Jan. 11, 2005

At 10-Year Mark, WTO Has Failed to Deliver on Promised Economic Gains for U.S.Residents; Number of U.S.Laws on WTO Casualty List Grows With Rulings Expected on More High-Impact Cases in Early 2005

Poorest Countries’ Standards of Living Also Decline Under Current Global Trading Regime

WASHINGTON, D.C. – A decade after the Geneva-based World Trade Organization (WTO) was launched, a growing array of U.S. laws has come under attack in the WTO’s closed dispute resolution tribunals, while claims made by WTO proponents that the institution would increase U.S. wages by $1,700 per year for the average American family and enhance global economic stability have not been realized, Public Citizen said today. In the first months of 2005, final rulings are expected on the controversial WTO decision that the U.S. ban on Internet gambling and certain U.S. agricultural subsidies are WTO-illegal. These cases implicate broad swaths of U.S. regulatory authority and also potentially billions of dollars in commerce.

“The WTO’s economic damage is the best-known of its outcomes – but only a part of the story,” said Public Citizen President Joan Claybrook. “Because its terms are so broad, the WTO has grievously damaged local, national and international policies that protect public health and safety, the environment and democracy itself.”

Said Lori Wallach, director of Public Citizen’s Global Trade Watch and author of Whose Trade Organization: A Comprehensive Guide to the WTO (The New Press), “Ten years ago, when opposition in numerous countries almost prevented establishment of this powerful global commerce agency with expansive one-size-fits-all rules, proponents said the WTO would lead to tremendous economic gains worldwide without posing any threat to public interest policies, democracy or sovereignty. But a decade later, it’s clear that the WTO has been very effective – at doing exactly the opposite.”

Since the WTO opened its doors in January 1995, the average American family has obtained only about a third of the income increase promised by the WTO, census figures show. Moreover, the increase in trade is driving growing inequality, with the lion’s share of income and wages going to an ever-smaller group of very wealthy households and individuals, while compensation for most working people lags far behind the economy’s productivity growth. Since the 1994 Uruguay Round of global trade talks that established the WTO, the U.S. trade deficit has skyrocketed more than 500 percent in nominal terms (not adjusted for inflation), with projections showing the 2004 deficit will be $600 billion when the final figures are tallied.

That’s 5.5 percent of national income – a post-World War II high. U.S. Federal Reserve Chairman Alan Greenspan considers the deficit a significant drag on U.S. economic growth and a threat to the economy, given the growing weakness of the U.S. dollar.  

Meanwhile, the United States faces an export crisis as the growth in imports swamps U.S. exports, and the once-strong surplus in U.S. service trade diminishes greatly as the export of high-paying jobs with good benefits in fields such as information technology, engineering and accounting continues to rise. Additionally, a projected deficit in agricultural products is expected for the coming year, which would be the first time that agricultural imports exceeded U.S. exports since 1959. 

During the same period, the WTO has failed to deliver on promises of economic gains to poor countries; the number and percentage of people in the least-developed countries living in extreme poverty as defined by the World Bank (earning less than $1 per day) rose from the WTO’s inception through 2001, according to World Bank figures. In fact, most of the gains in poverty reduction for developing countries over the period have come from China and India, two countries that diverge strongly from WTO-recommended policies, and in China’s case, the country began restructuring its rapidly growing economy only to meet WTO requirements in 2002.

To comply with WTO rules, the United States has weakened pre-WTO food inspection standards for imported foods – even as the volume of such imports has exploded under the WTO rules. The WTO-compliant food safety rules require the United States to deem other nations’ food safety rules to be “equivalent” even when significantly different, allowing countries to import into the United States meat and poultry that does not meet U.S. safety standards. Foreign meat is indistinguishable to the consumer from U.S. Department of Agriculture (USDA)-inspected domestic products, since both bear the USDA grading seal, despite the fact that meat inspection practices in some of these countries are in clear violation of U.S. law.   The WTO’s downward pressure on vital consumer protections also is evidenced by the current U.S. threat to file a WTO challenge of the European Union’s proposed innovative chemical safety policy, known as REACH,   as a WTO   “illegal barrier to trade.”

During the WTO decade, WTO’s retrograde trade über alles rules trumping national sovereignty have not been limited to consumer safety policies. When a WTO tribunal ruled that the U.S. foreign sales corporations (FSC) tax benefit – a tax break for certain U.S. companies – violated WTO rules, comments by corporate globalization cheerleaders regarding the WTO began to emulate those of progressive critics. One conservative think tank said, “For the WTO to start commenting on whether U.S. tax policy is acceptable is a huge expansion of its authority. You have to ask, where does it stop?” Since then, the United States has been hit with sanctions in the FSC case and for its failure to repeal the Byrd Amendment, an anti-dumping related measure ruled illegal by the WTO.

On the WTO’s 10-year anniversary, the Bush administration is reeling from a watershed November decision from a WTO tribunal that whole sectors of the U.S. economy are subject to WTO rules that U.S. negotiators had assumed were exempt.  These include U.S. restrictions on Internet gambling, ruled to be illegal under the WTO’s General Agreement on Trade in Services (GATS). The decision, coming mere months before the second congressionally mandated five-year review of the WTO in 2005, could have serious implications for ongoing GATS talks in Geneva, where countries are being pressured to subject additional service sectors – including fundamental services such as healthcare and water – to the constraints of WTO rules.

“The WTO’s 10-year record is abysmal, with growing instability and an unsustainable U.S. trade deficit. Additionally, we have witnessed a spreading WTO cancer on democratic policymaking,” Wallach said. “The WTO is an experiment that flopped. How much more damage must be documented before we try something else?”

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