m the original 1948 ITO, except that the primary employment purpose of world trade became lost amid the free trade ideology popularized since then. W hen the WTO replaced GATT on January 1, 1995, all of the GATT rules and its 47 years of precedents were folded into the WTO. Broader in scope than GATT, the WTO establishes rules of open trade in a variety of industries, including manufacturing, services, and agriculture, as well as intellectual property. A December 1997 agreement adds financial services and banking. National laws restricting the rights of foreigners to buy banks must be swept aside. While GATT relied solely on pressure and persuasion, the WTO has the powerthrough its trade policy review processto pass judgment on domestic laws, regulations, and practices that affect trade. Although the WTO has not yet added basic labor rights to the list of fair trade practices subject to its rulings, decisions about how far the WTO can go to enforce labor rights will likely be reached within the next five years. Labor's best hope for mitigating the effects of competition from low-wage countries will thus be decided under the aegis of the WTO, where the battle lines are being drawn between a handful of industrial countries that seek to link trade rules with labor rights and an alliance of Third World countries with their corporate patrons who resist doing so. (These developing nations have been joined by some industrial-country governments, notably Australia, New Zealand, and Great Britain under John Major's Tory government.) Low wages do provide a comparative advantage, often legitimately, because they reflect lower productivity. Low wages can help poor countries promote exports and develop economically. But if the world trading system embraces rules that uphold a minimum set of labor rights, this could prevent artificially low wages. A linkage of labor rights and trade rules would help promote a "high-road" form of development in the Th...
