WTO emerges from Seattle battered and on the back foot

The reality is that only one nation - the United States - will decide how world trade is run in the next few years
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THE PARTY'S over; the hangover is fading and the recriminations are dying down. But the big question for world trade after the fiasco of the Seattle World Trade Organisation summit is: what do they do for an encore?

THE PARTY'S over; the hangover is fading and the recriminations are dying down. But the big question for world trade after the fiasco of the Seattle World Trade Organisation summit is: what do they do for an encore?

The WTO has emerged battered and bemused, with all hopes of a new trade round now on what is euphemistically referred to as the "back burner". Most trade officials believe that a better way to describe its position would be "in the freezer'" There is no consensus, as the meeting showed, on the way ahead. The preferred tack is reform of the organisation itself, but that is just as tricky, because there is no consensus on what needs to be done.

The WTO's general council will meet this week to assess where it is. In theory, a new round of talks can open any time, because there is a built-in agenda from the last round. But the scope of those negotiations - liberalisation of trade in agriculture and services - is not wide enough for anyone to make substantial concessions, and in practice, the process of trade liberalisation is becalmed. Talks will start next month with no timetable and no agenda.

The failure at Seattle can be looked at in three ways. First, there was clearly no consensus within the US itself about the way forward, as the demonstrations outside, the divisions within the Democratic party and the splits within the US negotiating team showed. That was, in the view of most countries, why the talks fell apart and why there can be no progress until after the US elections in November next year.

"We made an error of timing by trying to launch a world trade round at the start of an American election campaign," said Pascal Lamy, EU trade commissioner. "Nobody likes to make concessions during an election campaign. Bill Clinton came in for a hefty dose of vitriol."

"He played to domestic politics at a time when the American nation, in a very strong position of leadership, should have been able to carry this forward to the benefit of all, not just places like Australia," said Australia's Deputy Prime Minister, John Anderson. And he also lashed out at the European Union team, saying: "You really have to question the way that they've behaved."

There is another, more charitable way of explaining the failure. There is and was no consensus between the main countries in the WTO about how the agenda should be shaped up. Some still want to go back to reopen aspects of the Uruguay Round; others want to press ahead with radical extensions of the organisation's operations that cover labour, the environment, electronic commerce, investment and competition.

But the problem is that this is not just an issue about how to play off different interests: it also touches on fundamental questions about the WTO's role as a whole. Some countries want the WTO to emerge as a more global, transnational operator with a wide variety of competences, while others think it is just about trade. And this touches on what became known, euphemistically, as "the process".

At Seattle, "the process" meant the way that America convened working groups, used "green room" sessions of leading countries and marginalised developing countries, in their view. But "the process", even critics of America's handling would admit, has far bigger problems. No agreement was hammered out in Geneva ahead of the summit because the WTO process at headquarters is also flawed, and solving these problems will raise some massive issues that touch every international institution. As Mr Lamy concisely explained it at Seattle, the issue is how to trade off transparency against efficiency. Transparency means, for the developing countries, allowing them to have their say at every stage. For the protestors, it means letting in non-governmental organisations and opening up the debates to public scrutiny.

The developing nations want more NGOs like they want a hole in the head: that, in their view, means more white faces around the table. Nor do they want delicate trade-offs out in the open. And from the point of view of efficiency, increasing visible democracy means slowing down matters, reaching deals yet more painstakingly.

When the WTO was formed, some proposals called for the organisation to run more like the International Monetary Fund. In the Fund, countries are shareholders, their influence weighted by their economic heft. Nations are gathered in regional groups. And work is supervised by a committee of ministers who meet periodically to direct the organisation.

That, in turn, raises heckles in the developing countries. It also antagonised some of the ambassadors in Geneva who saw it as yet more evidence of a stitch up. In essence, Mr Lamy and his Japanese and American counterparts would move in from time to time and steer the work so the WTO's supranational elements were balanced by traditional international concerns. The result, as everyone acknowledges, is a fudge.

Many of the same problems of legitimacy assail every international organisation, from the EU and its "democratic deficit" to the UN and American concerns about its bureaucracy, to the IMF, which has to struggle against criticism from both right and left. Yet there is little sign of any of these problems being addressed systematically, precisely because they raise such neuroses in both the US and the developing nations.

Ironically, Europe - which is in constant battles about its own supranational organisations - is in a position to advocate some new ideas, and it is planning to gather together with important regional players such as South Africa, Australia and Egypt to push the agenda forward on reform. Stephen Byers, Britain's Minister of Trade, spent considerable time in Seattle working with all three countries, and is to expand London's work with Commonwealth states, many of which (including India and Pakistan) were crucial players in Seattle. Churchill's post-war idea that Britain is in the centre of three circles - the Atlantic relationship with the US, the European Union and the Commonwealth - is being revived, from the trade standpoint.

But the reality is that only one nation decided the Seattle summit, and only one nation will shape the way that world trade is run over the next few years: the US. At worst, America's partners fear it will shift towards more unilateralism, enforcing the rules on trade and labour which it failed to get agreed multilaterally. At best, it will get the entry of China into the WTO agreed - itself a very uphill battle - and the elections will clarify the battle lines.

But the success of the protestors and of US trade unions at Seattle may have permanently changed the balance of power. Europe is making efforts to establish itself as the new hegemonic power in world trade, but for the moment, there is a vacuum.