A World of Difference in Trade Views

The global economy, or so its boosters proclaim, is luring the world into a future of fantastic riches--and no country will enjoy a greater windfall than the United States.

But a growing cadre of critics broods over darker visions. Instead of a prosperous global economy, they warn of a sinister, netherworld economy where children are exploited in Dickensian factories, forest-gobbling pests hitch rides across the sea in packing crates, greedy corporations run roughshod over traditional ways of life and obscure international organizations make the rules of commerce in secret.

The two visions collide this weekin Seattle, where representatives of nearly every nation in the world are converging to launch a new round of global trade talks that could determine the shape of the global economy for years to come.

Until recently, such meetings were the province of people who squabbled over tariffs, quotas and other arcana of little interest to the public. But not this time: Awaiting the delegatesis an army of protesters, championing causes from rain forests to family farms, from child labor laws to food safety.

That has turned the Seattle summit of the World Trade Organization into something that its planners never dreamed of: a referendum on globalization itself.

Inside and outside the convention center, delegates and protesters alike will be struggling with the same overarching question: Should the rules protect the rights only of those who profit from trade while ignoring the many social questions that arise from how goods are made?

Or, more specifically, should the WTO, which enforces the trade rules, protect the investment of a factory owner whose shipment of aluminum is blocked at a foreign port but stay on the sidelines if the shipment was made by slaves or the factory degrades the air or destroys a local community?

“Intellectually, I think it’s very difficult to say that we’re concerned with property rights but not the effects of trade on workers and the environment,” said Alan Wm. Wolff, a former deputy U.S. trade representative and leading trade attorney. “It’s a natural progression . . . and this took me quite a while to come around to seeing.”

Mainstream economists give globalization--the increasing flow of goods, services, people and money across national borders--much of the credit for boom times in the United States and better times overseas. Critics, by contrast, see capitalism run amok.

Trade rules embraced in the 1990s, they say, protect the corporations that profit from global commerce while ignoring both the rights of those who produce the goods and services and the damage done by such businesses to the air and water. Companies, in this view, have less loyalty to workers and communities than ever before.

“Human rights, labor rights and environmental rights are being completely subordinated to the right to make a profit,” maintained Julie Light, managing editor of Corporate Watch, an Internet magazine that is part of the growing movement against globalization in its current form. “There has to be some check on this.”

To consider the case of Canada’s Methanex Corp. against the United States is to get a sense of how the 1990s trade rules are banging up against broader social concerns.

On March 25, Gov. Gray Davis ordered the phase-out within California of a fuel additive known as MTBE, which had been detected in drinking water in Santa Monica, Santa Clara and South Lake Tahoe, as well as elsewhere in the United States.

Within three months, Methanex, which produces the chief ingredient in MTBE, filed suit seeking $970 million in damages. The company, concerned about the sharp injury to its business, sued based on the North American Free Trade Agreement, which protects foreign investors from government policies that result in unfair “expropriation” of their profits.

Although the suit remains unresolved, the mere fact that it could be filed led Daniel E. Seligman, trade policy analyst with the Sierra Club in Washington, to complain: “Before these trade rules came along, we thought it was our right to have clean air and clean water. This case shows that we have to pay foreign companies to maintain that right.”

Economists regard free trade as just about as controversial as motherhood. Imports pay off, they insist, by expanding consumer choice and keeping a lid on prices. Exports, they say, fuel growth in high-wage jobs and have become an increasingly important weapon in America’s economic arsenal.

If free trade is so undesirable, its advocates argue, then why is most of the world either within the WTO or clamoring to get in?

The club, which numbered just 23 nations when the modern trading system began to take shape after World War II, now has 135 members and will soon probably add China. The former Soviet republics of Estonia, Latvia and Kyrgyzstan are already in, and among the 31 countries on the waiting list are Russia, Ukraine, Vietnam, Croatia and Bosnia-Herzegovina.

Not all countries have profited equally--or at all--from globalization, although the broad experience has been economic growth and a rising reliance on trade. While the 1990s have been disastrous for Japan and Russia, trade was hardly the culprit. Meanwhile, much of Latin America, the Caribbean and sub-Saharan Africa enjoyed stronger growth than in the 1980s, according to World Bank data.

“Expansion of trade and investment promotes economic growth, and economic growth promotes the general welfare,” said Julius L. Katz, a former deputy U.S. trade representative who negotiated NAFTA and helped oversee the last major series of global trade talks, known as the Uruguay round. “Why they [critics] don’t see that, I don’t understand.”

And there are plenty of critics. Some 52% of Americans believe “the global economy will hurt America,” according to an October survey by the Pew Research Center for the People and the Press. Particularly gloomy are workers on the lower rungs of the economic ladder who feel--and probably are--the most threatened by foreign competition. Sixty-three percent of people making $20,000 or less expressed the pessimistic view.

As some analysts see it, the misgivings reflect deep-seated changes in a world where financial turbulence shoots like lightning across borders, where allies such as the nations of Western Europe are also rivals, and where restless technology is leading the workplace in unknown directions.

“I think people worry that the issues are larger than what the government or the country can control,” said Andrew Kohut, director of the Pew Research Center.

To its most militant critics, globalization amounts to an assault, not only on local ways of doing business but also on deep-seated cultural values.

“While Indian villagers may now have access to CNN and ‘Baywatch,’ the dissemination of Western popular culture by global media companies is destroying diverse local cultural and artistic traditions,” argued the International Forum on Globalization, a San Francisco-based alliance of scholars.

