WASHINGTON — WASHINGTON -- In 1994, the United States and 124 other nations formed an organization to police world trade. In the process, they seemed to agree that globalization -- the technology- and communication-driven integration of world economies -- was an unstoppable force.
Except now there are second thoughts.
Free trade and the global marketplace are again the subject of debate and threaten to be a major topic in American presidential politics. Divisions within the Democratic Party on trade issues have already chilled the Clinton administration's eagerness to expand the North American Free Trade Agreement. In addition, efforts toward new worldwide trade talks are stalled.
That seemed an improbable outcome when officials signed the pact that slashed tariffs and created the World Trade Organization, a Geneva-based agency that decides trade disputes. The agreement was eight years in negotiation and marked the culmination of five decades of trade liberalization that followed World War II. It signaled a broad consensus that the world was moving inexorably toward one market, enhancing global peace and prosperity.
To a large extent, the agreement has delivered on its promises.
"My general assessment is positive," says I. M. Destler, director of the Center for International and Security Studies at the University of Maryland's School of Public Affairs. "It has established itself as an important place for the settlement of disputes. It is employed by a wide variety of countries, including the United States. And the general pattern is for countries either to settle cases out of court or to accept the findings" reached by WTO panels.
The United States in particular has enjoyed a trade-driven period of economic growth and has made greater use of the WTO's trade dispute system than any other country. But critics haven't been silenced -- and new voices are joining the chorus of those questioning whether unfettered trade among nations is always a goal worth pursuing.
Two recent additions are financier-philanthropist George Soros and author William Greider.
Soros became a billionaire from the very essence of world commerce: currency trading. But in a widely cited article in the February issue of Atlantic Monthly, he bites the hand that bestowed his wealth, saying it undermines his new, cherished goal of a "civil society."
"Too much competition and too little cooperation can cause intolerable inequities and instability," Soros writes. Nations, guided by the principal of survival of the fittest, "are unwilling to make any sacrifices for the common good."
He argues that the global system needs to be tempered by "the recognition of a common interest that ought to take precedence over particular interests."
Greider, a Rolling Stone editor who revealed the candid musings of Ronald Reagan's first budget director, David A. Stockman, is more alarmist. He writes that the global economy has reached a "pathological" stage, threatening to create far more goods than there are consumers and to produce large-scale unemployment and financial crisis.
"Certainly, enormous conflicts lie ahead for the peoples of the world, political and economic collisions, possibly including the violence of wars between rival economies," Greider writes in his well-received book "One World, Ready or Not: The Manic Logic of Global Capitalism."
His prescription: National controls over capital, worker-controlled businesses, increased taxes on wealth, compulsory trade balancing and debt forgiveness for the poorest countries.
Even nations that led the way in creating the new trading regime are contributing to the strains.
The European Union has formally challenged a U.S. law, co-sponsored by Sen. Jesse Helms, Republican of North Carolina, and Rep. Dan Burton, Republican of Indiana, that penalizes foreign companies that invest in and trade with Cuba.
Cuba matters little to Europe economically. But Europeans fear that if the United States gets away with Helms-Burton, it would be tempted to impose penalties for trading with other countries that Congress doesn't like.
One threat is a new law, named for New York Republican Sen. Alphonse M. D'Amato, that penalizes firms investing in Iranian and Libyan oil development.
"We want to stop D'Amato and all possible follow-ons," says Hugo Paemen, the EU ambassador in Washington. "The problem is that once you accept that it is allowed in international TTC economic relations that you apply your domestic law in an extra-territorial way -- today it's the United States with Cuba -- who is going to do it tomorrow?"
After firing their opening salvos, the United States and Europe have been worried by the danger that the dispute poses to the world trading system and are scrambling to reach a settlement.
As they do, however, an even bigger controversy looms: whether to admit China to the WTO. While in principle open to admitting China, the United States and other major powers oppose allowing it to enter as a "developing" nation, meaning that it would be forgiven certain anti-competitive trade practices. Instead, Washington wants China to make its trade practices at least approach industrial-world standards.
But in return for reforms, China might demand an end to Congress' annual vote on granting Beijing favorable trade status. Many in Congress would oppose such a major concession, citing China's extensive record of human rights abuses, including use of prison labor, and its large trade imbalance with the United States. But keeping what could become the world's largest economy out of the free-trade club could pose a serious threat to the durability of the global system.
Other threats to globalization are percolating as well, including fears that expanding world trade will harm the U.S. labor force.
Howard Rosen, executive director of the Competitiveness Policy Council, a federal advisory group, argues that the U.S. government needs to assume a much more active role in training and retraining the American work force so it can thrive in a global economy. "Existing U.S. labor programs are too small, inadequate and short-sighted to support this flexibility," he writes.
And the huge disparities in the treatment of workers between the industrialized and developing worlds have scarcely been addressed. Governments in the industrialized world are downsizing, leaving them with less money to soften globalization's social costs at home.
Even less is available for the impoverished populations of developing nations. As these nations slip further behind economically, many are driven to exploit natural resources to the overall detriment of the world's environment.
"Free trade is not the ultimate rule for the international economy," says Wolfgang Reinicke, a senior scholar at the Brookings Institution. "Other rules may have to be taken into account."
Pub Date: 4/08/97