Essay

Capitalism in conference or democratic gridlock?

THE WORLD TRADE Organisation (WTO) suddenly gained notoriety in Seattle in 1999 when demonstrations against it appeared on every television screen: in the sitting rooms of the rich, the lobbies of global corporations and the crowded slums of the poor. The WTO was a dangerous political threat, the demonstrators warned: an international body that had caused social and economic ills. It became the symbol of globalisation, capitalism in conference, benefiting the rich and the powerful, exploiting poor nations and entrenching, even widening, the incidence of poverty. The dominant image was of an organisation tinged with menace, a monster to be feared and to be faced.

But that image crumbles in Geneva, the headquarters of the WTO. Instead of a powerful body with the capacity to destroy the world, the WTO is seen as more democratic than all other international organisations. Indeed, its consensus decision-making sometimes suggests it is on the verge of collapse. Gridlock is an ever-present possibility. So what is this institution? Who makes up the WTO and how real are the threats it is said to present?

Even here there is ambiguity. The secretariat of the WTO, with a staff of 600, small by international standards, works in the long, functional five-storey William E. Rappard building on the edge of Lake Geneva, overlooking immaculate parks just a 15-minute walk from the centre of the old city. The building is named after the co-founder of the Graduate Institute for International Studies in Geneva, a believer in internationalism and free trade. It is down the road from the Palais des Nations, the site of constant demonstrations that gather under a vast three-legged chair, a memorial to victims of landmines.

Geneva has long been the city for international diplomacy, with delegates quietly meeting in conference rooms to reach appropriate solutions; all far from the madding crowds. But the anticipated rampages (all police leave was cancelled) that rocked Geneva and Lausanne during the G8 meetings in the nearby French town of Evian in June are reminders that those ordered and peaceful days are gone. Internationalism now brings protest and violence; negotiation has moved from the conference rooms to the streets. The violence and chaos sit uneasily with the Swiss belief in order, neatness and profit.

The building on the busy Rue de Lausanne may be the physical presence of the WTO but that can be misleading. Ask the delegates of the 146 nations who are members of the WTO and they tell you that they are the WTO.

It was states that created the WTO's predecessor, the General Agreement on Tariffs and Trade (GATT) in 1947; they agreed over the decades on the fundamental rules that have regulated trade relations. They negotiate the agreements. They legislate, they enforce the rules, they appeal against the lack of adherence by other members and rule on disputes among themselves. It is, to use a slogan that reverberates around Geneva, a 'member-driven organisation'. In the view of many delegates, the secretariat by the lake is no more than the clerks who organise their meetings.

The officials who work at the WTO Secretariat will not challenge that rhetoric, indeed they repeat it. But it, too, can mislead. The officials have a different perspective and more influence than the slogan suggests. They are to many observers the personification of the organisation and its continuing feature. They have the corporate memory, experience, professional expertise and skill to identify common ground and unobtrusively show the way forward. They can organise disparate subjects into categories amenable to debate. They can draft agreements, devise strategies and propose alternatives.

One hundred and forty-six members, each pushing national trade agendas, could never agree on anything without a forum in which to negotiate and skilled officials to assist and mediate. When national delegates don't trust each other and are not prepared to put the first proposal on the table – as is often the case – the secretariat, with its reputation for impartiality, credibility and capability, discreetly breaks the impasse by identifying common interests and the path to an agreement.

The officials know that WTO would achieve little if they waited for directions. The reality of their influence is masked by the myth of the international civil servant. The WTO is, par excellence, a bureaucracy that serves but is not subservient.

 

THE POSITION OF the directors-general embodies this tension between the servant and the crucial adviser. Outside Geneva, they have status and influence. They can visit presidents and prime ministers, attend meetings of the G8, speak on issues of world trade and development. People listen, because they are heads of an important international organisation. Back in Geneva, they are the servants of the member states, who regard them as the principal organisers of their support services. As one director-general reputedly reminisced: 'Overseas I am treated as a head of state and welcomed with a red carpet. Here I have to ask the members if I can go to the toilet; and they say, yes, but only for two minutes.'

Of course the directors-general can exert influence. They can arrange meetings, pressure the members to reach a decision and seek to set new directions. They can convene Green Room consultations of significant states to advance negotiations. The vital breakthrough in the Uruguay Round, which drew all negotiations into a single draft document, was the initiative of the then director-general Arthur Dunkel.

But the power and influence of directors-general can also be curtailed. In 1999, the WTO membership was so badly divided in that it split the six-year term between the last two candidates standing, three years for Michael Moore, former prime minister of New Zealand, and three years for Dr Supachai, a former deputy prime minister of Thailand. Three years is not long enough for any director-general to make a mark. In the lead-up to Seattle there was no director-general to lead the secretariat and shepherd the members. Even the best have limited power. They have no troops at their disposal, no power to command, no sanctions to threaten. They can lead only by moral authority and persuasive argument. They cannot take the members where they do not want to go. To persuade 146 members to go in the same direction is always a challenge but occasionally a director-general can rise to the leadership role.

