Towards a High Road International Trade and Development Policy

Introduction

In my remarks, I will describe:

• my organization, the Center for Labor and Community Research;

• my assumptions about what kind of international development we need;

• my critique of the WTO as an example of Low Road International Trade and Development Policy;

• and my suggestions for a High Road International Trade and Development Policy.

My Organization

The Center for Labor and Community Research emerged from the industrial crisis in this city in the early 1980s. We are now a community development organization specializing in work with manufacturing companies in partnership with labor, local businesses, community groups, and government. We work in Chicago and around the country.

• The heart of our approach is identifying local assets that are undervalued, mismanaged, abused or discarded by others and developing them. We believe in and promote local control of the local economy. We are in favor of partnerships with national and international companies and organizations, but under terms which promote local development and control.

• In Chicago, we have seen the internationalization of our economy in the last 20 years. Companies that were locally owned and had a local identity and commitment were replaced by international companies that, in many cases, turned out to be poor stewards of the institutions that our residents took decades to build.

• Stewart Warner was purchased by BTR and moved to Mexico costing 1,500 good jobs;

• Leaf was purchased by Hutamaki Oy and finally closed, costing 800 jobs.

• Brach was purchased by a Swiss owner and now employs 2,000 less employees.

• And of course, Frango Mints became a victim in the purchase of Marshall Fields by Dayton Hudson.

• And the same thing has happened in urban and rural communities around the country and the world. Just at the point where we are developing effective strategies to redevelop and stabilize our local communities, we are faced with new international business pressures that are accelerating the destructive polarization of our local economies-one being the policies and practices of the WTO.

• The "Battle in Seattle" brought the public into the public policy debate on trade and international development. The Chicago Council of Foreign Relations is continuing this vitally important discussion with this forum tonight.

• This is what building an international civil society is all about-bringing a broader and broader number of people and organizations into discussion and debate on the critical issues of our time-even complex issues like international trade.

• Already the debate on WTO is transforming the participants. As an ex- steelworker, I'm amazed and pleased with the effort of that union in particular--and the labor movement in general--to take on complicated issues and to create new alliances even with turtle lovers and tree huggers. There is a huge change taking place in labor - its shift from a traditional protectionist perspective to a more complex view on development.

My Assumptions

I am in favor of globalization, international trade and development, and growth that are driven by high road values and priorities, not low road values and priorities. Let me explain.

• I'm in favor of dramatically expanding international trade of goods and services. But we must always acknowledge the unbreakable linkage between "trade" and "development." Trade always gives rise to increased social, political, and economic ties between the people, and countries who engage in trade reflect the values, priorities, and power of the participants.

• We must have a trade policy that promotes the sustainable development of all countries and promotes good relations and peace. What do I mean by "sustainable development?"

• Economic sustainability: Just talking about jobs is not enough. Slavery was full employment. We need jobs that build our communities and society, not degrade them.

• Social sustainability is overcoming the costs and impact of discrimination by gender, race, nationality, and class.

• Environmental sustainability is ensuring that we don't poison the communities where work is done, create harmful products, but sustain our natural resources, etc.

• And of course all these issues are linked. As businessman and environmentalist Paul Hawken said, "the most important environmental demand is a living wage job."

• Promoting sustainable development is what I call the High Road, and development that degrades communities and people is what I call the Low Road.

• Despite the common demagogy about "free markets," all markets are constructed and constrained by rules. There is no such thing as "free trade" or a "completely planned economy" for that matter. I want rules in commerce and trade that promote sustainable development, democracy, and the growth of civil society.

• Again, I am in favor of "growth" but "growth" is a speed, not a direction. Cancer represents growth but it will kill you. On the other hand, we like to see children grow and develop. The same choice faces us in international development. To say we want growth is not enough. We must define the kind of growth that is our objective.

And what kind of world has been created by current trade and development policies like the WTO?

We now live in both the best of times and worst of times--it just depends who you are.

• The personal assets of Microsoft co-founders Paul Allen and Bill Gates plus Berkshire Hathaway's Warren Buffet exceed the combined gross domestic products of the world's 41 poorest countries with their 550 million citizens. The wealth of the Forbes 400 richest Americans grew by an average $940 million each over the past two years (a combined $1 trillion) while the net worth of the bottom 40% shrunk by 80% between 1983 and 1995. For the rich, that's a raise of $1.3 million a day or $225,962 an hour.

• United Nations Secretary General Kofi Annan commented on the globalization of the world economy and challenged the common view that we are living in prosperous times. He pointed out that 80% of world trade flows among 12 countries and 100 countries are worse off today than they were 15 years ago. More than 1 billion people saw their per capita income decline between 1980 and 1993.

• These conditions will inevitably give rise to calls for a new order to end the misery of the majority. And some of the calls will take hold and move people to action. There is no guarantee that the action proposed will be constructive and progressive-it can be criminal or reactionary and last for decades, as we have seen. This is the compelling long term reality that must drive our discussion on WTO.

