Global Policy Forum

By Lori Wallach and Deborah James*

The collapse of the World Trade Organization (WTO) Doha Round talks on July 24, 2006, should come as no surprise. A decade into the WTO experiment, it is clear that the WTO model of corporate globalization has not delivered the promised benefits of increased economic prosperity, while economic, social, and environmental conditions have worsened in many rich and poor countries alike. Because of this failed record, opposition has grown worldwide to the WTO model of globalization which as been driven by a narrow slice of corporate elites to suit their interests. The collapse of the Doha Round WTO expansion talks offers an extraordinary opportunity for a fundamental re-think of the direction of the global economy.

To date, most press coverage of the Doha Round collapse has focused on the blame game -- which countries' failure to make specific agricultural concessions is to blame. But the under-recognized, but extremely important story is that the underlying cause of the breakdown is the growing rejection of the WTO, and more broadly of the corporate-led globalization model, by many people worldwide based on this model's effects on their lives.

Since the Doha Round's 2001 launch, every deadline on issues from service sector liberalization to industrial tariffs has passed. In 2004 half of the original Doha agenda – adding new foreign investor rights and limits on countries' competition and procurement policies – was simply jettisoned after the Cancun WTO summit imploded. At issue throughout has been major differences regarding the WTO's proper objectives and direction. Effectively, popular opposition is now a significant counterforce pressuring many WTO member nations to reject the agenda pushed by the world's largest multinational corporations, which traditionally have used the WTO Secretariat and negotiators of the world's most powerful countries to write the rules of the global economy in favor of expanding their profit margins.

The Doha Round was dubbed a "Development Round." However, the actual texts reveal an agenda aimed at expanding the scope of the existing WTO regime. Yet, after a decade of damaging results, many people in the 149 WTO signatory nations have made clear their opposition to more of the same. This was before the World Bank dramatically revised downward its projections of Doha Round gains and revealed that a long list of poor countries would be net losers under the likely outcome. While U.S. and European editorials declared the Doha Round collapse as disaster for the poor, social movements and NGOs representing the populations of poor countries cheered.

A Decade of WTO Results Has Undermined Support for WTO Expansion

Instead of promised gains, during the WTO decade, economic conditions for the majority have deteriorated. The number and percentage of people living on less than $1 a day in Sub-Saharan Africa and the Middle East have increased while the percentage living on less than $2 a day has increased in these regions, as well as in Latin America and the Caribbean.

Growth and the rate of poverty reduction have slowed in most parts of the world since implementation of the WTO's policy package – a model imposed a decade earlier on many developing countries by the International Monetary Fund and World Bank. In Africa, per capita income – which is an economy's total output divided by its population– grew around 40 percent from 1960 to 1980 – but actually shrank more than 10 percent from 1980 to 1998. In Latin America, from 1960 to 1980, average per capita income grew by 82 percent – that's over 4 percent per year per person. However, during the era in which governments in the region began implementing policies of corporate globalization, from 1980 to 2000, income per person grew only 9 percent – less than one half of one percent per person per year. Now its down to 5%.

There is growing consensus that the clear failure of the model – often called "neoliberalism" – to deliver economic growth or better standards of living for most is translating into electoral victories for leaders who have made rejection of this agenda a staple of their platforms. Nowhere is this more evident than in Bolivia, Argentina and Venezuela whose economies all have been decimated under previous neoliberal governments. After adopting alternative domestic economic policies, Argentina and Venezuela now boast the highest economic growth and fastest poverty reduction in the region. Likewise, Bolivia's new president Evo Morales was elected on a platform of opposition to flawed trade deals after previous neoliberal governments' policies resulted in a lower per capita GDP today in Bolivia than 27 years ago. Even Costa Rica, Peru, and Mexico, traditionally neoliberal strongholds, have experienced presidential elections almost entirely dominated by debate over trade liberalization.

The number of people living in poverty has also increased in South Asia, while growth rates and the rate of reduction in poverty have slowed in most parts of the world – especially when one excludes China, where huge reductions in poverty have been accomplished, but not by following WTO-approved policies (China became a WTO member only in 2001). Indeed, the economic policies that China employed to obtain its dramatic growth and poverty reduction are a veritable smorgasbord of WTO violations: high tariffs to keep out imports and significant subsidies and government intervention to promote exports; an absence of intellectual property protection; government-owned, operated and subsidized energy, transportation and manufacturing sectors; tightly regulated foreign investment with numerous performance requirements regarding domestic content and technology transfer; government-controlled finance and banking systems subsidizing billions in non-performing debt; and government-controlled, subsidized and protected agriculture. Many of these same policies are those employed by the now-wealthy countries during their period of development.

It's not as if the status quo is working for most people in the rich countries either. During the WTO era, the U.S. trade deficit has risen to historic levels – from $130 billion (in today's dollars) in 1994 (the year before the WTO went into effect) to more than $717 billion in 2005. The U.S. trade deficit is approaching 6 percent of national income – a figure widely agreed to be unsustainable, putting the United States and global economy at risk. Soaring U.S. imports during the WTO decade have contributed to the loss of nearly one in six U.S. manufacturing jobs. U.S. real median wages have scarcely risen above their 1970 level, while productivity has soared 82 percent over the same period, resulting in declining or stagnant standards of living for the nearly 70 percent of the U.S. population that does not have a college degree.

