TRADING ON OUR FEARS: The World Trade Organization

Wednesday, January 26, 2000

In November of 1999, tens of thousands of people took to the streets of Seattle to protest against the World Trade Organization (WTO). How does the WTO work and why did it raise such a response? Does the WTO threaten environmental laws, human rights and national sovereignty or does it provide the best framework for ensuing that all nations benefit from international trade? Were the protests aimed at the WTO in particular or at the concept of free trade itself?

Recorded on Wednesday, January 26, 2000

Peter Robinson: Welcome to "Uncommon Knowledge". I'm Peter Robinson.

Our show today: the World Trade Organization. Founded in 1995, the World Trade Organization, or WTO, is the only international body dealing with trade among nations. It's purpose: to reduce trade barriers.

A couple of examples. Gasoline. In 1996, Brazil and Venezuela charged that the United States was imposing unfairly high standards on imported gasoline. The WTO sided with Brazil and Venezuela, and we were forced to amend the Clean Air Act to permit dirtier gasoline into the country.

Another example, McDonald's food. Now you will find plenty of McDonald's restaurants in Europe. But when you open your hamburger, what you won't find is American beef. The European Union has banned all beef treated with growth hormones.

The United States protested to the WTO, and this time, the WTO sided with the United States, permitting us to impose tariffs on certain European goods until the Europeans changed their mind about American beef.

Now, discussions of the World Trade Organization used to be dull, but that was before the WTO met last year in Seattle. Tens of thousands of protesters showed up, took to the streets, and brought the WTO meeting to a standstill.

With us today, three guests. Kevin Danaher, cofounder of Global Exchange, was in Seattle, in the streets, protesting the WTO. He will tell us what he thinks is wrong with the WTO.

Melvyn Krauss, a fellow at the Hoover Institution; and Jerry Levine, chairman of the Northern California Export Council, will tell us why they think Kevin is wrong.

Teary-Eyed Over the WTO

When the World Trade Organization met in Seattle last November, the protesters included labor unions, environmentalists, human rights activists. What did all these protesters have in common? What would so many people have against that one organization? Jerry?

Jerry Levine: What they had against the organization was not in common. There were many different motivations. There were people seriously concerned about the environment. There are people seriously concerned about labor conditions overseas and jobs in this country. There are people concerned about democracy.

Peter Robinson: Well, we have one huge organization that affects all kinds of issues.

Jerry Levine: That's correct.

Peter Robinson: Kevin.

Kevin Danaher: I think Jerry hit on it. Democracy is the key thing. The phrase for me out there on the sign was, no globalization without representation. That was the key.

Peter Robinson: You were there?

Kevin Danaher: I was there.

Peter Robinson: You were in the streets?

Kevin Danaher: I was getting tear-gassed.

Peter Robinson: You were getting tear-gassed? Okay.

Melvyn Krauss: Well, for me, what they all have in common is very simple: they are all against free trade; they're all protectionists.

Peter Robinson: They're all protectionists? You going to let that stand?

Kevin Danaher: Well, protect, I protect my family, I protect my health, I want to protect the planet. "Protect" is a good word. It's interesting that the free-trade ideologues have turned a word "protect", a totally positive word, into a negative word, like an epithet to be thrown at people.

Jerry Levine: It's like turning "free" into a negative word, isn't it? What you do?

Peter Robinson: Kevin, what is the World Trade Organization?

Kevin Danaher: The World Trade Organization was formed in 1995 to solidify, expand, and enforce a thing called GATT, the General Agreement on Tariffs and Trade. The key word is "tariffs". These are taxes that are charged against products crossing borders. The project, for decades, was to lower those taxes, to increase the volume of international trade.

The difference of the WTO is that the WTO has enforcement capability. GATT was voluntary by the 130 nations that are signed on. WTO has muscle to enforce its rules and its decisions.

Peter Robinson: What kind of muscle?

Kevin Danaher: For example, there are sanctions right now that the WTO has allowed the U.S. government to impose on European products because of two cases, one around bananas going into the European market, and the other on Europeans wanting hormone-treated beef to stay out of the European market.

Jerry Levine: But the power is exercised by the United States government, not by WTO. They simply sanction the exercise of power.