THE WTO GAINS both its potential and its problems, from the unwieldy combination of democratic decision-making, complex subject matter and the 'single undertaking'. The existing international trade rules have been negotiated over the past 55 years. There are no votes in the WTO; members negotiate and reach decisions by consensus. 'Consensus' gives a veto to each member. Not every member is equal. The United States and the European Union can exercise that single veto. Others are likely to give in, but delay the negotiation they can. Therules initially governed traditional trade in goods, but have now been extended to trade in services, intellectual property, textiles, agriculture and government procurement, and others. To prevent an agreement on one area being undermined by a decision in another and to protect each part of the final compromise, the WTO members decided that agreements emerging from negotiations such as the Doha Round (launched in 2001 and still in its first stage of negotiations) must be signed 'as a single undertaking'. Nothing is agreed until everything is agreed.

Reaching agreements at the WTO has become much harder. Now, in addition to the structural hurdles, the WTO has a high public profile and draws the political attention of presidents and prime ministers. It is no longer regarded as too specialised for all but the cognoscenti, a quiet repository for international civil servants, economists, trade experts and delegates enjoying the perks of diplomatic life in Geneva.

The sheer number and diversity of its membership create their own pressures. When GATT began there were 23 members, largely homogenous in their political and economic systems. Even then multilateral negotiations were lengthy. The Tokyo Round took seven years from 1973 to 1979. About 100 nations signed the final treaty that emerged from the Uruguay Round in 1994. In 2003, the members range from the richest to the poorest countries in the world. China is a new member and Russia is negotiating to join. Future agreements will be even harder to conclude. This scale is both the WTO's strength and its weakness. If it can bring all its members to a final compromise, its impact may be huge because so many countries will sign on. But it is enormously hard to develop a consensus among so many countries on so many issues important to their economies.

Rising expectations may further hobble the WTO. Its trade rules are not just resolutions. They are binding decisions incorporated into treaties which must be implemented accordingly. Violation of the rules can be trigger a WTO dispute settlement in which panels of experts judge between two sides. Since the completion of the Uruguay Round these panels can make binding decisions. Countries actively use the process. In April 2003, for instance, Australia filed a complaint against the EU on its protection of agricultural products; in the same month Canada, the Philippines, Chile, India and the EU brought Australia into the procedure for using quarantine regimes to protect its agricultural markets. The legal status for its decisions adds to its significance.

Further pressure comes from non-government organisations (NGOs); they now demand that trade must be friendly to the environment, protect human rights, promote higher labour standards, aid development and on and on. NGOs lobby to demand participation in negotiations to advance their agendas through trade rules. The secretariat tries to accommodate these zealots but knows it can only go so far. "We are the World Trade Organisation, not the World Organisation," said one in frustration. Besides, the officials ask, what can an NGO lay on the table for negotiation and whom do they represent? But politics and public demand have given the NGOs a hearing. There is now a danger that the whole edifice will fall over under the weight of competing expectations.

Frustrated by a lack of action, some states are seeking to work outside the multilateral system. They are pursuing regional or bilateral agreements such as the North American Free Trade Agreement between the US, Canada and Mexico or the free trade agreement between Australia and Singapore. Some argue bilateral free trade agreements (or to put it more accurately, freer trade agreements) can bring benefits or at least supplement the WTO.

Australia, long known as a good international citizen, has been active in building and protecting this multilateral trading system. The system served its interests as a mid-sized primary commodity producer. Australia made its mark during the Uruguay Round when its leadership of the Cairns group advanced the interests of small agricultural exporters against the US and the EU. As the leader of the Cairns group Australia punches above its weight, enhancing its reputation and influence. But Australia has now jumped on the bandwagon and is negotiating a bilateral treaty with the US. While debate about the benefits of such a treaty continues, it is undoubtedly in Australia's interest to maintain its active participation in the WTO, for all its flaws.

A multilateral trade system depends on the big players – the US, the EU, Japan and China – that conduct most of the trade. Many of the most bitter trade disputes are between them. But complex areas of trade, particularly those of direct interest to the developing world, such as textiles and agriculture, can only be solved by multilateral negotiations. If the big players can't agree, even on trade between themselves, the WTO negotiations will bring precious few benefits for anyone.

Paradoxically for the protesters, the largest nations are more likely to agree to outcomes that assist developing states as a result of collective pressure in a multilateral forum than in bilateral arrangements where power is exercised less publicly.

For Australia, as for most countries, there are benefits if the WTO survives as an effective organisation. Not because the WTO can tell anyone what to do, but because if agreement is reached in its forums it has a chance of being effective. The WTO can only work if its member nations want it to – and that includes, albeit to different degrees, the richest and the poorest states.

Seattle demonstrated the WTO's limitations, not its strengths. The officials in the secretariat, and most of the delegates, are painfully aware of this. They wish the WTO had just some of the power and the influence attributed to it by the demonstrators. But for that to occur the members would need to agree and keep agreeing. In Geneva the reality of the WTO is a mere shadow of the global menace demonstrators tackled in the streets of Seattle. It remains an important institution if, to some degree at least, we want to be governed by rules and not power.

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