The Battle of Seattle: The World Trade Organization
After signing NAFTA, Clinton immediately turned his attention to an even larger free trade project: the World Trade Organization. The WTO was an evolution of the GATT, hammered out in the Uruguay Round, a lengthy and complex set of trade negotiations that lasted from 1986 to 1994.
|The General Agreement on Tariffs and Trade (GATT) became the World Trade Organization (WTO) in 1995.|
The Uruguay Round featured a multitude of competing objectives: developing nations pressed for a liberalization of agricultural trading, a proposal long resisted by the United States and European Union; the United States wanted more protections for services and intellectual property; all countries realized that the GATT had largely succeeded in reducing tariffs, and now the largest obstacles to trade were non-tariff barriers.
After long years of negotiations, countries struck a grand bargain, aiming to address all these concerns. In 1994, 123 nations signed a new agreement, and the WTO went into effect the following year.
The WTO unleashed even more unrest than NAFTA. In 1999, tens of thousands of protesters disrupted the WTO conference in Seattle. “The WTO is a mistake,” thundered Teamsters president James Hoffa to a crowd of 20,000 union members in Seattle. Corporations were writing the rules of the global economy without any input from workers. “We will have a place at the table of the WTO,” Hoffa said, “or we will shut it down.”
Seattle Police spraying opponents of the World Trade Organization (WTO) with pepper spray in 1999 (left). A sign from the 1999 WTO protests in Seattle, Washington depicting the WTO as the Grimm Reaper stepping on the Clean Air Act, Clean Water Act, and Endangered Species Act (right).
There had never been such violent opposition to trade deals in the United States, nor such a diverse coalition of opponents, including trade unionists, environmentalists, consumer advocates, religious groups, and even internationalists frustrated that globalization had not lived up to its promises.
The WTO, they argued, spurred competing nations to dismantle environmental and labor regulations in a “race to the bottom,” enriching global corporations at the expense of workers both North and South. The scale of the protests surprised nearly everyone. The unrest was put down by tear gas and the National Guard, but the “Battle of Seattle” revealed deep discomfort with the prevailing global economic order.
The Consensus Collapses: The Trans-Pacific Partnership
With the Trans-Pacific Partnership, the bipartisan consensus finally cracked.
The TPP would create a free trade region around the Pacific Rim, stretching from Chile and Peru in South America through the United States, Mexico, and Canada, across the Pacific to Japan, through the South China Sea nations of Singapore, Malaysia, Vietnam, and Brunei, down to Australia and New Zealand. With 800 million people and 40 percent of the world economy in the TPP, it would be the largest regional trade agreement in history.
Started by Republican president George W. Bush and advanced by his Democratic successor Barack Obama, the TPP appeared to follow the bipartisan pattern of earlier trade treaties. Under its terms, the TPP offered increased American export opportunities, particularly for agriculture, beef, pharmaceuticals, and high tech. As with trade agreements in the past, the TPP was endorsed by the main American business lobbies, the National Association of Manufacturers, the U.S. Chamber of Commerce, and the Business Roundtable.
For the Obama Administration, the value of the TPP was partly strategic. Just as previous administrations used trade policy to advance their foreign policy agendas, the Obama administration envisioned the TPP as a bulwark against Chinese influence in the Pacific and Southeast Asia. The agreement would expand the role of the United States in the region, a key part of the administration’s “pivot to Asia.”
Critics charged that the TPP was “NAFTA on steroids”—a revealing insult in that “NAFTA” had become an epithet. Negotiators of the agreement aimed to prevent the resistance that accompanied NAFTA and the WTO by specifically protecting health, environmental, and labor regulations. Members would be required to recognize unions, establish minimum wages, prevent child labor, and promote workplace safety.
But critics contended that the TPP’s mechanism of dispute resolution—Investor-State Dispute Settlement, which allows foreign corporations to sue member governments—effectively prohibited regulation in the public interest. Defenders of the treaty countered that the United States already uses ISDS in 51 trade agreements, including NAFTA, and that of the 17 ISDS suits brought through NAFTA, the United States has lost none.