Kevin Danaher: They permit it, so that one member of the WTO can then levy sanctions against other members.

Peter Robinson: And you have behind it the moral authority of an international organization, even as, in going into Serbia, the United States had behind it the moral authority of the United Nations, right, that kind of thing?

Jerry Levine: You want a different definition?

Peter Robinson: Yes, please.

Jerry Levine: I think the WTO is an outgrowth of the GATT, and it's an attempt to create order in international trade out of what would otherwise be jungle chaos.

Peter Robinson: The WTO sounds pretty good so far. Why are so many people opposed to it?

Trading On Our Fears

Peter Robinson: Ken, I have to say, this strikes me as a pretty benign institution. You were in the streets in Seattle getting tear-gassed, protesting this operation. What's your top objection to the WTO?

Kevin Danaher: Well, you have to make clear: the protesters weren't against rules. We want rules for the global economy. But we want rules that are going to prioritize human rights and saving the environment, not increasing profits for transnational corporations.

That is the central goal of the WTO, the World Bank, the IMF, is to increase commerce, increase the ability of transnational corporations to go into Third World countries, move factories from here, get access to low wage labor in places like China, living under a communist dictatorship.

Peter Robinson: Okay, you're bundling a lot of things there. Low-wage labor. Kevin is linking hands with Pat Buchanan in a certain sense, because Buchanan is very opposed to corporations in the United States shipping their operations to Mexico, to China.

Kevin Danaher: Why do they do that? Because to give jobs to the poor Mexicans? They do it to increase their profits.

Peter Robinson: Okay, now, Mel, you're a big free trader.

Melvyn Krauss: Yes.

Peter Robinson: You have guys in Michigan are losing their jobs so that people in Mexico can work in bad conditions and earn a nickel an hour.

Melvyn Krauss: Guys in Michigan are not losing their jobs. That is nonsense.

Jerry Levine: We have the lowest unemployment rate in thirty years.

Melvyn Krauss: We have unparalleled prosperity.

Peter Robinson: Don't tell me this. Tell him.

Melvyn Krauss: He knows this.

Kevin Danaher: When I was a kid growing up, one person could support a family. There was a family wage. Now it's not. It's an individual wage. The spouses are working, seventy-seven percent of the spouses are working. People have to hold two, even three jobs.

Melvyn Krauss: They don't have to, they want to.

Jerry Levine: One person could still support a family if they weren't as greedy as we all are today. We live in houses that are eight times bigger than they were then. We drive bigger cars and more cars, three cars per family.

Kevin Danaher: So these are the indicators of success, material acquisition, while 30,000 children a day die from the effects of hunger. We're destroying the biosphere. The planet is being destroyed.

Jerry Levine: Where are they dying? Where are these 30,000 dying?

Kevin Danaher: Africa, Asia, Latin America, Caribbean.

Melvyn Krauss: Well, we're trying to help them through free trade. Free trade makes them richer and makes us richer.

Kevin Danaher: There is a simple indicator to look at this. Fifty years, look at the past 50 years of history, this free trade model, which by the way, there is no free trade, there has been government intervention, this country developed through government intervention.

Melvyn Krauss: We want less of it, you're right.

Kevin Danaher: If you look at the last 50 years that this model has been out there, and the corporations have grown, and there is more trade and more GNP and all of this, inequality got worse, the environment got worse, our communities got worse, spiritual quality of life got worse. All the major indicators--

Peter Robinson: Now hold on, you're talking about this country?

Kevin Danaher: In the world, in the planet.

Melvyn Krauss: And it's all free trade that's doing this? My God.

Kevin Danaher: It's interesting to me that conservatives--

Melvyn Krauss: No name calling.

Kevin Danaher: You called me a protectionist. You're a conservative.

Melvyn Krauss: Well, you said protectionist was good.

Kevin Danaher: Right. If you look at the traditional philosophy of conservatism, it's for limited government. Our Bill of Rights says, Congress shall pass no law, et cetera.

Here we have an organization based in Geneva, Switzerland, operates in secret, secret tribunals, no right to appeal, citizens have no standing.