Although trade and the failure of corporate globalization will be important issues in many 2006 U.S. congressional races, the bottom-up public pressure that has altered trade politics in many nations has not risen to a level in the United States that translates into significantly altered negotiating positions. Thus, while a majority of the U.S. public is losing under the Bush administration's trade agenda, the U.S. WTO position continues to be that of the narrow commercial interests that have bankrolled the administration's campaigns and those of the Republican majority in Congress. That's why efforts of the newly launched Citizens' Trade Campaign Political Action Committee (CTC PAC - www.citizenstrade.org/political-action.php) to hold elected officials accountable for their trade votes on recent bilateral and regional agreements with Oman and Central America are crucial to changing the future of U.S. trade policy, and hence the future prosperity and well-being of workers and farmers in the United States and globally.

Meager Projected Doha Round Gains for a Few and Net Losses for Many

The Doha Round was dubbed a "Development Round." However, the actual texts reveal an agenda aimed at expanding the scope of the existing WTO regime. Given the record of the WTO decade, proponents of the Doha Round agenda sought to change the debate away from the WTO's performance and onto prospective future gains. While initial projections by the World Bank were $832 billion, more recent World Bank studies based on revised analysis found extremely limited possible gains from a "Doha Round" overall. The most likely Doha scenario the World Bank reviewed would yield benefits of only $54 billion to the world by 2015, with developing countries receiving a meager 16 percent of those gains. These projections amount to a miniscule 0.14 percent of projected developing country GDP by that year, or about 0.23 percent of world GDP. Put another way, it is a little less than one cent per person per day to the developing world, or about four cents per person per day to the world as a whole.

Worse, the new research revealed that under the "likely" Doha scenario, the Middle East, Bangladesh, much of Africa and (notably) Mexico would actually face net losses. These studies also showed that the alleged gains that are projected to accrue to Brazil and India would be largely concentrated in those countries' agribusiness and manufacturing industries respectively, while subsistence farmers – a much, much larger percentage of those populations – would see tiny gains or net losses.

There are several key problems with the studies, however, in that they project gains from agriculture and goods liberalization without taking into account many costs of Doha implementation. First of all, the economic models used in the studies "assume full employment." That means they capture alleged savings on consumer food prices as gains, but fail to show a loss if millions of subsistence farmers, who represent nearly half of the developing world, lose their livelihoods. In addition, they fail to include the increased costs that consumers worldwide pay for medicines due to pharmaceutical monopolies, which some economists estimate outweigh the projected gains, even for the few developing country "winners." And finally, the models fail to adequately take into account the loss in tariff revenue for developing countries, which the United Nations Conference on Trade and Development estimated would be 2 to 4 times the projected gains for developing countries from the Doha WTO expansion. These flaws have rarely been mentioned in media reports touting alleged "gains" for the poor.

The World Bank findings are key to understanding the current political dynamic because many countries only reluctantly entered into WTO expansion talks at Doha in 2001 after being promised a "development" round aimed at rectifying imbalances left over from the original ‘Uruguay Round" multilateral negotiations that hatched the WTO. Indeed, at the 2001 Doha WTO Ministerial, where the talks that have just collapsed were started, a group of 100 developing nations had tabled an alternative agenda for negotiations, called the Implementation Agenda, which consisted of specific fixes needed to existing WTO terms. The Implementation Agenda was the developing countries' counter-initiative after they had rejected the "Millennium Round" WTO expansion agenda at the 1999 Seattle WTO summit. So while the media still refers, without attribution, to the negotiations as a mechanism to help the poor, in fact those pushing WTO expansion merely used the false promise of poverty reduction to get the talks launched, while pursuing policies geared to fatten corporate profit margins.

The Failed Model of Corporate Globalization and its Alternatives

Underlying the continuing faltering of the WTO negotiations and those of other agreements based on the same model of corporate globalization is not a battle between "protectionism" and "free trade." Rather, the current globalization model implemented by the WTO is being challenged increasingly by large numbers of elected officials, economists and civil society analysts, joining workers, farmers, and environmentalists worldwide, because the set of policies embodied in the model have proved to be harmful across the globe to all but a corporate elite representing the management of the largest of grain trading, pharmaceutical, banking and other multinationals. As we live in a world where 24,000 people die every day of hunger and poverty-related diseases, wages are stagnant yet corporate profits soar, we need to identify the causes of all of this damage – and how to fix the situation.

Historically, trade agreements have dealt with lowering tariffs on goods. The United States and European nations relied heavily on tariffs to protect infant industries from foreign competition. But trade agreements no longer just deal with trade in goods. A cornerstone of the expansion of the corporate globalization agenda also encompasses services. The liberalization of services involves allowing foreign investors the right to own and operate services within other WTO signatory countries' territories – including essential services like education, health care, electricity provision and water distribution – for profit. It also involves de-regulating service industries such as telecommunications, insurance, transportation – even banking, such as Argentina did before its IMF-induced economic collapse in 2001.

