the architecture intact is one of the great challenges that political leaders will face this century. It is true, the institutions are creaky, inefficient, middle-aged. It is time the WTO had a check-up and a reality check as all middle-aged people and institutions should. Ironically, some NGOs and pressure groups say the WTO has too much power. Then, after saying the WTO has too much power, they want to load it with responsibilities that will increase that power, whether it be regulating indigenous rights, or gender or women’s rights, or labor rights, or whatever. If that were to happen, then the WTO really would be a threat to you all!