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Defending Trade
But lately, with free trade and U.S. membership in the WTO under withering attack from Republican presidential candidate Patrick Buchanan and populist rabble-rouser Ross Perot, Bacchus finds himself frequently speaking up for the organization and against economic isolation. He's been quoted in the New York Times attacking Buchanan's views, and he recently testified before the U.S. House of Representative's trade subcommittee in support of the WTO's objectives. "I'm a little surprised that I'm asked to do as much of that as I am," Bacchus says.
Although the WTO figures to have a profound effect on global business, Bacchus says most Americans still don't know what it is or does. "Very few people even in the financial press in the U.S. realize how important these changes are," he says.
The WTO was created by the Uruguay Round of the General Agreement on Tariffs and Trade, or GATT, to monitor world trade issues and resolve disputes between nations. The Uruguay Round cut tariffs worldwide and broadened the new WTO's jurisdiction to include oversight of trade in manufactured and agricultural goods as well as textiles, services, intellectual property and other issues. The WTO's 120 member nations account for more than 90% of world trade.
Perhaps the most important achievement of the Uruguay Round, however, was the creation of a new mechanism for resolving trade disputes.
Previously, the GATT dispute settlement system was toothless. An aggrieved nation could file a complaint, but had no right to an impartial panel to hear its arguments. If a GATT panel did hear a grievance, it was under no obligation to render a decision in a timely fashion. And even if the panel made a decision, it had no authority to enforce the decision. "You could block enforcement by saying, 'I disagree with this,' " Bacchus says. "The inability of the GATT to enforce its decisions led to a lot of insecurity and instability."
Under the auspices of the Geneva-based WTO, however, a more comprehensive trade dispute resolution system was created. There are deadlines for resolving cases and assurances that WTO decisions will be enforced.
The new system seems to inspire more confidence than the old one. There have been more cases filed in the first year of the WTO, about two dozen, than in any other year since World War II ended, according to Bacchus. The first case filed, in fact, was by Venezuela and Brazil against the U.S., charging the U.S. with using the Clean Air Act to hold imported gasoline to higher pollution standards than domestic gasoline. Venezuela won, and the U.S. appealed. The WTO appeals court was scheduled to hear the case in early April.
Other cases noted by Bacchus include the European Community, Canada and the U.S. charging Japan with discriminating against their liquor imports; a U.S. complaint over European limits on imports of U.S. beef treated with Bovine Growth Hormone; a Costa Rican complaint over U.S. limits on imports of foreign-made underwear; and a U.S. suit over Japan's use of American pop music from the 1950s and 1960s without payment of royalties. In fact, half the cases pending before the WTO involve the U.S.
The knock on the WTO leveled by Buchanan is that its ability to enforce rulings on trade disputes impinges on U.S. sovereignty. Bacchus, of course, disagrees. "The WTO has no authority to make any member nation change its laws and regulations," he says. "What the WTO can do is deny the benefits of the GATT contract to any nation that does not want to honor the obligations of the contract."
In the Venezuela case, for example, the WTO cannot order the U.S. to change its EPA laws, but can say that if the laws aren't amended, the U.S. must pay compensation in the form of other trade concessions to Venezuela. "This is not an issue of sovereignty; it is an issue of contract law," Bacchus says.
J. Antonio Villamil, a former U.S. undersecretary of Commerce in the Bush administration and now president of the Washington Economics Group in Miami, agrees. With world trade exceeding $3.5 trillion last year, Villamil says it is vital that the WTO "create clear rules of the game and a clear settlement mechanism" for resolving trade disputes. The real test of the WTO, he adds, "will come over the next several years as they come out with rulings."
Ambler Moss, the former ambassador to Panama who heads the University of Miami's North-South Center, expects a new round of WTO bashing if it appeals court rules against the U.S. in the gasoline case. Moss says the facts of the case support Brazil and Venezuela. "There will be many in the land screaming we ought to get out of the WTO," he says.
Bacchus expresses disappointment with his former colleagues in the Congress. "I think there are a lot of people in the Congress who would benefit from reading Adam Smith and David Ricardo. Free trade is not a zero sum game," he says. Especially galling to him is the lack of enthusiasm for free trade in Florida.
"More than any other nation, the U.S. has a very real national interest in the success and the strengthening of the multilateral trading system. And more than any other state in the U.S., Florida has an overwhelming interest in the success of the multilateral trading system." Yet Bacchus laments that "our success is almost in spite of ourselves" when it comes to trade.
"We have not done nearly enough to capitalize on all our assets to make us a major trading power," he says. Rather than make international expansion a priority, Florida government and business leaders treat it as an afterthought. "We could do a whole lot more to add high-paying, value-added jobs if we had a unified strategy for promoting international trade in the state," Bacchus says.
For now, the WTO job is part-time. Otherwise, Bacchus heads the Orlando office of Miami law firm Greenberg Traurig. He represented Indian River and Brevard counties in Congress from 1990 to 1994. During the Carter administration, he served as international trade negotiator in the office of the U.S. Trade Representative. Prior to that, he was aide to Gov. Reubin Askew. But he says his contribution to the drafting of rules for the WTO's appeals court may be the most important thing he's done in public service.
"What we have done could last for generations," he says. "The WTO could be the most important global institution of the 21st century."
Latin Americans Become Bigger Spenders
Consumer spending rose substantially throughout most of Latin America last year, and total consumer buying power in the region should surpass $1 trillion in 1996, compared to $4 trillion in the U.S.
So says Strategy Research Corp., the Miami-based market research group that measures consumer buying power in 18 Latin American countries. For 1995, Strategy Research found strong consumer spending growth in countries like Brazil (+9%), Chile (+8%) and Peru (+7.2%), tempered by a major downturn in buying power in Mexico (-22.9%) and smaller declines in Argentina (-4%) and Uruguay (-5.6%). Overall, however, 15 of the 18 countries measured reported spending increases, even though real wage growth was flat in most countries.
Although Brazil, with 164 million people, is by far the largest market in Latin America, with a gross domestic product (GDP) of $578.7 billion, Argentinians have highest per household buying power. Strategy Research reports that Argentinians have an average household buying power of $17,542 per year - far more than the next wealthiest country, Chile, with average household buying power of $10,918.
U.S. households, by comparison, have an average buying power of nearly $40,000, says Strategy Research, which defines "buying power" as the rough equivalent of after-tax income.
Average buying power isn't always a good measuring stick of the health of consumer markets, however, because income disparities are much greater than in the U.S., and the middle class, while growing, remains quite small.
Strategy Research reports, for example, that the average Brazilian household has annual buying power of $10,222, but more than 65% of households fall below the average. That's because the top 2.5% of households in Brazil have a buying power of $117,352, while the next 16% of households have buying power of $21,722. The poorest 52.5% of households have average buying power of $2,200 per year.
Though Latin America remains poor by U.S. standards, consumer spending in the region could grow as much as 10% annually for the foreseeable future. And Frank Kelly, a Strategy Research vice president, notes that GDP in Brazil is about the same as in China, while Mexico's GDP was bigger than South Korea's prior to the 1994 peso devaluation.
His point: The emerging markets of Latin America are comparable to Southeast Asia, but not nearly as well-known.
