The Continuing Threat
From Trade Negotiations
by Daniel Kraker and Kristin Dawkins
Dollars and Sense magazine, March/April 1999
In 1980, a health scandal erupted in Italy when a synthetic
hormone used to promote weight gain and muscle development in
cattle was linked to premature breast development and menstruation
in young girls. In response the Europeans banned the use of synthetic
hormones for any purpose, effectively banning both imports of
hormone-treated beef and its trade within Europe.
The ban went into effect on January 1, 1989. In 199G the European
Parliament voted an astonishing 366-0 in favor of reauthorizing
the ban, formally backing their citizens' and scientists' belief
that hormones used in meat production increase cancer rates and
may contribute to reductions in male fertility.
But the United States argued that the health concerns of the
European Union (EU) were not based on sound science and acted
as a barrier to trade. Less than four months after the European
Parliament's vote, the United States requested that the World
Trade Organization (WTO) determine whether the hormone ban complied
with WTO rules. In early 1998 the WTO ruled in favor of the United
States, forcing the EU to either remove its ban on imports or
face severe economic sanctions.
As the first WTO decision on food safety issues, it has potentially
widespread repercussions for public health, development and environmental
policy. Because Europe's ban was struck down even though it was
non-discriminatory (it treated domestic and imported products
alike - one of the key tenets of trade policy), the decision jeopardizes
the right of nations to limit the risks to which their citizens
will be exposed.
The decision warns the world that, consistent with its promotion
of trade, the WTO will favor lower international standards over
higher domestic standards. It also turns the traditional burden
of proof standard on its head, placing it on countries seeking
to protect human health rather than on those seeking to further
liberalize trade. The decision confirmed the fears of free trade
opponents: The WTO puts health, development and environmental
policy decisions in the hands of international bankers, jurists
and trade economists-decisions they clearly lack the expertise
or accountability to make.
This is only one of the decisions rendered behind closed doors
by the WTO in its four years of existence that have struck fear
into the hearts of advocates for social justice, public health
and consumer rights. Other controversial judgments included a
decision against the United States' restrictions on importing
shrimp from Asian countries that have inadequate conservation
policies for endangered sea turtles; and a decision against the
EU's preference for Caribbean banana producers, who are mostly
small-scale farmers, over Latin American producers where corporate
An environment has been created in which large, rich countries
can run roughshod over the rights of small nations, and transnational
corporations (TNCs) have their way with both. Authority, decision-making
power and enforcement capabilities are now centralized in one
institution, rules have been streamlined and made increasingly
uniform from country to country, capital is mobile, and resources
are easily attainable-in short, mega-corporations have been given
virtually everything they could ask for to accelerate global trade
and increase their profits. "We are writing the constitution
of a new global economy," boasted Renato Ruggiero, Director-General
of the WTO in 1996, in a now famous statement.
With the WTO acting ever more as a legitimizer and backer
of playground bullies, an international movement has risen to
challenge its corporate-backed model of liberalized, harmonized
trade and unfettered free markets. In late 1997, U.S. activists
defeated "fast track"-legislation that would have enabled
the Clinton Administration to sidestep Congress when negotiating
new trade deals. And the once-secret Multilateral Agreement on
Investment (MAI) -a proposal for eliminating governmental controls
on foreign investors -has been stalled by a global coalition of
But battles remain. Wealthy countries are trying to resurrect
the MAI talks at the WTO, after failing in the Organization for
Economic Cooperation and Development (OECD), which serves as a
think-tank for the 29 most industrialized countries of the world.
The WTO's Agriculture and Intellectual Property Rights agreements
will be renegotiated in the next year, with huge implications
for addressing world hunger and food security (including whether
communities will have the capacity to be self-sufficient in food
production), public health, biodiversity and environment. And
the United States is seeking to introduce other new issues at
the WTO, while developing countries are still reeling in response
to the flood of new obligations mandated by the Uruguay Round.
