The Eleventh Ministerial Conference (MC11) of the World Trade Organisation (WTO) in Buenos Aires, Argentina (December 10-13, 2017) ended in a chaos. It failed to produce even the most customary document - a ministerial declaration that normally includes references to the centrality of the global trading system and to trade as a driver of development.
Driven by President Donald Trump's "America First" strategy and a preference for bilateral deals, the United States Trade Representative (USTR) blocked the drafting of a perfunctory ministerial. The USTR Robert Lighthizer refused to engage in promised negotiations on a permanent solution on the use of food reserves by India and other countries for food distribution systems. Unfortunately India's National Food Security Act, the most ambitious food security initiative in the world, with its plans to buy food grains from small-scale farmers to distribute to some 840 million poor Indians, became controversial since 2013 but the US and other industrialised countries, themselves engage in subsidising their own farmers. The failure of MC11 means very little prospect for an orderly expansion of trade, and balanced global economic recovery.
As a matter of fact, the dejection of WTO by the US began much earlier. For example, the Obama administration undermined trade multilateralism by its unwillingness to honour the compromise which initiated the Doha Development Round. By pushing to conclude the US-led Trans-Pacific Partnership Agreement (TPP) before the mid-December 2015 Nairobi WTO ministerial, the USTR Michael Froman wanted to derail the WTO Doha Round of trade negotiations. The US and its European allies hurled the WTO into an existential crisis with their demands for the addition of previously rejected agenda items on which WTO members could not agree after 14 years of negotiation.
Following the Seattle WTO ministerial failure, the Doha Round negotiations begun in late 2001, after 9/11, with the promise of rectifying the anti-development and food security outcomes of the previous Uruguay Round. Ending the Doha Round inconclusively will enable WTO members to renege on promised concessions to bring all countries back to the negotiating table. Not surprisingly, most developing countries want the Doha Round to continue, hoping to finally realise the 2001 promises to rectify the Uruguay Round outcomes, which have undermined food security and development prospects.
THE DOMINANCE OF US CORPORATE LOBBY: Interestingly, it was the US which also killed the first attempt at creating a truly inclusive and developmental post-World War international trade organisation (ITO). Ironically, the idea for such an organisation was born in the US congress itself, dating back 1916.
In 1946, the US proposed to the United Nations Economic and Social Council for a conference to draft a charter for an ITO, as the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD), the two institutions created at the 1944 Breton Woods conference with broad regulatory powers to provide short and long-term finance to stabilise the international order could not be expected to do all the work. Therefore, a third international organisation was needed for the regulation of trade, including areas such as tariff reduction, business cartels, commodity agreements, economic development and foreign direct investment.
The US State Department officials prepared the draft charter for discussion at the first session of the preparatory committee to the UN Conference on Trade and Development. However, the US officials made significant concessions to accommodate the views of the underdeveloped countries with the strategic aim to extend US's range of alliances even at the expense of its closest ally Great Britain. And the ITO Havana Charter's final text was signed by 53 countries, including the US, on March 24, 1948.
There was a general unwillingness of the underdeveloped countries to give guarantees to the security of foreign investments. And in some quarters, there was also a feeling that such capital in itself was suspect, and a likely tool of foreign exploitation. The Havana Charter's rule that the foreign investments could not be expropriated or nationalised except under "just", "reasonable", or "appropriate" conditions was interpreted by the US businesses as weakening the protection that US investments previously enjoyed. Thus, the Havana charter lost crucial support from the US business lobby. The US's concession on the use of quantitative restrictions in the interests of economic development was also seen as a deviation from the canon of free trade.
By 1949, US political elites and corporate lobby reached the consensus that American interests and investment rights were not well protected in the ITO Havana Charter. To them, what had begun as an "American project" no longer remained so once the underdeveloped countries became involved in designing the ITO.
Therefore, the Republican-dominated Congress opposed its ratification, and what seemed certainty only months earlier ended in failure by December 1950.The ITO did not survive American trade politics despite initial US sponsorship and signing the Draft Charter in Havana. A coalition of protectionist and perfectionist critics of the Charter convinced President Truman to withdraw the draft treaty from the Congress, reneging on his Administration's international undertakings to support the ITO.
CONSEQUENCES OF ITO'S STILLBIRTH: The envisioned ITO was not simply or mainly a trade organisation like its descendent, the WTO. At its core, the countries of the world rejected the idea that it was possible to maintain a firewall between trade, development, employment standards and domestic policy.
The ITO Charter embedded the full employment obligation, along with "a commitment to free markets" as the cornerstone of multilateralism. It was driven by the powerful idea that people mattered even more than export or investment opportunity. It projected a new vision of international political economy that a trade and investment regime had to be more than an abstract set of rigid legal principles with which to defend investors' rights at any price.
The negotiators at the Conference recognised the need for domestic and international measures, including international policy coordination for "…the attainment of higher living standards, full employment and conditions of economic and social progress development" as envisaged in Article 55 of the UN Charter.
Thus, its success would have obtained international security of employment as a critical benchmark for recasting the principles of trade. As a direct consequence, the ITO's collapse represented a significant closure of the full employment era internationally.
In a series of remarkable essays written during 1944-1946 addressing the future of trade and employment in the post-War world, The Economist, a vocal and persistent champion of laissez-faire free trade, recognised the need to compromise between market forces and the democratic aspirations of people. The demise of ITO made possible the rapid return of the free trade canon that imposed its authority and ideology on all international organisations and on the practice of multilateralism.
Richard Toye, a leading economic historian, summarised what would have happened had the ITO survived as follows: "The ITO might have been a more attractive organisation for underdeveloped countries to join, which might, in turn, have promoted less autarchic/anarchic trade policies among them with additional growth benefits. This development might, in its turn, have given a further boost to the impressive post-Second World War growth in world trade … At the same time, the Havana charter's exceptions to free-trade rules, especially those made in the interests of the economic development of poorer countries, might have helped to reduce global inequalities."
That is, the ITO might have produced a more inclusive, productive, orderly, and just world economy than that which later emerged. Therefore, one could say that the root cause of the discontents with the latest phase of globalisation and the consequent rise of populist identity politics lies in the ITO's stillbirth.
Anis Chowdhury, Adjunct Professor at Western Sydney University and the University of New South Wales (Australia), held senior UN positions in New York and Bangkok.
