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House Debate on Resolution of Withdrawal From WTO Signals Growing Congressional Discontent With WTO’s 10-Year Record, Which Belies Promises of Economic Gains

June 9, 2005

House Debate on Resolution of Withdrawal From WTO Signals Growing Congressional Discontent With WTO’s 10-Year Record, Which Belies Promises of Economic Gains

Even as Congress, Lobbying Groups Are Distracted with Intense China, CAFTA Trade Debates, Number of House No-on-WTO Votes Grows Since 2000

WASHINGTON, D.C. – While 30 more members of Congress voted today to remove the United States from the WTO than in 2000, the floor statements of those voting for continued membership were often as critical and demanding of change in the institution as were the statements of those who supported withdrawal – signaling a challenge for the WTO Doha Round, Public Citizen said today.

“The many organizations, businesses and activists across this country who are critical of the WTO have been so busy working on other intense trade debates that this resolution did not get attention, which is to say that the WTO’s 10-year record alone has moved a growing bloc in Congress to the conclusion that continued membership in the WTO is not in our nation’s interest,” said Lori Wallach, director of Public Citizen’s Global Trade Watch division and author of Whose Trade Organization: A Comprehensive Guide to the WTO (The New Press).

Among the most significant aspects of the WTO’s 10-year record are:

  • Claims made by WTO proponents during the 1994 congressional debate on the organization that the WTO would increase U.S. family income by $1,700 per year have not proven true in any year of the WTO decade.
  • During the WTO decade, one in six U.S. manufacturing jobs has been lost as labor and wage arbitrage under the WTO system promoted a race to the bottom, with investment and jobs shifting to venues with lower wages and lax labor, health, worker safety and environmental standards.
  • Even economists who support the WTO agree that increased trade liberalization is driving growing U.S. income inequality, with the lion’s share of gains 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.
  • During the WTO decade, the U.S. trade deficit exploded from an annual $98 billion in 1994 to a monthly deficit of just under $60 billion today. Even the once-strong U.S. service trade surplus has diminished greatly as the export of high-paying jobs in fields such as information technology, engineering and accounting continues to rise. The United States is poised to become a net food importer this year for the first time since 1959 – even as we are simultaneously the world’s largest agricultural exporter (although with export growth rates slowing) as WTO rules favor increased trade flows rather than producer income or consumer savings. This deficit is being caused by a post-WTO flood of imports in products in which the United States was once considered the leading exporter, such as beef and poultry, while U.S. exports of cotton, soy and red meat have declined dramatically in recent years.

Meanwhile, U.S. crop prices have generally declined about 40 percent, while the cost of running a farm has risen by as much. The United States lost 226,695 small and family farms between 1994 and 2003, while average net cash farm income for the very poorest farmers dropped to an astounding -$5,228.90 in 2003 – a colossal 200 percent drop since the WTO went into effect. However, according to government data, real prices for food eaten at home in the United States rose by 30 percent during the WTO era (1994 to 2004), even as prices paid to farmers plummeted.

“Ten years ago, when opposition in numerous nations almost prevented the 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,” said Wallach.

A growing array of U.S. laws has come under attack in the WTO’s closed dispute resolution tribunals. In most WTO cases, the country that launches the challenge wins:

  • Challenging countries have at least partially prevailed in 102 of 118 completed WTO cases.
  • With only two exceptions, every health, food safety or environmental law challenged at the WTO has been declared a barrier to trade.
  • In 42 out of 48 cases against the United States in which a WTO panel has ruled (85.7 percent of the cases), the WTO has labeled as illegal U.S. policies ranging from tax and antidumping law to sea turtle protections and clean air rules.
  • The United States has not been able to successfully defend any U.S. trade safeguard laws, with U.S. losses on 14 of 14 completed WTO cases brought against safeguards on products ranging from steel to lamb to wool shirts. The United States also has lost 11 of 15 anti-dumping or countervailing duties cases. Now, ongoing Doha Round negotiations are poised to translate these WTO cases against the United States into new, more expansive limits on U.S. domestic trade safeguard laws.

This continued attack on sovereignty, capped by an April WTO ruling that the entire U.S. gambling sector is covered by WTO rules that forbid many existing state gambling policies, also is generating growing unease from state officials. Last week, 29 state attorneys general wrote U.S. Trade Representative Rob Portman decrying state officials’ lack of a role in setting U.S. WTO policy even as WTO rules are limiting their regulatory authority. The state attorneys general called on Portman to withdraw the gambling sector from WTO coverage: “We believe that under our constitutional system of federalism, states should continue to have flexibility and sovereign authority to determine whether and under what conditions gambling occurs within their borders, without such decisions being subject to second-guessing by WTO tribunal,” the attorneys general wrote. 

Meanwhile, the WTO decade has disproved the promises of the WTO delivering economic gains for 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 WTO decade 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. Implementation of WTO rules promoting the privatization of essential services, such as water and health care, and WTO rules extending monopoly patenting of medicines and seeds have undercut the livelihoods of millions in Asia, Africa and Latin America, often generating major social disruption and protests.

“The WTO is facilitating growing economic and social instability overseas. That the United States is viewed as a major proponent of more of the same at the WTO generates negative public opinion about the United States by many people around the world who are well aware that their lives are being damaged by the institution,” Wallach said.