Meilke, Karl D.

English

Research Papers in Economics

 
 
 
What Went Wrong In Seattle? 
 
 
 
 
 
Karl D. Meilke 
University of Guelph 
 
 
 
 
CATRN Paper 2000-01 
January 2000 
HTTP://www.eru.ulaval.ca/catrn/ 
EN COMMERCE 
INTERNATIONAL
AGROALIMENTAIRE
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E SEAU CANADIEN     DE RECHE R
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CANADIAN   AGRIFOO D
 TRADE RESEARCH
NETWORKThe Canadian Agri-Food Trade Research Network (CATRN) is a joint research, 
teaching and public service program of the University of Guelph, Laval University 
and the University of Saskatchewan.  The CATRN was founded in 1999 with 
funding provided by Agriculture and Agri-Food Canada.  The CATRN web page 
is: www.eru.ulaval.ca/catrn 
 
The views expressed in this paper are those of the author(s) and should not be 
attributed to founding institutions. 
 
Author contact information: 
 
Karl Meilke 
Department of Agricultural Economics and Business 
University of Guelph 
Guelph, Ontario  
Canada 
N1G 2W1 
 
Phone: 519-824-4120 ext. 2769 
Fax: 519-767-1510 
E-mail: Meilke@agec.uoguelph.ca 
Web page: www.uoguelph.ca/kmeilke 
 
 
 
 CATRN Paper 2000-01     http://www.eru.ulaval.ca/catrn 
 
  1
What Went Wrong In Seattle?
 1 
 
  The Third WTO Ministerial Meeting in Seattle was meant to kick-off the next 
round of multilateral trade negotiations.  However, the meetings were adjourned with no 
agreement having been reached.  The reasons for the collapse were many and varied but 
had little to do with the protesters  who filled the streets of Seattle and dominated the 
evening news broadcasts. 
 
  Perhaps the cover of  The Economist
2 magazine captured the true significance of 
the Seattle meetings best.  Under the heading "The Real Losers in Seattle" was the picture 
of a poor child in a developing country.  It would not have been much of a stretch to have 
included a picture of a North American grain farmer in the background.  
 
  Selling freer trade is always a difficult task.  Trading relationships are complex 
and highly controversial.  It has taken more than 50 years to lower tariffs on industrial 
goods from an average of 40 percent to the current 4 percent.  The push towards trade 
liberalization in agri-food, services, investment and intellectual property is still in the 
beginning stages
3.  It is not unusual to see moves towards freer trade interrupted by 
periods of no progress or even backsliding.  Hence, the failure of Trade Ministers to 
launch a new round in Seattle is not particularly unusual or surprising.  In fact, for 
economists with memories of the Uruguay Round of trade negotiations, it is reassuring 
that agri-food trade was not the issue that caused the negotiations to be suspended.  
However, disagreements about the extent and pace of liberalization in agri-food remain 
deep-seated between the European Union, Japan, and the major agri-food exporters. 
 
  What did cause the negotiating collapse, and what does it mean for Canada?  The 
failure to reach an agreement was caused by the lack of political will and leadership  - 
primarily in the United States and the European Union  - to forge the compromises 
necessary to launch a new Round.  There was no respected world leader willing to make 
the strong case for freer trade
4.  To point out: 
  
•  the benefits of liberalized trade for all countries, rich and poor; 
 
•  the benefits of liberalized trade for the environment; 
                                                 
1  Karl D. Meilke, Co-Director, Canadian Agri-Food Trade Research Network, Department of Agricultural 
Economics and Business, University of Guelph.  The author greatly appreciates the comments provided by 
the other members of the CATRN on this document, however any errors are solely the authors. 
2  The Economist, December 11, 1999.  The Economist carried an excellent series of articles dealing with 
globalization and the WTO negotiations in the November 27, December 4 and December 11, 1999 issues. 
3 Negotiations on a Multinational Agreement on Investment were held by the OECD, however, when an 
agreement could not be reached some WTO member countries were hoping to revive these negotiations in 
the WTO.  
4 A number of political events resulted in negotiators from the European Union and the United States, as 
well as WTO officials being ill prepared to launch a new Round in December: a lame duck President in the 
United States and an election campaign well underway; a new European Commission as a result of 
scandals in Europe; and a protracted debate in the WTO about naming a new Director General.   CATRN Paper 2000-01     http://www.eru.ulaval.ca/catrn 
 
  2
•  the benefits of a transparent, rules based and nondiscriminatory trading regime; and 
 
•  to present a vision of institutional reform that would result in the WTO being better 
able to fulfill its mandate. 
 
Gains from Trade    
 
  Since 1950 world GDP has increased by 600 percent while world trade has 
increased by nearly 2000 percent.  In 1950, world exports accounted for 8 percent of 
GDP and by 1999 they had increased to 26.4 percent.  While increased world trade and 
openness have not been the only engines for growth and improved living standards, they 
have been important ones.  It has been proven time and again that countries with an 
outward trade orientation grow and flourish, w hile those that hide behind protectionist 
barriers stagnate.   
 
That the multilateral trade negotiations failed in Seattle, the home of Boeing 
Corporation and Microsoft, two of the world's largest transnationals is ironic.  Those 
protesting the WTO need to ask themselves if the world would be a better place if many 
billions of dollars of economic activity were removed from the marketplace, and the 
United States could not trade its airplanes and computer software?            
 
  Closer to home the case for trade is even more compelling.  In 1998, over forty 
percent of Canada's gross domestic product (GDP) was accounted for by exports and the 
value of agri-food exports was more than 75 percent of our farm cash receipts.  These 
exports allow Canadians to enjoy a  higher standard of living and to consume imported 
products that we can not produce, or can only produce at very high prices. 
 