A BRIEF HISTORY OF THE GATT/WTO
The WTO, successor of the old GATT, forms the trade arm of
the triad of global economic institutions (including the World
Bank and the International Monetary Fund, or IMF) that grew out
of the multilateral discussions in the town of Bretton Woods,
New Hampshire following World War II. The WTO's precursor, the
General Agreement on Tariffs and Trade (GATT), was created out
of these meetings. GATT met periodically to negotiate lower tariffs
on imports, and in 1986 its Uruguay Round of negotiations commenced,
the most recent of seven such rounds. The Uruguay Round greatly
expanded GATT's purview to include issues that previously had
been solely matters of domestic policy, including: investment;
intellectual property rights; services such as banking and telecommunications;
food, occupational and consumer safety standards; and product,
health and environmental standards.
The WTO was created at the culmination of the Uruguay Round
talks in 1994 to oversee and enforce the new global trade rules.
Whereas the old GATT had no enforcement mechanisms (beyond encouraging
bilateral settlements between nations), the WTO has the teeth
necessary to implement its decisions. The nations that disagree
appoint a dispute settlement panel consisting of three trade experts
(in the case of disagreement, the WTO's Director-General appoints
the third). The panel's judgments can be appealed once to a standing
Appellate Body made up of seven trade experts appointed by the
entire WTO, whose verdict is final. Any country that does not
comply with a decision rendered by the WTO faces the threat of
economic sanctions, such as a refusal of the other country involved
to continue trading.
Because of its enforcement abilities the WTO has become the
global institution of choice for transnational corporations and
industrialized countries seeking to harmonize international standards
and domestic regulations to maximize trade. Together with NAFTA,
which bears similar enforcement teeth, the WTO has greatly increased
the power and impact of globalization.
Prior to the Uruguay Round discussions the GATT was a relatively
tame institution, essentially limited to negotiating tariff reductions
among sovereign states. It emerged eight years later, however,
with a hugely expanded mandate and scope, the enforcer of globalization
with which all member countries must comply. To understand how
the metamorphosis came about, let's look at two sectors that featured
contentious negotiations during the Uruguay Round: agriculture
and intellectual property rights (IPRs).
AGRICULTURE AND INTELLECTUAL PROPERTY RIGHTS
President Reagan appointed a lifetime executive of Cargill
-possibly the world's largest agricultural company-to draft the
U.S.'s agriculture proposals and serve as its chief negotiator
for the Uruguay Round. Not surprisingly, these proposals were
crafted to favor the interests of multinational agribusinesses
over producers everywhere, including family farmers.
The Uruguay Round's negotiation in agriculture was a bitter
affair. The end agreement, hammered out bilaterally behind closed
doors by the United States and European Union, and foisted upon
other member countries, has done little to enhance food security.
Below-cost prices and export subsidies in a few countries with
industrialized production, primarily the United States and Europe,
have continued to encourage overproduction. This leads to the
dumping of commodities in developing countries at below-market
prices, driving local farmers off the land in droves. The agreement
is potentially devastating to developing countries which often
lack the revenue necessary to import food and to support their
own farmers in ways that increase local production. Liberalized
agriculture benefits the traders-Cargill and other transnationals-rather
than farmers or consumers throughout the world.
A coalition of corporations including Monsanto, DuPont, Merck
and other giants drafted the U.S. position in the Uruguay Round
of negotiations on TRIPs (Trade-Related Intellectual Property
Rights). The TRIPs agreement applies to patents, copyrights and
trademarks of all "products of the mind" including books,
movies, graphic designs and so on -- in each case, shifting the
costs and benefits of cultural development in controversial ways.
One of the most controversial segments obliges governments to
offer patents on genetically engineered products such as medicines
and seeds (whether or not plants are to be patented will be debated
later this year).
Corporations desperately want TRIPs because by manipulating
just one gene of a living organism a company can be declared the
sole owner of an entire plant variety (and in some cases, an entire
species!). The result is a boon to the biotech industry, giving
agribusiness and the pharmaceutical industry a virtual monopoly
anywhere they can market these products. U.S. Agriculture Secretary
Dan Glickman has referred to the fight over genetically engineered
foods and patents on life as the "battle royale of 21st century
agriculture." Meanwhile, Monsanto and other biotech giants
are buying up seed companies like candy bars.
