For years, it was a running joke in the Washington Post newsroom that any story slugged "GATT" about global trade talks was a guaranteed snooze, destined for deep inside the paper. So it's weird to see how GATT's successor acronym, "WTO," has become a lightning rod for global protest and the hottest story around.
The biggest result of last week's meeting of the World Trade Organization--perhaps the only real outcome, since it broke up without agreement on an agenda--is that politics and the global economy are now tightly entwined. That's as it should be. Nothing affects the lives of ordinary people more than the business revolution that's sweeping the world. It's too important to be left to business alone, and after Seattle, it's obvious that it won't be.
The puzzle for the future is how governments can match the velocity of global economic change. Money now moves instantaneously from continent to continent, but regulators often move so slowly they might as well be traveling in the clipper ships of 150 years ago.
That mismatch between the speed of the market and the paralysis of politics was behind many of the protests last week. Protesters were angry that governments have failed to establish global environmental and labor standards as part of the new world trade regime. The world could certainly use such standards, but as other commentators have noted, the WTO isn't the place for them. That would create the super-bureaucracy many WTO critics fear.
No, the right response to Seattle is to expand existing government efforts to deal with the problems created by a global economy. And it happens that there's a wonderful but little noticed model, in the Justice Department's cooperation with other nations to bust international price-fixing conspiracies.
During the past few years, Justice has brought an amazing string of global antitrust cases. They've mostly involved hum-drum commodities--such as food preservatives, vitamins, sweeteners, livestock feed. The companies that have pleaded guilty to fixing prices include some famous names, such as Archer Daniels Midland, Hoffmann-La Roche, Pfizer, BASF and Hoechst.
These cases are just the beginning, it turns out. The Justice Department has roughly 35 other grand jury investigations underway now, gathering information about international conspiracies that have fixed prices of dozens of other basic commodities, from metals to chemicals.
These international price-fixing conspiracies are actually a perverse consequence of globalization. Justice Department prosecutors have discovered that as competition increases and market barriers fall in global commodity markets, profit margins tend to decline, as well. It's hard, after all, to differentiate your version of Vitamin C from your competitor's. So rather than engage in a destructive price war, business executives often conspire to set prices and allocate market share.
The conspirators are as diligent about fixing prices as they are in managing their businesses. They send each other monthly reports, showing where each member of the conspiracy stands, year-to-date, on its global sales quota. The price-fixers meet in person, too--often under the cover of a legal trade association--to review how the conspiracy is faring. If any member is violating the rules, the other conspirators will quickly retaliate by cutting prices to penalize the cheater.
Justice has already convicted companies for fixing prices on a range of simple, everyday products. The list includes: lysine, which is added to chicken and swine feed; citric acid, used to preserve and flavor cosmetics and soft drinks; maltol, used in caramel-flavored candies and beverages; sorbates, used to preserve cheese and baked goods; basic vitamins such as A, B2, B5, C, E and Beta Carotene, which are added to everything from kids' cereals to animal feed.
European and Asian markets have been dominated for decades by such cartels. But now, thanks to globalization, they're affecting U.S. consumers--and thus are targets of U.S. antitrust laws. Indeed, Justice recently levied a $500 million fine, the largest in its history, against the Swiss firm Hoffman-La Roche for conspiring to fix vitamin prices.
The lesson for WTO critics is that these cases couldn't have been prosecuted without help from European governments and Japan. "Antitrust enforcers have set up a global network that allows us to crack these cartels," explained Joel Klein, Justice's antitrust chief, in an interview last week.
The global economy is here to stay, happily. And the benefits of free trade seem clear from any reading of economics and history--so long as it stays competitive. But in the real world, business will try to evade that competition--through price-fixing conspiracies, bribery and other forms of corruption.
That's why it's good that politics intruded so clamorously on the trade bureaucrats last week in Seattle. Politics is about setting rules--deciding what areas to fence off from the cyclone of the global economy. For France, a core national value may be protecting an agriculture system that gloriously and inefficiently produces 400 kinds of cheese. For Americans, a core national value is certainly free competition, symbolized by the Sherman antitrust act.
With its 35 grand jury investigations underway, the Justice Department may add a surprising new chapter to the WTO debate. The antitrust example shows that, far from eroding U.S. legal sovereignty, globalization may actually extend its reach.