Stop the WTO

Where’s the trick? That’s the first question to ask about any international trade deal these days. What appears to be a step in the right direction – towards greater liberty in trade across borders – turns out to be a leap into world statism.

That was true of Nafta, with its labor regulations, environmental restrictions, trade-diverting rules of origin, foreign aid, investment guarantees, and supranational bureaucracies. The agreement placed a legal imprimatur on the worst aspects of the mixed economy, as one might expect from the Clinton administration. And the recent Gatt negotiations are Nafta cubed.

Gatt’s “Uruguay Round,” if approved by Congress, will create a menacing new supranational institution, the World Trade Organization. The WTO, which international statists have worked for since at least the Wilson administration, will entangle the entire world in a Keynesian thicket of regulation, enact international fiscal planning, and link trade with wealth redistribution.

The multinational corporations aligned with big government will benefit from all of this, but medium and small businesses, not to speak of American liberty and sovereignty, will suffer.

The present version of the WTO was outlined in 1992, when Gatt director general Arthur Dunkel advocated merging all the agreements reached under Gatt into a new agency. The centerpiece of the “Dunkel Text” was the Multilateral Trade Organization.

Dunkel compared the MTO to the wealth-destroying World Bank and the International Monetary Fund. What they are to foreign giveaways, he said, the MTO would be to trade. But at the end of the Uruguay Round in December, U.S. Trade Representative Mickey Kantor changed the name of the bureaucracy. It would now be the World Trade Organization, or WTO. That title has more “gravitas,” said the former Hollywood fixer, and sounds less bureaucratic.

Trade between nations, like trade within nations, takes place when parties make contracts to their joint benefit. The rules are simple: primarily, keep your promises. A Domestic Trade Organization, and we have dozens of oppressive agencies in Washington, D.C., that could be called exactly that, only mucks up the market to benefit the state and the special interests. The WTO will do the same on a global scale, while also promoting world government.

The WTO will convert peaceful trade into policy imperialism. It will allow economic exchange with some countries under approved conditions, and impose a variety of sanctions on others. The conditions will include all the legislation beloved of U.S. left-liberals, such as preferences for labor unions, artificially high labor costs, controls on the organization of industry, high taxes on capital and income, central-bank inflation, invasive tax collection, and abolition of financial privacy. The goal, as with Nafta, is to transform every country, developed or developing, into a carbon copy of Clintonian social democracy.

It is wrong, of course, to use private trade to export statism. Such a tactic violates the sovereignty of nations that dare to be independent of the New World Order. Meanwhile, our economy is encumbered with the richest, biggest, and most powerful government in the history of the world. Developing nations, former Soviet clients, for example, do not need to follow our example.

Under the WTO, we’ll also hear much talk about democracy. If a country is rules by an “authoritarian regime,” i.e., one that disobeys the State Department, it will have to depose its leaders before it can benefit from cross-border trade. Or if a country proves itself too democratic by electing someone that Al Gore and the New York Times don’t like, it will also face sanctions.

The WTO is nothing new, however. It has had many predecessors in this century, all thankfully stopped in their tracks. One close call came at the end of World War II, when the governing elites sought to refashion the world in their image. Crucial to their plan were the Bretton Woods institutions of the World Bank and the IMF. The third leg of this managerial tripod was supposed to be the World Trade Board, as outlined by government planner Otto Tod Mallery in his 1943 work Economic Union and Durable Peace.

The WTB would “control international depressions by international action,” and “regulate international cartels and enforce international fair trade practices.” However, the board could not be subject to public approval. It must appear, wrote Mallery, “not as an argument,” but as “a news event.” He suggested a series of propaganda articles for the New York Times to run, which is today busily promoting the World Trade Organization.

When the news event took place, however, the World Trade Board had become the International Trade Organization, to be run by the United Nations.

ITO forces worked from 1945 to 1948 to draw up their “Havana Charter,” but only Liberia and Australia signed on. President Truman, a perfervid supporter, faced sure defeat in the Congress, and had to withdraw the ITO bill in 1950.

Why the opposition? Because the Old Right saw the ITO as an attempt to impose world central planning in the name of free trade.

The anti-ITO forces were led by Philip Cortney, an attorney and businessman in New York City. His magnificent book The Economic Munich (1949) took on the ITO and destroyed it. No surprise, Cortney was a follower of economists Ludwig von Mises and Henry Hazlitt, the two greatest free-market champions of the time.

Cortney dedicated his book to his country, “which I worship for having taught me the real meaning of liberty.” The Havana Charter, he wrote is nothing but the product of economic fallacies,” of “Keynes’ teachings” and of zealots, ignorants, clever politicians or ‘do-gooders.'” Without principled opposition, their economic theories could be “the grave-diggers” of our freedom.