AGRICULTURE AND TRIPS RENEGOTIATIONS
There remains a small window of opportunity for opponents
to this power grab. Both the agriculture and TRIPs agreements
were temporary deals. They were so bitterly contested, nearly
bringing the discussion to a standstill on a few occasions, that
the European Union and United States agreed to temporary settlements
and called a truce in which they promised not to challenge one
another's farm programs. Renegotiations of both are scheduled
under the WTO's built-in agenda: the patenting of the genetic
code for particular life-forms in 1999, and the rest of TRIPs
and the whole Agreement on Agriculture in 2000.
TRIPs critics have been busy gearing up for the talks. In
July, 1998, over 7,000 protestors convened in Kabankalan City
in the Philippines to voice their outrage over the patenting of
life. They called on their governments to join India, Thailand
and 50 African countries in working to remove biodiversity from
the jurisdiction of the WTO, where the U.S. is leading the charge
to allow transnational corporations to obtain legal monopoly rights
over farmers' seeds without recognizing the farmers' rights. "Peoples'
opposition to patenting life is not just the concern of countries
whose national sovereignty and biodiversity are directly at stake,"
says Manny Yap, organizer of the Filipino rally and a leader in
Masipag, a national network of peasant farmers there. "Anyone
who is concerned about the integrity of our environment, of creation
and of culture, not to mention the increasing power of [transnational
corporations] over the world economy, is affected by TRIPs."
Likewise, the agriculture agreement affects everyone concerned
about the decline of rural communities and the global increase
in food insecurity, primarily in the developing world. In the
upcoming talks the United States and EIJ will stake out their
familiar positions, both seeking to expand their share of the
global market by dumping surpluses overseas and obligating farmers
to make the sacrifices necessary to do so. In many countries,
farmers' groups are calling for the withdrawal of agriculture
from the WTO altogether. They argue that agriculture is not merely
a system of production, as it is popularly viewed in most of the
North, but a way of life. Further agricultural trade liberalization
threatens the survival of rural communities as well as the food
security of entire countries.
THE MULTILATERAL AGREEMENT ON INVESTMENT (MAI)
The MAI does to investment what the WTO does to trade. If
enacted, investment rules will be liberalized and harmonized,
accelerating the flow of investment capital around the world,
principally from North to South. Countries will lose their ability
to make sovereign decisions to regulate investment, including
speculative capital that can flee a country as fast as it enters,
wreaking havoc-as recently happened in southeast Asia. "The
treaty is a throw-back to colonial-era economics," says Martin
Khor, Research Director of the Third World Network, based in Malaysia.
"It cannot have a place in the present world where developing
countries have the legitimate right to regulate investments, develop
their own domestic economy and to strengthen their own enterprises."
The OECD began to discuss the once-secret agreement in 1995,
and proceeded unchecked until a draft was leaked on the internet.
The citizen response was so vehement and ensuing activist mobilization
so effective that the agreement has been given up for dead by
many, including the United States. But the EU has spurred a new
initiative to negotiate the agreement through the WTO, forcing
activists to remobilize.
You can already see the harmful effects of an MAI-style treaty
in the three-nation NAFTA agreement. One of NAFTA's worst provisions
allows corporations to sue governments that infringe on their
"right" to make money. In one case, the California-based
Ethyl Corporation sued the Canadian government on the grounds
that its ban of one of their products, a carcinogenic gasoline
additive already banned in the United States, was a trade barrier
violating their rights. The suit was so intimidating that the
Canadian government backed down, and allowed Ethyl to sell its
carcinogen in Canada.
An identical provision-giving corporations the right to sue
states-is intended for the MAI. It is a magna carta that would
strengthen the access of transnationals to worldwide markets and
resources-not an altruistic agreement to pour investment dollars
into impoverished countries. An MAI, backed by the enforcement
arm of the WTO, would likely lead to a major decline in local
industry and a large outflow of financial resources into the coffers
of transnationals-not to mention environmental degradation and
ACTIVIST SUCCESSES AND CHALLENGES
The globalization train continues to rumble along, but it
faces a number of potential stumbling blocks in the near future.
