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WTO: Friend or Foe?

05 Oct 2017Economics Essays

In December 1999, more than 200 arrests were made in Seattle as rioters broke out into the streets, blocking off traffic, making huge bonfires, and chanting "the world is watching" ("Hundreds Arrested"). Indeed, the world was watching as televisions across the globe tuned into the WTO conference held in Seattle. Viewer attention was called on the multitudes marching for interests that ranged from labor issues to environmental degradation, while riot police made grim pronouncements for the eventual use of tear gas and brute force. This, however, was not enough as the protesters turned into a violent mob that damaged property all over the city providing some with the perfect opportunity to loot the neighborhood convenience store.

According to the WTO, it is the only international organization dealing with the global rules of trade between nations ("WTO in Brief" 1). The main idea which drives the WTO is promoting and fostering trade between nations, espousing globalization as a factor in the development of member nations. The idea of nations dealing with one another is a fairly old one, and the General Agreement on Tariffs and Trade (GATT), is actually the 50-year old precursor of the WTO. GATT simply transitioned into the WTO during the Uruguay Round negotiations which was held between 1984 to 1994 ("WTO in Brief" 8). Since its inception, the WTO has been serving its member nations as an administrator for WTO trade agreements by handling trade disputes, monitoring national trade policies, serving as a forum for negotiations, and providing assistance and training for developing countries ("WTO in Brief" 8).

The WTO provides vital services as trade agreements require negotiation, i.e. haggling, and will inevitably lead to disagreements and disputes as to interpretation and compliance. National governments can formulate and legislate trade policies that may be counterproductive or even prejudicial to the interest of free trade, which requiring policing. As implied in the functions the WTO performs, developing nations require assistance and training in matters of global trade. Global trade and its benefits were first clearly explained by Adam Smith and his exposition of comparative advantage. The usual illustration provided by the concept of comparative advantage is trade for certain commodities or products offered by two nations. Through specialization, each country can produce more of specific goods and use the surplus in trading with the other country. The result is a clear expansion in the productive capacity of the aggregated economies. The concept of comparative advantage still holds today, but there are some complicating factors that have cropped up, particularly for developing nations.

According to WTO, it is a common misconception that WTO destroys jobs and widens the gap between rich and poor, or the gap between developed and developing nations ("Common Misunderstandings" 8). There are, however, reports to the contrary. Martin Khor, director for the Third World Network, reports that Mexico is on the receiving end of the ill effects attributable to the Free Trade Agreements (FTA), the idea of which the WTO subscribes to ("Serious Effects"). In his article, Mexico concluded a FTA with the United States, increasing their fruits and vegetable exports by 50% but tripling their imports for corn and more then 500% for soybeans, wheat, poultry and beef, causing the loss of about 1.7 million jobs in rural Mexico. This is only one example providing for the ill effects of free trade among developing nations. According to Khor, between a developed and developing nation, the more affluent market tends to take all the benefits of free trade as they have a higher capacity to sell, while the less developed economy tends to be in a position where it cannot take advantage of the increased market access.

The WTO as a venue for negotiation has turned into a political arena, with accusations and counter-accusations of taking protectionist stances, providing for inappropriate subsidies in certain industries, or imposing restrictive tariffs contrary to agreements. In this arena, the WTO proclaims that big countries and small countries are on equal footing, but it has become apparent that member countries do not hold equal bargaining power ("Common Misunderstandings" 9). Proof of this is found in a report made by Risen, where he relates that in a recently-held WTO conference, the United States and European Union were only willing to deal and open their markets to developing nations with the promise of massively reducing the latter's tariffs and trade barriers (Risen). More developed nations are using the size of their markets as a powerful bargaining chip for concessions disadvantageous to developing nations.

While espousing the ideals of globalization as a tool for development, there are clear indications that would lead one, or many, as indicated by the Seattle riot, to see free trade as a major failure on the part of over three-quarters of the WTO's membership, the developing and leastdeveloped nations ("WTO in Brief" 6). Although the WTO was established with high-minded goals, these goals are far from being realized in practice. Instead of helping developing countries progress, the effect of the WTO is to make these countries more dependent on the developed ones. Developing nations have no power to call the shots or dictate the pace of the negotiations, and thus have to rely on whatever concessions their more powerful and wealthier counterparts are willing to offer them. This hinders whatever growth the WTO aspires to help them attain.

But taking things into perspective, development can occur over a very long period of time. Perhaps the ill effects of free trade are, indeed, limited only to the short term. The loss of 1.7 Million jobs in Mexico or in other developing nations due to free trade could merely be transitional events that will eventually lead to the development or enlargement of other industries. The WTO is neither friend nor foe; it is simply a facility for free trade, and nothing more, and will largely be up to its members to come up with economic plans to adapt to the increasingly globalized trade arena.

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