The Stalemate in the WTO

An Update on Global Trends
Publisher Name: 
Focus on the Global South

Recent Developments in the WTO

1. Perhaps the best way to characterize recent developments
in Geneva is that the negotiations are practically at a
stalemate.

- This stalemate is perhaps exemplified in the polarized
situation in the agricultural negotiations. The Harbinson draft (prepared by
Agricultural Negotiations Chairman Stuart Harbinson) is an orphan. The US and
the Cairns Group consider its proposed tariff reductions too shallow while the
European Union and Japan see them as to deep. The developing countries are
concerned that the draft requires very substantial tariff cuts from them. They
are also demanding a broadening of Harbinson's proposed "strategic products"
concept, which reserves a few "strategic products" for shallower tariff cuts.

One thing that must be noted is that the EU and the US, in pushing for
negotiating advantage, have split the ranks of the developing world. The
countries in the Cairns Group, like Brazil, Uruguay, and Thailand, are siding
with the US against the EU and Japan. The EU has hit back by gaining the support of India and many other developing countries for a counterproposal for
agricultural liberalization that would replicate the allegedly more flexible
liberalization formula of the Uruguay Round. The long and short of it is that it is very unlikely that there will be agreement on the modalities of negotiation before Cancun.

- In the Trade-Related Intellectual Property Rights (TRIPs)
and public health area, there has been no give on the part of the US. It
continues to maintain its position that only in the case of drugs for three
diseases-HIV-Aids, malaria, and tuberculosis-should patent rights be loosened.
Since this has been rejected by developing countries, the US is now talking not
about loosening patent rights for public health problems but for "public health
crises."

American negotiators have reportedly told developing country
negotiators that they can't change their positions, and if they want any
movement in the negotiations, they should talk directly to the pharmaceutical
giants. Another disturbing occurrence is that the Director General, Dr Supachai
himself is spreading the blame for the stalemate from the US to Brazil and
India, whose manufacturers, he alleges, will be the ones that will principally
benefit from looser patent rights.

- On the new issues-investment, competition policy,
government procurement, and trade facilitation-the EU is now trying to delink
the decision to commence negotiations on these issues from movement on the part
of the EU to liberalize agriculture. They are telling the developing countries
that liberalization in these issues is for their own good. To bring about some
movement, the US has reportedly proposed to "unbundle" the four areas so that
negotiations could proceed on them separately. The EU has publicly agreed with
the US, but its preference is still to take the four areas together. The EU is
also side-stepping developing countries' concerns about substantive modalities,
preferring to narrow down the negotiations on modalities to be agreed on in
Cancun to procedural modalities - how many meetings should be held, etc. This
has been criticized by developing countries as attempting to elicit from them a
blank cheque to start negotiations without first agreeing on the substance of
these negotiations.

- In two negotiating areas of great interest to developing
countries, there has been absolutely no movement. These are the issues of
Special and Differential Treatment and Implementation. On the latter, it might
be of interest that when we met with him in Bangkok at few weeks ago, Pascal
Lamy, Trade Commissioner of the EU, placed the blame squarely on the developing
countries, whom he accused of not being able to agree to what were the two or
three top priorities regarding implementation that needed to be
tackled.

2. What does all this add up to? What does it mean for the
Cancun Ministerial? We posed the question to Pascal Lamy a few weeks ago.
Interestingly, his answer was to sidestep the question and simply say that if
one views the process from the Doha Ministerial's mandate for the negotiations
to end by 2004, then things don't look so bad, since "in some areas,
negotiations are 2/3rds of the away through, in some halfway through, in others
a third through, in TRIPs 98 per cent through."

Now, the role of ministerials is to carry out negotiations in
several areas simultaneously in order to bring about a comprehensive settlement. Since member countries cannot even agree on the modalities of negotiations in so many key areas, the WTO faces a great problem of what they will do in Cancun. Perhaps this is the reason why key WTO officials are now talking about coming up not with a declaration announcing agreements on issues being negotiated, but a "communiqu?" serving as a "progress report" on the ongoing negotiations, drawing upon short reports made by the various negotiating groups on the work they have undertaken since Doha.

3. The hopes for a Doha-type outcome in Cancun have been
further doused by the recent worsening of trade ties between the United States
and Europe. The EU has threatened to impose sanctions on the US by the end of
2003 for tax breaks for exporters that a WTO judicial panel has found to be in
violation of WTO rules. In what has been perceived as a retaliatory move, the US said it will file a case with the WTO against the EU's de facto moratorium
against genetically modified foods.

