The World Trade Organization's director general, Pascal Lamy, was a bit defensive, wanting to assure us that the WTO "wasn't created as a dark club of multinationals secretly cooking plots against the people. We do things in the open. Look at our website."

It's been a year since globalized finance brought the planet to its knees, yet here in Geneva, where in late November the WTO opened its grand "seventh ministerial," the diplomats are in denial. One confidential document from the files of WTO members--definitely not on the WTO website--tells us that despite financial and environmental crises, the globalizers still want to party like it's 1999.

In that year, just eight months before the Battle of Seattle, the WTO's Financial Services Agreement (FSA) became global law, breaking down old rules against cross-border trade in currency and financial derivatives. Financial goods spread rapidly. So did financial bads. The result: the collapse of US mortgage-backed securities slammed holders worldwide. When California home prices swooned, Iceland's banks melted.

But Lamy, throughout our lengthy one-on-one chat, insisted we see the WTO not as a corporate enforcer of deregulation but rather as the promoter of "interdependence," a kind of Oxfam or ACLU for trade. "This interdependence has a lot of good sides," he told me, "about freedom, about human rights, about technology, about media, about political civil liberties."

I suggested that, outside the WTO's gated compound below the Alps, few people associate derivatives and mortgage securitization with human rights and freedom. "They should!" Lamy said. "They should!"

I attempted to steer the director general back to the devilish details of this document, marked "ensure this text is not made publicly available": the demand of the European Union, echoed by the United States, that Brazil open its borders to derivatives trading and the sale of other exotic products of foreign banking giants. The EU nations were none too happy, it seems, that "Brazil has not yet accepted the Fifth protocol," that is, stood alone among major nations in flat-out rejecting the FSA.

Brazil's president, Luiz Inacio Lula da Silva, resisted hopping into the financial free-trade free-for-all, which saved his nation from most of the pain of the Great Recession, allowing its GDP to rocket upward at a 9 percent rate over the past three months. Wasn't it just a bit nuts to demand that Brazil now join the derivatives casino? Lamy replied, not unreasonably, "Trade is not the problem. The problem is whether what you trade is regulated or not."

The solution, then, to the problem of bankers gone wild is to regulate them, as they were just ten years ago. But there's a catch. As Lamy acknowledged, "In the WTO you can always claw back." Go ahead and re-regulate, but "there's a price to pay to claw back." Quite a price. Under the FSA, once a nation has stripped itself bare of banking regulations it cannot, despite the crisis, reimpose protective rules that get in the way of newly established foreign bank operations. For example, were Ecuador to follow former Federal Reserve chair Paul Volcker's advice to reinstate regulations that prevent commercial banks from gambling in derivatives, the US government, by WTO rule, would probably be able to slap a stiff tariff on every banana from Ecuador to make up for US banks' lost trading profits. In other words, it could cost a pretty penny to a treaty signer to rein in the local JPMorgan trading desk.

How did governments get tied hand and foot by the Financial Services Agreement?

When the WTO financial treaty took hold in 1999, ours was a very different planet. A month before the protest against the WTO, Robert Rubin had joined Citigroup, a megabank effectively created by the deregulation pushed by... Rubin, when he was Bill Clinton's treasury secretary. At that time Rubin was Merlin, and except for the protesters in Seattle ("ridiculous...yuppies looking for their 1960's fix," wrote the New York Times's Thomas Friedman), few doubted Rubin's magic.

In 1999 the international trade in equity derivatives and credit default swaps was too rare to track. But thanks to WTO treaty terms negotiated by Timothy Geithner, then assistant treasury secretary for international affairs, cross-border trade in swaps and derivatives would grow to a $115 trillion business by 2008, the year of Citigroup's near collapse and government bailout.

A decade ago, during the Battle of Seattle, Lamy himself wore the epaulets of the financial shock force of globalization as director general of the French banking giant Crédit Lyonnais, whose privatization he engineered. On leaving, I asked him if the protesters hadn't been proven right by the crisis--that breaking down financial borders was fraught with danger.

The banker turned globalcrat insisted that the WTO's woes are not a matter of policy but of public relations. "We've realized that there was a part of our activities which needed more transparency, more explanation. We've done a lot of that, I think."

Martin Khor thinks not. As executive director of the South Centre, and as former director of the NGO Third World Network, Khor is the closest thing the anti-globalization insurgency has to a leader--and a quite successful one at that. The South Centre, based in Geneva, provides Brazil and many other developing nations with the technical firepower to defend themselves against the diktats of the United States and Europe.

Khor says the WTO's bad rep stems from its chutzpah in pressuring developing nations to replicate, in the guise of trade rules, the deregulatory frenzy that put the United States and Europe "into the soup." And he finds it rich indeed that banks that would have gone bust if not for massive government bailouts are still preaching to emerging nations the gospel of deregulating financial markets. "If there had not been those bailouts, these financial institutions would no longer exist. But having been bailed out, they now continue to think they're going to go back to business as usual."

Apparently they haven't heard that the party's over.

http://www.thenation.com/doc/20091221/palast