The High Price of "Free" Trade

July 01, 2001

The Director-General of the World Trade Organization, Mike Moore, recently said, "When governments adhere to WTO rules that prescribe transparency and predictability, there is less scope for corruption." These are interesting words coming from a man whose own organization is so rife with secrecy and favoritism. Moore was speaking at the May 2001 United Nations Conference on Least Developed Countries, where he pushed the idea of creating sweeping multilateral trade agreements at next November's WTO round. He finished his speech by asking, "Ministers ... in your heart, do you think you can get more out of the present system, bit by bit, or will more be delivered from a wider negotiation?" Exactly who gets what from these agreements, and who pays the ultimate cost, is worth looking at.

WTO, GATS, NAFTA and all the other regulatory trade offshoots of corporate globalization can't just be dismissed as confusing acronyms; they hold life and death power over entire populations and show little accountability to the world citizens they claim to serve. Prior to 1995, international trade was promoted by GATT (General Agreement on Tariffs and Trade) which essentially pressured countries to reduce tariffs. After the Uruguay Round, however, the WTO replaced GATT and expanded its overall mission to a corporate-inspired agenda: targeting both tariff and "non-tariff" barriers to trade. That essentially meant throwing out a nation's right to limit trade due to its environmental, labor, sociological or developmental implications, leaving short-term immediate profit as the only criterion worth considering.

The results have been staggering. "Rigged Trade and Not Much Aid," a report by the British charity Oxfam shows how WTO-sanctioned protectionism helps "rich countries ... keep the least developed countries (LDCs) poor." Under pressure from the WTO, not to mention International Monetary Fund and World Bank, many LDCs have undergone draconian trade liberalization measures, either lowering or completely scrapping tariff and non-tariff barriers. For example, Haiti now has 800 product lines without tariffs, and Cambodia will slice its average tariff from 30% to 15% next year. This while wealthy countries spend roughly US$1 billion each day on agricultural subsidies alone. The effect, according to the Oxfam report, is that "some of the world's most vulnerable rural producers [are] competing against the treasuries of Europe and North America, with heavily subsidized imports driving down local prices and destroying markets." To make matters worse, LDCs are three times as likely as wealthy countries to face "tariff peaks" of over 15%. This is tantamount to direct market discrimination against the poorest countries, a practice which somehow is not addressed by the WTO.

WTO Director-General Moore also noted, "cutting barriers to trade in agriculture, manufacturing and services by a third would boost the world economy by $613 billion," but he forgot to add which countries would benefit the most. The Oxfam report estimates that the current monetary impact of Northern protectionism on Southern economies is roughly US$700 billion per year drained from the South, but the cost in rural poverty, child malnutrition, and people forced off farms and into slums to find work is incalculable.

And of course, not only LDCs are affected by trade agreements. In North America, seven years of NAFTA has led to Mexican wages declining by 27%, with the number of Mexicans living in "severe poverty" (surviving on less that $2 a day) raised by 4 million. And the 200,000 new US jobs each year promised by the Clinton administration haven't exactly panned out after NAFTA either; instead, over 760,000 Stateside jobs have been eliminated. It's indicative that awhile back, with some embarrassment, the US Commerce Department cancelled its biannual surveys of American NAFTA-related job creation; it turns out that fewer than 1,500 new jobs could actually be attributed to the treaty.

But in the spotlight now is a different trade agreement: the General Agreement on Trade in Services (GATS). Sold as a harmless way to ensure that countries regulate their services sector, the WTO-sponsored agreement looks much less innocent in light of recently leaked documents. Missing from public view is Article VI.4, a clause which dictates that national laws and regulations can be wiped away if they are "more burdensome than necessary" to business. Think about that. Countries would no longer be able to determine environmental, labor or developmental standards by themselves - instead these would be decided by a "Disputes Panel" of non-elected trade specialists who operate with no public input, no conflict of interest provisions, and whose decision making is shrouded in secrecy.

This secretive system of settling disputes has been in place since the WTO's inception, and in the overwhelming majority of cases that have been raised challenging environmental, labor or public health legislation on behalf of corporations, the corporations have won.

So what can be done? The WTO and all agreements regulating international trade should be reviewed, and the emphasis shifted from short-term economic gain for a small elite, to fair and sustainable development for all. Major industrialized countries should be encouraged to coordinate their economic policies in the public interest, and a tax on foreign currency transactions ("Tobin Tax") should be implemented to discourage short-term capital flows. Market opportunities which encourage domestic growth must be opened up for poorer countries, rather than the current austerity programs to service export-led growth. Transnational corporations should follow a binding Code of Conduct which regulates labor, investment and environmental practices. And on and on.

At the very least, the transparency Moore prescribed for others should be applied to his own organization, but given the fact that next November's WTO Ministerial Round will be held in the Emirate of Qatar, away from public access and scrutiny, that doesn't seem likely.

Heather Wokusch is a freelance writer. She can be contacted at