Group Pushes for More Trade Regulation

In a recent paper, the group complained that U.S. advertising glorified “Western taste, dress, food and lifestyle as being a sign of progress, while non-Western traditional values and cultures are viewed as backward and out of date.”

Trade, some of the system’s detractors maintain, inherently endangers the environment and should be regulated much more carefully.

A Noah’s ark of dangerous pests has traveled the trade routes over the years, spreading blight through undefended forests, attacking farmland and wreaking havoc in water supplies.

Current examples include the tree-killing Asian long-horned beetle, which journeyed from China to Chicago in wood crates, and the Zebra mussel, which cruised in ship ballast water from Eastern Europe to the Great Lakes, where it has clogged water systems.

Only recently has anyone dreamed of connecting such assorted grievances to trade policy.

For the first four decades after World War II, trade negotiators concerned themselves mainly with tariffs and quotas on goods like boots and bicycles. But by the 1980s, a changing, increasingly service-oriented economy prompted a change in the historic strategy--and opened the door to today’s trade controversies.

At American Express, executives in search of new markets documented how Japan, Germany, Brazil and other nations effectively blocked American Express cards from access to local banking systems. Sympathetic Reagan administration officials, eager to cut red tape limiting business overseas, agreed to make financial and other services a new trade priority.

“If Citicorp wants to go over to Malaysia to open a bank or control an insurance company, it should be able to do so,” said Harry L. Freeman, the former executive vice president of American Express, in a recent interview. “It’s different from how you ship English muffins.”

At the breezy, seaside resort of Punta Del Este, Uruguay, in September 1986, officials of 92 countries officially recognized the new realities by launching a marathon effort to make trade rules for such non-traditional areas as copyrights, patents, banking, insurance, telecommunications and other services.

This expansion had a fateful effect on the course of the debate. By attempting to knock down non-tariff barriers to trade--such as health and safety regulations that double as ruses to keep out rival products--officials put countries’ domestic regulations in the spotlight, setting the stage for a new generation of controversies.

“What we didn’t understand was the extent to which [we] had really shifted the focus of trade from the border to domestic policy,” recalled Sylvia Ostry, a former Canadian trade negotiator who is now a scholar at the University of Toronto.

Few Linked Trade With Broader Concerns

Reagan administration officials, turning their attention to North America, then reached a deal with Canada that would become a showcase of the new, broader thinking. The negotiations left some Canadians worrying that their powerful southern neighbor might exploit their resources.

Few in the United States, however, were prepared to link trade with broader concerns about national rights or health policy. Ralph Nader, the consumer activist, was one of the exceptions.

Nader recalled how drug prices went up in Canada after Canadian Prime Minister Brian Mulroney restricted generic drugs at the behest of the Reagan White House, which was trying to help big U.S. pharmaceutical firms.

The drug issue “was basically a harbinger of things to come,” Nader contended in an interview.

What came next was the U.S.-Canadian trade accord in 1988, followed by the more problematic NAFTA, which embraced Mexico as well, and completion of the Uruguay round in 1993.

“It was quite clear,” Nader said, “that consumer protections were going to be rolled back and sacrificed on the altar of international commerce.”

Unlike the U.S.-Canada deal, which made few waves, NAFTA touched a multitude of raw nerves. Organized labor worried that it would spark an exodus of jobs because American workers could not compete with low-paid Mexicans in workplaces with weaker safety and environmental standards. Nonetheless, trade policy in the early 1990s still commanded broad political support, and Congress approved NAFTA in November 1993, after a push by the Clinton administration.

Five months later, in the Moroccan town of Marrakech, trade ministers finally completed the sweeping Uruguay round, whose 22,000 pages of accords amounted to a blueprint for the emerging global economy. The Uruguay round established the World Trade Organization, which joined the U.N. Security Council as one of the few global entities empowered to approve monetary penalties against sovereign countries.

The Uruguay round also established guidelines for protecting intellectual property--a far-reaching area as varied as compact disks, medical formulas and genetically engineered seeds.

Those protections, to the alarm of AIDS and other health care activists, have at times blocked foreign firms from providing cheap medications because pharmaceutical multinationals now have firmer control of global patent protections.

The Uruguay round also made it harder for countries to use health and safety laws as weapons to keep out food and other imports, a device exploited by many nations to protect their own industries from foreign competition. Now the question is whether the pendulum has swung so far that countries can no longer legitimately keep out products that fall short of their standards.

For example, new international standards for pesticide residues in food, lead contaminants in mineral water and pasteurization of cheese are less stringent than the U.S. versions, noted Bruce Silverglade, director of legal affairs at the Center for Science in the Public Interest.

U.S. officials have vowed not to lower their health and safety standards to meet global norms. But if a would-be exporter complained to the WTO that the U.S. standards were restricting trade, “we’d be on very shaky ground,” Silverglade contended.

Critics of unfettered trade, after their losses in Congress on NAFTA and the Uruguay round, have waged a fierce and successful public relations campaign to block further trade liberalization, a campaign that has left many with a searing image of globalization.

Even some of trade’s champions acknowledge that as trade expands so do its darker consequences. None of this was foreseen when Congress blithely voted in 1994 to accept the World Trade Organization as referee of the global trading system. “I don’t think there was a real appreciation of the full significance of the vote,” said Rep. Robert T. Matsui (D-Sacramento), a leading trade specialist in Congress.

Only in hindsight has it become clear that Congress had endorsed a powerful symbol for all the grievances of the global economy--and a target for the activist army encamped in Seattle today.

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WEIGHING THE EFFECTS

Lowering of barriers would mean different things to different Southland companies. C1