Mobilization Against Globalization Why All The Fuss? Lecture 18

The World Trade Organization Created in 1994 as Part of the Uruguay Round GATT Negotiations. Created in 1994 as Part of the Uruguay Round GATT Negotiations. An International Organization. An International Organization. –144 Member Countries –Budget of $86 million –Staff of 550 Most Important Functions: Most Important Functions: –Administering WTO Trade Agreements –Forum for Trade Negotiations –Handling Trade Disputes –Monitoring National Trade Policies –Technical Assistance and Training for Developing Countries See for more detailswww.WTO.org

Sense and Nonsense About the WTO 1. “The WTO Benefits Rich Countries at Expense of Small Countries.” –Rule of Law Levels the Playing Field: Small and Poor Countries Have Same Rights and Responsibilities as Large 2. “The WTO is Run By MNCs.” –WTO is Run By Governments; if Governments are Too Responsive to MNCs, that’s a Different Matter. 3. “The WTO Imposes Trade Laws.” –WTO Has No Authority To Impose Anything. –All Changes are Determined By Governments and Ratified by National Legislatures. –All Disputes Within WTO are Initiated by Governments.

4. WTO Undermines Democracy The Dispute Settlement Mechanism

The DSM Alleged Violation Alleged Violation Consultations Consultations Panel Established By DSB Panel Established By DSB –3 Trade Law Experts –Reviews Evidence, Meets with Parties, Issues Report DSB Must Accept Report Unless Unanimous Vote Against DSB Must Accept Report Unless Unanimous Vote Against Right to Appeal Right to Appeal –Appellate Body 3-5 People DSB Must Accept Appellate Report Unless Unanimous Vote Against DSB Must Accept Appellate Report Unless Unanimous Vote Against If “Guilty” Must Alter Practice If “Guilty” Must Alter Practice –Compensation Until Changed –Retaliation if Practice Not Changed Undermines Democracy? Undermines Democracy?

5. The WTO Is Hostile to Legitimate Environmental Objectives? Early 1990s, U.S. Requires American Shrimpers to Use Turtle Exclusion Devices (TEDs). Early 1990s, U.S. Requires American Shrimpers to Use Turtle Exclusion Devices (TEDs). In May 1991 U.S. Prohibits Shrimp Imports From Countries that Don’t Protect Sea Turtles. In May 1991 U.S. Prohibits Shrimp Imports From Countries that Don’t Protect Sea Turtles. October 1996: India, Malaysia, Pakistan, Thailand File Case Against U.S. in WTO. October 1996: India, Malaysia, Pakistan, Thailand File Case Against U.S. in WTO. WTO Rules that US Law Represents “Arbitrary and Unjustifiable Discrimination.” WTO Rules that US Law Represents “Arbitrary and Unjustifiable Discrimination.”

Hostile to Environment? What the WTO Appellate Board Ruled: What the WTO Appellate Board Ruled: –American Policy Justified Under Article XX(g): Can restrict trade when attempting to conserve “exhaustible natural resources.” Can restrict trade when attempting to conserve “exhaustible natural resources.” Governments Can Restrict Trade to Achieve Legitimate Environmental Goals (such as protecting Sea Turtles) Governments Can Restrict Trade to Achieve Legitimate Environmental Goals (such as protecting Sea Turtles) –American Policy Unjustified Under the Chapeau of Article XX: trade restrictions adopted under Article XX cannot be “applied in a manner which would constitute a means of arbitrary and unjustifiable discrimination between countries where the same conditions prevail…” trade restrictions adopted under Article XX cannot be “applied in a manner which would constitute a means of arbitrary and unjustifiable discrimination between countries where the same conditions prevail…”

Broader Implications: Broader Implications: –Growing Sensitivity to Environmental Issues in WTO. –Lack of Clarity Concerning How To Reconcile Existing Trade Rules with Emphasis on Non-Discrimination with Environmental Policy Objectives. –Generated support for the idea of restricting trade on the basis of “processes or production methodologies” (PPM) rather than the goods themselves Nothing wrong with the shrimp, just the way they are raised. Nothing wrong with the shrimp, just the way they are raised. Hostile to Environment? Cont…