One obstacle is that it no longer has a "fast track"
in the United States, courtesy of an increasingly common coalition
between Pat Buchanan-style isolationists and progressives who
want to spread the benefits of trade to all participants, not
just transnational corporate behemoths and the developing world's
elite. The key to their success lies in their ability to link
the day-to-day concerns of people's lives-stagnant wages, the
demise of the family farm and rural communities, the erosion of
local decision-making authority, and environmental degradation-to
the spread of liberalized, harmonized trade.
The task is being made easy for them. During the NAFTA and
WTO debates activists opposing the treaties had no tangible proof
that the weak labor, environmental and health protections in the
agreements would fail to outweigh the benefits given to corporations
and the restrictions placed on nations. Now, after five years
of NAFTA and four years of the WTO, activists have such proof.
Countries worldwide, including the United States, are experiencing
job losses and falling wages. The Economic Policy Institute estimated
that the United States lost 420,000 jobs from 1993 to 1997 due
to NAFTA. And the jobs created in the industrialized world are
low-wage service-sector ones, while those created in the developing
world tend to be even lower-wage sweatshop jobs.
This is precisely what a group of progressive representatives
on the "Fair Trade or Bus Tour" found early in 1998
on a drive through Atlanta and neighboring communities to see
first hand the effects of globalization on Americans. Organized
by the Citizens Trade Campaign, a coalition that includes Ralph
Nader's Public Citizen, the group, as described by Jim Hightower,
was on "a journey to establish a new American policy of fair
trade based on raising the world's labor, health, environmental
and living standards -rather than knocking ours down."
Thus there is some momentum building for activists as trade
bureaucrats prepare to descend on a major U.S. city -San Diego,
Seattle, Chicago, and St. Louis have been mentioned as strong
candidates to host the WTO's 3rd Ministerial in late November
1999. This will be the WTO Ministers' final gathering before the
next talks gather steam in 2000. While the United States, the
European Union and other major exporting countries are eager to
negotiate, Third World governments are insisting that the talks
stick to implementing the Uruguay Round and fulfilling, promises
made then, especially commitments to provide more lenient terms
for less developed countries as they strive to comply with trade
Participating governments are hoping for a less eventful meeting
than the Second Ministerial in May 1998 in Geneva, where peaceful
demonstrations staged by some ten thousand protestors by day disintegrated
into riots by nightfall. The irony was obvious as delegates toasted
the 50th anniversary of the GATT/WTO, while requiring security
to protect them from the masses outside, protesting the very effects
of the globalization they were touting.
Their security may be better prepared in 1999, as will the
defenders of the international trade system. Northern leaders
"recognize that... the greatest threat to the global system
comes not from the difficulty of the negotiations but from the
failure of public trust and the public suspicion of the system,
the public mistrust of secretive organizations," in the words
of U.S. Trade Representative Charlene Barshefsky. But Barshefsky's
effort to win over labor unions and environmental groups through
a handful of concessions will be accompanied by a "very aggressive
market opening agenda" to win greater access to other countries
for American corporations and industries. We can also expect to
see the launching of a major public relations effort to win over
the growing body of WTO skeptics.
Thus, while some gains have been made, the war is far from
over. The challenge for activists is to harness the growing international
backlash against the effects of trade liberalization to fight
both the corporate free trade model and to present an alternative
"fair trade" model. Such a model must be based on high
international standards for public health, wage and labor security,
environmental protection and other social justice concerns; and
allow individual countries to voluntarily exceed its provisions
without fear of penalty.
To achieve such a vision, more democratic forms of international
governance must be designed. Many advocates of global democracy
believe that the old Bretton Woods institutions-the IMF, World
Bank and the GATT/WTO-cannot serve humanity's needs. As the proponents
of Bretton Woods are forced to acknowledge the need for "a
new architecture" with which to correct the glaring economic
failures of 1998, others who believe in a more democratic approach
to international decision-making suggest that the global community
turn to the United Nations framework. Flawed as the United Nations
may be, at least its membership is universal, all members have
a vote (except in the Security Council), and non-governmental
organizations have access to its halls of power.
Daniel Kraker writes on issues of globalization and community.
Kristin Dawkins is Director of the Trade and Agriculture Program
with the Institute for Agriculture and Trade Policy. Both are
based in Minneapolis, Minnesota.