Little-known negotiations in the current Doha Round would also strictly limit national, state and local authority to set service sector professional licensing, technical standards and qualification requirements. The United States has even offered to commit higher education to WTO disciplines. But privatization and de-regulation of essential services worldwide have decreased access for the poor and have eroded hard-won democratic consumer protections.

Meanwhile, the WTO's agriculture trade rules have been a disaster all around. According to the UN Food and Agriculture Organization, "progress [toward reducing hunger] has slowed significantly in Asia and stalled completely worldwide" in the last 15 years. It was the goal of the world's handful of multinational grain trading giants, including a former Cargill executive who as a U.S. trade official drafted the WTO farm rules which forced the world to treat food like any other commodity. This system has failed with horrific results and must be replaced.

The livelihoods of billions of subsistence farmers have been pitted against the profits of corporate agribusiness and grain trading companies with success measured as greater volume of food moving around in trade, not in decreasing hunger. The Indian government has confirmed that at least 100,000 farmers who have lost their livelihoods to this scandalous system have committed suicide in the WTO decade. Meanwhile, for the first time in generations the United States is headed for net food-importer status (imports outpaced exports in April 2006) even as we are the world's largest agriculture exporter (often of the same foods we import) U.S. farmers' incomes have tanked, while profits of corporate agribusiness giants have soared.

Another pillar of the WTO model is the massive expansion of corporate patent monopolies. The WTO's Trade Related Aspects of Intellectual Property Rights agreement (TRIPS), which sets 20-year worldwide monopoly marketing rights on drugs and seed varieties, is the single greatest protectionism agreement in the world. Forcing governments worldwide to provide monopoly protection for every seed variety or medicine that Big Pharma and Agribusiness patent has meant vastly increasing prices for consumers in rich and poor countries alike – and many cut off of these life sustaining goods.

Instead of having to adhere to new restrictions on trade that protect corporate profits, countries must be free to prioritize other values and goals, particularly regarding the saving of millions of lives by getting access to low-cost life-saving drugs. For example, African nations facing the HIV-AIDS epidemic must be free to decide that access to essential medicines takes priority over U.S. pharmaceutical profits, even if those corporations are one of the largest lobbies on trade in the United States.

The Way Forward: Saving Global Trade from the WTO

Taken together, the evidence points conclusively to a global shift away from the neo-liberal corporate globalization model embodied by the WTO based on people's experience of the model's failure. With the Doha Round's collapse, the story to be written is about viable alternatives to the WTO - as well as to the bilateral or regional trade agreements based on the same failed model.

Instead of pinning blame on specific countries, the focus of energy should be on how the world's governments can develop a multilateral trade system that preserves the benefits of trade for growth and development, while pruning away the many anti-democratic constraints on domestic policy making contained in the existing WTO rules. These rules are designed to create a world that operates as one single homogenized global market rather than setting terms of trade between separate nations with distinct priorities.

The critics of corporate globalization are for international trade between different, unique countries or regions when it is mutually beneficial. To strike this balance between promoting trade while respecting the laws and values of different countries, some existing international rules and institutions need to be cut back, while others need to be bolstered.

Currently, the WTO trumps all other international agreements. The WTO must be scaled back so that the human rights, environmental, labor and other multilaterally agreed public interest standards already enshrined in various international treaties can serve as a floor of conduct for corporations seeking the benefits of global trade rules. For instance, the International Labor Organization provides core labor standards; there are more than 200 multilateral environmental treaties covering toxics, air pollution, biodiversity and waste dumping; and the World Health Organization and the U.N. Charter on Human Rights provide many standards on access to medicine and food security.

Two hundred and six civil society organizations, including social movements representing millions of people in poor and rich countries alike, support a WTO transformation program dubbed "Stop Corporate Globalization: Another World is Possible," available at www.ourworldisnotforsale.org. The International Forum on Globalization has published the book Alternatives to Economic Globalization: A Better World is Possible, which reports on proposals for alternatives gathered through years of conversations with civil society leaders, scholars and government officials in poor and rich countries.

These are but a few of the rich alternatives being discussed everywhere but at the WTO. The WTO experiment has failed. Replacing the overreaching WTO agenda with fair rules aimed at facilitating trade between willing countries is the only way forward. Such change globally requires work form us living here in the United States. We can start by building a majority in our elected leadership who understand that the corporate globalization system implemented by the WTO has failed American workers and farmers, failed the most basic tenants of democratic governance and failed the world. Time is long overdue to change the way this policy is developed and thus whose needs it serves. This will only happen through citizen activism. For ideas about how to get involved, please visit our website at www.tradewatch.org.

About the Author: Lori Wallach, Director of Public Citizen's Global Trade Watch, is the author of Whose Trade Organization? A Comprehensive Guide to the WTO. Both she and Deborah James, Director of the WTO Program at the same organization, are leaders in the worldwide struggle against corporate globalization.