IT’S NOT ALL BAD NEWS AT THE WTO

The World Trade Organisation’s important work continues despite the present stand-off in negotiations to conclude the Doha Development round. Headlines suggest “Trade war looms,” “Crisis between the European Union and the U.S. on aircraft,” or, “China to face trade war over exports,” none of this ever happens. Editors love inflammatory headlines, the headlines should be, “Trade peace talks begin in the WTO.” The binding disputes system of the WTO makes it unique in the international architecture, all parties have always accepted final rulings, there’s never been a hint of corruption. Sure, disputes take too long, frivolous cases are launched by governments to appease local interests and it’s a little bizarre that the penalties imposed by a trade liberalisation organisation are often to reduce trade. Other remedies and an update of this vital safeguard and safety valve are being worked through in parallel to the Doha round. I helped create a special fund to provide legal advice for poor countries to assist them in taking cases to disputes when I was Director-General of the WTO. This was not without controversy, why, some rich countries asked, should our taxpayers pay to take legal action against our own businesses? Yet there is now legal assistance for the weaker members, this is not available anywhere else in international institutions, including the World Court in The Hague. Disputes now under consideration vary from U.S. duty on shrimp, China tariffs on auto parts, intellectual property differences - this is not just rich countries against poor countries, there many disputes between developing countries. If civilisation is defined by living under the rule of law, then global commerce through the WTO with its agreed enforcement systems is way ahead of global politics in other areas. This clear, predictable dispute settlement system alone justifies the WTO, however unless the Doha round concludes, the pressure on the disputes system will grow, such are the injustices that exist in the trading system that the round needs to address.

Meanwhile, history is being made quietly, both Russia and Ukraine are close to membership of the WTO and Vietnam became the 150th member this week, an important step in promoting its integration into the global economy. Vietnam’s growth has only been surpassed by China’s in Asia this decade with its poverty rate falling by almost two-thirds and life expectancy dramatically improved. That alone should convince the anti-globalists who, if you think about it, have no victories to report. What countries can they point to as success stories that have restricted investment or trade? With 84 million people and the youngest population in Asia, Vietnam is the next hot spot for investors and trade. Corruption is still a problem, when I was in Vietnam recently, a senior party leader told me in hushed tones about villagers who protested about corruption. The Government sent in the police, the villagers responded by getting their old military veterans, resplendent in uniforms and medals, including my friend’s war hero father, to eyeball the police. The police backed down. Now it’s getting interesting.

Why would sovereign nations that have fought so hard for their independence want to join the WTO? Smart leaders see the rules, obligations, and the disputes system as advantages for them as they integrate into the global economy. Business needs predictability, the WTO’s rules and membership can be used to benchmark reform and act as an outside peg to drive up internal reform. Open economies are less corrupt, competition is not only an economic tool but an anti-corruption mechanism that cleans out the privileged crony capitalists. Imagine what a less predictable, therefore dangerous, world it would be now if China was not a member of the WTO? Before their membership, each year in Washington, Tokyo or Brussels, politicians, under populist pressure could just stop China’s exports. No country should have that power over another, it invites retaliation resulting in the kind of trade war escalation that made the Great Depression deeper, more prolonged, and lethal. That, in part, was why the WTO was formed. It should remind us what’s at stake if the glacial momentum of the Doha round is abandoned. Dark clouds of protectionism are gathering in new forms such as a food miles, an idea to combat global warming by penalising food exports. This is a European concept to protect their farmers. Note, it’s only agriculture that’s mentioned, not industrial products or tourism. If logic and self-interest win, then we shouldn’t be too concerned, alas the headlines are always with the protectionists and their fellow travellers, who frequently grotesquely masquerade as friends of the poor and the environment.