Misadventures of the Most Favored Nations

By Jim Miles

Misadventures of the Most Favored Nations – Clashing Egos, Inflated Ambitions, and the Great Shambles of the World Trade System. Paul Blustein. Public Affairs (Perseus Books).New York, 2009.

Since its arrival in public awareness – at least for the public that follows ideas related to international trade, not many in our star studded frivolous media world – I have been antagonistic to the WTO. Reading this work by Paul Blustein was a self appointed task to read the opposition’s own ideas and how they are formulated.

His most current writing in Foreign Policy [1] carries some very good news for those who, like myself, think of the World Trade Organization (WTO) as a supra-national level of corporate governance that is neither democratic nor open and transparent. Blustein says,

“After eight painful years of standstill and failure, with each meeting just a shoveling of intractable problems forward to the next, the Doha talks might collapse once and for all in 2010, possibly taking the World Trade Organization (WTO) down in the process.”

One can only hope that this comes to pass. Even if they do reach some kind of a ‘deal’, Blustein still thinks it might be the end,

“The round’s initial goals — making globalization work for the billions left behind by eliminating the farm subsidies and tariffs that adversely affect the world’s poor — have become so laughably implausible that completing what’s left of an agreement will prompt a painful reckoning. The deal on the table has been so watered down by negotiations that it cannot be credibly said to work wonders for the poor, or even effect much change in how global trade takes place.”

For myself, that is good news, for in spite of all the positive spin that Blustein tries to put on the WTO, his thesis and supporting arguments tend to contradict one another. In his recent book, Misadventures of the Most Favored Nations, he argues that the WTO “is a crucial linchpin of stability in the global economy.…the ultimate safe keeper of open world markets.” Along the way he argues the ‘traditional’ right wing arguments including the idea that “Terrorism and hatred grow their strongest roots in poor soil,” a nice metaphor except that terrorism and hatred grow strongest in occupied soil, soil contaminated by foreign elements – poisons if you will to fit the metaphor. He later argues that “impoverished countries pose an acute risk of becoming havens for terrorists”, another specious addition to the argument without supporting evidence, partly because there is no evidence of this – other than when the country is invaded, occupied, or subverted by the CIA or some other special ops group.

He argues in absolutes – always dangerous outside of religious dogma – that “among sensible and knowledgeable people…the expansion of trade has been a force for growth and higher living standards. Agreement is universal….” I and many others would like to consider ourselves “sensible and knowledgeable” people who fully disagree with the set up and intentions of the WTO, and agreement is hardly “universal” on any idea, let alone that the demise of the WTO would be a “disaster.” Further, he provides no statistical support that the expansion of trade has been a force for growth and higher living standards – true for some, certainly not universal – and for certain areas it has been nothing but negatives (most of the developing world). It also needs to be considered that those measurement statistics are readily manipulated and do not take into account anything to do with the environment, social health and welfare, and global labour that is definitely not free to move.

But that is getting ahead of the development of the book. Other fallacious arguments are that the WTO discussions involve “complex economic issues” and “affords protection against bullying by the wealthy.” First, the issues are not really complex. Detailed yes, but only complex because of the arcane language and mathematical formulas derived from thin theoretical pure air that economists use to obfuscate their very real lack of understanding of how anything truly works, especially people. As for the bullying, the very structure of the WTO and its formulation of “consensus” that creates to a large degree a global bullying structure.

He argues, with the implication that it is bad, that the “governments of major countries bowed to the heavy influence of domestic interest groups,” those groups being the ‘domestic factions’ such as the environmentalists, health workers, educators, labour unions, that decried the power of the WTO when it tried to impose the Multilateral Agreement on Investment (MAI) that was essentially defeated in the late 1990s because of the activist work of these groups. The MAI was the brainchild of the Organization for Economic Cooperation and Development (OECD), the think tank that did a lot of the thinking for the WTO.

