Trade Agreement Insights

The WTO at 13: A Work in Progress

Susan Ariel Aaronson, Ph.D., Institute for International Economic Policy

Americans have benefited significantly from membership in the WTO. However, it is difficult to assess the WTO's record because it has 3 very different roles. The WTO not only governs trade between 151 nations, but it also mediates trade disputes and it serves as a vehicle to stimulate trade negotiations. But the WTO is not equally successful at all these diverse tasks. The WTO has helped improve the rule of law internationally and encouraged more countries to adopt transparent market-based approaches to stimulating trade and economic growth. Americans have benefited from this system of rules as consumers, taxpayers, producers, shareholders and even as friends of the earth. However, although the WTO has made great strides as a global governance institution, it has been stuck in idle as a vehicle for trade negotiations. Its members have not done enough to help developing countries participate in the trade regime and benefit from trade liberalization. The WTO has had a hard time disciplining member governments such as the United States that maintain policies that may hurt the poor at home and in the developing world. Moreover, although the WTO has become more transparent in its global governance responsibilities, the process of trade negotiations remains closed and opaque. Thus, citizens may not see the WTO as acting in their interest. Not surprisingly, Representative Bernard Sanders and Representative Ron Paul have submitted a joint resolution to withdraw approval of the United States from the Agreement establishing the WTO.

The Charts below delineate our assessment of the WTO upon the US and upon American citizens. It is a relatively young institution and thus its members have not had much time to examine its problems and posit solutions. But its successes are significant and can serve as a foundation for reform.

Summary: Big Success at Implementing Rules, a Relative Failure at Achieving Results

Successes	Failures
WTO now governs the bulk of world trade. Today has 151 members. Over 32 new countries joined since 1995 including China.	Over a 10 year period, no new round has been completed despite multiple meetings and lots of pretty words.
WTO has successfully accommodated nations with divergent economic, social and political cultures and different expertise at governance.	Members promised to put needs of developing countries first, yet this is not happening. Little agreement on areas of concern to the poorest countries.
Nations are clamoring to join including Russia, Vietnam, Ukraine and Saudi Arabia.	Some members feel the size of the WTO has made it unworkable; consensus is difficult to achieve.
The WTO's dispute settlement mechanism has successfully resolved over 300 trade disputes.	Some countries, including the US have not complied with dispute settlement decisions.
The United States has litigated more disputes than any other country and won more of these disputes.	Members, particularly the US, seem to put more effort into negotiating bilaterals.
The WTO carries out its responsibilities with a relatively small staff at a relatively low cost.	Staff can do little to move negotiations forward.
WTO has successfully transitioned to new leadership. Leadership process viewed as legitimate and democratically determined.	The WTO does not work effectively with other organizations on globalization issues that cut across existing bureaucratic turf such as poverty, public health or trade in conflict zones.
WTO has proven flexible at dealing with global emergencies such as public health.	WTO rules and threats of disputes have not led to effective enforcement of intellectual property rights, particularly in China.
Members have done a remarkable job of converting nontariff trade barriers into tariffs, thus making such barriers more transparent.	Many developing countries are finding it hard to comply with all agreements (including services and intellectual property). The single undertaking may not have been in the interest of all WTO members.
WTO has successfully accommodated new sectors including trade related investment and agriculture.	Many developing countries are desperate for new rules governing agriculture yet average agricultural tariffs are over 61%, export subsidies continue; and agricultural supports have risen in the US.
WTO is beginning to accommodate environmental and human rights concerns. WTO approved the Kimberley trade waiver (only trade allowed in diamonds certified that no human rights were abused in mining or production).	No formal mechanism or means to negotiate trade implications of many human rights and environmental issues.
	Small countries have less clout in negotiations. Small countries are often poor. Poor countries have little leverage to get trade concessions in sectors they need.
	Trade policy review system could be used more effectively to prod changes in policies and enforcement.
WTO has begun to train policymakers in developing world how to enforce rules and participate in dispute settlement etc	Inadequate focus on capacity building

What Has Been the Effect of the WTO on the American People?