Taken in the context of already existing trade conflicts as well as the bitter conflict between the US and France and Germany over the US intervention in Iraq, these recent moves do not bode well for both parties arriving at consensus positions on negotiating modalities in agriculture and other trade issues before Cancun. It must be remembered that it was not only the revolt of the developing countries at the Seattle Convention Center and the mass mobilizations in the streets that brought down the third ministerial in Seattle in 1999 but also unresolved conflicts between the US and EU on agriculture, the environment, and labor standards.

US Trade Representative Robert Zoellick and EU Trade
Commissioner Pascal Lamy, who are close personal friends, are said to be moving
to bridge the Washington-Brussels gap before Cancun, but the contextual
conditions are more difficult now than before the Doha Ministerial in November
2001, when the US and EU shared a common position on combating terrorism and
intervening in Afghanistan and Washington had not yet imposed a 40 per cent
protecting tariff on steel imports and passed its $100 billion subsidies for
American farmers. Nevertheless, it is important not to underestimate the
capacity of Zoellick and Lamy to engineer a US-EU concordat as they did in the
leadup to Doha.

The Global and Conjunctural Context of the WTO Negotiations

The context for understanding the stalemate at the WTO is the
crisis of the globalist project and the emergence of unilateralism as the main
characteristic of US foreign policy.

1. First of all some notes on the character and development
of the globalist project.

- Globalization is the accelerated integration of capital,
production, and markets globally driven by the logic of corporate
profitability;

- It is a process accompanied by the coming to dominance of
the ideology of neoliberalism, centered on "liberating the market" by
institutionalizing privatization, deregulation, and trade
liberalization;

- Globalization has had two phases, the first lasting from
the early 19th century till the outbreak of the First World War in 1914; the
second from the early 1980's till today. The intervening period was marked by
the dominance of national capitalist economies marked by a significant degree on
state intervention and an international economy marked by significant restraints
on trade and capital flows.

2. The apogee of the second phase of globalization was
reached, in my view, with the founding of the WTO in 1995. The triumphalism
marking this event was conveyed by the joint statement of the World Bank, WTO,
and IMF in 1996 at the Singapore Ministerial of the WTO, where the three
institutions said that the task at hand was bringing about the "coherence" of
the policies of the WTO, IMF, and the World Bank to create the framework of
international economic governance that would assure global
prosperity.

The Economist and the rest of the establishment press toasted
the WTO as the gem of capitalist global governance, setting up a "rules-based"
system of world trade that both powerful and poor economies would submit
themselves to. According to George Soros, the significance of the WTO lay in its
being the "only global institution to which the United States was willing to
subordinate its national laws."

3. In just five years, however. the globalist project,
whether in its "hard" Thatcher-Reagan version or its "soft" Blair-Soros version
(globalization with "safety nets") was in very serious trouble. There were three
key moments to this crisis:

- First was the Asian financial crisis of 1997. This revealed
that one of the tenets of globalization, the liberalization of capital account,
could be profoundly destabilizing. It was main factor in the collapse of East
Asian economies, with 22 million people in Indonesia and one million in Thailand falling below the poverty line in just a few months.

The Asian financial crisis was the Stalingrad of the IMF, the
prime global agent of liberalized capital flows, bringing about a review of its
record in Africa and Latin America, which showed that the program of structural
adjustment that it had promoted alongside the World Bank had failed almost
universally, institutionalizing instead stagnation, greater poverty, and greater inequality.

Along with economic crisis, the Asian financial crisis
spawned a massive crisis of legitimacy and credibility of the globalist project, resulting in the defection from neoliberalism of several of its key
intellectuals: Jeffresy Sachs, Jagdish Bhagwati, Joseph Stiglitz, and George
Soros.

- The second moment of the crisis was the collapse of the
third Ministerial of the WTO in Dec. 1999. This was due to the fusion of three
volative elements into a deadly explosion: the revolt of developing countries at Seattle Convention Center, the massive mobilization of 50,000 people in the
streets, and unresolved trade conflicts between the EU and the US, particularly
in agriculture.