6. WTO Advantages MNCs at The Expense of Labor WTO Rules, and Trade Liberalization Benefit MNCs. WTO Rules, and Trade Liberalization Benefit MNCs. No International Rules that: No International Rules that: –Regulate Corporate Activity –Regulate Treatment of Labor Propose to Incorporate “Core International Labor Standards” into WTO Propose to Incorporate “Core International Labor Standards” into WTO –Better Wages –Improved working Conditions –Reduced Hours –End Child Labor

Developing Countries Disagree “The Western World, the industrialized world, wants to take away our comparative advantage. It’s a pernicious way of robbing our comparative advantage.” Murasoli Maran, Indian Delegate to the WTO. “The Western World, the industrialized world, wants to take away our comparative advantage. It’s a pernicious way of robbing our comparative advantage.” Murasoli Maran, Indian Delegate to the WTO. “Unfortunately, trade unions in developed countries feel that...their employment prospects are imperiled.” D.L. Sachev, Secretary of the All India Trade Union Congress (2.5 million members). “Unfortunately, trade unions in developed countries feel that...their employment prospects are imperiled.” D.L. Sachev, Secretary of the All India Trade Union Congress (2.5 million members). “The objectives of the…trade unions…that back the push for core labor standards are mainly protectionist in nature…They want to protect jobs in the north by reducing the low-cost incentive that attracts global corporations to the developing countries.” Martin Khor, Director of Third World Network. “The objectives of the…trade unions…that back the push for core labor standards are mainly protectionist in nature…They want to protect jobs in the north by reducing the low-cost incentive that attracts global corporations to the developing countries.” Martin Khor, Director of Third World Network. More Broadly, African, Latin American, and Asian Academics, Labor Officials, and Non-governmental Organizations Protest the Inclusion of Labor Standards in the WTO. More Broadly, African, Latin American, and Asian Academics, Labor Officials, and Non-governmental Organizations Protest the Inclusion of Labor Standards in the WTO.

Comparative Advantage and Factor Price Equalization Drive This Conflict Low Skill Labor in the United States Has Been Hurt By International Trade Low Skill Labor in the United States Has Been Hurt By International Trade –Attempt to Raise the Cost of Labor in Developing Societies –Resist Additional Trade Liberalization Labor in Developing Countries Gain From Trade Labor in Developing Countries Gain From Trade –Efforts to Raise Standards in these Countries Can Eliminate the Basis of their Comparative Advantage and Make it Impossible to Develop –They Resisted The Clinton Administration’s Efforts to Incorporate Labor Standards into the WTO.

7. Globalization Causes Inequality Source: World Bank World Development Indicators CD-ROM

Globalization Causes Inequality Per Capita Income as Percent of US per Capita Income South Korea 5%27% Singapore19%76% Hong Kong 19%77% Brazil9%14% Malaysia8%15% Thailand4%10% France60%76% Italy40%63% Source: World Bank World Development Indicators CD-ROM

What Have We Learned? Globalization is Not New. Globalization is Not New. –Product of U.S. Policy Initiated in the 1940s and Implemented through the GATT/WTO During the Last 60 Years. Globalization Has Unambiguously Raised Global Income. Globalization Has Unambiguously Raised Global Income. –The World as a Whole is Wealthier Today Than Ever Before in History. –A Large Share of these Income Gains Can Be Directly Attributed to the International Economic System that was Created Following WWII. These Gains Are Not Evenly Distributed. These Gains Are Not Evenly Distributed. –Globalization Generates Winners and Losers.

The Politics of Globalization are Driven By These Distributional Consequences of Economic Integration The Politics of Globalization are Driven By These Distributional Consequences of Economic Integration –Politics is “who gets what.” –The Politics of Globalization are about who wins and who loses from the Global economy. Winners and Losers are Not Quite as the “New Left” Would Have You Believe. Winners and Losers are Not Quite as the “New Left” Would Have You Believe. –Not a Simple MNC vs. Labor Issue: Whether you win or lose depends upon what you do and where you do it. Developing World Does Benefit From Globalization Developing World Does Benefit From Globalization –Then why are they still so poor?