Equally disturbing for critics was the secrecy that shrouded the TPP negotiations. Negotiations were classified, and while the Obama administration appointed hundreds of advisors to assist in the process, the overwhelming majority of advisors came from businesses and trade associations, with only modest participation from labor and environmental groups.
Sherrod Brown, the Democratic Senator from Ohio, assailed the lack of transparency: “This continues the great American tradition of corporations writing trade agreements, sharing them with almost nobody, so often at the expense of consumers, public health and workers.”
The specter of job losses through the TPP and other agreements has spurred political polarization around issues of trade. According to a Pew survey in March 2016, a bare majority of Americans say that free trade agreements are good for the country.
A 2012 protest against the TPP in Leesburg, Virginia (top left). A 2015 protest against the TPP in Washington, D.C. (top right). Opposition to the TPP at the March for Clean Energy Revolution in Philadelphia, Pennsylvania in 2016 (bottom left). A 2014 protest in Seattle, Washington against the TPP (bottom right).
Yet the survey revealed a partisan difference in attitudes. While most Democrats supported free trade agreements, most Republicans opposed them, especially among Trump supporters, 67 percent of whom said that free trade was bad for America. The partisan divide paralleled racial, gendered, and age divides. White men older than 65 were the staunchest opponents of free trade, while most Latinos, African Americans, women, and younger people were the most likely supporters.
As the survey indicates, the contemporary conversation on trade takes place within the narrow boundaries of what is good for the United States. Most Americans are unmoved by the U.S. trade representative’s affirmations that the TPP will end child labor in Vietnam or strengthen unions in Brunei—a line of argument that would have been compelling as recently as the 1990s but that today seems impossibly quaint.
Gone entirely is any sense that the United States—still the world’s largest economy—has any moral responsibility to alleviate poverty elsewhere, or that American workers might find common cause with workers in other nations.
Popular hostility has tempered politicians’ enthusiasm for trade agreements. While most Republicans and Democrats in Congress favored the TPP, the agreement quickly became politically toxic, and even supporters of the agreement rarely vocalized their support. By May 2016, all remaining contenders for the presidency had come out against it.
Despite Obama’s urging, Congress appears unlikely to move on the bill. For the first time in recent history, a landmark trade agreement, years in the making, appears headed for defeat.
The Rise of China
The contemporary anxiety about trade parallels the rapid increase in imports from China. After a series of economic reforms initiated in 1978, China pursued export-oriented development. The Chinese Communist Party facilitated a breakneck expansion of capitalism, aggressively recruiting multinational corporations to invest in the nation’s manufacturing sector.
U.S. trade with China steadily increased through the 1980s and 1990s, and in 2000, after 13 years of negotiations, the United States established Permanent Normalized Trade Relations with China. China joined the WTO the following year.
China quickly became one of America’s largest trading partners. Within five years, imports and exports tripled; within a decade, U.S. exports had quintupled and imports quadrupled. U.S. service exports to China increased 791 percent, giving the United States a trade surplus in services. Outweighing the trade surplus is a mammoth trade deficit in goods—a record $356 billion in 2015.
Among the principal beneficiaries of increased trade with China have been American retailers, and none more than Walmart. Walmart’s drive for “everyday low prices” led the company to invest heavily in China, where low labor costs coincided with a stern government that guaranteed political stability, a stable currency, and efficient shipping infrastructure. Today, Walmart imports more goods from China than do the entire nations of Germany, the United Kingdom, or Russia.
Ostensibly a retailer only, Walmart directly or indirectly controls a gargantuan network of factories, sweatshops, and subcontractors in China.
The heart of this industrial behemoth is Guangdong Province, a rapidly urbanizing stretch of the South China Sea coast. In hundreds of thousands of factories, workers toil 12 hours a day, six days a week, for as little as $100 per month. Still, the wages are high enough to draw tens of millions of migrants from rural villages in inland China.
Migrant workers, however, lack legal residency status, which makes them easily exploitable. Walmart, the largest retailer in the United States, relies upon these workers to produce the electronics, clothing, and cheap consumer goods that line the company’s shelves.
