THE ROAD FROM SEATTLE.

Globalization is a hot topic, and the World Trade Organization (WTO) is feeling the heat. While the protests in Seattle did not cause the trade negotiations to collapse, they certainly did not help; neither did the unprecedented revolt by developing countries against a process that excluded them from negotiating rooms and a global trading system they view as unfair. Of course, the primary reason the talks failed is because major trading partners could not agree on their priorities.

The United States pushed for the addition of core labour rights to the WTO's agenda and resisted calls to ease its anti-dumping rules. Developing nations said labour standards could be used as a protectionist is tool to exclude their exports. The United States, the European Union and others disagreed on the issue of farm subsidies. All told, the trade delegates' failure to reach agreement on launching the next round of trade talks is a major setback for the WTO. It is also a wake-up call.

Things are changing. Corporate power and people power are stronger than ever. In the past 10 years, global market forces have been unleashed by reformed regulatory systems, privatized assets and liberalized trade and foreign investment. Transnational corporations (TNCs)--a driving force of globalization--wield more power than ever. They now produce one fourth of the world's total output, which is 5 per cent more than the output of all developing countries combined. And TNCs are increasingly forging strategic alliances to consolidate their power. Also, their direct investment in developing countries is now the single most important source of external finance, overshadowing inflows from official aid and exceeding net lending by international banks.

In Seattle, an estimated 30,000 protesters rallied against corporate control, secrecy in trade decision-making, environmental destruction, genetic engineering and the patenting of life forms, job insecurity, exploitative labour practices and growing inequality, to name a few issues. They targeted the WTO because it is viewed as an agent of globalization that has the power to make important decisions and enforce them.

Developing countries are also concerned about globalization and the WTO, and they came to Seattle with concrete proposals to make trade work for them. While the United States and Europe pursued a broad round of talks on new issues such as investment, electronic commerce, competition policy, and labour and environmental standards, many countries in Africa, Asia and Latin America sought a "development round" to review implementation of some Uruguay Round agreements that were reached between 1986 and 1994.

After two decades of the Tokyo and Uruguay Rounds, the vast majority of developing countries have ended up with 3 per cent more trade deficits than in the 1970s and 2 per cent less economic growth. Even major financial institutions seem to be convinced that the multilateral trading system is imbalanced and that action should be taken to enable poor countries to reap the benefits of globalization. In Seattle, the heads of the WTO, the International Monetary Fund (IMF), the World Bank and the United Nations joined the developing countries in calling for a "development round" of trade talks. The IMF, the World Bank and the WTO issued a joint statement saying, "trade and trade policy reform must be made more effective tools for poverty reduction."

They pledged to increase their support for countries to use the opportunities offered by the global economy as key elements of their strategies for poverty reduction and development.

Reducing poverty has become a priority for the United Nations and the Bretton Woods Institutions, and this is reflected in their internal reforms. Rightly so. Half of all people live on less than $2 a day. The gap between the richest 20 per cent of humanity and the poorest 20 per cent doubled between 1940 and 1990. Furthermore, it has become clear in the past few years that free trade and global market forces are not dosing the gap between rich and poor. On the contrary during the 1990s as the pace of globalization accelerated, "the income gap between the developed and developing countries has grown wider, and the prospect of marginalization is becoming increasingly real", said the Group of 77 developing countries in a recent assessment of the situation.

Developing nations are convinced they need differential and more favourable treatment in order to advance in the global economy. Their domestic producers now face greater competition from large multinational corporations. Before he died, former President of the United Republic of Tanzania Julius Nyerere compared the world trading system to a boxing ring. "If I get in with Mohammed Ali, I will get knocked out," he said. To level the playing field, developing countries have been calling for better terms of trade, increased investment and technology transfer, and expanded technical cooperation, capacity-building and trade infrastructure.

Poor nations are also concerned about the procedures of the WTO. Many trade delegates feel they are second-class members, especially after Seattle where they were excluded from key informal negotiations. They also view the membership process with suspicion. The challenge for many of these countries is adjusting to the economic openness that admission brings and carrying the administrative burden of changing so many policies in a short period of time. Some nations cannot afford to make the effort without external aid.

