From Bananas to Buttons, New Trade Rules Kick In

JUST down the hill from the Byzantine office complex built after World War I to house US President Woodrow Wilson's failed League of Nations, a bold new experiment in global government is being launched.

The World Trade Organization quietly opened for business here on Jan. 31.

Supporters say the WTO, with 76 members and 16 states close to joining, will be able to erase national borders to increase the flow of goods and services, ease racial and class tensions, and even avoid wars.

But the WTO's mission -- opening up dozens of markets and exposing millions of workers to foreign competition -- may be more difficult than expected. And whether WTO's ''nameless, faceless bureaucrats'' (as one United States politician called them) can be effective global governors will be determined in the first year.

The stakes, supporters say, are big.

''Trade has caused in the past more division and war than anything else,'' outgoing WTO Director-General Peter Sutherland said in an interview.

''We have seen how the development of trade links of a profound kind in the case of the European Union, for example, have transformed relations between peoples,'' Mr. Sutherland added. ''There is [also] the opportunity of removing a lot of racial barriers through the greater communication which comes through trade.''

The first tiptoe toward world trade was taken with the creation of the General Agreement on Tariffs and Trade shortly after World War II, when tariffs left over from the Great Depression were prohibitively high.

After decades of revisions to GATT, the latest 1993 accord that created the WTO is the most powerful yet: More than 120 countries agreed to lower their tariffs by an average of one-third. Agricultural tariffs are dealt with for the first time, as is intellectual property. And the newly created WTO has the sanction power, on paper, to make countries accept its rulings.

Remembering the little guy

Supporters say the significance of the WTO is often lost in the haze of economic statistics that confuse both expert and average observers.

A majority of the world's nations -- including the most powerful states in the world -- are agreeing to stick with the decisions of an impartial panel of experts chosen by the WTO's dispute-resolution board.

There is no loaded UN Security Council dominated by the United States and its European allies in the WTO -- for now. The US might theoretically have to knuckle under to a request from tiny Costa Rica, for example, if the dispute-resolution board says so.

If the US decides not to play along, the WTO is in trouble, say WTO officials. ''If the first dispute involves the US, and it loses, and then the US doesn't implement [the decision], what kind of precedent does that set?'' asks a WTO staffer. ''GATT is ruled by consensus, and it's a fragile body.''

But Sutherland predicts that WTO will work because it has to. Free trade is being accepted by rich nations because they see it as the only way to boost their own prosperity while stemming a flood of illegal immigration from poor countries.

''I'm saying that you can have migration or you can have trade,'' Sutherland warned. ''Whether we're talking about Central and Eastern Europe or Latin America or whatever, you have to give the safety valve of opportunity.''

The WTO is off to a rough start, however. A group that must make its decisions by consensus is already experiencing infighting.

The search for Sutherland's successor as director- general of the WTO is deadlocked, and the former Irish bank president who guided the new pact through its final, difficult stages is to leave March 15.

Each of the world's major trading blocks has lined up behind a different candidate. The US and most Latin American countries are backing former Mexican President Carlos Salinas de Gortari, the EU is backing former Italian Trade Minister Renato Ruggiero, and Asian countries are backing former South Korean Trade Minister Kim Chul Su.

A dispute over WTO's textile-monitoring board -- which will control how quickly rich countries drop protectionist textile tariffs, endangering thousands of jobs -- nearly postponed the first meeting. But a compromise giving developing countries majority control over the board averted an embarrassing delay.

The first WTO meeting itself was marred by complaints from Costa Rica and Colombia that the US is already failing to submit to the WTO's authority. Instead of allowing the WTO to decide the matter, the US is pressing ahead with its own probe of a banana- trade agreement between the EU and the two Latin American countries that the US says unfairly discriminates against US firms.

''This is not an appropriate time for the US to threaten sanctions when we have a [WTO] dispute board to resolve these disputes,'' Nestor Osorio, Colombia's ambassador to the WTO, who criticized the US at the first meeting, said in an interview. ''It's not this specific case, it's the principle of abandoning the rules we have all agreed to.''

The continuing squabbles over Sutherland's successor have lowered morale at the WTO, according to some of the 400 staffers, and other disputes have clouded the organization's beginnings.

''[There] we were a day before the first meeting, and there's this textiles spat,'' said one WTO official. ''There's no time to celebrate.''

Others predict free trade may not be the panacea WTO supporters expect. Charles Arden-Clark, senior policy analyst at the Geneva-based World Wildlife Fund -- one of several environmental and development groups that have criticized GATT -- says the treaty and the WTO are flawed because they do not take into account the environmental and social cost of free trade.

WTO should instead encourage developing countries to adopt more sustainable approaches to development, critics say. ''There will be winners and losers,'' Mr. Arden-Clark says. ''If the people who lose their jobs [to foreign competition] can't find new ones, you're in a bit of trouble. If you're a peasant farmer, what are your alternatives? Very few, if any.''

The will to survive

But the largest question hanging over the WTO is whether the unprecedented will that politicians needed in order to sacrifice some of their nation's sovereignty and join the WTO will hold. The massive political resistance that will be sparked by the agreement -- which calls, for example, for an easing of billions in aid to farmers in the US and Japan -- may lead politicians to balk at the WTO's decisions.

Wang Shi Chun, counselor to the Chinese Mission in Geneva, warns that the credibility of the WTO -- which China is lobbying intensively to join -- will be whittled away if the US continues to act on its own to resolve trade disputes instead of deferring to the WTO.

''If the US leaves the system,'' Mr. Chun says, ''it's an empty system.''

Booth Gardner, the US ambassador to the WTO, says the US fully intends to abide by the organization's decisions and will ''have to make some hard decisions'' about protecting certain domestic industries.

Mr. Gardner predicted the WTO will work, but warned that successful trade-dispute resolution is far different from solving international disputes over population, development, and the environment.

''The reason it works for trade is that trade carries this incredible retaliatory threat with it. If [trade] breaks down, everyone gets hurt,'' he says. ''When you come to the environment, human rights, disease, hunger, it doesn't carry with it that threat and I'm not so sure it will work as well.''