The Long History of Industrial Decline
China is Trump’s main villain in his narrative of American decline. China, he said, is “killing us on trade” and “raping our country.” The trade deficit constitutes the “greatest theft in the history of the world.” Trump’s solutions—rip up the trade deals and slap a 45-percent tariff on goods from China—harken back to the economic nationalism of Smoot-Hawley.
Such actions are unlikely to “bring back” well-paying manufacturing jobs to struggling communities in the Rust Belt. The decline of manufacturing in the great cities of the industrial heartland—Detroit, Cleveland, Pittsburgh, St. Louis, and many more—began not in 2001, when China joined the WTO, nor in 1994, with the advent of NAFTA, nor even in the 1970s, when Japanese automakers increased their share of the American market.
It began in the 1950s, as businesses moved production from the urban centers of the upper Midwest, first to the suburbs, then to the rural Midwest, and eventually to the states in the South and West, in a relentless drive to lower wages, eliminate unions, and increase returns. The move to China is only the most recent episode in a decades-long search for a tractable workforce.
Meanwhile, it will surprise many to learn that manufacturing’s contribution to the American economy has increased substantially from $63 billion in 1947 to more than $2 trillion in 2015 (in constant dollars). In spite of competition from Mexico and China, American manufacturing output has doubled over the past 30 years.
Manufacturing constitutes the fourth-largest sector of the American economy. Over the past five years, American factories have even added 600,000 jobs. Nevertheless, American manufacturing employs millions fewer workers than in the past, due in large part to the automation of jobs that were once done by hand. And automation will only further reduce employment in the future.
Since 2003, there have been more jobs in retail than in manufacturing. Today, some 16 million people work in retail, 1.4 million of them at Walmart alone. If Trump slaps tariffs on imports from China, Americans will have to pay higher prices for clothes, toys, electronics, and more. Many Americans, surely, will grudgingly pony up an additional $300 for an iPhone, but millions more will resent paying nearly twice as much for basic consumer goods.
High tariffs would force Americans to confront an abiding tension between their roles as producers and as consumers, a reckoning they are unlikely to handle gracefully.
Inequality and the Future of Trade
An unusual feature of today’s opposition to trade is that it comes not in the depths of a great depression but during a historic expansion, a time when unemployment is low and falling.
Yet the benefits of that expansion have not been shared equally. Those who have suffered most from plant closures are concentrated in certain places with few alternative jobs, and they have limited resources or little will to move to areas where employment is growing.
The increase in economic inequality has fostered hostility to China and to global engagement more broadly.
|A t-shirt for supporters of President-Elect Donald Trump's 2016 campaign."Build the Wall" was a common rallying cry for many Trump supporters who opposed immigration from Mexico.|
But the real causes of inequality are not foreign competition; they are public policies. Nations have a remarkable range of policy options in response to increased trade, and while most other OECD nations (Organisation for Economic Co-operation and Development) accept a higher percentage of free trade, they have much less inequality.
In the United States, it is far easier to blame foreigners for stealing jobs than it is to address inequalities of wealth and power at home.
The bipartisan consensus for an integrated global economy developed in a unique and irreproducible context. Besides recent experiences of the Depression and global war, America’s unparalleled economic power in the postwar era coincided with union strength, social supports, and an aggressive tax structure that reduced inequality.
Domestic support for further trade agreements likely will not be forthcoming until more is done to alleviate the dislocations caused by trade liberalization. Neither will domestic support be forthcoming without a seat at the table. The rallying cry of WTO protesters was “No globalization without representation”—a plea to democratize of the global trade regime.
In the absence of domestic support, the United States will be unable to lead the international order. As the United Kingdom leaves the European Union, and as nationalist uprisings in Italy, France, and elsewhere threaten to undermine the European Union entirely, it is easy to imagine a future with fewer international agreements.
Facing a revival of beggar-thy-neighbor policies, we would do well to remember that cooperation can achieve objectives that nationalism cannot, and that nationalism can lead to situations in which everyone loses.