Another big fallacious argument is that “governments around the globe will resort to protectionism,” a statement that is true but needs to be put in context. The rise to riches in most countries has been due to protectionism, free trade is what those countries wanted after they became wealthy and powerful and could control their idea of “free” markets. South Korea, Taiwan, Japan, the U.S., Great Britain, Singapore, China, and others have all created wealth by protecting their export industries and agriculture through various means (tariffs, import taxes, subsidies, various other rules and regulations) before allowing themselves to open and declare themselves free traders – and even at that many still are far from free trade.

Consensus, Democracy, and Tansparency

Consensus is one of Blustein’s big arguments in favour of the WTO. He says the “WTO extends its rules deeply into the domestic economy of its member countries in ways unmatched by other international bodies.” This can be read as surrendering national sovereignty to that of the corporations, which in reality is exactly what it is. He then continues with this line of thought, that the “depth and scope of these rules affect all members, they should be agree by all members,” thus consensus.

The overall theme of the book, apart from the historical description of all the action that takes place under the name of Doha, is that of consensus and democracy, transparency being a natural part of the first two. Yet throughout the work, as it outlines the history of the Doha round of talks, there are serious problems with all three, making them more talking points for public consumption rather than a reality.

His initial argument is that because most of the world’s governments are “democratically elected” they “might therefore command a certain degree of legitimacy.” That degree of legitimacy is near zero on any legitimacy thermometer. Many countries are only nominal democracies, places like Egypt being among the most obvious of that kind, along with the not so obvious nominal democracies of Israel, South Korea, Japan where the democratic structures are there but the real power lies with the hidden – or not so hidden – powers of an elite class of businessmen and political bureaucrats. Even given the democratic election of many governments, once in power those governments rule to stay in power more than they do to satisfy their population. The ‘ambassadors’ that are sent to the WTO are definitely not democratically elected, and I do not remember the results of any WTO decisions being brought back to the populace for a referendum for acceptance (it certainly did not happen with NAFTA in Canada that was railroaded through by both lead parties against a majority of the population against it).

Returning to the MAI, an official of the WTO is quoted in many references saying,

"’This is the place where governments collude in private against their domestic pressure groups,’ says a former WTO official. ‘Allowing NGOs in could open the doors to European farmers and all kinds of lobbyists opposed to free trade.’"

Yes, those nasty “Domestic pressure groups” need to be kept at bay, and lobbyists, whoever would have thought that they would oppose free trade – imagine. This bit of history is not recorded by Blustein, probably because it contains too much truth in countering his arguments about democracy and transparency.

As for consensus, it has serious problems. Considering that no modern government in the world operates on consensus – unless it is autocratic dictatorial government – why then is it so suddenly democratic under the auspices of the WTO? Simply it is not, and in spite of Blustein‘s arguments for it, his development acknowledges that, well maybe the WTO is not really democratic under the rule of consensus. Combining the arguments of consensus/democracy at the end of the work, Blustein posits that a “pure majority-rule system [under which most of the ‘democratic’ world operates] would be rejected by the rich countries…” for obvious reasons as they are outnumbered by the poor and developing countries and while they want the poor and developing countries to give up their sovereignty, they do not want the same standards applied to themselves. So kill democracy and go back to consensus because,

“The consensus principle has enormous value in instilling WTO rules with legitimacy, and it helps underpin the credibility of the dispute settlement system as well.”

Yet again, his own arguments – and common sense from us “sensible and knowledgeable” people – indicates that consensus is not democratic, nor transparent. Consensus at the WTO level is really consensus by coercion. Blustein provides his own example, of which there are probably many more untold stories, of coercion brought upon the Indian representative by the directors of one meeting. The Indian was asked, after objecting to adding his vote for consensus, “Do you know how many Indians work in this country?” with the direct implication being that the Indian workers would be ejected or punished somehow if the ‘correct’ vote was not provided. This kind of scenario is readily duplicated by all consensus votes, where threats, ridicule, sanctions, insinuations of future calamities all weigh in from the powerful nations against the poorer nations who have neither the financial, military, or knowledge power to be able to counteract the pressure.

Add to this consensus mix the power of the lobbyists, being mainly the CEOs – and political flacks related to them – who carry enormous financial clout (in particular with campaign donations in the rich countries as well as the poor, and pure financial power as many are financially more powerful than many countries) and can exert that over governments and government personnel. The main culprits mentioned implicitly if not directly in the work are the pharmaceutical and agribusiness companies.