WTO is the Low Road

In this context, the terms and role of international trade are a key factor. The current WTO is a Low Road approach to international trade and development in its anti-democratic and secret process and procedures, and in its impact on the less developed countries and communities of the world including those in our own country.

First, how is the WTO used?

Each of these examples are complex stories that we can pursue in the next section of the discussion, if you wish. But each of them demonstrate how the power of the WTO has turned back progress not only for the particular country, but the world. The following examples come from an excellent book, Whose Trade Organization? by Lori Wallach and Michelle Sforza and published by Public Citizen.

• It has been used by the Gerber Baby Food company to force the government of Guatemala to back down in a program to promote breast feeding by young mothers to lower infant mortality.

• It has been used by the Clinton Administration in collusion with Chiquita Bananas to stop the European Union from setting aside 7% of its purchase of bananas from its ex-colonies, as a way to insure local stable economies.

• It is being used to stop the state of Massachusetts from refusing to purchase products from Burma that is now ruled by a military junta and grossly violating international labor standards. This is an action similar to those taken by the world-wide community against South African apartheid.

• It is being used to block the implementation of a South African law that was passed by Nelson Mandela in an effort to deal with the AIDS crisis.

• It is being used to force the U.S. to relax standards on limits on gasoline contaminants because of a challenge by Venezuela. (Whose Trade Organization [WTO] by Public Citizen, p. 21)

• The WTO forced the US to weaken its laws designed to protect dolphins in tuna fishing because of a challenge by Mexico. (WTO p. 23-24)

• The WTO is being used to force the EU to abandon high standards for curtailing electronics industry pollution. (WTO, p. 30)

• The US, with the support of Ford and Chrysler, has challenged Japan's commitment to fuel efficiency in the Kyoto protocols that set high standards for car efficiency to reduce emissions. (WTO p. 31-33)

• Hong Kong has made a WTO challenge to US and Chicago restrictions of the nasty beetle that killed 500 trees in Ravenswood. (WTO p. 38)

• The US is threatening WTO action against European countries, Japan, and Australia against labeling on food that contains Genetically Modified Organisms. (WTO p. 90)

• And in cases related to "Trade Related Aspects of Intellectual Property (TRIPS), advanced countries and companies are allowed to engage in bio-piracy-gaining production and patent control over seeds and plants that have been developed and used for medicinal reasons by indigenous people over centuries. WTO member countries will have to uproot illegal crops or collect fees from subsistence farmers. (WTO p. 109) A Texas firm was granted a patent for "Basmati" rice in 1997. (P. 109)

And the list goes on.

How Does WTO take action? What is the Process? (WTO, pp. 195-209)

WTO was created in 1995 in the GATT Uruguay Round Negotiations. WTO's legal power can reverse the power of national governments. It operates without an open-decision making process or a full airing of views, nor does it solicit the views of those most affected by the decisions-this under the mantel of separating trade policies from other policies. And dispute panels operate in secrecy. It operates in a way that is described as a "slow motion coup d'etat."

• Unlike GATT that acts only when countries agree to each instance, the WTO is a free- standing organization with a "legal personality" and self-executing enforcement with binding arbitration. Members can stave off action only if all other WTO members unanimously agree!

• The whole process is absent the safeguards-participation of NGOs and other advocacy organizations-that are essential for good policy and undermine rather than promote broad citizen involvement. This fundamental structural flaw guarantees growing anger and protest.

• Once WTO has declared a country's law WTO-illegal, the country must change of face sanctions, and the sanctions can be very broad and powerful.

The implications of WTO for local communities are enormous. They:

• take away the rights of communities, and local, state, and national governments the right to control their economic relations and to set priorities for use of their dollars;

• undermine strategies for development in less developed countries;

• harmonize rules and regulations at the lowest level;

• avoid the issues of labor, environmental, and democratic rights.

• or as Ralph Nader says in the preface to WTO, "Under the WTO, the race to the bottom is not only in standard of living and environmental and health safeguards, but in democracy itself."

What kind of international trade and development policy do I want?

• One that is transparent and democratic in its process, committed to building civil society and respect for nations rather than side-stepping and undermining it.

• One that has an explicit commitment to sustainable development, and accountability and enforcement mechanisms that ensure that commitment.

• A commitment to use the tremendous and growing imbalance in wealth referred to in my opening in the developed countries to fund an equivalent of the Marshall Plan in technology and knowledge transfer to the less developed world. We could call it the Aliber Plan and transfer a $1 trillion over the next 10 years in technology and knowledge to the developing world to permit growth and development that is sustainable for them and us. This is:

• a means for redistribution of wealth and promoting good growth

• a concrete step for raising all boats

• a way to compensate the losers by the winners-embracing a standard in classical economics-- "compensatory financing."

We need another approach. Let's broaden the debate in Chicago!

The Chicago Council on Foreign Affairs and the new Global Chicago project initiated by the MacArthur Foundation need to broaden this discussion on the WTO and other options for trade and development as a first step.

Let's demonstrate our courage and skill and jointly organize an educational conference for the city, rich with information and a continuation of this debate and dialogue that involves representatives from every sector and stakeholder. Thank you.