Don't throw the baby out with the bath water

The build-up to the World Trade Organisations ministerial meeting in Seattle and the Millenium Trade Round has been marked by protests, some of which begin to threaten the multilateral trading system and the prospect of further liberalisation. Calls have even been made to do away with the WTO. In some respects the virulence of the protests reflects the fact that the WTO, at whose founding I was proud to preside, can be argued to be the most important organisation in the whole multilateral system. Even some of its sternest critics accept that point. They even accept that the WTO has been instrumental in providing a system of rules and transparency in trade between nations that avoids conflict. But what of the other accusations, sometimes from ostensibly informed quarters, that the WTO generally sides with the most powerful nations and that the prospective agenda of the forthcoming Millennium Round of trade talks will be skewed in the same direction. How odd, when only last summer the WTO singled out onequarter of US exports for disguised subsidies and unfair practices, and warned the United States to change its tax legislation within fourteen months. A similarly robust approach has been taken with the EU. These arguments against the WTO are unfounded and deserve a rebuttal. The truth is that the WTO is a highly balanced institution with a hundred of the 134 members being developing countries, including 29 of the least developed countries on the planet. Those who are not Yet members are anxious to become so, and with good reason.

The new Millenium Round, far from being "skewed", is potentially a positive milestone. That goes first and foremost for those of our countries which, sovereign but poor, have found it difficult to enter the world trading system on the basis of a just framework for negotiation and adjudication. I am amazed that so many experts, even among the most enlightened, tend to confuse the illness and its cure. Apparently opposed to the concept of globalisation, they bracket it negatively with the WTO.

Containing and driving globalisation

In reality the WTO seeks to contain globalisation in a framework of binding multilateral rules and this is the only way to ensure that the benefits of an interdependent world are fairly shared. Today, those efforts are serving to advance the real sovereignty of states, that is their ability to influence their own destiny rather than having their rights prescribed through bilateral negotiations, or even the unilateralism of more powerful countries.

Over the past fifty years, since the inception of the GATT, trade - and this can never be said enough - has been the primary engine of world growth, contributing substantially to prosperity, development and higher living standards in all our countries, in developed and developing countries alike. Since 1951 world trade has multiplied by a factor of seventeen, world output has quadrupled and per capita world income has doubled. The opening of markets has enabled the developing countries to double their exports over the past thirty years alone.

The bottom line - as revealed by so many recent studies, from the World Bank, IMF, and the WTO - is that the developing countries whose economies have opened up - according to the rules that we "liberalisers" of trade have ceaselessly promoted - experienced annual growth of 4.5% in the 1970s and 1980s. By contrast, the countries that chose to remain closed to trade recorded growth of no more than 0.7% a year. For the rich countries, the result is very much the same: open economy, 2.3%; closed 0.7%. Protectionism has a proven record of substantial failure, as has the discredited notion of development based on wholesale import substitution.

Many critics of the WTO tend to exaggerate. The Millennium Round, if it commences at all, as I hope it does, will certainly be important, but not as revolutionary as the Uruguay Round. The agenda will have to advance the process of global interdependence. And the idea that the agreement on services (GATS) will evolve to the point where "national treatment" - in other words, treatment for foreign firms at least as favourable as for domestic operators - becomes mandatory for all services is pure fancy. Still, through the WTO the trading nations have a chance of surviving and prospering in concert with the others. It is our job to further the principles of multilateralism in the very important round of negotiations soon to begin. Criticism is all very well, as long as the baby - that extraordinary multilateral instrument we have done so much to develop - is not thrown out with the bath water.

See also article by Peter Sutherland in Le Monde, 23 October 1999.

PETER D. SUTHERLAND, LAST DIRECTOR-GENERAL OF THE GATT AND FIRST DIRECTOR-GENERAL OF THE WTO, PRESENTLY CHAIRMAN OF GOLDMAN SACHS INTERNATIONAL AND CO-CHAIRMAN OF BP Amoco.

Copyright Organisation for Economic Cooperation and Development Dec 1999
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