Dispute Settlement

Blustein lauds the dispute settlement mechanism of the WTO, with some recognition of its flaws. The dispute settlement system – one that is not clearly nor fully described as is the case with the whole of WTO organization – often described as the “crown jewel” of the WTO, is “clearly the most powerful dispute settlement system at the international level that we have today or perhaps ever n the history of the world.” But is that good? To have the most powerful dispute mechanism controlled by the corporate CEOs of the world? It is a flawed and tarnished jewel at best as accepted by Blustein.

Although not part of his flaws, Blustein argues that the dispute panels are filled from “a permanent list of qualified candidates with experience in trade matters.” It would be interesting, in the name of transparency, to have this list revealed. I would make an educated guess that there are not very many environmental, labour, health and welfare related names on that list. Most I would have to presume would be CEOs, politicians, MBAs, and others of the same train of thought that the WTO should rule the world.

His first actual argument against himself is that the mechanism “is no model of transparency.” All too true and backed up by more critical studies as well, as the information discussed in the disputes is not revealed, nor are the names of the participants on the panel, nor the ‘expert’ witnesses that can be called upon. To his credit Blustein argues that “by maintaining secrecy over its panel proceedings, the WTO only perpetuates its stereotype as an undemocratic, sinister institution.” Unfortunately, it is not at all a stereotype, it is undemocratic, and because of its practice of colluding for a new world governance, is rather sinister.

Another non-democratic recognition is that “small countries rarely file WTO cases…because of their lack of resources and legal expertise, which can put them at a huge disadvantage relative to [wealthy] nations.” This is so true of the discrepancy of wealth when it comes before the law, domestic or international. Judicially then, as for consensus goes, “the ability to inflict punishment on opponents and to muscle them into compliance with WTO rulings is reserved for the fairly rich and fairly big.”

And yet, at the end of his arguments, Blustein argues that “Most important, the dispute settlement side of the WTO instills the whole institution with credibility.” No, sorry, without transparency, without equal power, without recognition of those annoying “domestic factions” as being important to democracy, there is no instilling of anything but the “stereotype“ of a big secret organization that colludes for world domination of corporations rather than sovereign nations.

Oh Yeah, It’s A History

The work is a history, but not one that does much but make the reader wonder more about the WTO than they ever did before. It lacks a basic outline of the WTO’s structures and corporate mechanisms. It lacks an historical context – it is only minimally presented here – that is not fully developed. That lack allows Blustein to ignore the failure of the MAI as it was opposed by a significant number of global advocates against the many intrusive and supranational powers accorded to the corporate world over national sovereignty. His historical story creates a disconnect in the truly critical reader’s mind as many of his points contradict his overall opinion that the WTO could be the saving grace of the whole world.

So as history progresses, I for one will not be disappointed by the demise of the WTO. Sure, world trade statistics may be ‘hurt’, but those statistics have never measured the cost to workers and the environment. As a final line of argument on that idea, Blustein does say that many small countries object to the attempts to upgrade labour rights and environmental conditions. That is only natural when the elites of those countries are the ones who will benefit the most, and will make much larger profits if they do not have to pay attention to working conditions and civilian rights. If the workers were given more rights, if the environment was protected, that would help all – except for the profit margin of the elites ruling the country, elites who seldom have any sympathy and generally some antagonism towards the workers who create their wealth.

As I began to say, the WTO will not be missed by anyone but the corporate elites and their political cronies. The demise of the WTO will be well deserved. More attention needs to be given to the civilians of the world through a truly democratic and transparent institution such as the UN could become with considerable reform. Otherwise, the world will not end, trade will continue, and perhaps sovereign nations will again be able to assert their sovereignty over corporate rule.

– Jim Miles is a Canadian educator and a regular contributor/columnist of opinion pieces and book reviews for The Palestine Chronicle. Miles’ work is also presented globally through other alternative websites and news publications.


[1] R.I.P, WTO – Why 2010 could mark the death of the global trade system as we know it. Paul Blustein. Foreign Policy, March 06, 2010.

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