CAMBRIDGE: The Asian financial crisis barely over, the world economy faces another major eruption, one with even greater significance to the health of the global economic system. The cause this time is not panicked bankers rushing out of emerging markets, but a crisis of legitimacy that threatens the world's trading regime.
As the riots surrounding the failed World Trade Organization conference in Seattle demonstrated, a coalition of labor, environmental, and human rights advocates is intent on sabotaging the WTO, the institutional embodiment of global trade. The WTO is also in trouble with developing countries, which feel estranged from rules they feel do not benefit them. The chasm separating these groups from the agenda pursued by American and EU policymakers is growing, destabilizing the world economy.
All sides agree that the stability of the international economy is predicated on a system of global rules. What is contested is the nature of these rules. Opponents of trade liberalization decry the secretiveness and "non-democratic" nature of the WTO, and the influence of corporate interests in rule-making. They see a trading system that privileges business over labor, the environment, and consumer safety. Developing countries complain about restrictive rules applied to their exports (garments, agricultural products, labor services), and fear that new demands they face over labor and the environment are designed to undermine their competitiveness.
Finding a way out of this crisis requires clear principles for trade rules. Here are five principles on which all ought to agree, and which would allow us to move forward.