TCS Daily

Why Bush Should Save the WTO

By Alan Oxley - March 2, 2005 12:00 AM

The Bush Administration seems no closer to replacing Robert Zoellick as US Special Trade Representative. It should get a move on. The WTO needs saving.

Following the State of the Union address, the world expects the Bush Administration resolutely to pursue freedom and democracy around the world. In the address, President Bush stated that "In every region, free markets and free trade and free societies are proving their power to lift lives". Free markets also are only secured through resolute action. The WTO is the world's leading free market agency, and it is languishing.

Freedom is a powerful ideal. It unseats tyrants. It defeated fascism and communism in the twentieth century. While the desire for political freedom was the driving force, the benefits of economic freedom consolidated it.

After the Second World War, the United States set about building a new world order to promote freedom and free markets. The United Nations was established and at a conference in Bretton Woods in New England, the capitalist economies agreed to establish international bodies to build prosperity and free trade -- the International Monetary Fund, the World Bank and an International Trade Organization.

The trade idea failed and the result instead was a seemingly pedestrian piece of international law on how trade should be managed, the GATT. No one paid much attention. The UN, the IMF and the Bank had the presence that grand buildings on the East River in New York and in downtown Washington DC and thousands of employees provides. The GATT was just a 50 page technical agreement. Yet this Cinderella became the star of the group.

The GATT was piece of genius. It was a regulation to reduce regulation. It made international law which fostered competition in trade and free markets. It provided the global cement with which free markets built prosperity first in Western Europe after the Second World War then two decades later in Asia. Never in human history have we seen such a rapid increase in prosperity, such eradication of poverty or such an increase in the personal security of so many individuals throughout the world. Or as quickly: it was achieved in just half a century.

There is more to come. China is generating growth in the world economy today the same way the United States did in the late nineteenth century. It is using free markets to do this and consciously chose membership of the World Trade Organization, the legatee of the GATT, to lock its economy into a free market model. Russia and the other former communist states in Eastern Europe have done the same thing.

So why does the WTO need saving if the likes of China value it? Because the EU does not value it highly, international NGOs are determined to wreck it and African countries are going along with them.

Trade officials in Europe see the importance of the WTO. It sets rules for managing trade disputes with the US and is valuable for encouraging countries formerly in the Soviet orbit to maintain the transition to market economies. But this interest is subordinated today in Brussels to environmental and social objectives. Eurocrats are more interested in regulating business to protect the environment than de-regulating business to increase growth. Although now moribund, the Kyoto Protocol is more important in the EU than the WTO. The EU laid down a strategic marker on the Doha Round of negotiations in the WTO. Whenever they come to conclusion, the EU will demand in return for agreeing to reduce controls on international trade that WTO rules be doctored to allow it to re-regulate trade to satisfy Europe's Green parties.

International NGOs, particularly the World Wide Fund for Nature (WWF) and its companion Greenpeace, and latterly Oxfam, are on mission to discredit and demonize the WTO. They are supported by labor movements in North America and Europe and anti-free market groups like Ralph Nader's Public Citizen and the International Institute for Sustainable Development in Canada.

They have three strategies -- to put sand in the WTO's free market gas tank; to conscript the WTO's system of compliance, the most effective in the world, to enforce environmental objectives; and to dilute the impact of WTO law by creating conflicting rights in international law in environmental conventions.

The final threat to the WTO is the idea that it be turned into a UN-style development agency. This is the strategy of the fifty or so African countries that now constitute about thirty percent of the membership of the WTO. Their skewed view of the world is that it is up to others to solve their problems and open markets to trade, not up to them to get free markets working properly. Rather than use the WTO to do that, they want to stop it from serving as a daily reminder that they are not.

These pressures are slowly bringing the WTO to a halt at a time when the former communist nations and China in particular need it most and the need for the poorest developing countries, particularly in Africa, to build the basis for free markets has never been greater.

The GATT and the WTO have only ever been effective when the US determined it should be. It only works when the US takes the initiative. This is always difficult to mount. Noisesome industries who don't like international trade negotiations which threaten their particular pork barrels quickly get into the ear of Administrations to get them to desist.

For trade officials, it is easier to negotiate bilateral Free Trade Agreements. But these agreements cannot substitute for the global system of law promoting fee markets created by the WTO or generate the same benefits. While the UN is rarely effective, the multilateral system of global trade rules has been a brilliant and largely unrecognized success.

The Bush Administration needs to ensure it stays that way. Its goal of advancing freedom cannot succeed unless it also acts to ensure free markets endure.

Alan Oxley is a former Ambassador to the GATT and host of the Asia-Pacific page of Techcentralstation.


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