World Ready To Trade

Dec. 21, 2004

But protectionism could stall progress.

Six weeks before representatives of 134 nations gather in rainy Seattle under the umbrella of the World Trade Organization (WTO), there's remarkable consensus that the world is ready for a new round of international trade negotiations. Formally known as the WTO's Third Ministerial Conference, the Nov. 30 to Dec. 3 confab is expected to give a go-ahead to the trade talks, the ninth such round since 1948. However, with national bargaining positions now differing dramatically, the content of the final product is far from certain. For example, the U.S., at $8.11 trillion the world's largest single-country market, is seeking a limited agenda and a limit on the negotiations of about three years, indicates Commerce Secretary William M. Daley. Notably absent from Daley's agenda: the drafting of international investment rules, a highly contentious matter that continues to divide the world's economically developed and still-developing countries. On the other hand, the 15-nation European Union (EU), collectively an $8.09 trillion market, is pushing a sweeping agenda for what it dubs "the Millennium Round." Proposed topics range from adjusting industrial and agricultural tariffs to writing rules on investment, nonfinancial services, antitrust matters, and trade-related environmental issues. Asian nations want the WTO to come up with rules covering e-commerce and other Internet traffic. But "let's make sure that whatever is done is done in a very thoughtful way that grows e-commerce and doesn't stifle it," cautions Michael C. Maibach, Intel Corp.'s Washington-based vice president for government affairs. Singapore specifically wants to see agreements on telecommunications, information technology, and financial services fully implemented. "Together these three agreements will help maintain the momentum of multilateral trade and liberalization under the WTO," states Singapore's Ministry of Foreign Affairs. However, the greatest concern of Gran Lindahl, president and CEO of the Zurich-based ABB Group, is that the upcoming talks "will not be able to move [trade liberalization] forward." His concern is shared by David L. Aaron, the U.S. undersecretary of Commerce for international trade. "Unless this [trade] bicycle is going forward, it's going over," he warns. "Protectionist pressures are building in Europe. They are certainly alive and well in the United States. And there are opportunities to improve U.S. exports [to Asia] -- if only we can get some of [the] tariffs down." Adds the U.S. Alliance for Trade Expansion, a Washington-based coalition that includes the CEO-dominated Business Roundtable and the National Assn. of Manufacturers, "It would be a shame if mainstream WTO opponents allowed their rhetoric and actions to descend into isolation from the rest of the world." Nevertheless, U.S. labor and environmental groups are among organ-izations worldwide sounding alarms as negotiations approach. The Pittsburgh-based United Steelworkers of America, for example, opposes reopening WTO agreements covering antidumping and countervailing-duty actions. Complains Carl Pope, executive director of the Washington-based Sierra Club, "The blunt fact is that the present world trade regime is [advancing] the values of multinational corporations." And, asserts Rodger Schlickeisen, president of the Defenders of Wildlife, Washington, "Given all the flaws that exist with present commercial trading agreements on forest products, I find it incomprehensible that the [Clinton] Administration is creating a carnival-like atmosphere of trade wheeling and dealing . . . while simultaneously doing nothing to resolve thorny biotechnological issues such as genetically engineered foodstuffs, which recent scientific surveys show could have disastrously negative impacts on biological diversity, including the monarch butterfly." What's the trade bottom line for manufacturing? Significantly, both Lindahl and Aaron say action on agriculture in a new negotiating round is essential. One reason, contends Aaron, is that agricultural subsidies "are the biggest distortion of the world economy." And dramatically reducing or eliminating them presumably would free up funds for more productive purposes. What's more, as both sellers and buyers, manufacturers stand to benefit from any moves to liberalize agricultural trade, stresses Asim Erdilek, an economics professor at Case Western Reserve University's Weatherhead School of Management, Cleveland. As trade becomes freer and the U.S. is able to export more, the market will expand for fertilizer and such capital goods as tractors and harvesters, he explains. Meantime, less protectionism in the U.S. -- coupled with greater efficiency and economies of scale -- will produce lower prices for food processors and other manufacturers "that use agricultural inputs as raw materials or intermediate goods," he says. Erdilek believes agriculture will be the "most contentious" issue in a new bargaining round. He could be right. In Europe, the U.S., and Asia, farmers will fight liberalization. Japan, for example, is urging that "due consideration . . . be given to food security and other aspects of multifunctionality in agriculture." That translates to trade protectionism -- and the unstated political reality behind the statement is that farmers are the backbone supporters of Japan's ruling Liberal Democratic Party. Contentiousness also promises to take a seat at the bargaining table if antitrust issues end up on the final agenda. The EU, for example, is seeking a new and binding set of international "competition" rules, covering the adoption and enforcement of antitrust laws, common approaches to "hard-core" cartels and other anticompetitive arrangements, and the resolution of disputes. Yet the U.S. Justice Dept. and Federal Trade Commission, "understandably don't want to give up benefits we get from ferocious competition," says Gary Horlick, a partner at O'Melveny & Myers LLP, Washington, and a former international trade counsel for the U.S. Senate's Finance Committee. "Because not everyone is close to being on the same wavelength intellectually, there's a danger that you'd get some sort of compromise where we'd end up with worse rules." Finally, if the negotiators decide to reform the WTO's overall trade-dispute settlement mechanism, "a real flash-point there is the conflict between efforts to protect the environment and efforts to promote world trade," advises Sydney M. Cone III, counsel at the New York-based law firm of Cleary, Gottlieb, Steen & Hamilton. "That's going to be a very tough one to resolve, because the U.S. Congress comes under pressure from environmental groups to take action to protect the environment and developing countries don't like the U.S. to take unilateral action in that area." Some sleeplessness at the WTO ministerial in Seattle? You can bet on it. Tanya Clark in Tokyo and William H. Miller in Washington contributed to this article.

