Setting the record straight: free trade, NGOs and the WTO

One of the more striking features of recent anti-globalisation demonstrations has been the range of accusations levelled against the World Trade Organisation (WTO) for its part in the globalisation process. Yet the complaints from non-government organisations (NGOs) show little or no knowledge of the WTO agreements or how they operate. Worse, inconsistencies among the NGOs amount to serious contradictions in the anti-globalisation coalition.

Environment lobbies regard trade and economic development as a threat to nature conservation and fear that their single-issue solutions will be rejected when governments are exposed to the benefits of global arrangements. Trade unions in manufacturing industries that have come under cost pressure from newly industrialising economies want to preserve their old jobs and privileges and, above all, wage relativities. This is their argument for ‘fair’ trade.

Attempting to enforce universal labour standards by applying trade sanctions, however, could increase poverty in countries where labour productivity is still low. The poorest developing countries would thus be deprived of the opportunity to develop economically and to compete internationally.

Oddly enough, this danger does not even seem to concern the development NGOs. Doubts about the justification for forcing outside standards on developing countries are absent. But the economic costs could be significant and could bring the present global prosperity to an end. Look what happened the last time sanctions and trade wars were practiced in the early decades of the 20th century. What began with protectionism ended in the world economic crisis of the 1930s, mass unemployment and world war.

The WTO is built on the foundations laid by the General Agreement on Tariffs and Trade (GATT 1947). This was a contract (among 23 governments originally) to eliminate non-tariff barriers to trade and to liberalise tariffs progressively by negotiating reductions (concessions) based on reciprocity. The principal rules since 1947 have been transparency of trade policies and non-discrimination in trade among members.

The WTO is an intergovernmental agreement and decision making is based on consensus, which is more demanding than majority decisions. The rules agreed upon constrain nationalist economic opportunism of the sort that did so much harm in the first half of the 20th century.

WTO dispute settlement

The dispute settlement understanding (DSU) has given real meaning to WTO agreements, because violations carry consequences for offending economies.

The environmental NGOs and the labour unions have taken a special interest in the WTO since they became aware of the DSU, as they see WTO rules as opportunities to introduce new international standards for the environment, labour and other social issues.

The allusion to international law also attracts NGOs, who cannot obtain sufficient support through legitimate political processes, notably parliamentary elections. International agencies allow them to seek power over national governments.

The use of trade sanctions to enforce DSU rulings has alerted NGOs to new opportunities to interfere in trade. Environmental groups and labour unions (plus some human rights activists) see scope for using discriminatory trade sanctions against countries failing to meet what they regard as appropriate ‘standards’. Advocates of international labour standards, for example, aim to use trade sanctions to enforce compliance with ‘international standards’. However, no OECD government has yet been prepared to confront the 100 plus developing countries in the WTO.