Financial Times THURSDAY APRIL 30 1998
How the growing power of lobby groups and their use the Internet is changing the nature of international economic negotiations. By Guy de Jonquieres
There is a memorable scene in the film Butch Cassidy and the Sundance Kid when the outlaw heroes are hounded for days by a bunch of armed men on horseback. After failing to shake off their mysterious pursuers, one of the hunted men asks despairingly: "Who are these guys?"
Similar fear and bewilderment have seized governments of industrialised countries as they struggle to draft rules for the treatment of foreign investment. To their consternation, their efforts have been ambushed by a horde of vigilantes whose motives and methods are only dimly understood in most national capitals.
This week the horde claimed its first success and some think it could fundamentally alter the way international economic agreements are negotiated.
The target of their attacks was the Multilateral Agreement on Investment (MAI) being negotiated at the Organisation for Economic Co-operation and Development, the attackers a loose coalition of non-government organisations (NGOs) from across the political spectrum. They included trade unions, environmental and human rights lobbyists and pressure groups opposed to globalisation.
The opponents' decisive weapon is the internet. Operating from around the world via web sites, they have condemned the proposed agreement as a secret conspiracy to ensure global domination by multinational companies, and mobilised an international movement of grass-roots resistance.
This week, they drew blood. Unnerved by the campaign against the MAI, OECD ministers interrupted the negotiations for six months in a belated effort to rally support for the proposed agreement among politicians and voters at home.
Does it matter? Postponing the agreement may make little difference for the maligned MAI is a paper tiger. Trumpeted as a historic initiative in 1995, flawed preparatory work and bitter disagreements among negotiators have thwarted its main aims anyway, such as relaxing national investment restrictions.
Nonetheless, the unexpected success of the MAI's detractors in winning the public relations battle and placing governments on the defensive has set alarm bells ringing. "This episode is a turning point," says a veteran trade diplomat. "It means we have to rethink our approach to international economic and trade negotiations."
The central lesson is that the growing demands for greater openness and accountability that many governments face at home are spilling over into the international arena. That makes it harder for negotiators to do deals behind closed doors and submit them for rubber-stamping by parliaments. Instead, they face pressure to gain wider popular legitimacy for their actions by explaining and defending them in public.
There are signs these trends could affect many international economic agreements, including those involving the World Bank and International Monetary Fund. But nowhere are the lessons of the MAI affair likely to be studied more intently than at the World Trade Organisation. Born out of the General Agreement on Tariffs and Trade (a highly technical body), the WTO is emerging as the pre-eminent forum for global economic rule-making.
Its task is complicated by three closely-related trends:
* The threat of "globalisation backlash", as voters in the US and many other countries blame social and economic insecurity on free trade and open markets.
* The extension of trade liberalisation beyond border barriers, such as tariffs and quotas, into areas that were until recently regarded as national policy preserves.
As a result, trade liberalisation impinges far more directly than ever on ordinary people's lives, and risks stirring up popular resentment when it conflicts with sensitivities over issues such as environmental and food safety standards.
* The growing reach of the WTO's disputes settlement procedures. Critics allege that the body's increased power to enforce world trade law puts countries' sovereignty at the mercy of a judicial process that lies beyond national control. Defenders of the WTO reject such criticisms as inaccurate and ill-informed. But some admit the organisation and its members are paying the price for acting with unnecessary secrecy.
The system is already fraying at the edges, partly under pressure from its own members. Governments involved in controversial trade dispute cases regularly "leak" confidential interim rulings by WTO panels. WTO chief Renato Ruggiero says that unless disclosure rules are reformed, the organisation's credibility will be undermined.
A US-led debate is under way on opening the doors wider. The WTO has equipped its new council chamber with a public gallery and invited representatives of more than 150 NGOs to its ministerial meeting next month. Some diplomats favour making disputes panel hearings public.
However, it is uncertain whether such moves will be enough to satisfy the critics. Most officials admit they are in a dilemma over how to deal with the NGOs' demands, and how to assess their political strength.
One problem is deciding which organisations to listen to, and whom they represent. Governments agree that many such groups hold views that reflect a broad swathe of public opinion. But they also believe much pressure is exercised by fringe movements that espouse extreme positions, with little public support. The trouble is, as officials concede, that good organisation and strong finances enable such groups to wield much influence with the media and members of national parliaments.
The desire to neutralise the impact of such lobbying may push governments to work more energetically to drum up business support for liberalisation agreements. The OECD's failure to do so in the case of the MAI is an important reason for its problems.
Business lobbies which trade negotiators have traditionally suspected of being mainly interested in preserving protection are becoming more active as proponents of free trade. Strong support from industry leaders on both sides of the Atlantic played a big role in WTO agreements last year to eliminate information technology tariffs and open global financial services markets to more competition.
Nonetheless, striking the balance between wider public consultation and capitulation to lobby groups will not be easy. Some diplomats fear that if they concede too much they will be unable to resist demands for direct participation by lobby groups in WTO decisions which would violate one of the body's central principles.
"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."
He and other trade experts fear the result would be to paralyse the WTO's effectiveness as an engine for freeing trade and turn it into a happy hunting ground for special interests.
However, free trade advocates are aware that the MAI affair is likely to mean they will have to fight harder to keep the WTO's mission intact. "The NGOs have tasted blood," says one. "They'll be back for more."