Jerry Levine: The rules are signed on to by the 134 countries that joined the WTO; they've accepted them. And these countries range from socialist to capitalist to dictatorships to parliamentary democracy. Each one chooses its own method of sending its delegates. The Barbados delegation happens to include two trade union members. This is a parliamentary democracy in a tiny country. It has as much of a vote as the U.S. when the votes come.

So I think it is a democratic way to try to put some order into things.

Kevin Danaher: But this about the way it actually operates. Geneva is an expensive city to live in. Guatemala and Barbados and these poor countries, they can't afford to have the same kind of staff that either the U.S. government or Monsanto or General Motors--

Melvyn Krauss: Are you against the United Nations? Because the United Nations are also in Geneva. Should we get rid of the United Nations for that reason?

Kevin Danaher: No, I'm for the United Nations. Poor countries are at a disadvantage in the WTO, just as they're at a disadvantage in the World Bank and the International Monetary Fund.

Melvyn Krauss: But we're not trying to hurt poor countries.

Jerry Levine: Yeah, poor countries are at a disadvantage, whatever they do.

Melvyn Krauss: One of the best ways for a poor country to improve its economic lot is through international trade. We have a lot of scientific evidence...

Peter Robinson: What would Kevin like to see instead of the WTO?

Tariff-ic Ideas

Okay, so we eliminate the WTO. What would you replace it with?

Kevin Danaher: You rebuild it with an institution that actually has representatives from civil society, from the women's groups, the environmental groups, the grassroots development...

Peter Robinson: Who elected them? They're not democratic organizations?

Kevin Danaher: Through elections. There are these things called elections where you elect people.

Peter Robinson: You hold a worldwide election?

Kevin Danaher: Sure.

Melvyn Krauss: We have elections. We have elections to the Congress, president, local levels. We have so many elections already.

Jerry Levine: And the elected people choose the delegates to the WTO.

Melvyn Krauss: You know what Kevin and his people really object to and what they are really afraid of, in my view, and correct me if I'm wrong. They hate globalism, and I'll tell you why they hate globalization. They see globalization, which I would define as free trade plus also capital mobility and labor mobility, they see globalization as a threat to big government.

For example, globalization makes governments compete.

Peter Robinson: Cuts tax rates down.

Melvyn Krauss: Oh, yeah, they compete. What happens is, if any particular country imposes high taxes, a company can say, okay, a company can move to another country and export back to the market.

So if you have free trade--

Peter Robinson: It also undermines unions, no?

Melvyn Krauss: It also keeps unions in check.

Free trade constrains unions. The unions don't like it, because free trade constrains the unions. The left-wingers don't like it because it makes government compete for businesses. They don't like it because they think that free trade undermines environmentalism, and they're wrong in that.

And I've argued that free trade is not antithetical to environment.

Peter Robinson: Hold on just a moment. Kevin?

Kevin Danaher: On this democracy question, I would like to see the people in the corporations and in the World Trade Organization, I'd like to see them put 50,000 people out on the streets without paying them. Could they do that? And could they have as diverse a crowd as we had out there? No, they can't.

Melvyn Krauss: You guys are great at political theater. Political theater. I grant you that. You guys are terrific, and you're--

Kevin Danaher: We're mobilizing constituencies who represent the broadest spectrum--Seattle was the broadest spectrum of different constituencies. Every interest was out there. We had women farmers from El Salvador, we had--

Peter Robinson: That is a very narrow niche, I must admit, women farmers from El Salvador.

Melvyn Krauss: How about consumers in this country? Were they represented there?

Kevin Danaher: We were all consumers there.

Male Voice: I'm a consumer here. I wasn't there.

Kevin Danaher: Inside the convention hall was a pretty homogeneous group. They may have looked different, but they all ride in limousines. That's who's making the rules for the planet. And we're saying, look--

Peter Robinson: Let's look at the argument that the WTO fosters sweatshop labor overseas at the expense of American workers.

Loves Labor's Cost

We move production from the United States to Mexico. What happens? American workers are worse off, and the Mexicans are just engaged in virtual slave labor, such low wages, lousy working conditions, right?

Melvyn Krauss: Wrong. The whole idea of international trade is, international trade improves our well-being and the well-being of the traders because we take advantage of the specialization, international interdependence.

