Who's Afraid of the Big Bad WTO?

Almost eight years after protests overtook the World Trade Organization's ministerial meeting in Seattle, some folks still don't understand what the group is for.

Last week my book tour took me to Seattle, a gorgeous city set between mountains and sea. It's always an especially significant stop for me, because I started covering international trade at The Economist less than a year after the Battle of Seattle. People there still remember the days in late 1999 when protesters appeared to derail global trade talks, but some of their questions and comments surprised me.

Whether you're for or against free trade, it's worth knowing what the World Trade Organization actually does. From what I heard, there were a couple of myths circulating. First, some people seem to think that the WTO has its own agenda, and that it can force its members to sign up to new trade agreements. That's not true. The WTO's agenda is completely set by its member nations -- in fact, the group's director-general, Pascal Lamy, could be seen as little more than a glorified cheerleader -- and every single member has a veto.

Of course, some members loom larger than others. In the current negotiations, the United States, the European Union, Australia, Brazil and India have been acting on behalf of other members with similar interests. That's a change from the last round, where the United States and the European Union were joined by Canada and Japan, and it wasn't clear who else they represented. Yet even with so few parties doing a lot of the negotiating, any individual member can still veto the final deal. Whether the members' governments really speak for their citizens is another question -- and not one over which the WTO has any control.

The second myth is that the WTO acts as a sort of global trade police. That's not true, either. The WTO on its own has no official monitoring capacity. Rather, it acts as a court of arbitration for members with grievances against each other. By being members, they agree to submit their disputes to a lengthy legal process that takes place in Geneva, at the WTO's headquarters. In this setting, wealthy countries do have an edge; they can hire more lawyers. But it doesn't follow that the WTO's own arbitrators are somehow biased against poor countries.

Still, the apparently disproportionate influence of wealthy countries leads many people to protest against the WTO's existence. The protesters' efforts may indeed have encouraged wealthy countries to offer poor countries a better deal. The current round of talks was conspicuously called the Doha Development Round when it was launched in 2001, and there was no doubt that an improvement in public relations was one of its goals. But when poor countries walked out of the negotiations in Cancun in 2003, it was obvious that progress had not been sufficient. They used their veto power by voting with their feet.

The Doha round is still struggling, and some people who protested against the WTO have been celebrating. If the round fails, it could reduce the WTO to little more than a slow-moving courtroom. But would that actually make people in poor countries better off? It's hardly certain. When talks at the WTO fail, wealthy countries shift their attention to regional and bilateral deals -- often as a way of doling out favors in return for political support.

For example, the United States recently created a free trade area with five Central American countries and the Dominican Republic. Let's say, for the sake of argument, that American importers looking for the cheapest sugar before the new pact found it in Paraguay, where wages were lowest. After the free trade area came into effect, though, Dominican sugar no longer faced a tariff. So, it became the cheapest for Americans, even though it was more expensive to produce than Paraguayan sugar. Yet if the deal had gone through the WTO instead, everyone would have faced the same reduced tariff, and Americans would still have gotten their sugar from the truly cheapest source -- and the poorest exporter -- Paraguay.

Now, protesters might respond that if the WTO goes out of business, they'll rally against the regional and bilateral trade deals instead. If they were successful, though, then no one's tariffs would ever be lowered; consumers, exporters and importers around the world would all lose.

If the protesters really cared what the WTO was doing, they'd picket every day in Washington, Brussels, Sao Paulo, New Delhi and Canberra, where the top negotiators have their offices. And they wouldn't have to stop there. They could go to all the embassies of the WTO members whose governments aren't democratically elected, too. If they succeeded in changing things in all those places, no WTO member's citizens would ever need anyone else to protest on their behalf again. And isn't that what every protester wants -- to protest themselves out of the need to protest?

Daniel Altman's new book, Connected: 24 Hours in the Global Economy, is being published today by Farrar, Straus and Giroux. He also writes a blog called Managing Globalization for the International Herald Tribune.