GDP and Exports of Goods and Services, bil. dol. 
 
Year  GDP  Exports  Percent 
       
1970  89.1  20.1  22.6 
1980  309.9  87.6  28.3 
1990  645.6  168.9  26.2 
1998  866.2  370.0  42.7 
 
Farm Cash Receipts and Agri-Food Exports, bil. dol. 
 
Year  Farm Cash Recpt.  Exports  Percent 
       
1980  16.0  8.3  51.8 
1990  22.0  13.5  61.3 
1998  29.6  22.6  76.3 
   CATRN Paper 2000-01     http://www.eru.ulaval.ca/catrn 
 
  3
Although the case for trade liberalization is a compelling one it would be a 
mistake to ignore the issues Trade Ministers will have to confront in order to forge an 
agenda for a new Round.  Some of these issues are discussed briefly below. 
 
WTO Structure 
 
  Since the completion of the Uruguay Round of trade negotiations more than 30 
new countries have joined the WTO.  The current membership consists of 135 countries, 
most of them in the developing world.  The developing countries are not homogeneous, 
ranging from agricultural exporters who are members of the Cairns Group to countries 
that are large net food importers.   
 
  Traditionally, the GATT/WTO has made decisions based on consensus.  When 
the membership was smaller and more homogeneous this method of decision making 
served the GATT/WTO well.  However, with  a larger and more heterogeneous 
membership it is unclear if "consensus" can continue to be the way all decisions are 
made.  Even if consensus decision making continues, a way will have to be found to give 
developing countries greater voice in the processes leading up to decision documents.  In 
addition, developing countries are asking for early and meaningful liberalization 
initiatives by the developed world, before they will committ to a new round of 
negotiations.   
 
  Of equal importance is the necessity to redefine the mandate of the WTO.  Is the 
WTO the proper forum in which to discuss environmental, investment and labor issues?  
If not, what is the proper forum, and how will the responsibilities and powers of the 
various international bodies be determined?  Are new international organizations 
required?  Sylvia Ostry, Chair of the Centre for International Studies at the University of 
Toronto has argued that we need a World Environment Organization to debate and 
resolve transboundary environmental issues
5.   Most economists would argue that the 
International Labor Organization is the proper forum in which to consider labor issues. 
 
Developing Country Issues 
 
Developing countries argue that they have not benefited as much from trade 
liberalization as they were promised during the Uruguay Round, particularly for clothing, 
textiles and agri-food where developed country markets remain heavily protected.  In 
addition, developing countries argue that as soon as they become competitive in 
developed country markets they are often subjected to anti-dumping actions.  At best, 
fighting an anti-dumping action is expensive, at worst it excludes developing country 
products from developed country markets. 
 
In addition, the developing world fears that developed countries will  use stringent 
environmental and labor regulations as thinly disguised protectionism.  The developing 
world sees its large endowment of low-skilled labor as its major comparative advantage 
in gaining access to developed country markets.  Developing countries can not compete 
                                                 
5 Ostry, S. "Foggy in Seattle." National Post. November 26, 1999. CATRN Paper 2000-01     http://www.eru.ulaval.ca/catrn 
 
  4
in the high-growth, high-technology markets dominated by the major developed 
countries.  The developing world's comparative advantage lies in supplying goods that 
require, and can be produced with its abundant supply of unskilled labor. 
 
In the past, developing countries have been offered "special and differential" 
treatment in the GATT/WTO.  This allowed developing countries longer periods of time 
in which to phase-in trade liberalization measures and/or made them subject to less 
stringent rules.  Perhaps it is time to rethink the way special and differential treatment is 
handled by giving developing countries early and preferential access to developed 
country markets.      
 
The Agri-Food Negotiations 
 
  As mandated in the Uruguay Round Agreement, multilateral negotiations on agri-
food and services will begin in January 2000.  However, with no agreement on the scope 
of the general negotiations and no deadline, it is romantic to think that much progress will 
be made.  This means that: 
 
•  export subsides will continue to be employed in trading agri-food products thereby 
depressing the price Canadian farmers receive for their products; 
 
•  that tariff rate quotas and different rules for quota administration will continue to 
exclude Canadian products from foreign markets;  
 
•  that the "Peace Clause" will expire at the end of 2003 before new negotiations are 
concluded, opening a wide range of domestic and export subsidies to possible 
countervailing duty actions: and  
 
•  that no decisions will be made on trade in agri-food products created using 
biotechnology.    
 
What Does It Mean? 
 
  The start of a new round of multilateral trade negotiations has been seriously 
delayed.  At best, meaningful negotiations might begin in 2002, postponing any 
conclusion of the Round until the last half of the decade. 
 
  As a result, Canada, and other nations are likely to seek out alternatives through 
bilateral trade agreements and the expansion of regional trading relationships.  Whether 
these efforts strengthen or weaken the multilateral trading system remains to be seen. 
 
  In order to make progress at the multilateral level the short-term mercantilist 
nature of the WTO negotiation process may require fundamental reform.  The request-
and-offer process of the past, where export opportunities were "paid for" with 
"concessions" on imports appears to be inadequate to deal with the current problems and 
issues.  A long-term vision of the world trading system, designed to accelerate economic CATRN Paper 2000-01     http://www.eru.ulaval.ca/catrn 
 
  5
growth, ensure export opportunities for developing countries, provide predictable 
international rules for investment and intellectual property, while at the same time 
protecting the environment is required.  The request-and-offer process was successful in 
lowering tariffs on industrial goods, however, new methods and perhaps new institutions 
will have to found to deal with the current trade agenda.   
 

WHAT WENT WRONG IN SEATTLE?

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