The WTO's Slow Motion Coup
An Interview with Lori Wallach,
director of Public Citizen's Global Trade Watch
Multinational Monitor, October/November 1999
(Lori Wallach is the director of Public Citizen's Global Trade
Watch. Dubbed "the Trade debate's guerrilla warrior"
by the National Journal, Wallach is a leader in the worldwide
movement for fair trade and investment policy. She is co-author
of Whose Trade Organization?: Corporate Globalization and the
Erosion of Democracy. Her other publications include numerous
trade analyses and reports, and chapters in several anthologies.
Wallach was a founder of the Citizens Trade Campaign and a founding
board member of the International Forum on Globalization.)
Multinational Monitor: Who thought up the WTO?
Lori Wallach: The WTO was established in 1995 at the Uruguay
Round of the General Agreement on Tariffs and Trade (GATT). It
was the brainchild of the European Union and Canada, with the
U.S. government playing a more reticent role. But the EU and Canada
were pushed by a variety of different business coalitions-the
equivalent of the U.S. Chamber of Commerce-the European Roundtable
of Businesses, and the Canadian Chamber of Commerce.
Their idea was to create a supra-powered international institution
to try to limit more active governments. Already the U.S. government
under Reagan was going on a deregulation binge, but that was not
the case in Canada and Europe.
MM: How was it, going to override democratic governments?
Wallach: The basic idea was to fence in the range of government
action so as to establish a single global market with uniform
rules. Human beings are either labor or consumers. Water, trees,
animals-basically all of nature-is a resource to be exploited.
To exploit these human and natural resources most efficiently,
all barriers breaking up this single world market must be eliminated-so
as to maximize efficiency of scale.
Yet, what the corporate interests saw as market "fragmentation"
is the diversity of policies, values, cultures and laws that one
would consider the blessing of democracy. The WTO was to be a
body that would continuously promulgate international standards
that would be biased towards promoting commerce over other values
and with powerful enforcement to knock down any divergent national
MM: What was the corporate interest institutional vision?
Wallach: As a practical matter, the WTO was envisioned to
transform the GATT, which was established in 1947 as a business
contract between countries. The GATT was understood to be a contract;
it was enforceable only as an agreement between consenting parties.
Countries were called contracting parties. It operated like most
international institutions, requiring consensus to move forward-before
any decision could be adopted which would apply to or bind any
country, every country was required to agree to it.
The GATT's dispute system, for instance, required consensus
to adopt any case, much less to adopt any enforcement of it. Any
individual country could exercise a sovereignty "emergency
break," block consensus and stop implementation of a ruling.
That was only done once in the history of the GATT because generally
countries thought they benefited more from the rules functioning
and they didn't want to undermine the authority of the system.
But it existed and was somewhat of a curb on the most outrageous
cases that could have occurred.
The transformation that was sought with the WTO was to develop
a broad set of international commercial rules that would impose
a global regulatory scheme that was favorable to the biggest of
This regulatory system was to have what is called self-executing
enforcement, which is a rare phenomenon in international law.
None of the multilateral environmental agreements have it, arms
control treaties don't have it, the International Labor Organization
doesn't have it, the World Health Organization and UNICEF agreements
don't have it. Self-executing enforcement means that the institution
is given its own legal personality, like the UN, and it has the
capacity to enforce decisions on signatory countries-which are
called Members- absent their unanimous consent. It also is empowered
to facilitate further rule-making that binds all members even
in the absence of their explicit consent. At the WTO, a two-thirds
vote of the membership can bind all the members.
That is a totally different phenomenon than the notion of
being a party to a contract from which you can walk away. For
instance, under WTO rules, it requires unanimous consensus to
stop the institution from implementing a decision issued by a
WTO tribunal or authorizing permanent trade sanctions against
countries that refuse to change their domestic laws to comply
with a WTO decision. There is no other international agreement
that requires every single signatory country to agree in order
to stop action.
The combination of much broader, expansive rules and stronger
enforcement was an enormous transformation that was not well understood
at the time it was imposed on governments around the world. This
subtle but incredibly effective expansion of WTO power is why
we often say it is carrying out a slow-motion coup d'état
against democratic, accountable governments.
MM: What is the WTO's scope of action?
Wallach: The WTO itself is the enforcement body. Think of
it as the head of the octopus. But the octopus has 12 arms-12
underlying, substantive sets of rules that are free-standing agreements.
One of those is an updated version of GATT-the General Agreement
on Tariffs and Trade. It covers trade in goods, tariff's and quotas
on trade in goods.
What was added during the Uruguay Round are 11 free-standing
agreements on a whole set of issues that you would never think
of as particularly related to trade. There are 800 pages of regulations
under these 12 different agreements. Obviously a global free trade
agreement would require one page-cut tariff's and quotas. Instead,
the WTO is managed trade - corporate managed trade.
The 12 agreements cover services, food safety, environmental
and other product safety standards, agriculture, subsidies, intellectual
property, investment rules, and government procurement. Those
agreements constrain government actions-they constrain both the
goal a government seeks and the means it uses to obtain them.
