WTO 101: Myths About the World Trade Organization

WTO 101: Myths About the World Trade Organization

Before November 1999, few Americans knew what “WTO” meant, much less understood its workings. The World Trade Organization evolved from the General Agreement on Tariffs and Trade (GATT) and was officially created in 1995. Membership has now reached 135 nations and another 32 have applied for accession, including China and the former Soviet Republics. Current members span the spectrum of the world economy, from the poorest (Sierra Leone at per capita GNP of around $140 in 1998) to the wealthiest (Switzerland at $40,080), from the largest democracy on Earth (India) to the smallest dictatorship (Cuba).

The initial concern was tariff reduction. But lately the system has expanded to include governments’ uses of “non-tariff barriers to trade,” including anti-dumping measures, environmental and safety regulations, humanitarian sanctions against a country’s products, and restrictions on foreign investment. What distinguishes the WTO among international agreements is its Dispute Resolution Panel. The panel possesses far-reaching sanctioning powers over member countries, which it uses to ensure compliance with WTO commitments. No other international body has such strong enforcement capabilities.

The Seattle meetings were intended to produce an agenda for a new “Millennial Round” of negotiations. The aim was to expand the WTO’s mandate to cover a wider range of goods and services, including financial investments, education, and health care. The protests successfully derailed (at least temporarily) the next round, and the WTO and its supporters have been practicing serious spin control ever since. In the United States, trade officials now talk of “educating constituents” on the benefits of free trade. Within a week of the Seattle meetings, the WTO completely overhauled its Web site, incorporating a new “global town hall” and Letterman-like “Top 10 Lists” extolling the “benefits” and de-fogging the “common misunderstandings” of the WTO. The twin themes being advanced by the newly image-conscious WTO are global economic successes, combined with assurances of newfound transparency. The Seattle events pushed open the closed doors of global trade negotiations. For the first time, people around the world have the chance to become better informed about WTO-style globalization, and to demand more democratic participation and accountability in future negotiations.

In what follows, we look critically at some of the claims and assumptions made by the WTO and its supporters, ideas presented by the WTO as accepted knowledge, when, in fact, deep polemics surround these issues. For many of these claims, the best evidence is contradictory; for others, it’s simply nonexistent. We consider them as six key myths of the multilateral trading system.

Myth #1: It’s About Free Trade

One of the greatest economic illusions, proclaimed since Adam Smith, is that capitalism works best (that is, profit...