Summary: Americans Have Benefited Significantly From the WTO, but the US Has Not Consistently Applied WTO Rules

Positive Effects (Benefits)	Negative Effects (Costs)
As taxpayers, consumers, and individuals saving for investment through stocks, many Americans have benefited from economies of scale and scope in lower prices and rising share prices.	As workers and friends of the earth, and as citizens concerned about human rights, Americans have legitimate questions about the unwillingness of WTO members to address social and environmental issues within the purview of the WTO.
As citizens, American people benefit from a clear transparent system of rules governing trade between nations. American ideals of transparency govern WTO's work as a global governance institution.	As citizens, Americans may not benefit from WTO's failure to discipline US proclivity to cut bilateral deals. These deals often enshrine existing protectionism and undermine multilateralism.
Taxpayers get global governance on the cheap: a staff of 630 and a budget of 169 million Swiss francs.
American citizens benefit from the glacial nature of WTO decision-making. The WTO moves by consensus. US benefits by successfully working in a system where it must convince rather than direct its trading partners to see its perspective on various issues.	Some Americans may be hurt by the slow deliberative nature of negotiations and trade decision making.
Americans have not lost their ability to influence government decisions. WTO has in no way undermined US sovereignty. US retains ability to ignore WTO decisions and accept retaliation, compensate, or change policies.	Americans will not benefit when the US ignores WTO rules despite obligations. This undermines US credibility at home and abroad.
	US farmers and consumers may lose from the members of the WTO's failure to complete agricultural negotiations. Meanwhile, the US has not worked to find to find new ways to support farmers without distorting trade and without making it harder for developing countries to export food and other commodities.

Do Americans Agree with Trade Agreements?

Susan Ariel Aaronson, Ph.D., Institute for International Economic Policy

Overview: The Economic and Political Context

Americans are deeply concerned about the economy. Voters want candidates to show what they can do to help investors create jobs, stave off a recession, stabilize the U.S. stock market and halt the never ending ascent of oil prices.[1] Few Americans see the solution to these problems in new trade agreements. But trade agreements at the bilateral and multilateral level can stimulate economic growth in the U.S. and abroad. Over time, more exports generally mean firms can hire additional workers and reap what economists call economies of scale and scope. They can produce more goods and services more cheaply over larger markets. And this in turn often leads to higher profits and higher stock prices. Every so gradually, the economic growth linked to multilateral trade liberalization may help more Americans save for their children's education, their retirement, and afford houses, healthcare, and consumer goods.

But many Americans do not "see" or "realize" the benefits of trade agreements until years after their approval. Moreover, individual bilateral and regional trade agreements have little impact on the American economy as a whole, although they can have both a positive or negative impact on specific sectors.

Today, trade is increasingly contentious. The American public is generally pro-trade, but frightened by trade agreements. Voters want policymakers to do a better job of enforcing existing trade agreements. Moreover, Americans have little understanding of what trade agreements do, why the U.S. negotiates so many trade agreements, and how these agreements affect them in their many roles as citizens, taxpayers, friends of the earth, producers, consumers, parents, etc…[2]

View an introductory PowerPoint presentation on "What Are Trade Agreements and What do They Do?"

Policymakers generally talk about trade agreements as "opening markets" or freeing trade. In addition, policymakers argue that trade agreements create jobs or help to set a "level playing field" for U.S. producers in foreign markets. These CAN BE side effects of trade agreements. But trade agreements themselves do not free trade.

Trade agreements facilitate expanded trade because they allow two or more nations with very different governance systems, funding, will, and expertise to find common ground on the many rules (from health and safety standards to procurement policies) that can affect trade flows. Thus, trade agreements increasingly affect domestic regulations that may, without intent, distort trade. Trade agreements essentially reregulate relations between countries. They set common rules regarding how and when nations can apply regulations that distort trade. They also allow U.S. interests to participate in and influence foreign decision-making in areas related to trade (thus this includes labor conditions in China or environmental conditions in Guatemala). In so doing, they make foreign governments accountable not only to their citizens but to foreign market actors. In countries that have long been opaque and relatively undemocratic such as Saudi Arabia (which just joined the WTO), they create new norms of due process and transparency. Thus they are essential tools to improve governance as well as stimulate economic growth.