In his statement to the WTO meeting, UN Secretary-General Kofi Annan emphasized it was up to the WTO and its members to ensure that developing countries benefit from free trade. He urged greater market access for developing-country exports in which they have a competitive advantage, such as textiles, footwear and agriculture. He also pointed out that farmers in the third world cannot compete with agricultural interests in industrialized countries, which now receive some $250 billion a year in subsidies. The benefits of reducing trade protection measures, he said, could increase exports of developing countries by "many millions of dollars per year, far more than they now receive in aid", while costing the rich countries very little. For millions of poor people, the Secretary-General argued, "this could make the difference between their present misery and a decent life". Mr. Annan also pointed out that the tariffs rich countries impose on developing countries' imports are now four times higher than the ones th ey impose on products from other industrialized countries. Therefore, he concluded, it was not surprising that many developing countries "feel they were taken for a ride". He also said it was "hardly surprising" if developing countries viewed arguments for using trade policy to advance various good causes as "yet another form of disguised protectionism".

"My own sense is that if you try to tag all these things onto trade negotiations, it is going to be extremely difficult, if not impossible", Mr. Annan told journalists in December after the Seattle meeting. Instead, he argues, "corporations operating around the world need not wait for the local government to apply these standards which their own Governments have endorsed. You do not have to have a national law to pay your staff a decent salary. You do not have to wait for a national law to respect the human rights of your workers; they should do that as a matter of course."

A year before Seattle, in January 1999, Mr. Annan told business leaders at the World Economic Forum in Davos, Switzerland: "We have to choose between a global market driven only by calculations of short-term profit, and one which has a human face. Between a world which condemns a quarter of the human race to starvation and squalor, and one which offers everyone at least a chance of prosperity, in a healthy environment."

In what now seems a prescient move, the Secretary-General challenged the business leaders to join a "Global Compact" with the United Nations and support international standards on human rights, labour and environmental protection, or else face increasing threats to the multilateral trading system. He explained that universal values had already been established in these areas by the Universal Declaration on Human Rights, the International Labour Organization's Declaration on Worker Rights, and the Rio Declaration adopted at the UN Earth Summit. "What we have to do is find a way of embedding the global market in a network of shared values", he said.

"Seattle showed all of us that economic forces and social priorities must be reconciled. Doing so requires that we devise innovative approaches such as the Global Compact", said John Ruggie, former Dean of Columbia University's School of International and Public Affairs, who is a key adviser to the Secretary-General. Mr. Ruggie, who has written extensively on international affairs and the role of the United Nations and the United States in the post-cold-war era, is one of the key architects of the Global Compact, along with trade expert Georg Kell, who spent 10 years at the United Nations Conference on Trade and Development (UNCTAD) before working with the Secretary-General. Mr. Kell was one of the officials who accompanied Mr. Annan on his trip to Seattle, where he was unable to deliver his statement due to the chaos in the streets.

Mr. Ruggie and Mr. Kell argue that expanding global markets requires a social response. In a recent policy paper, they contend that the significant expansion of global economic rule-making over the past decade, which basically enables global markets to function, has not been matched by comparable efforts on behalf of other global concerns, such as the environment, human rights or poverty, or for that matter food safety and international cartels. While the major capitalist countries have the domestic and institutional capacity to protect themselves from the worst negative effects of this imbalance, they claim the rest of the world is far more vulnerable. As national economies have become more integrated into a global whole, Ruggie, Kell and others see a dear need for international institutions to replace the uneven patchwork of national rules and regulations. They view the Global Compact, which calls on corporations and others to work with the United Nations in applying environmental, labour and human rights standards, as a step in this direction.

Since it was launched last year, the Global Compact has gained considerable support. Business partners include the International Chamber of Commerce (ICC), the International Organization of Employers, the World Business Council on Sustainable Development and Business for Social Responsibility. In a message delivered to Mr. Annan in January, the ICC urged the upcoming Millennium Assembly to ensure that the United Nations takes the lead in supporting a rules-based open system of international trade and investment, while opposing all forms of protectionism. Relevant UN agencies and programmes, and not the multilateral trading system, should be the recognized global institutions for raising environmental and labour standards and promoting human rights, the message states. It also says that the United Nations should give special attention to capacity-building in least developed countries, particularly in human resources, physical infrastructure and institutional reform, to help them raise and attract investment a nd to link to the global information society.

Other key supporters of the Global Compact include such influential groups as Amnesty International, Human Rights Watch, the Lawyer's Committee for Human Rights, Oxfam and the World Wildlife Fund for Nature. Another important partner is the International Confederation of Free Trade Unions, which has 125 million members in 145 countries.