- The third moment was the collapse of the stock market and
the end of the Clinton boom in March 2001. This was essentially the onset of a
crisis of overproduction, the main manifestation of which was massive
overcapacity. Prior to the crash, corporate profits in the US had not grown
since 1997. This was related to overcapacity in the industrial sector, the most
glaring manifestation of which was in the leading telecommunications sector,
where only 2.5 per cent of installed capacity globally was being used. The
stagnation of the real economy led to capital being shifted to the financial
sector, resulting in the dizzying rise in share values. But since profitability
in financial sector cannot deviate too far from profitability of real economy, a collapse of stock values was inevitable, and this occurred in March 2001,
leading to the prolonged stagnation and recession that we are seeing
today.

The current crisis is not simply the downside of the normal
business cycle. It is the downside of the so-called Kondratieff Wave (named
after the economist Nikolai Kondratieff). Kondratieff observed that capitalism
progresses via 50-60 year "long waves" marked on the upside by the exploitation
of new technologies and on the downside by the exhaustion of new technologies,
leading to a prolonged period of stagnation before the next upswing. We are now
on the trough of a wave the crest of which occurred around the late sixties and
seventies.

4. The crisis of globalization, neoliberalism, and
overproduction provides the context for understanding the economic policies of
the Bush administration, notably its unilateralist thrust. The globalist
corporate project expressed the common interest of the global capitalist elites
in expanding the world economy and their fundamental dependence on one another.

However, globalization did not eliminate competition among the national elites. In fact, the ruling elites of US and Europe had factions that were more
nationalist in character as well as more tied for their survival and prosperity
to the state, such as the military-industrial complex in the US. Indeed, since
the eighties there has been a sharp struggle between the more globalist fraction of ruling elite stressing common interest of global capitalist class in a growing world economy and the more nationalist, hegemonist faction that wanted to ensure the supremacy of US corporate interests.

As Robert Brenner has pointed out, the policies of Bill
Clinton and his Treasury Secretary Robert Rubin put prime emphasis on the
expansion of the world economy as the basis of the prosperity of the global
capitalist class. For instance, in the mid-1990's, they pushed a strong dollar
policy meant to stimulate the recovery of the Japanese and German economies, so
they could serve as markets for US goods and services. The earlier more
nationalist Reagan administration, on the other hand, had employed a weak dollar policy to regain competitiveness for the US economy at the expense of the Japanese and German economies. With the George W. Bush administration, we are back to economic policies, including a weak dollar policy, that are meant to revive the US economy at the expense of the other center economies and push
primarily the interests of the US corporate elite instead of that of global
capitalist class under conditions of a global downturn.

5. The Bush administration has supplanted the globalist
political economy of the Clinton period with a unilateralist, nationalist
political economy that intends to shore up the global dominance of the US
corporate elite economically that parallels the aggressive military policy that
is meant to ensure the military supremacy of the United States.

I would just like to point out some of the distinguishing
features of this approach:

- Bush's political economy is very wary of a process of
globalization that is not managed by a US state that ensures that the process
does not diffuse the economic power of the US. Allowing the market solely to
drive globalization could result in key US corporations becoming the victims of
globalization and thus compromising US economic interests. Thus, despite the
free market rhetoric, we have a group that is very protectionist when it comes
to trade, investment, and the management of government contracts. It seems that
the motto of the Bushites is protectionism for the US and free trade for the
rest of us.

- It is wary of multilateralism as a way of global economic
governance since while multilateralism may promote the interests of the global
capitalist class in general, it may, in many instances, contradict particular US corporate interests. The Bush people's growing ambivalence towards the WTO stems from the fact that the US has lost a number of rulings there, rulings that may hurt US capital but serve the interests of global capitalism as a
whole.

- For the Bush people, strategic power is the ultimate modality of power. Economic power is a means to achieve strategic power. This is related to the fact that under Bush, the dominant faction of the ruling elite is
the military-industrial establishment that won the Cold War. The conflict
between globalists and unilateralists or nationalists along this axis is shown
in the approach toward China. The globalist approach put the emphasis on
engagement with China, seeing its importance primarily as an investment area and market for US capital. The nationalists, on the other hand, see China mainly as a strategic enemy, and they would rather contain it rather than assist its growth.

6. So among the key components of Washington's unilateralist
economic strategy are:

- Control over oil, a move strategically directed not only
against the EU but also against oil-poor China;

- Aggressive protectionism in trade and investment
matters;

- Aggressive manipulation of the dollar's value to stick the
costs of economic crisis on rivals among the center economies and regain
competitiveness for the US economy.

