Ethics of Trade Agreements
John Dobson
Almost all trade agreements today are administered by the World Trade Organization (WTO). The WTO is based in Geneva, Switzerland, and is recognized by practically every country that undertakes international trade. The WTO has also garnered much attention because of its ability to act as a lightning rod for various anti globalization protest groups. This controversial aspect was demonstrated perhaps most dramatically during the WTO meetings in Seattle, Washington, in November of 1999. This four day meeting saw some of the worst urban rioting that the US had ever experienced. There appears to be no single reason for this wide spread hostility to the WTO: John Dobson (2001: 1) describes it as ‘‘a manifestation of the groundswell of anxiety concerning questions of externalities and sustainability in the face of global capitalism’s advance.’’
In order to understand the moral controversy surrounding the WTO it is necessary to under stand its history. Although officially formed in 1992, the WTO had a long prior history as the General Agreement on Tariffs and Trade (GATT). As was also the case with the Inter national Monetary Fund (IMF) and the United Nations (UN), GATT was formed as a result of the Bretton Woods agreement of 1946. GATT’s stated aim was to dismantle the cobweb of tariff barriers and achieve free trade.
Thus GATT essentially arose from a desire to escape the mercantilist protectionism that had characterized international trade in the years between the two world wars. International trade was recognized as a non cooperative ‘‘Prisoner’s Dilemma type’’ game in which the optimum solution could be reached only through some form of cooperation between players, the primary players being governments of developed nations (see prisoner’s dilemma).
In order to achieve this objective, GATT was founded on three basic principles: (1) non discrimination: a country is prohibited from levying different tariffs on the same good imported from different countries; (2) reciprocity: reductions in tariffs should be balanced between countries; (3) impartial adjudication of trade disputes, through processes developed and controlled by GATT.
For the first three decades of its existence GATT appeared to serve the international com munity of developed nations well. Trade barriers worldwide were reduced, and membership in GATT grew from 23 countries at its inception to over 100 countries by the time of its trans formation into the WTO. The membership of GATT, therefore, expanded from essentially a club for developed nations into an organization spanning all stages of the development life cycle.
From an ethical perspective, as GATT grew larger it became increasingly criticized on the grounds that its espoused ideology of free trade was merely a facade to conceal an underlying mandate of profit maximization for the world’s large multinational corporations (MNCs). This criticism became even more widespread and vociferous when GATT became the WTO, prob ably because of the apparent power held by the latter to influence trade flows to and from developing countries. Indeed, the moral criticism of the WTO generally concerns the dealings of MNCs in developing countries. The moral question surrounding the WTO is thus in essence one of free trade versus fair trade: does the WTO’s avowed promotion of free trade and the eradication of trade protection actually benefit all parties, including the less powerful, or does it merely benefit the MNCs based in the developed world?
Bibliography
Business Ethics Quarterly (2001). The battle in Seattle: Two conflicting views of corporate culture. Business Ethics Quarterly, 11 (3) (July).