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February 2000
Volume 18, Number 2

Birth of the WTO
James M. Sheehan

The city of Seattle, which had planned to make money on hosting the World Trade Organization, wound up trying to cut its losses by asking the WTO to end its conference early and leave town. Self-described free-traders who helped to create the WTO ought to be feeling the same way. The organization that writes the rules of world trade is now the focus of nearly every unionist, environmentalist, and capitalist-hating pressure group in the world.

Some want to eliminate the WTO, but most want the WTO's Supreme Court-like power over the global economy enhanced even further. In response, political leaders are vowing to expand the WTO's powers to dictate what minimum wage must be paid, what kinds of energy may be used, and how much competition will be tolerated.

Meanwhile, the only strong resistance force to this trend is made up of developing countries. Their trade officials understand that globally mandated labor and environmental standards would rob them of their comparative advantage and shut them out of the world market. Staying integrated in the world economy is the only prospect the poor in these countries have. Leave it to the self-appointed saviors of the oppressed to propose regulations that oppress people even more.

How did the global trading system become so identified with government intervention and international planning? The whole disaster could have been averted easily, if not for the efforts of Congressional Republicans and misguided advocates of the free market.

The WTO was created in the confusion of the post-1994 election, lame duck Congress. With the GOP sweeping to victory for the first time in forty years, the Uruguay Round trade treaty was in grave jeopardy. Bill Clinton resorted to desperate measures in order to get it passed into law. Unlike other treaties, which require a two-thirds Senate ratification under the Constitution, the WTO pact was to be passed by a simple majority vote. Clinton called a special session of Congress to meet for the sole purpose of passing the WTO under these extra-constitutional procedures. The newly ascendant Newt Gingrich was put in de facto control of the House vote.

The GOP faced a crucial decision. They could either: a) postpone the WTO vote until the newly elected Congressmen took office, allowing them to deliver a knockout punch to an already humiliated Clinton administration; or b) pass the WTO at the urging of DC's top dollar business lobbyists, and try to take credit for the idea themselves.

Beltway opinion leaders chose the latter course. Bill Kristol, then the author of a highly influential fax service called Project for the Republican Future, counseled Gingrich to cave in. Wouldn't it be a noble act of statesmanship to promote "free trade" in a bipartisan manner, laying the groundwork for cooperation in the next Congress? Clinton could even be praised for his commitment to open trade and economic growth.

In hindsight, this sounds hopelessly naïve, but at the time, advice like this was considered ingenious. There was one problem: Bill Kristol was merely pushing a political strategy; he hadn't actually read the treaty himself. I know, because he had earlier sent his aide to my office to gather information on the treaty from various groups in order to determine his own position.

Other Gingrich intimates advised the next House Speaker to argue that the WTO was a "tax cut." When I confronted Gingrich at a National Review celebration of the 1994 election, he defended the WTO on this basis, despite knowing full well that the implementing legislation "paid for" every penny of the meager tariff cuts with offsetting tax increases on the American people. His blatant and public lie received a standing ovation from the National Review audience.

Clinton's chief trade negotiator, Mickey Kantor, delivered a major speech at the Heritage Foundation in which he lavished praise on a policy paper endorsing the WTO by Heritage trade analyst Joe Cobb. Shortly thereafter, Time magazine read the Cobb paper and discovered that it bore a striking resemblance to a government position paper published by Kantor's agency.

Other Beltway think tanks rushed to endorse Clinton's trade cartelization scheme. Cato Institute analyst Jerry Taylor attacked anti-WTO forces for their "paranoia" about WTO power; besides, he said, they were "wrong about Nafta." This same analyst once published a lengthy defense of Nafta for Cato, parts of which were later found to include a legal analysis by Beltway lawyers Kenneth Berlin and Jeffrey Lang (who later became an assistant US trade representative in the Clinton administration).

As for Nafta, its opponents were exactly right. Nafta's currency fund led to the peso bailout, and its side accords led to tighter environmental regulations in Mexico. Had Republicans in Congress ever mustered the courage to deregulate, the White House had what Kantor called Nafta's "anti-rollback provisions" to thwart them.

The failures of Nafta and the WTO may never sway those who maintain an almost religious faith in government trade negotiators, which represented what Wilhelm Röpke once called "false internationalism." They want us to believe, against all experience, that trade bureaucracies will promote economic freedom instead of cronyism and corruption. Someone once made the same claim about the federal government.

While the WTO's failure in Seattle was a setback for government bureaucrats, it was meaningless for the vast majority of American entrepreneurs and consumers. Government-to-government trade negotiations simply do not benefit them. The kind of contacts they need to make international trade flourish are with actual importers and exporters who are driven by the desire to get consumers what they want at a price they are willing to pay.

For example, Microsoft chairman Bill Gates was invited to the WTO conference, but he found the invitation a nuisance, not a business opportunity. What can a bunch of regulators and government officials offer to a successful entrepreneur other than a blueprint for global antitrust rules? Indeed, what can the WTO truly offer any business other than more entangling bureaucracy?

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James M. Sheehan attended the first World Trade Organization ministerial conference in Singapore and wrote about his experience in The Free Market.

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