- Aggressive manipulation of multilateral agencies to push
the interests of US capital-something we see not only in the WTO but also in the
International Monetary Fund, where the US Treasury recently torpedoed the IMF
management's proposal for a Sovereign Debt Restructuring Mechanism to enable
developing countries to restructure their debt while giving them a measure of
protection from creditors. Already a very weak mechanism, the SDRM was vetoed by
US Treasury in the interest of US banks.

7. The great advantage of multilateralism as a system of
global political and economic governance was that it dispersed the defense of
the system to many allies and created a degree of legitimacy and consensus among
the masses that did not benefit from it. The great problem for unilateralism is
overextension, or a mismatch between the goals of the United States and the
resources needed to accomplish these goals.

A key base for successful imperial management is an expanding
national and global economy. That will not be here for a long time. Moreover,
resources include not only economic and political resources but political and
ideological ones as well. For without legitimacy-without what Gramsci called
"the consensus" of the dominated that a system of rule is just-imperial
management cannot be stable.

Faced with a similar problem of securing the long-term
stability of its rule, the ancient Romans came up with the solution of extending
Roman citizenship to ruling groups and non-slave peoples throughout the empire,
creating what was till then the most farreaching case of collective mass loyalty
ever achieved till then and prolonged the empire for 700 years. The US
unilateralists have no such "moral element" to accompany their military
domination.

8. Overextension is relative, that is, it is to a great
degree a function of resistance. An overextended power may, in fact, be in a
worse condition even with a significant increase in its military power if
resistance to its power increases by an even greater degree. Among the key
indicators of overextension are the following:

- Washington's inability to create a new political order in
Iraq that would serve as a secure foundation for colonial rule;

- its failure to consolidate a pro-US regime in Afghanistan
outside of Kabul;

- the inability of a key ally, Israel, to quell, even with
Washington's unrestricted support, the Palestinian people's
uprising;

- the inflaming of Arab and Muslim sentiment in the Middle
East, South Asia, and Southeast Asia, resulting in massive ideological gains for
Islamic fundamentalists-which was what Osama bin Laden had been hoping for in
the first place;

- the collapse of the Cold War Atlantic Alliance and the
emergence of a new countervailing alliance, with Germany and France at the
center of it;

- the forging of a powerful global civil society movement
against US unilateralism, militarism, and economic hegemony, the most recent
significant expression is the global anti-war movement;

- the coming to power of anti-neoliberal, anti-US movements
in Washington's own backyard-Brazil, Venezuela, and Ecuador-as the Bush
administration is preoccupied with the Middle East;

- an increasingly negative impact of militarism on the US
economy, as military spending becomes dependent on deficit spending, and deficit
spending become more and more dependent on financing from foreign sources,
creating more stresses and strains within an economy that is already in the
throes of stagnation.

We have, in short, entered a historical maelstrom marked by
prolonged economic crisis, the spread of global resistance, the reappearance of
the balance of power among center states, and the reemergence of acute
inter-imperialist contradictions. We must have a healthy respect for US power,
but neither must we overestimate it. The signs are there that the US is
seriously overextended and what appear to be manifestations of strength might in
fact signal weakness strategically.

In conclusion, let me make important clarification regarding
the implications of the foregoing analysis to our task in the run-up to
the WTO Ministerial in Cancun. They should not be mistaken as leading to a
strategy of saving multilateralism and siding with the competitors of the US to
shore up the IMF, World Bank, and the WTO. Neither US hegemony institutionalized
in multilateral institutions nor US hegemony exercised unilaterally has brought
about anything good for the poor and oppressed countries. Both have spelled
trouble for us. On the contrary, the task at hand is to take advantage of the
sharpening competition among the US and the other big economic powers to
disempower, if not dismantle, the WTO, World Bank, and the IMF. The task at hand
is to redouble our collective efforts to derail the Cancun
Ministerial.

From this vantage point, let us beware of the proposal being
floated by the WTO leadership to form an NGO Advisory Committee for the WTO.
This idea is nothing more than a Trojan Horse planted in our midst to split our
ranks and shore up an institution of the global capitalist elite that is in the
grip of an irreversible crisis of legitimacy.

Walden Bello, Ph.D., is the director of Focus on the Global South based in Bangkok, Thailand. He is concurrently also professor of sociology and public administration at the University of the Philippines. He has authored many books and numerous articles on Asian economies, political systems, and security issues.

AMP Section Name:Trade Justice