In the next few months, Congress will vote up or down on trade agreements: with Colombia Panama, and Korea. Congress has problems with each agreement. Members are concerned about labor rights and extra-judicial killings in Colombia; while auto-trade and food trade issues make the Korean agreement contentious. The Panama agreement is expected to be approved, but it too has political problems. The Panamanian National Assembly elected as leader a man wanted in the U.S. for the murder of a U.S. soldier. Meanwhile, U.S. trade negotiators are continuing to negotiate the Doha Round of trade talks under the WTO-the multinational trade agreement adhered to by 152 nations.[2]

These web pages will provide Americans with some of the information they need to make informed decisions about trade agreements, what these agreements do and include, and how they affect Americans in their daily lives. We will also answer why the U.S. participates in so many (over 400 as of 2006), and whether or not these trade agreements undermine our sovereignty or undermine our economy. We will be discussing why the Bush Administration has focused on these bilaterals, but won't address the specifics of these bilaterals. Finally we will also link to a wide range of sources on trade agreements such as www.tradeagreements.org and www.bilaterals.org. Finally, as this is an educational site, we want to make our own biases known up front. We believe trade agreements are essential tools to help make globalization both more equitable and efficient, but we also believe the dialogue about trade agreements is incomplete and at times dishonest. Thus, we created these pages to help you come to your own conclusions. We hope that these pages will give you the tools to understand what the candidates say about trade policy. (Please see table below) We will also link to summaries of the candidates' views on trade.

We welcome your questions and suggestions.

Summary : The Candidates On Trade and Human Rights And the George W. Bush position

Issue	Obama	Clinton	Romney	McCain	Huckabee	George W. Bush
Overall View of Trade	Trade is good, but needs a broad rethink	Trade is good, but we need to review existing agreements, maybe take a timeout?	Trade is good	Trade is good	Trade is not creating enough opportunities and is not 'fair' for many Americans	Trade can stimulate democratization and economic growth
Labor rights in Trade Agreements (A,B)	Yes, ILO standards	Yes		No	Talks about 'fair trade'	Link in bilaterals, but not WTO
Colombia Free Trade Agreement	No	No	Yes	Yes		Yes
End Cuba Embargo? (C)	Yes	No	No	No, but add incentives for democracy	No	No
Increase sanctions on Burma?	Yes	Yes		Yes
Trade as tool to promote democracy? (A)				League of democracy	U.S. should not export democracy	U.S. should explicitly link trade and democracy
Revisions to Trade with China	Link trade and labor rights	Link trade and workers rights	Enforce Intellectual Property Rights (IPR)		Link trade and human rights	No explicit link

Sources: Candidates web sites and (A)- William Shultz, Center for American Progress, "Presidential Candidate Positions on Human Rights"; (B)- Iowa Fair Trade Campaign, http://www.iowafairtrade.org/labor.php; (C)- on Cuba, http://www.cfr.org/publication/14758/; (D)- on trade and poverty, One Vote 08, at http://www.onevote08.org/ontherecord/, (E)- Candidates on China, http://www.cfr.org/publication/14759/candidates_on_us_policy_toward_china.html
All last searched 15 January, 2007.

[1] http://www.washingtonpost.com/wp-srv/politics/polls/postpoll_020308.html?sid=ST2008020400314 ; also see polling data cited by Edward Luce, "Economy to Dominate U.S. Presidential Race," Financial Times, 14 January 2007, www.ft.com/cms/s/b090ac46-c2d0-11dc-b617-0000779fd2ac.html and Peter Baker and Dan Balz, "Economy Slumps to the Top of the Campaign Agenda," Washington Post, 11 January 2007, www.washingtonpost.com/wp-dyn/content/article/2008/01/10/AR2008011004055.html.

[2] For an interesting albeit short summary of 2007 polls on trade, see http://benmuse.typepad.com/custom_house/2008/01/2007-trade-poll.html; also see Mark Champion, "Fewer Americans Favor Free Trade, Study Finds," Wall Street Journal Online, 5 December, 2007, which reported on the German Marshall Fund Study.

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