The "battle in Seattle" is viewed by some observers as a watershed event, not only for international trade and globalization but also for the legitimacy of Government and governmental organizations. At a meeting in January with senior UN officials, Mike Moore, the Director-General of the WTO, warned that many of the Seattle protesters did not believe that Governments represent the will of their citizens. Needless to say, this is potentially threatening to international institutions composed of government representatives, such as the WTO and the United Nations. Secretary-General Annan has addressed the issue in some of his statements. "We are getting into an era where people are very conscious of their rights and of the decisions that affect them", he said recently. "They do not want to be looked after; they want to participate. I think we need to accept this and organize ourselves and be prepared to work with them." Mr. Moore also warned of "the potentially dangerous rise of nationalism, isolationism and uni lateralism".

To address this trend and take some pressure off the WTO, Mr. Moore urged increased cooperation between the WTO and the United Nations in managing the economic, social and political issues that intersect with trade. He endorsed the initiatives of Mr. Annan to make trade work for the poor and improve transparency and relations with civil society, including the business community, through the Global Compact. He also agreed it was necessary to enhance the capacity of UN institutions dealing with labour, human rights and the environment as proposed by the Secretary-General. In a number of statements, Mr. Annan has called on Governments to give these institutions the funds and support they need.

Since the WTO meeting, the Secretary-General has been in close contact with Juan Somavia, Director-General of the International Labour Organization, Klaus Topfer, Executive Director of the UN Environment Programme, and Mary Robinson, UN High Commissioner for Human Rights. It should be noted that these three top officials accompanied Mr. Annan to Davos when he launched the "Global Compact" in 1999 and are key institutional partners of the initiative. Addressing a Business for Social Responsibility conference in November, Ms. Robinson said: "The immediate goal in implementing the Compact is to challenge the international business community to incorporate these universal values into mission statements; to change management practices to achieve these goals; and to share learning experiences."

At the WTO meeting, Mr. Somavia, a former Ambassador of Chile who gained international respect for his leadership of the 1995 UN Social Summit in Copenhagen, called for a new multilateral initiative involving different organizations of the international system to address the social implications of globalization. The initiative envisions joint research, international policy development and policy packages at the national level to promote development, poverty reduction and decent work.

A series of key meetings this year will further determine the United Nations social and economic policy and its overall response to globalization. These include UNCTAD X, and the two special sessions of the General Assembly reviewing the 1995 Beijing Women's Conference and the 1995 Social Summit. Of paramount importance is the Millennium Assembly in September, when Governments will chart the United Nations role for the twenty- first century.

It is already clear that Mr. Annan is reaching out in an unprecedented way to the private sector and civil 50crety to help the United Nations meet its goals in the new millennium.

The doors of the United Nations are being opened to corporations in an effort to harness their expertise to improve living conditions around the world. "They have capital, they have technology, they have management, and we need to encourage them to open up to the third world and work with them through investment, the sharing of technology and the transfer of knowledge, because I do not think that we can develop the third world by going around and pushing for development assistance, which is constantly decreasing", Mr. Annan said recently.

The Secretary-General is also pushing for NGO participation in the Millennium Assembly. "I know that non-governmental organizations are sometimes difficult", he said in December. "But I have to admit that on quite a few issues they are often ahead of us. They can say and do things that we are not always free to do. They have been a force for good in many areas and, I think, we need to work with them. I hope the Member States will agree to it. I have a sense that they will. Otherwise, we may have another Seattle."

At the WTO Ministerial Meeting, James D. Wolfensohn, President of the World Bank, outlined five areas for priority action:

* Expand market access for all exports from developing countries;

* Reduce agricultural protectionism in high-income countries;

* Work collaboratively to support the capacity of the poorest countries to participate in international trade negotiations;

* Anchor trade liberalization firmly within the wider context of the global development effort;

* Make trade liberalization work most effectively for the poor.

Activists, not just corporations, are transnational. Thanks to the Internet, they mobilize rapidly and efficiently, and issues like trade, which used to be addressed behind closed doors, are now public. Suddenly everyone is a stakeholder and the spotlight phenomenon of public attention is unavoidable.

www.unglobalcompact.org

The Global Compact has its own UN Web site that provides "one-stop shopping" for anyone interested in helping companies to become good corporate citizens. It spells out the nine principles of the Global Compact, which focus on protecting human rights, worker's rights and the environment. It also has a hands-on section to help corporations "transform the principles into management practice", which includes such tools as surveys, checklists, guidelines and training kits. The site, which garnered applause from USA Today, has hot links to the three UN agency partners of the initiative: the International Labour Organization, the United Nations Environment Programme, and the Office of the United Nations High Commissioner for Human Rights. It also has links to all Global Compact partners, including Amnesty International, Oxfam and the ICETU.