In the late 1980s, corporate leaders and their backers in the U.S. and British governments launched a campaign to transform the General Agreement on Tariffs and Trade (GATT), a narrowly-cast, 20-page trade pact, into a powerful new system of global governance. The GATT, which cut tariffs and quotas on trade in goods, and the overall notion of trade both enjoyed broad support, making these obscure negotiations an ideal Trojan horse within which to conceal an expansive non-trade policy agenda.
The WTO enforces 900 pages of one-size-fits-all rules pertaining to global policies on food, health, safety, the environment, social services and service sector regulation, investment, intellectual property, and government procurement. The agency’s expansive powers over the regulatory authority of WTO member nations are enforced by a binding dispute resolution system unlike any system existing in environmental, human rights or other treaties. A key WTO provision requires all signatory nations to “conform their laws, regulations and administrative procedures” to the WTO’s terms.
Any national or local policy of a WTO member nation that falls outside the WTO’s terms is challengeable as an “illegal trade barrier” before a WTO tribunal comprised of three trade officials who meet behind closed doors. Unlike domestic courts, the WTO tribunals have no basic due process protections: all documents and proceedings are secret and there is no appeal outside of the WTO system. The three officials deciding the cases are not judges, but rather private trade attorneys and government officials who have represented countries at GATT or WTO hearings. These tribunalists are not subject to conflict-of-interest disqualification. Nations whose policies are judged by the kangaroo court not to conform to WTO rules are ordered to eliminate the policy—or face permanent trade sanctions. Under WTO operations, it is irrelevant if the policy in question was passed by democratically elected parliaments, supported by domestic Supreme Courts, or established by public referendum. It is irrelevant if the law in question is unrelated to trade or if it treats domestic and foreign goods and companies the same. If the policy is ruled to be outside the constraints set by the WTO, it must go.
Because the WTO’s substantive rules are extremely biased against governments’ power to regulate markets, WTO enforcement tribunals have ruled in nearly every case to eliminate the policy in question. After nine years and nearly 90 cases decided, there is only one instance of a member refusing to comply with WTO rules: the European Union (E.U.), which banned meat containing artificial growth hormones, faces over $100 million in trade sanctions annually for the privilege of maintaining its ban. Most members cannot afford to take such a course of action. Indeed, now the mere threat of a WTO challenge often causes countries to change their laws to conform to WTO rules.
False Promises of Free Trade
WTO proponents and defenders continue to posit that governments and populations benefit because, according to them, reorganizing countries’ laws and economies to conform with the one-size-fits all model will ensure economic growth. However, the economic data—including data provided by the World Bank and other supporters of this model—prove the opposite: countries that have most strictly complied have suffered from dramatically slowed growth in per capita income, while countries remaining outside the rules have enjoyed the highest rates of poverty reduction. Nations such as Argentina and Thailand were touted as the poster children of the WTO model for other countries to emulate—until their economies crashed and burned. As the economies of country after compliant country in Asia, Latin America and Africa tanked and millions of their inhabitants suffered from the consequences of this failed social experiment, the high priests of the WTO suddenly claimed that the countries—not the model they had all followed—were themselves to blame for their economic problems.
Countries such as China and Vietnam—who were originally outside of the WTO system—implemented many of the investment, capital and import-control policies that the WTO forbids, yet have had stunning growth rates that lifted millions from poverty. If one excludes these countries and only considers those complying with WTO rules, the number—as well as the percentage—of people living in abject poverty (defined as $1 per day) has increased during the WTO era. Moreover, in the era of the WTO—and following the imposition of the same package of policies by the International Monetary Fund (IMF)*—income inequality between nations and within nations has increased dramatically. For instance, income inequality in the United States is at its highest since the age of the robber barons at the turn of the century.
But despite this track record, some interests—including the U.S. and E.U. trade agencies and the corporations they serve—have been pushing for negotiations to broaden the WTO’s scope and power even further. They seek to add to WTO rules certain outrageous terms now found in the IMF’s bilateral Structural Adjustment Programs (SAPs) with poor countries and in the North American Free Trade Agreement (NAFTA). Through NAFTA, for example, foreign corporations and investors are empowered to privately enforce new privileges and rights by suing governments for cash compensation based on allegations that government policy undermines expected profits. A string of these cases have already been decided. For instance, Mexico has paid a U.S. toxic waste company $18 million in damages after a NAFTA tribunal ruled that Mexico’s zoning laws barring toxic waste treatment in an environmental preserve violated the company’s investor rights. Not even international environmental and human rights treaties are free from these attacks: in another case, a corporation received compensation because Canada’s implementation of the Basel Convention (governing trade in hazardous waste) had limited its business opportunities in PCB trade.
Neoliberalism’s Next Phase
The world is living with the threat of WTO and NAFTA in part because the voices of those who would be most affected were locked out of the discussions. This dichotomy, combined with nearly ten years of dismal results, led to the collapse of talks at the WTO’s Cancun Ministerial in September 2003. Social movements, labor unions and a diverse array of other civil society forces from around the world have run effective campaigns in scores of countries to inform citizens and demand a more equitable trade system. The result was a setback to the corporate globalization agenda pushed by the Bush administration, some European countries, and WTO promoters in Geneva and in corporate boardrooms.
The Bush administration and its corporate funders suffered yet another blow two months later in Miami when a strong bloc of Caribbean and South American countries resisted plans to expand the NAFTA model to 31 more countries through a proposed Free Trade Area of the Americas (FTAA). The United States demanded an all-encompassing treaty with NAFTA’s extreme corporate investor protections; patent rules that limit access to seeds and essential medicines; and procurement rules that trump any local, state or federal government’s ability to use its tax dollars to employ local workers, or for “green” policies. In Miami, the United States was faced with a stark choice: no FTAA or a limited agreement that would not pass muster with its corporate backers. The United States settled for a basic framework that does not go beyond the WTO rules and to which all countries would be bound, and an “a la carte” system on other issues. However, the United States did succeed in keeping the more controversial issues on the table—i.e., FTAA rules that countries can opt into or out of are included in the framework.
Since the NAFTA model was implemented, and similar Wall Street-promoted IMF deals have caused social and economic chaos in developing countries, various governments in the hemisphere have changed from neoliberal cheerleaders to skeptics. This includes Brazil, Argentina, Venezuela, Paraguay and, most recently, Bolivia. Mass demonstrations in Peru and Bolivia have reversed plans to privatize basic public services. The same month as the Miami FTAA meeting, six people were killed in demonstrations in the Dominican Republic over new demands being made by the IMF. Public opinion polls throughout the region indicate a complete loss of faith in the “free trade” model.
This sentiment is also shared in the United States as public concern over trade policy and corporate globalization’s winners and losers has already made trade a central issue in the upcoming general election in November.
Lori Wallach is executive director of Public Citizen, a national non-profit consumer advocacy organization. Wallach is also the author, with Patrick Woodall, of Whose Trade Organization? A Comprehensive Guide to the WTO (The New Press). For more information, visit www.tradewatch.org.
* The International Monetary Fund (IMF) is the international organization originally established to help nations with short-term cash crunches relating to trade financing and to manage the gold-standard currency valuation system. In recent decades, the IMF has morphed into providing long-term loans to developing countries on the condition that these countries reorganize their laws and economies to prioritize servicing debt, for instance, by cutting government budgets, such as health and education spending, liberalizing trade and investment policies, and providing new intellectual property and investor protections.
Originally uploaded on: 2005-10-10 14:41:12 -0700