Can Canada save World Trade Organization?

A worker transfers steel cables at a steel factory in Qingdao in east China's Shandong province in this June 8, 2018, photo. (Chinatopix via The Associated Press)

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Ottawa next week will welcome representatives of 13 member states of the World Trade Organization (WTO) in an attempt to save the faltering international body and to jumpstart discussions on how to reform the global trading system.

However, due to the Trump administration’s open hostility toward the WTO and its not-so-veiled threats to pull out of the organization, the Trudeau government has unwisely decided to exclude the U.S. from the Ottawa conference, which will take place Oct. 24 and 25.

Given that the escalating trade war between the United States and China threatens the entire international liberalized trading order, it seems odd that the protectionist Trump administration is being excluded from talks that will supposedly help to defuse tensions.

Clearly, the Trudeau government needs to be reminded of the pivotal role that the United States played in the accession of China to the WTO in 2001. It was only after Washington and Beijing worked out the terms of China’s entry that it finally came to pass.

U.S., China and the WTO

In December 1996, the U.S. House of Representatives and the Senate passed the Global Agreement on Tariffs and Trade (GATT) with sizable bipartisan majorities. The trade agreement slashed worldwide tariffs by US $740 billion. And the deal opened “previously closed markets to American products and services,” former American president Bill Clinton writes in his 2004 memoir, My Life.

In addition, Clinton states that GATT gave “poor countries a chance to sell products to consumers beyond their borders.” Moreover, the agreement provided for “the establishment of the World Trade Organization to create uniform trade rules and adjudicate disputes.”

As in the current Donald Trump era, America’s trade relations with China were also a controversial issue in American politics during the Clinton era. The Democratic president had to work hard to advance the Sino-American trade agenda.

In 1997, “the House of Representatives voted to continue normal trade relations with China,” but only after “a heated debate,” Clinton recalls. “Although the motion carried by eighty-six votes, it sparked strong opposition from conservatives and liberals who disapproved of China’s human rights record and trade policies.”

To Clinton’s way of thinking at the time, the often-contentious Sino-American trade relationship “could be improved only through negotiations leading to China’s entry into the World Trade Organization.” And he states that before those negotiations were completed, the United States “needed to stay involved with, not isolate, China.”

In October 1997, Clinton welcomed Chinese leader Jiang Zemin to Washington, D.C., for talks about trade and human rights. Clinton pressed Jiang to release some dissidents. And he recalls telling the Communist leader that “in order for the United States and China to have a long-term partnership, our relationship had to have room for fair, honest disagreement.”

Despite Clinton’s concerns about the state of human rights in China, he used his joint 1997 Washington press conference with Jiang to reaffirm Sino-American co-operation. And he pledged to do all he could “to bring China into the World Trade Organization.”

Early problems

The WTO has had problems with process from the outset. For example, President Clinton travelled to Geneva in 1998 “to urge the World Trade Organization to adopt a more open decision-making process, take more account of labour and environmental conditions in trade negotiations, and listen to the representatives of ordinary citizens who felt left out of the global economy.”

In June 1998, Clinton paid a visit to China. He was accompanied by his family and several members of his Cabinet as well as six members of Congress. Rep. John Dingell of Michigan was one of the visiting dignitaries and the longest-serving member of the House of Representatives. “John’s presence was important because Michigan’s dependence on the automobile industry made it a center of protectionist sentiment,” Clinton writes. “I was gratified that he wanted to see China firsthand, to make his own judgement about whether China should join the WTO.”

During the China visit, Clinton and Chinese leaders discussed “the remaining issues we still had to resolve in order to bring China into the World Trade Organization.” The American president was “strongly in favour” of bringing China into the WTO in order “to continue China’s integration into the global economy, and to increase both its acceptance of international rules of law and its willingness to cooperate with the United States and other nations on a whole range of other issues,” he recalls.

In April 1999, Zhu Ronzji, premier of China, visited the White House for the first time “in the hope of resolving the remaining obstacles to China’s entry in the World Trade Organization,” Clinton writes. Outstanding issues included greater access to China’s auto market.

Another stumbling block was the Communist regime’s insistence on a five-year sunset clause for the so-called surge agreement, which permitted the United States to restrict a sudden jump in Chinese imports. “It was an important issue in America,” Clinton states, “because of the surge we had experienced in imported steel from Russia, Japan, and elsewhere.”

Without progress on the outstanding issues, the U.S. Congress was prepared to reject the trade deal with China, effectively blocking China’s entry to the WTO.

Battle in Seattle

In December 1999, the WTO convened in Seattle and was met by massive and sometimes violent anti-globalization street demonstrations. The protests, which came to be known as “The Battle in Seattle,” marked a turning point in the fledgling anti-globalization movement. From then on, the movement would continue to grow and gain strength, spreading across the industrialized world.

“The process of interdependence probably could not be reversed, but the WTO would have to be more open, more sensitive to trade and environmental issues,” Clinton told the WTO delegates at the Seattle convention. In addition, he declared that wealthy nations needed to do more to ensure that the less fortunate also benefited from globalization.

At the World Economic Forum in Davos the following year, Clinton discussed the popular uprising against globalization. He made the point that globalization had failed to help many poor people in the developing world who were living in extreme poverty.

“Even in wealthy countries, the constant churning of the economy was always dislocating some people, and the United States wasn’t doing enough to get them back in the workforce at the same or higher pay,” Clinton writes.

In May 2000, Clinton actively campaigned in favour of the China trade bill. In September of that same year, both the House of Representatives and the Senate approved the bill establishing normal trade relations with China, setting the stage for its accession to the World Trade Organization.

“I was convinced that in time it would prove to be one of the most important foreign policy developments of my eight years,” Clinton says of his efforts to integrate China into the international rules-based trading system.

The WTO was far from perfect during the Clinton era. And it faces even greater challenges in the era of Donald Trump’s protectionist “America First” trade policies.

However, the WTO cannot be saved if the United States is not included in the preliminary talks to reform the international institution. Given America’s historic role in the establishment and expansion of the WTO, Canada must invite U.S. representatives to the Ottawa conference.

Follow Geoffrey P. Johnston on Twitter @GeoffyPJohnston.