TRADE REALITIES IN THE AFTERMATH OF SEATTLE

TRADE REALITIES IN THE AFTERMATH OF SEATTLE

The key question arising from the spectacular failure of the Seattle ministerial meeting of the World Trade Organization is how to reformulate a U.S. liberal trade strategy that will gain public support.

Seattle was a watershed for the multilateral trading system of the past half-century, and the post-Seattle realities have to be factored into such a policy reassessment.I offer five observations as a point of departure:

1. United States-European Union leadership is in disarray.

Trans-Atlantic solidarity, despite perennial differences over agriculture, has always been essential for multilateral trade liberalization. But it was sadly lacking during the 18-month run-up to the Seattle meeting.

A European minister told me in Seattle that such United States-EU solidarity is no longer necessary or appropriate because it can be viewed by developing countries as hegemonic. I disagree, but re-establishing a common WTO strategy with Europe will require serious joint strategic thinking about trade and related economic issues.

2. Developing countries have a more central role in WTO deliberations.

This was evident throughout the Seattle meeting, on the streets and in the conference hall. Developing countries, particularly the emerging market economies, have become fully engaged in the WTO, but their enhanced engagement involves inner conflicts and a basic role reversal.

In the 1960s and 1970s, developing countries viewed the free trade-oriented General Agreement on Tariffs and Trade as contrary to their interests. They sought instead a more statist ''New International Economic Order.''

Now they are almost all WTO members or applicants and see multilateral trade liberalization as critical to their economic advance. But little was offered at Seattle that would benefit their exports.

A former Indian commerce minister described the change to me in blunt terms. Developing countries used to have a free ride in the GATT, he said. They made few commitments for access to their markets while reaping the benefits of progressive reductions in trade barriers by the industrialized countries.

This began to change in the Uruguay Round (1986-1995), and at Seattle the industrialized countries were making far greater demands on the developing countries than visa versa.

3. The WTO is a more difficult negotiating framework.

This, too, was evident in Seattle through the much larger, unwieldy membership and emerging political coalitions, especially among developing countries.

The institutional difficulties will only grow over the next several years, as China and Russia ultimately become members, and as the WTO director-generalship shifts to developing countries. Chinese membership, for example, would put to rest any lingering U.S. hopes to bring core labor standards within the WTO.

4. The U.S. three-track trade strategy has a weakened multilateral track.

Since the mid-1980s, U.S. trade strategy has consisted of mutually supportive initiatives at the multilateral, regional free-trade, and bilateral levels.

As a consequence of Seattle, prompter results from regional free-trade and bilateral initiatives will be more appealing, but this raises basic questions of timing and substance, especially between the WTO multilateral and free-trade tracks.

5. For the WTO, environmental standards are more clearly in, and labor out.

This is the least apparent and most controversial observation in the immediate aftermath of Seattle, but the dichotomy has been building for several years.

Environmental standards have been inside the GATT/WTO for two decades, with a standing trade/environment committee. There is broad recognition that trade sanctions can be appropriate to support multilateral environmental agreements. The sticking point is that the United States wants to reserve the right to impose unilateral sanctions.

Core labor standards, in contrast, have never been inside the WTO, principally because of the implied recourse to sanctions that all countries except the United States reject.

At the 1997 WTO Singapore ministerial, the United States agreed that sanctions were not an appropriate policy instrument for improving core labor standards, and that the ILO rather than the WTO was the proper organization for addressing them. The United States made another try at Seattle, but this was likely the last attempt if there is ever to be a new WTO round.

It is not too soon for presidential candidates to factor these post-Seattle realities into a revised, comprehensive U.S. trade strategy. The next WTO ministerial, most likely in late 2001, will be an immediate challenge for the new administration.