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Welcome to Overreaction

Right this minute, Seattle is in a state of emergency unseen since the 1960s. All this for what? We've got the answer to that question.

The World Trade Organization (the WTO), an international organization that deals with trade negotiations between nations, is currently holding its third annual Ministerial Conference in Seattle, Washington. The conference is being held amidst massive demonstrations aimed at shutting down the conference in protest of its policies. These protesters have valid reasons for standing up against certain issues the WTO works with, such as labor and environmental issues. But is the WTO itself directly responsible for these rules or does the responsibility lie elsewhere?

A little background on the creation of the WTO. History is rife with situations where trade disputes have led countries to go to war with each other. One well-known example is the United States declaration of independence from the Crown of Britain. More recently, countries throughout the world raised trade barriers in order to protect their domestic products and businesses during the Great Depression. Such actions led other countries to raise their trade barriers to protect their own products and businesses. This ultimately keyed off what is historically know as the trade wars of the 1930s, which significantly worsened the Great Depression and in part led the world to war in the 1940s. On May 19th, 1948, the General Agreement on Tariffs and Trade (GATT) was formed to set rules and standards for countries to follow in order to allow such issues to be resolved before they turned into more serious problems. For the first time, countries worked together towards forming an international trade group that would set standards that all countries could agree upon. GATT was established in the hopes of avoiding future trade restrictions, protecting domestic markets, and avoiding future military conflicts between countries over trade issues.

Members of GATT met through a long series of negotiation rounds in an attempt to establish rules everyone could agree upon. The finalization of the work of GATT came after the Uruguay Rounds (1986-1994) where a series of annexes to the GATT rules marked the completion of the GATT rules. The General Agreement on Tariffs and Trade rules were ratified on April 15th, 1994. The following year, 46 years after the establishment of GATT and 30,000 pages later, the WTO was created.

The overall purpose of the WTO is to increase trade throughout the world by decreasing tariffs, quotas and other limits on importing and exporting goods internationally. According to the WTO's official website (http://www.wto.org), the organization hopes to create an environment "to help trade flow smoothly, freely, fairly and predictably." The organization would like to see an end to the complicated trade agreements set up between individual nations. One of the ways the WTO wants to do this is by implementing what it calls "transparency" in trade laws. Such trade laws would set universal standards for trade dealings between all countries with "clear information about policies, rules and regulations."

"The whole point of trade is that it promotes efficiency," says Ron Davies, a University of Oregon professor specializing in international trade. "What trade does is it gives people more options. I cannot see how that is bad. It causes effects that hurt certain groups and helps others, but that becomes a domestic issue on how to redistribute these gains we get as a country or how to promote more environmentally safe practices."

According To Davies, these are all natural occurrences of an economic system, not just issues of trade. "In every other economic situation you've got winners and losers. Those that can compete, compete. Those that can't compete get driven out of the market. The protesters seem to be very worked up over the idea that trade is what does this and it's not. It's capitalism. They're attacking a symptom, not the cause.

One thing that a country could do when it loses jobs due to trade with other nations is work to implement systems for retraining and work to increase the education of their workers for newer, more technical jobs. According to the Organization for Economic Co-Operation and Development (OECD), only 10-20% of wage reductions is caused by competition from imports of lower-wage countries. The major cause of such drops in wages is due to advances in production technologies in developed countries. This gives a country all the more reason to stress retraining and the education of its citizens.

Another OECD study showed that by imposing a 30% duty tax on imports from developing countries actually reduced skilled wages by 5% and unskilled wages by 1% in the developed country.

Davies says the same is true of environmental issues. "That's an issue of production, not an issue of trade," he says. "If people want to buy polluting goods, like non-dolphin safe tuna, then that's a consumer's decision. If people really value dolphin safe tuna over non-dolphin safe tuna, then that's what they should buy. People can vote with their dollars. If consumers don't want [non-dolphin safe tuna] then those businesses will go under or they will adopt more environmentally safe standards on their own." The WTO has received much criticism concerning its environmental policies, such as shrimp harvesting practices. The WTO currently allows use of nets that easily catch and kill endangered sea turtles, arguing that a change in the law would be an unfair barrier to trade. This issue could likely be brought up for review through Article 20 of GATT, which allows countries to take actions to protect human, animal or plant life or health.

While the increase in the amount of trade between nations can lead to more conflicts, the WTO has implemented an arena for countries to air such grievances. The Dispute Settlement Body (DSB) is part of the General Council of the WTO, and handles such conflicts. Member countries are obligated to bring their disputes to the DSB in order to resolve the problems, rather than acting unilaterally. The DSB then reviews the case under the GATT and makes a ruling. The countries involved must comply with the ruling the DSB hands down. The strength of the DSB hinges directly on the GATT rules, but is not always considered an end to such conflicts. A member country always has the opportunity to open up talks to renegotiate the rules established under GATT. Overall, the DSB was established to avoid disputing countries from going to war with each other. As of March 1999, over 167 disputes have been brought to WTO since its creation, compared to the approximate 300 cases between 1947 and 1994 brought up at GATT meetings.

These disputes are wide ranging and have caused many holdups in the pursuit of lowering trade barriers. Delegates from various member countries have been working in Geneva for the past 14 months trying to hash out an agenda for the Ministerial Conference. The envoys gave up on Tuesday, November 30, citing internal conflicts. The United States wants to see a "manageable road" covering a small number of items, such as electronic commerce, and eliminating a number of industrial tariffs in areas such as forestry and fishing products. The European Union, with the backing of Japan, South Korea and some Eastern European countries would like to see a "broad agenda" discussing a wide array of issues, including environmental and labor conditions. Most developing countries involved in the negotiations would prefer that there were no new talks this year at all, giving them more time to implement the market liberalization commitments from the Uruguay Round. The United States is flatly opposed to delaying the talks any further.

There is still a good chance that the current Seattle negotiations could end without any significant progress made toward freeing up trade between countries. With all the differences between various member countries, talks could easily bog down and the conference could end with the recommendation of a new timeline for future negotiations, similar to those the just ended in Geneva.

There are member countries that stand aligned with many of the issues that the Seattle protesters are demonstrating. While the Teamsters are planning on staging a large march through the streets of Seattle in defense of worker's rights, members such as the United States and the European Union are pushing to raise labor standards. The members that oppose such increases are the smaller developing countries, fearing that such standards would increase their production costs and ultimately undermine their ability to remain competitive.

It is customary for all WTO members to sign off on a new trade agreement before its formal adoption. Technically speaking, trade regulations can be passed by the WTO by majority vote. However, this has never been done. In practice any WTO member can "veto" a trade agreement.

Ultimately, the WTO is not a mouthpiece for global corporations, though such corporations are the ones most likely to be directly affected by the WTO's policies. Some of the WTO's rules can actually limit the control corporations can have over government. When a quota is in place there is a limit on the available supply. This can create unnaturally high profits for the producers of the limited good, leaving more money available for lobbying to influence future policies. The lowering of such quotas could ultimately limit the ability of corporations to influence governmental policies. Without such restrictions, the government could resist the pressure of a particular lobbying group more easily.

The WTO is not a "Big Brother" organization. They are an international organization that wants to bring the countries of the world together through a global economy, while at the same time recognizing the sovereignty of each nation. It is by no means united under one front. It sets up an arena where countries can air their grievances and hash out resolutions without raising trade restrictions or going to war with another nation. The main reason that these conferences are held is because of disputes that the different countries have on what to do. Their goal is to find a middle ground that all countries, and ultimately those countries' people, can all deal with.

Ben Nahorney, a senior majoring in Journalism, is a staff writer for the Oregon Commentator