Peter Robinson: Okay, a factory moves from the United States to Mexico. How does that improve things?

Jerry Levine: Let me be specific about that.

Peter Robinson: I love a specific example.

Jerry Levine: In the five years since NAFTA, there are 600,000 new jobs in Mexico that didn't exist before, people who are working who didn't have jobs before.

Peter Robinson: Those would be known as formerly poor people, right?

Jerry Levine: They're still poor, but they were desperate before.

Peter Robinson: All right. So they're better off.

Jerry Levine: But they're better off in another way. Here's another way to look at the same people. Those poor underpaid people, a young woman may only earn $50 a week or $50 a month, it doesn't matter, selling jeans in Mexico, this is an actual example. She has four sisters who together in a month earn one-quarter of what she earns. They make tortillas. So these people have improved.

Meanwhile, as we pointed out, back in the states, we have the lowest unemployment we've ever had. We get those jeans back here, so that your kids can afford to wear them. So it really is a classic win-win.

Kevin Danaher: The average wage in Mexico is lower now than it was in the early 1970s. Mexico just went through its worst economic crisis over the past decade. The entire middle class was devastated.

Melvyn Krauss: Not because of NAFTA. NAFTA helped, it helped relieve the problem.

Kevin Danaher: If you look at the effect of NAFTA, the business classes in Canada, U.S. and Mexico all benefited. The middle class and the working class in all three countries got the shaft.

Melvyn Krauss: That's just nonsense. Based on what study? Where did you hear that?

Peter Robinson: Somebody stop and explain what NAFTA is. NAFTA is?

Kevin Danaher: North American Free Trade Agreement, signed between Canada, U.S. and Mexico. The way to look at it is not--you know we could pile up all sorts of statistics--

Peter Robinson: It's an example of increased free trade, but among those three countries.

Kevin Danaher: We go to these places. We see the impact. My wife just got back from visiting factories in Mexico. We had people in Chinese factories--

Peter Robinson: What did she find? She found poor people.

Kevin Danaher: Find people struggling, children as young as 12 years old working in these factories, because they're so desperate, so poor.

Melvyn Krauss: It didn't happen because of NAFTA. They would be 12-year-old poor people without jobs.

Kevin Danaher: That's a specious argument. That's like saying African-Americans had full employment under slavery. They were worse off in Africa before we gave them jobs on the plantation.

Melvyn Krauss: They are better off than they were before.

Kevin Danaher: Look, it's about sovereignty. It's about do people have control over their own lives? If you have big corporations dominating a government--

Peter Robinson: But if you're born in a desperately poor country, surely you don't have control over your life in any event. Now Jerry is making a very modest claim, which is that, as a result of freer trade, you get a job sewing jeans, it's not wonderful work, it's still extremely difficult work, your wages are still low, but you are a little bit better off, and in your desperate situation that is a tremendous improvement.

Kevin Danaher: It's based on a racist assumption--

Jerry Levine: Racist?

Kevin Danaher: Let me finish. It's based on the assumption that some people deserve a better standard of living than others, and others are beneath us.

Melvyn Krauss: I'd like to ask Kevin a question. If NAFTA has been so bad for the Mexicans, why don't the Mexicans withdraw?

Kevin Danaher: Because Mexico is controlled by an elite who they're benefiting from NAFTA. Do you think that is a democratic country? It's been a one-party state for over 50 years. It's the longest running one-party state in the world.

Peter Robinson: Kevin's point is that these governments engage--that in many of these Third World countries, the governments are run by plutocracies that are on the take, corrupt, so on and so forth. That they have every incentive to enter into agreements--

Jerry Levine: But in other countries, they are not run by such people, and they still want to be involved.

Peter Robinson: Next issue: does the WTO weaken environmental protections? Or does it not?

I Love the Smell of NAFTA in the Morning

Peter Robinson: We talked about labor conditions. What about the environment? Let me give you an example of a country under capitalism, and a country where there is much less economic development. And those two examples would be the former West Germany and the former East Germany.

And you go look at economic despoliation in those two countries, and the pollution, the misuse of the environment, in East Germany, where there was very little economic development, is a magnitude greater than in West Germany.

