Last Tuesday, a crowd in downtown Seattle assembled in front of a McDonald’s restaurant. First, a French dairy farmer, defending European agricultural export subsidies, denounced the World Trade Organization. Next, a Brazilian farmer, harmed by those same European export subsidies, excoriated the WTO. Then an American rancher, hurt by the European Union’s ban on hormone-fed beef, condemned the WTO. Finally, a vegan attacked the WTO. By rights, the three farmers should have been at each others’ throats, and the vegan presumably wanted to put both the Frenchman and the American out of business, but in the topsy-turvy world of Seattle, the four joined together and smashed the windows of the McDonald’s.
Last week, representatives from more than 134 countries and more than 500 nongovernmental organizations met in Seattle for the biennial ministerial meeting of the WTO with the putative task of launching the next round of global-trade talks. Going into the meetings, expectations were low: There was no global upswell for trade liberalization. Asia was still recovering from its financial crisis, and policymakers there believed they already had enough issues to grapple with.
Japan showed its lack of interest in further trade liberalization by blocking the Early Voluntary Sectoral Liberalization effort in the Asia Pacific Economic Cooperation forum. And in the United States, President Bill Clinton has been unable to secure “fast track” trade-negotiating authority from Congress.
Instead, this meeting was driven by a political compromise left over from the previous round. During the Uruguay Round negotiations, the U.S. had agreed to a compromise in which the EU would not fully reform its agricultural practices in return for a commitment to revisit the issue in 1999. This is the origin of the so-called built-in agenda of talks on agriculture and services motivating the new round.
This built-in agenda shaped participants’ negotiating strategies heading into the Seattle ministerial. Japan and the EU wanted to broaden the agenda to hide their inevitable concessions in agriculture, and use gains in other areas to make an agreement emerging from the new negotiations politically palatable at home. They preferred to see a “comprehensive round” involving talks not only on agriculture and services, but also on industrial-product tariff cutting, competition policy and reform of antidumping rules. Within agriculture, the EU had jumped onto the Japanese bandwagon and was promoting the notion of “multifunctionality” in agriculture to distract attention from its increasingly indefensible export subsidies.
In the U.S., a lame-duck president appeared to be unwilling to make any real concessions to help advance U.S. interests. The U.S. seemed content to limit the agenda mainly to agriculture and services while pushing action on environmental and labor issues.
The developing countries felt that they had been taken to the cleaners during the previous set of world-trade talks and were gearing up to be far more assertive in defense of their interests this time around. Their goals included obtaining technical assistance from the developed countries, accelerated liberalization in textile and apparel trade, and rejection of the trade and labor linkage. Once in Seattle, officialdom was caught off-guard by the degree of public mobilization against the talks by a wild melange of protest groups whose motivations and aspirations appeared at times only tenuously connected to the issue at hand.
Additionally, despite police intelligence, the authorities in Seattle appeared unwilling or unable to comprehend the violent tendencies of some of these groups. Seattle officials were slow to react Tuesday and temporarily lost control of the streets. The U.S. was humiliated throughout the world by televised scenes of foreign diplomats being roughed up by the rabble. Only when the White House demanded that authorities restore order in preparation for the president’s arrival in the wee hours of Wednesday morning were police permitted to reclaim the streets.
The Clinton administration’s behavior in Seattle was perplexing. It sought to promote the labor and environmental issues, but Clinton’s statement that he would like to see economic sanctions used against countries not meeting labor standards took his Cabinet members in Seattle by surprise and destroyed any possibility of making progress on the issue.
The president’s actions must be interpreted through the lens of domestic politics. Organized labor and environmentalists are key Democratic Party constituencies, and it is important for the party’s fortunes that these groups be fully mobilized for next year’s elections. At the same time, the president knew that he would be unable to make much progress on the central issue of labor standards in Seattle. Expecting to “lose” on this issue, he cynically chose to play to his domestic audience and called for sanctions to enforce labor standards, thereby jeopardizing any progress in Seattle.
The real, still-unanswered question is why, given this configuration of forces, did the U.S. push to hold the meeting in Seattle, even promoting it as the “Clinton Round”? Presumably, if the Clinton administration had realized that it could not make progress on the labor issue, it would have been better to hold the meeting in some faraway place and not put the president in the middle of such a debacle.
So who were the winners and losers? In the short run, the world lost. American farmers, Japanese manufacturers, high-tech firms the world over, all were denied the opportunity to further articulate a set of international trade rules embodying economic rationality.
And, despite claiming victory, the street demonstrators lost as well. They wanted the rules amended to take into account labor and environmental issues, but with no new negotiations, the existing rules — the ones to which they so vociferously objected — remain in place. Together with Clinton, they clearly stiffened the spines of developing-country negotiators, who blocked consideration of their issues. The real damage that the protesters may have done is to make trade negotiations a kind of “third rail” in U.S. politics — something that no politician wants to touch. But even this is a negative accomplishment in that it will not further the construction of rules that they would support, but rather encourage a haphazard lapse into protectionism.
In the end, it was the traditional U.S.-EU dispute over agriculture — the same dispute that nearly scuttled the launch of the prior round of negotiations and nearly torpedoed those negotiations half a dozen times — and not the shenanigans of the Raging Grannies or the Ruckus Society that sank the Seattle negotiations. This, together with the emergence of the developing countries as a coherent negotiating group, are the real lessons coming out of Seattle.
The bottom line is that the meeting was unlikely to accomplish much in any event. The U.S. was unlikely to take major actions on trade policy until a new presidential administration took office in January 2001. Consequently, the best that could have been hoped for would have been the launch of a two-year extended negotiation over the agenda for a genuine new round of global-trade negotiations two years hence. In the end, we will still get that launch two years hence — but hopefully at a more hospitable venue.
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