Philippe Legrain
Thursday July 12, 2001
The Guardian





Many on the left obsessively loathe the World Trade Organisation, in the way Tory Europhobes hate the European Union. Just as Brussels-bashers peddle lies about the EU, so Naomi Klein, Noreena Hertz and others slander the WTO. That is a pity. The left has warmed to the EU. Now it should reconsider its opposition to the WTO. Believe it or not, the WTO is not against social democracy.
The worst charges against the WTO are these four. First, that it does the bidding of big global companies. Second, that it undermines workers' rights and environmental protection by encouraging a "race to the bottom" between governments competing for jobs and foreign investment. Third, that it harms the poor. And last, that it is destroying democracy by secretly and unaccountably imposing its writ on the world.

Undeniably, some companies have undue influence over governments. More should be done to separate money and politics. But companies are constrained by competition and regulation - both of which the WTO bolsters. Freeing trade curbs domestic giants by exposing them to foreign competition.

Take BT. For international phone calls, where there is competition, it is just one provider among many. For local calls, where there isn't, it can hold customers and the government to ransom, most recently by delaying the roll-out of broadband internet. The only reason companies like Shell heed protests is that they face competition: if Shell had a monopoly, it could safely have ignored Greenpeace's Brent Spar campaign.

Competition is not a cure-all. Often, governments need to regulate too. And they can. It is a terrible irony that the left has lost faith in government. Governments are not impotent. The WTO itself is merely governments acting together to regulate global markets. Brussels has just blocked General Electric, the world's biggest company, from taking over Honeywell. Labour has imposed the utility windfall tax, introduced the minimum wage and ramped up petrol duty.

So much for the race to the bottom. As the fuel protests showed, the main constraint on government is public opinion, not globalisation or corporate power.

If globalisation is forcing governments to slim down, how come the average tax take in rich OECD countries has risen from 35% to 38% of GDP since 1985? Corporate taxes are a bigger share of government revenues than 20 years ago. Surveys show that skilled workers, good infrastructure and nearby customers determine where companies invest far more than low taxes and regulation.

Labour and environmental standards are generally rising, not falling. An OECD study found that workers' union rights had not got significantly worse in any of 75 countries since the early 1980s. In 17 (including Brazil, South Korea and Turkey) they had markedly improved. The same study found that pollution havens are a myth. If anything, competition is bidding up environmental standards.

Developing countries are attracting investment not by lowering their standards, but because they are making the best of their comparative advantage. This does not spell doom for British workers. Provided people are equipped with skills to find another job and are protected by a decent welfare system, we can all gain from globalisation. It makes no sense to protect yesterday's jobs at the expense of tomorrow's.

Nor is it fair. How else are the poor going to get richer? It is a funny kind of socialism that stops at national borders. Surely international solidarity means buying t-shirts from Bangladesh as well as demonstrating for debt relief. The fact that seamstresses in Bangladesh are paid less than in Britain does not necessarily mean they are exploited. They earn more than they would as farmers. And however awful conditions in a Nike factory may be, they are usually worse in a local sweatshop.

Poverty is terrible. But globalisation can help. While GDP per person fell by 1% a year in the 1990s in non-globalising developing countries, it rose by 5% a year in globalising ones. The WTO is a friend of the poor. Its rules protect the weak in a world of unequal power. Unlike the United Nations, WTO rules apply to everyone - even the United States. Costa Rica challenged US restrictions on its underwear exports at the WTO - and won. Of course, the WTO is not perfect. But it is better than the law of the jungle, where might equals right.

The worries about democracy are more well-founded. Democracy remains rooted in local communities and nation states. So it is difficult to work together internationally - on global warming or trade, at the EU or the WTO - without leaving voters feeling out of touch. But abolishing the WTO is not a solution. As we learned from the 1930s, beggar-thy-neighbour policies end up making beggars of us all. Nor are world elections to a world parliament and a world government realistic. Sixty million Britons would not accept 1,300m Chinese outvoting them. So the best option is to reform the WTO.

It is already more democratic than you think. All agreements are reached by consensus. Every country has a veto - unlike at the UN, where only big powers do - and WTO agreements are ratified by parliament.The organisation is held to account mainly through government, but also through contacts with MPs, trade unions, business and NGOs, through the media, and through its website - on which most working documents appear rapidly.

Even so, the WTO should be more open. Government should develop better procedures for informing MPs and voters about its work at the WTO and MPs could hold public hearings to reconnect the WTO with voters. If you hate capitalism, you will probably never support the WTO (although Fidel Castro does). But if, like most people, you believe in markets tempered by government intervention, you should think again about the WTO.

Philippe Legrain was until recently special adviser to the director-general of the World Trade Organisation