Seattle is world's last chance for mature trade deal
Starting a new trade round may be the only way to prevent the Uruguay one unravelling
Monday 15 November 1999
The seven-year Uruguay round staggered from one near-death experience to another, and it was only saved by a happy coincidence of political aspirations. That will be hard to find at this month's launch of the next round in Seattle.
Early in 1993 the British Prime Minister convinced the newly-elected President Bill Clinton that if the Uruguay round foundered, Mr Clinton's first big international outing - to the World Economic Summit in Japan - would be an embarrassing failure. Sir Leon Brittan, as European trade commissioner, likewise persuaded the Japanese summit hosts of the risk that they would be blamed for the flop. Chancellor Helmut Kohl improved his transatlantic relationship by sitting on the recalcitrant French.
So, on a summer night in Tokyo, the leading world economic powers clinched a deal to cut outstanding tariffs on manufactured goods. Much else followed - on services, intellectual property, network industries and a new World Trade Organisation (WTO) to settle disputes. But it was the Tokyo summit that gave a new trade treaty critical mass.
The same fear of embarrassment may help to concentrate minds before the Seattle meeting gets under way. But they are leaving it awfully late. In Geneva, the WTO's home town, the so-called "groundwork" looks like the kind of roadworks where a punctured gas main is followed by a burst water pipe, and the hole gets bigger with every extra engineer who turns up.
The Seattle agenda, or "ministerial document", is not merely unfinished, but it is impossible to fill up from the conflicting wish lists of the WTO's 135 members. Meanwhile, the inability of the United States and Europe to resolve their nursery squabble over bananas - an issue of no major economic significance to either party - bodes ill for the prospects of the transatlantic consensus needed to get a new round spinning.
Sooner or later, one must hope, the grown-ups will wake up to the realities. But the politics have changed for the worse. America' trade deficit is huge. President Clinton is on the way out, and Al Gore does not want to upset his support in the trade unions. And the US Congress has turned sufficiently hostile towards trade liberalisation to refuse the President "fast-track" authority, which means that he cannot cut international deals, anyway.
In Europe, Chancellor Gerhard Schroder of Germany has no authority to spare, while Brussels is holding its finger in the dyke of farm protection. In 2003 the transatlantic "peace clause" expires, and the European Commission is determined not to give any ground in advance. What the Americans call Europe's ABA agenda - "anything but agriculture" - makes low-cost farm producers furious.
So the United States is not prepared to listen to Europe's (sensible) arguments to include competition policy and more investment rules. Instead the Americans are pushing for the inclusion of "human rights", which has made developing countries furious. They rightly see this as an excuse for shutting out imports from countries that do not have rich-world employment laws.
It is beginning to look as if the round game - a kind of protectionists' strip poker that has brought down trade barriers since the General Agreement on Tariffs and Trade (GATT) was signed in 1947 - is becoming unplayable.
But the trouble is deeper than that. Free trade itself is losing popular support, ironically, from many of those it is supposed to help. Globalisation has become a dirty word to interest groups across the political spectrum, who will be putting Seattle under siege.
The WTO is the victim of its own success. Agreement to give it powers lacked by its predecessor - the GATT - crept in at the very end of the last round. They have been used to full capacity; nearly 200 disputes have been brought to the WTO, whose panels have established its independence by finding against the US, Europe and Japan in turn.
All these big economic beasts have, so far, felt obliged to recognise the WTO's authority by changing trading practices. Not always by as much as was needed - bananas again - but no one has so far felt that it would be politically correct just to say no.
Paradoxically, however, it is this very enthusiasm for taking one's case to the WTO that has been making the organisation unpopular. The WTO has been drawn into many disputes in which it now stands accused of ignoring environmental dangers and social consequences. At Seattle the WTO will be urged (and not just by the banner-wavers outside) to develop the "new trade agenda" and come up with rules for these aspects as well. But this way danger lies.
Governments see the WTO as an arbitrator of what happens at frontiers, not as a global government entitled to invade their domestic domains. Of course, that distinction has long gone in practice, as trade negotiators spend their time arguing about internal "non-tariff barriers". But the further trade regulators are drawn into health, social and environmental issues, the wider their challenge to national governments.
Already we hear echoes of the common British complaint about the European Union; that WTO members thought they were signing up to a common market, not a federal system of government. And if the European Commission cannot get members to accept decisions on beef, what chance does the WTO have of getting controversial judgements to stick?
So the organisation is wary of extra responsibility. Avoiding it, however, is easier said than done. Disputes frequently involve a regulation seen by one side as interference with trade, but by the other as a health measure, a means of conserving the dolphin population or a sanction against the exploitation of children. What WTO members must try to do is to drive different horses for different courses; negotiate environmental or labour rules in international bodies designed for these purposes, and refrain from using the WTO to achieve what they want in non-economic fields.
There is still plenty of old-style work to be done; wearing away at tariffs, and persuading countries to turn hidden barriers into tariffs which are at least capable of being worn down.
Starting a new round may be the only way of preventing the previous one from unravelling. So there will be a necessary conspiracy to pretend that the Seattle launch has been another triumph. An awful lot will no doubt be dropped into the tray marked "future work programme", but it will prove hard for America's trading partners to reject its basic market access wish-list outright.
If hopes of a rich early harvest are fading, the three-year time-limit proposed for this round should be retained - in theory, anyway. In truth, however, the only really significant effect of the launch deadline has been to revive negotiations to get China into the WTO. Opening up the world's largest potential market would be a much more spectacular triumph for Mr Clinton than the launch of a new round. But the two are linked. All sorts of transition arrangements are used to fudge new members into the club, but somewhere, sometime, the principle of equal treatment has to be accepted.
The WTO cannot move much faster than its slowest member without snapping the elastic of consensus. And it is very clear how little ground behind its frontiers the Chinese government is prepared to concede to the authority of theWorld Trade Organisation.
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