Kevin Danaher: Because it was not a democratic country.

Peter Robinson: You want democratic poor people?

Kevin Danaher: No, if you have a democracy, people have a chance to change policy. Lack of democracy means it's hard to change policy.

Melvyn Krauss: You know, Kevin is right. I can't argue with that, that democracy is an important thing. And I wouldn't want to be associated with the view that I'm against democracy; I'm in favor of democracy.

Peter Robinson: Stop the presses. He's in favor of democracy.

Melvyn Krauss: But let me get to the point of why the environmentalists are so hostile toward free trade; while a fellow like Kevin is up here sort of hawking the anti-free-trade line.

The answer is that they fear that the countries with low standards, that we'll import the low standards from other countries--

Peter Robinson: Low environmental standards?

Melvyn Krauss: Low environmental standards. For example, in NAFTA the argument was that we couldn't have NAFTA because the United States would adopt Mexican environmental standards. That's been argued by --

It's absolute nonsense. The economic evidence is clear. We have had NAFTA now for how many years? In five years our environmental laws have not been changed. In fact they have been made more stringent, not less stringent.

What's happened is, there have been some high environmental companies in this country have moved down to Mexico, but there has been very little effect.

These guys are saying that our environmental standards are going to be undermined by free trade, and they're wrong. I am an environmentalist. I would not--I'm very concerned about our environment. And I don't see a conflict between free trade and the environment.

Jerry Levine: I think the environment is of critical importance. I consider myself an environmentalist as well. I agree that the world is not doing what it should be doing to protect the environment. I don't ascribe that to free trade or the WTO, with one exception. And I do agree with Kevin that our government, among others, has not given a place at the defining table to the environmentalists as they ought to, and that the advisory council to the U.S. Trade Representative should include not simply representatives of an industry, but representatives of groups concerned with the environment.

Peter Robinson: But that's a relatively minor criticism about--

Jerry Levine: No, it's a serious one.

Kevin Danaher: It's a major one. Because if you subordinate the quality of the environment to commerce, commerce can destroy the environment.

Melvyn Krauss: I want to make a point. Jerry may be right. One of the reasons they may not be a part of it, though, is that they've been so hostile toward Free Trade for mistaken reasons.

Let me make one point. As a country gets richer, it tends to improve its environmental standards. And it would improve the economic well-being of countries like Mexico, of countries like Haiti, Puerto Rico, and so on and so forth, and your environmental standards would improve there as well.

And the way to make these countries rich is through free trade.

Kevin Danaher: The only way the free traders can argue that countries like Mexico are getting better is, they use macro data, GNP, increase in GNP. Well--

Peter Robinson: What else would you use?

Kevin Danaher: You've got to look at the inequality within the country. If a country is getting more and more unequal, that undermines democracy. You can't have democracy and inequality at the same time.

And think about the way GNP works. The Exxon Valdez contributed to GNP growth because all of that cleanup is a positive number.

So you're using a really stupid statistic. And then what they do is, they divide it by the population and say, GNP per capita, as if it's all one big happy family that shares equally in the economy. They don't.

Peter Robinson: Let me just try one more time. I could go through a hiking trip through Europe, Scandinavia, and the environment will be one way. And then I can go on a hiking trip through sub-Saharan Africa, and the environment will be not nearly as nice.

And the correlation is, one place I'm hiking in a rich area, and one place I'm hiking in an area where people are pool.

Kevin Danaher: Right, and we have to ask, where did that poverty come from? Did the poor create the poverty or did the rich create it?

Peter Robinson: Create it? It's wealth that you create. Poverty we're born into.

Kevin Danaher: Did the Europeans go to Africa and do slavery in Africa, or did the Africans colonize Europe? Look at the history. Five hundred years of violent distribution of wealth--

Jerry Levine: We can all agree we're against colonialism.

Kevin Danaher: The native Americans were destroyed. Slavery--

Peter Robinson: Mel and Jerry are in favor of democracy and the environment, and against colonialism.

Kevin Danaher: So we all agree.

Peter Robinson: Last issue. Does the WTO undermine American sovereignty?