About the Author

John McClenahen | Former Senior Editor, IndustryWeek

John S. McClenahen, is an occasional essayist on the Web site of IndustryWeek, the executive management publication from which he retired in 2006. He began his journalism career as a broadcast journalist at Westinghouse Broadcasting’s KYW in Cleveland, Ohio. In May 1967, he joined Penton Media Inc. in Cleveland and in September 1967 was transferred to Washington, DC, the base from which for nearly 40 years he wrote primarily about national and international economics and politics, and corporate social responsibility.

      McClenahen, a native of Ohio now residing in Maryland, is an award-winning writer and photographer. He is the author of three books of poetry, most recently An Unexpected Poet (2013), and several books of photographs, including Black, White, and Shades of Grey (2014). He also is the author of a children’s book, Henry at His Beach (2014).

      His photograph “Provincetown: Fog Rising 2004” was selected for the Smithsonian Institution’s 2011 juried exhibition Artists at Work and displayed in the S. Dillon Ripley Center at the Smithsonian Institution in Washington, D.C., from June until October 2011. Five of his photographs are in the collection of St. Lawrence University and displayed on campus in Canton, New York.

      John McClenahen’s essay “Incorporating America: Whitman in Context” was designated one of the five best works published in The Journal of Graduate Liberal Studies during the twelve-year editorship of R. Barry Leavis of Rollins College. John McClenahen’s several journalism prizes include the coveted Jesse H. Neal Award. He also is the author of the commemorative poem “Upon 50 Years,” celebrating the fiftieth anniversary of the founding of Wolfson College Cambridge, and appearing in “The Wolfson Review.”

      John McClenahen received a B.A. (English with a minor in government) from St. Lawrence University, an M.A., (English) from Western Reserve University, and a Master of Arts in Liberal Studies from Georgetown University, where he also pursued doctoral studies. At St. Lawrence University, he was elected to academic honor societies in English and government and to Omicron Delta Kappa, the University’s highest undergraduate honor. John McClenahen was a participant in the 32nd Annual Wharton Seminars for Journalists at the Wharton School at the University of Pennsylvania in Philadelphia. During the Easter Term of the 1986 academic year, John McClenahen was the first American to hold a prestigious Press Fellowship at Wolfson College, Cambridge, in the United Kingdom.

      John McClenahen has served on the Editorial Board of Confluence: The Journal of Graduate Liberal Studies and was co-founder and first editor of Liberal Studies at Georgetown. He has been a volunteer researcher on the William Steinway Diary Project at the Smithsonian Institution, Washington, D.C., and has been an assistant professorial lecturer at The George Washington University in Washington, D.C.