on December thirteenth, Hong Kong will host the sixth Ministerial Conference of the World Trade Organization (WTO).  Over the course of the next six days, delegates from across the globe will attempt to negotiate the rules and regulations of international trade.

Since its birth a decade ago, the WTO has become one of the world’s most influential institutions; it has also become one of its most controversial. Its policies shape international and domestic trade laws, and in an integrated, globalized world, these laws can affect almost every aspect of a national, regional, and global economy.

Proponents of the WTO say that it will bring unprecedented prosperity to the world and create peace and understanding through the diplomacy of free trade. Its opponents claim that it is just another tool of the developed world’s corporate interests, and that its main purpose is to drain the resources and exploit the markets of poorer countries.

Regardless of which side of this argument one falls, it is undeniable that the WTO has become one of the most immensely important bodies in the world today.

Despite its immense significance, however, many people all over the globe are still unaware of the WTO, or how it works, and how it can affect their lives. Many nations are beginning to realize that globalization requires the political engagement of the average citizen to extend beyond national borders.  Recent steps taken by governments, political parties, and civil society groups all over the world aimed at educating people about the WTO underscore the important role that it plays in shaping international affairs.

In countries such as Argentina and Venezuela, presidential candidates have won office based, in large part, on their policies toward international institutions such as the World Bank and the WTO.

Two of the last three Ministerials have ended in virtual collapse due to the organization’s  failure to come to clear and agreeable consensus. This year’s meeting in Hong Kong promises as much contention and drama as any Ministerial thus far. This article will offer a brief background on the founding of the WTO, and outline some of the more controversial aspects of its charter.

rom GATT to WTO: The Birth of the Trade Game

Founded in 1995 as a successor to the General Agreement on Trade and Tariffs (GATT), the WTO was created as a space in which the rules of global trade could be negotiated. The GATT, which was the original multilateral trade agreement, was founded in 1947 at the same negotiating table that gave birth to the World Bank and the International Monetary Fund. Both the WTO and the GATT are intended to increase free trade by clearly delineating the rules of the game for all member countries.

There are, however, some major differences between the two institutions. The GATT dealt only with trade in goods such as rice or textiles. The trade agreements of the WTO cover a much larger spectrum: trade in services, trade-related aspects of intellectual property rights, investment related to trade, and a host of other issues. Perhaps the most significant difference between the original GATT and the WTO is the ability of the WTO to settle trade disputes and punish non-compliant member states through sanctions and trade isolation. For the first time, international trading partners were armed with a mechanism of force. Through this mechanism an international body can now demand that a nation comply with the rules of the trade game or face drastic consequences.  

The binding, punitive terms of the WTO has led to enormous controversy throughout the world. A growing number believe that the WTO is no more than the police force of corporate interests, and that its primary objective is to maintain—and increase—the wealth and status of the world’s most developed countries at the expense of the world’s poorest. In order to understand the origins of these protests, it is important to know more about the make-up of the most significant, and controversial, terms and agreements that structure the WTO.

The Rules Contested

At the heart of the WTO are its nineteen agreements. These agreements lay out the rules and regulations that guide trade between WTO member countries. Space does not allow for an examination of each agreement; however, a glance at the guiding the Hong Kong ministerial and the debates surrounding them is possible.

According to the WTO the Agreement on Agriculture is intended to make markets fairer for the world’s farmers. It does this by calling on nations to reduce the so-called trade-distorting mechanisms, such as subsidies and tariffs, which are designed to protect and support a nation’s agriculture industry. For example, a country might use a domestic support mechanism that guarantees a minimum price at market to ensure that its poor farmers are able to meet the cost of production and procure a viable living for themselves. Under WTO provisions, a complaint can be brought against this nation if its support to its farmers is deemed trade distorting. Ironically, the nations which have historically been some of the loudest proponents of free trade possess some of the most significantly trade-distorting agricultural policies in the world. The United States, Japan, and the European Union have all repeatedly condemned by leaders all over the world for their high agricultural subsidies. These subsidies, which reach 100 percent in certain cases, allow assisted farmers to sell their products on foreign markets far below domestic prices; this practice is called “dumping.” When “dumping” occurs, local farmers are forced to pit their crops against subsidized foreign yields. They are often unable to compete and suffer heavy losses

Another highly controversial measure is the Non-Agricultural Market Access Agreement, or NAMA. NAMA is an attempt by the WTO to eliminate all trade barriers on all goods not covered by the Agreement on Agriculture. The primary goal of NAMA is to allow foreign firms unrestricted access to local markets by lowering import taxes (tariffs). Unrestricted market access for foreign companies means that consumers will be able to buy foreign goods at local—or below local—prices.

Encouraging consumer spending is often considered a healthy strategy for boosting domestic growth, however, many countries such as Sri Lanka allow for 100 percent profit repatriation; this means that a foreign businessman selling his goods in Sri Lanka can take every cent of it home with him. So the Rupees spent on foreign goods will not necessarily stay in the country to build business and create jobs. In fact, some argue that by reducing restrictions on market access for foreign businesses, a nation can subject its local producers to heavy and unmanageable competition. On the other hand, small economies that count on selling their goods in large foreign markets, want to see trade barriers lowered as well. Textile producers across the world are anxious to see openings in the enormous U.S. and EU markets.

The original GATT charter said nothing about trade in services, but as the global economy grew over the past fifty years, it became increasingly obvious that this too was an area of international trade that required management and codification. Because of its enormous scope, the General Agreement on Trade in Services is one of the most complicated of all the WTO agreements.

It is also one of the most viciously contested.

Those in favor of liberalizing trade in services argue that opening up the markets to competition creates the most optimal scenario for consumers.

The logic goes that if businesses involved in the service sector are forced to compete with one another, consumers will enjoy the benefits of choice, competitive prices, and quality.

Opposing governments and civil society groups, however, are not concerned with the economic theory behind GATS; they worry about some the services that the WTO deems tradable. Education, health care, and water can all fall under the GATS definition of services, and as such can be opened up for trade liberalization, which means little or no government interference or regulation.

Liberalizing this market will allow private companies to own and control the kinds of essentials that have been traditionally provided by governments. Those who oppose GATS, say that by limiting a government’s ability to protect its citizens from the cold realities of harsh markets, the agreement puts low-income consumers at a genuine risk of being denied access to essential services.