Peter Robinson: Let me quote Ralph Nader, one of your favorite people, I know.

"The WTO means foreign regulation of America. It means any two dictatorships can outvote us. It means secret tribunals can rule against our laws."

You're in favor of free trade. But what about this undermining of American sovereignty?

Jerry Levine: But that's a totally false statement.

Peter Robinson: Okay, so we disagree with the premise. Where is Kevin wrong? Kevin said that the WTO is undermining our own environmental legislation.

Jerry Levine: That simply isn't the case. In the first instance, we voluntarily joined the WTO. In the second instance, they can't tell us to do anything. If another country lodges a dispute against us, it's adjudicated and an opinion is put out, after which we have a choice of ignoring the thing, in which case the other country can impose some tariffs on some of our products, but we can ignore it if we want to.

If we want to modify our laws in order to take care of that, we can do that. So we have--we still have full choice.

Typically in the case of the Venezuelan oil, we renegotiated the law in accordance with many of the environmental groups who agreed with the renegotiations.

Kevin Danaher: The standards were lowered.

Jerry Levine: The standards were not lowered; they were changed.

Kevin Danaher: To allow more aromatics, more poisonous gases.

Melvyn Krauss: See, this is a very important part of the discussion. Nader is right. Some of our environmental laws, some of our consumerist legislation, may in fact be protectionist, or have protectionist elements. And by that I mean, may discriminate against foreign business and in favor of U.S. business.

The purpose of these laws are not protectionist. The purpose of these laws are consumerist, to help the consumer. But they may have protectionist byproducts.

And what is going to have to happen, and the reason Nader hates the WTO so much, is that they're going to have to rewrite this legislation. And just like this Venezuelan case, they're going to have to rewrite it in such a way that it's not protectionist.

Peter Robinson: To the extent that the WTO pushes us around, you think that's wonderful...

Melvyn Krauss: In that case, yes. Because what you do is, you get two things: you get the consumerist legislation, and you get rid of its nasty protectionist element.

Peter Robinson: Consumerist legislation: I don't understand what you mean by that?

Jerry Levine: Something that protects us from polluting products coming from overseas.

Kevin Danaher: A basic principle of the WTO is that you cannot discriminate against a product coming into your national market depending on how it was made. So if it was made with child labor, or it killed sea turtles, or it killed dolphins, or whatever, you can't erect barriers to that product coming in because of the way it was produced.

So then the debate is, the debate is, who will define the conditions of production? Just the company? Or the public in a democratic way. And I favor more democratic processes.

Melvyn Krauss: I don't see, though, the conflict between that worry and free trade. All we have to do is change some rules and we can go after the people who are killing the dolphins and trapping the dolphins, we can go after them, great, let's go after them. But why go after free trade? You guys are focusing on the wrong thing. You are making a major strategic blunder.

Kevin Danaher: Mel raised this thing before about globalization. There are two kinds of globalization going on: one is elite globalization; the other is grassroots globalization. And there are two different perspectives. One sees a 2,000-year-old redwood as $300,000 worth of lumber. The other sees it as a gift of the Creator that needs to be protected.

Those are very different world views, and they're in conflict, and they're going to continue to be in conflict.

Peter Robinson: So we need to round it up. Let me ask you for a few predictions. Five years from now, will there be more international trade, or less?

Jerry Levine: It's totally clear. In every one of the last 50 years, the growth of trade has exceeded the growth of world production, with one or two exceptions, and there is no indication that that is going to stop. So whatever we want to do, we're not going to stop it, it's coming, let's try to run it rationally.

Peter Robinson: Kevin.

Kevin Danaher: I think there will be more of a question is, will it be fair trade that respects human rights and the environment, or just money money money.

Peter Robinson: You agree more? More trade?

Melvyn Krauss: Well, let me put it this way: free trade has a better future than Seattle does as a convention center.

Peter Robinson: Okay, Jerry, Kevin and Mel, thank you very much.

In part, our guests were arguing about the World Trade Organization, and in part they were arguing about world trade itself. Should consumers even have the freedom to put Venezuelan gas into American cars, or American beef into a French Big Mac?

I'm Peter Robinson. Thanks for joining us.