Seattle Debacle Could Worsen WTO Divisiveness

Contrary to conventional wisdom, the Seattle protests may imperil the international trading system.
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Don't underestimate the importance of the Seattle meeting of the

World Trade Organization

or the consequences of its failure. It was a watershed event. The only questions are which way will the water eventually flow, and is the global trading system about to collapse under its own weight?

The conventional wisdom is that, despite the debacle in Seattle, globalization is a genie that can't be put back into its bottle. The only consequence of Seattle, the thinking goes, was the failure to start a new round of global trade negotiations, which is a shame, but hardly imperils the international trading system.

Don't count on it. Although it is unlikely that the U.S. or any other major economy would suddenly impose a major increase in tariffs, the global trading system is threatened because of Seattle, for several reasons.

The divisions within the WTO, simmering for years, finally boiled over. It was like a family Christmas gathering where all the little resentments and quarrels that had built up for years finally exploded. The developing countries rebelled against addressing labor and environmental issues, especially labor, because they view them as protectionist efforts on the part of the developed world to deprive them of their competitive advantage. The developing nations were also angered at being left out of key negotiations.

The

European Union

and Japan refused to consider reducing agricultural subsidies, which they view as central to maintaining ties to a bucolic agricultural past. And the U.S. rejected any effort to eliminate antidumping legislation, which the rest of the world rightfully views as pure protectionism.

U.S. Trade Representative

Charlene Barshefsky

said this week that she needed to halt the negotiations last Friday to give everyone a "timeout." In a few months, the member countries will reconvene in Geneva -- away from protesters and the press, in other words -- and get down to business. She compared this timeout to the one the U.S. and China took between April and November, before they finally concluded a deal for China to enter the WTO. Ironically, that pause contributed to the debacle in Seattle because getting a China deal prevented Barshefsky from spending the time necessary to reach agreement in the WTO before the conference.

Will the divisive issues go away by next year? Will French farmers suddenly back down? Will U.S. steelmakers? Will the Indian government that is opposed to discussing labor rights in the WTO? There is no reason to believe they will.

In such a protectionist and nationalistic atmosphere, it is not so difficult to imagine a scenario where nations begin to impose trade restrictions on each other, especially in the case of an economic downturn. A greater threat could come from regional trade blocs. Many such groupings --

Mercosur

,

Asia Pacific Economic Cooperation

,

North American Free Trade Agreement

-- have emerged in recent years. When they contribute to global free trade they are productive, but they quite easily could become restrictive to countries outside the blocs.

Opposition to compromise on the divisive issues will now be even stronger, because the movement is emboldened by the Seattle protest. The antitrade protesters are gloating that they have finally slowed the tide of globalization and a trade agenda promoted by multinationals that put profits before people. In fact, Seattle was the latest in a string of victories for the anti-trade crowd: the rejection of U.S. fast track negotiating authority and the abandonment of the

Multilateral Agreement on Investment in the Organization of Economic Cooperation and Development

to name just two. Now antitraders are planning a Seattle-style campaign, including street protests, against next year's vote in

Congress

on China's entry into the WTO.

The Seattle protesters liked to say that they weren't against trade as long as it was fair. They wanted the WTO to address the legitimate concerns of human rights and environmental issues along with economic interests. (Of course, one wonders how much the protesters really believe in trade. Sometimes it sounded like they just favored trading with countries at similar wage levels.) This idea of fair trade is emerging as the new consensus on trade in this country and I agree with it. However, few countries in the rest of the world see things the same way.

The world has gone through periods of free trade followed by periods of protectionism. The late 19th century is the classic example of a relatively free-trade era that ended abruptly in the early 1930s after the passage of the

Smoot Hawley

tariffs. I'm sure that economists, businessmen and investors were just as confident in the late 19th century as their contemporaries are now that the trading system could not be reversed.

David Kurapka wrote speeches for Treasury Secretary Robert Rubin from 1996 until 1999. Before that, he was U.S. Trade Representative Mickey Kantor's speechwriter from 1993 to 1996. Kurapka writes from Oakland, Calif