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Commentary (December 6, 2005)

WTO: Back to the Basic Principles

Laurence Brahm (Political Economist, founder of Shambhala Foundation)

In a public-relations exercise, World Trade Organisation director-general Pascal Lamy visited Hong Kong in October to try to dissuade non-governmental organisations from protesting at next week's ministerial meeting.

However, any gains achieved by meeting the groups quickly dissipated when he told them: "The WTO's core business is not distributing welfare. It is creating wealth."

This type of statement underscores the concerns that NGOs are raising over the WTO process and its possible outcomes. Mr Lamy's comments also reveal the widely different agendas of the Group of Eight leading industrial nations and the Group of 20 (G20), led by Brazil, India, China and South Africa. This division is fundamental to the WTO's future. Will it pursue its original values of free trade for equitable development, or will it become a rich-boys' club? On this question, don't expect a meeting of minds in Hong Kong.

First, the WTO is not a business; it is not run for growth and profit. Part of the problem is that it has been misused by some narrow interests and a few dominating nations, to make a profit for themselves. The WTO should have become the biggest NGO of all, representing broad interests to remove protectionism. Instead, it has become the target of these groups' wrath.

Second, creating wealth sounds good, but the WTO is not doing this. It is allowing certain interests to keep the wealth imbalance, with most of the riches concentrated within the G8. While the western media is quick to jump on the growing rich-poor divide in China, Mr Lamy's self-stated mission as WTO chief is to openly support a system in which certain corporate interests and individuals from selected nations "create wealth" at the expense of impoverishing others. For some reason, no one in the western media has raised even the slightest criticism of this.

Originally, WTO objectives were based on the principles of the General Agreement on Tariffs and Trade, to try to define and establish rules for international trade. At the same time, the WTO was supposed to evolve into the ultimate arbitrator of trade disputes. The purpose was to create fair rules and a level playing field, even though some nations possess resources that others do not. Is Mr Lamy looking at things differently today?

During his Hong Kong visit, Mr Lamy offered NGOs an apparent concession: America could withdraw its agricultural subsidies, Europe would follow, and then so must the G20. Clearly he wants to avert a breakdown in talks, as happened in Cancun, Mexico. But to some extent, he may have already precipitated it.

So, rather than trying to hold together something that is falling apart, is it not better to re-engineer it? It would perhaps be more appropriate for the WTO to look for new ways to promote exports from those developing nations that seek access to other markets. The question is whether the organisation carries too much baggage to serve as a suitable platform to resolve international trade disputes and create a level playing field.

Maybe we should be looking for alternatives. The China-Chile bilateral Free-Trade Agreement, signed this autumn, may point a way forward. Getting back to its original principles, the WTO should probably be re-engineered into a forum for setting fair-trade principles and then as a facilitator for constructive bilateral and multilateral free-trade negotiations.

Geography, demography and location all contribute to an imbalance of resources, education, health care, transport, and the like throughout the world. Then there is the evolution of nations. Colonial-era problems remain unresolved, and old economic structures have been kept alive. That is why the Cancun talks ended in stalemate. If an entirely new approach is not taken, the Hong Kong meeting will, too.

(Originally appeared in the December 6, 2005 issue of South China Morning Post in Hong Kong and is reproduced here with permission from the publisher)

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