First noting that no real free-trade agreement would be this complex, Cortney then showed, line by line, that the ITO was the opposite of free trade. Instead of allowing business to make its own trade deals, the bureaucracy ran interference for large corporations while hobbling their medium and small competition.

We must defeat ITO, he said, and work for real free trade, by reducing our own barriers, letting business make its own deals abroad, and reinstituting the international gold standard. Central-bank inflation is the worst enemy of international economic cooperation.

Cortney-generated pressure from their constituents caused the Chamber of Commerce, the National Association of Manufacturers, the National Foreign Trade Council, and the U.S. Council of the International Chamber of Commerce to join Cortney in opposition. Even John Maynard Keynes had to take notice, denouncing Cortney and his writings.

Cortney waged a magnificent fight, taking years from his business, because he saw that the ITO threatened free enterprise and decentralized government. He was inspired by his frequent talks with Mises, whose injunction that we must fight for liberty and not count the cost, as Mises himself had done, struck home.

The promoters of the ITO made apocalyptic predictions. Its defeat would be an “unthinkable tragedy,” wrote White House advisor and Marshall Planner Will Clayton. Opponents were called “isolationist,” “protectionist,” “backward- looking,” and every other epithet in an all-too-familiar litany.

The unthinkable and wonderful did happen, however, and, no surprise, the world kept turning. In fact, we were much better off. We got growing trade without international bureaucrats directing the process.

The “most ambitious attempt ever made” to enact “a comprehensive code of rules” for international trade “ended in failure,” said William Diebold, Jr., economist at the Council on Foreign Relations, in his 1952 history of the ITO.

But the international statists never give up, and in 1955, they tried to establish the Organization for Trade Cooperation (OTC), but it too went down to defeat.

Another attempt came in the mid-1970s. It was the New International Economic Order (NIEO), essentially the World Trade Organization all over again, but this time the inclusion of the Soviet Union was a sticking point.

NIEO was defeated by the anti-Soviet left-liberals known today as neoconservatives. Using the rhetoric of the right, they pointed out that the NIEO was not about free trade, but international redistribution of wealth.

“What the Third World is saying,” wrote Irving Kristol in Commentary, is “that their poverty is the fault of our capitalism.” William Safire predicted in the New York Times that “in the name of price stability and economic order, we will have acquiesced in the creation of a network of barriers, tariffs, special deals, reciprocal restraints, and income redistributions that will enmesh every American business decision in foreign policy.”

Their ally, then-Secretary of the Treasury William Simon attacked “the false gods of many who seek a New International Economic Order.” These gods, expropriation and cartelization, “are not the answer for either the developing nations or the industrialized nations.”

In the Nafta debate, however, these same people favored an NIEO for North America. With the Soviets gone, they will also undoubtedly pump for the WTO, calling its opponents – as they did Nafta’s – “isolationist,” “protectionist,” “backward- looking,” etc. We may, however, be spared Safire’s most hysterical Naftaism, when he called his foes “skinheads.”

Meanwhile, the World Trade Organization’s supporters at the UN are also calling for a World Development Authority, an International Central Bank, an International Development Fund, and a World Food Authority.

This all dates back to the Progressive Era. Woodrow Wilson’s 1918 plan for a World Trade Tribunal was part of his League of Nations Covenant. It was suggested by Huston Thompson, head of the Federal Trade Commission under Wilson. Thanks to Henry Cabot Lodge of Massachusetts and his allies, neither the League nor its Trade Tribunal were approved by the U.S. Senate, in one of the most courageous acts in its history.

The 19th century saw the freest trade in history. Not only were there no international bureaucrats, but the American government was, by today’s standards, barely visible. There were courts of law where contracts were enforced, but government interference was rightly seen as injuring trade, not helping it.

International trade does not need management. The passionate speeches of Richard Cobden in the 19th-century House of Commons were about the obligations of domestic government to allow imports and exports, not about new bureaucracies or supranational agencies. And the anger of the Jeffersonian free trader, John Taylor of Caroline, was directed not at other countries for their real and supposed trade restrictions, but at his own government for not allowing freedom for Americans.

Diebold ended his treatise on the failed ITO by wondering what he and his colleagues at the Council on Foreign Relations should do after the defeat. “Can we invent new means of attaining old aims? How can we devise a policy that is not only promising but politically acceptable?”

Here it is, answers Mickey Kantor more than 30 years later. But in the spirit of Cobden and Taylor, of Mises and Hazlitt, of Lodge and Cortney, we should say no.

We should toss the World Trade Organization into the dustbin of history, along with the World Trade Tribunal, the World Trade Board, the Organization for Trade Cooperation, the International Trade Organization, and the New International Economic Order. That, Mr. Kantor, would involve the classical republican virtue of gravitas.

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