Take the rules about standards. In the food area, a government
is not allowed to have an environmental goal, an animal welfare
goal or a consumer information goal in setting up a standard that
limits trade in food. For instance, the U.S. ban on DDT had more
to do with what it did to birds-to their egg shells-than with
what its effect on humans. That would not be allowed as a goal
under the WTO. You can't seek to help the environment through
Then the means are tested, and you have to always use the
"least trade restrictive means." This is a huge element
of the imposition of commercial objectives over all other values
and goals. What this means in practice is that when you are making
a health standard or a consumer information standard, the first
thing you have to think about is not its efficacy, or how politically
practical it is, but its impact on trade. If the trade effect
is not the most minimal possible, you have to change it, regardless
of how effective it is otherwise.
MM: How are WTO rules enforced.?
Wallach: These goals and means tests are enforced through
the WTO dispute settlement system. That system sets up free-standing
tribunals. The WTO includes a system for resolving cases where
one country can challenge any other country's laws-federal, state,
or local-or even the policy outcome of any law.
First, there's a consultation period. The country which has
the complaint tries to get the other country to change their law
before a formal case is filed.
During the consultation phase, especially when there is a
dispute between a rich country and a developing country, frequently
the developing country just preemptively dumps its law. Often
this happens even if a country thought it could win, because of
the expense of defending the law for a year in Geneva.
The threats are working even on powerful rich countries that
have the resources to defend their laws. The European Union, for
example, had a Europe-wide ban on the sale of furs caught with
steel jaw leg-hold traps, which are banned in a number of countries
because they're considered very cruel. The U.S. and Canada still
use them, and the U.S. and Canada threatened WTO action. As a
matter of WTO jurisprudence, the European Union would have lost
the case-countries are not allowed to look at cruelty to animals
in setting market access conditions. So, in response to a threat
of a case, Europe basically dumped the implementation of its ban.
If the consultation does not resolve the dispute, then the
complaining country asks for the formation of a panel.
MM: How are the panels formed ?
Wallach: WTO tribunals consist of three trade experts chosen
from a roster. The WTO Dispute Settlement Understanding sets up
the criteria to serve on one of these panels. The criteria ensure
that the judges will have a built-in bias towards maintaining
the status-quo system, as well as making sure commercial values
triumph over others. There are four ways you can get on the roster:
1 ) you have worked at the GATT; 2) you have represented a country
at the GATT or WTO; 3) you have worked at a high-level trade job
in your government; or 4) you are a private trade attorney who
has published in international trade treatises. Which is to say,
if you're not part of the international trade elite status quo,
you are not going to sit on a WTO panel. It doesn't matter if
you are a brilliant trade lawyer who happens to work at the Sierra
Club. You wouldn't qualify, absent having worked at the U.S. Trade
Representative's office before working at the Sierra Club.
Unlike a court, there are no conflict-of-interest rules that
mean anything. In fact, we discovered a case where a former head
of the GATT-Arthur Dunkel-was appointed to judge the Helms-Burton
law (related to the U.S.-Cuban trade battles). Dunkel was at the
time sitting as the chairman of the committee of the International
Chamber of Commerce that had just issued a paper arguing that
Helms-Burton violated WTO rules and had launched a global campaign
against Helms-Burton. He was also on the board of Nestle's Cuban
subsidiary, which would directly benefit if these trade rules
that were being challenged were changed!
MM: What is the public's role in the process?
Wallach: The three-person tribunals sit in secrecy. The only
written procedural rule in the entire WTO dispute settlement understanding
is a requirement that all documents, proceedings, panels and discussions
are confidential. There's no ability for the press, the public,
or even the attorney general of a state whose law is being challenged
even to be in the room during a tribunal's proceedings. The U.S.
now must release the U.S. briefs filed on behalf of its citizens
at the WTO only because Public Citizen won a lawsuit in 1992 forcing
the government to do so.
The WTO now publishes on its web site summaries with a very
polished, smoothed-over version of "country A thinks country
B's law about item C is not kosher; we will let you know in a
year and a half whether or not the law survives." Otherwise
you only know the subject matter.
A truly stunning story is of a WTO panelist who was in Washington
on summer holiday in August, during one of the WTO challenge to
the U.S. Clean Air Act by Venezuela. He showed up with his teenage
son, both in shorts, at Public Citizen's Capitol Hill office.
He had heard a rumor that Public Citizen and the Sierra Club had
tried to file an amicus (friend of the court) brief about the
case, even though no amicus briefs are allowed. He was interested
if in fact there was important information that he was not being
allowed to see. He asked whether we could provide him a copy as
a private tourist, and of course we gave him a copy.
Even though these panels are now empowered to judge food safety
laws, intellectual property rules and health issues, there is
no requirement that there be any but trade expertise on any of
the panels. Nor is there any requirement to seek outside expertise.
The panelists are allowed to ask for information, but there's
no requirement that, for instance, the World Health Organization
must be the substantive authority to decide the pros and cons
of a health law.
MM: What are the consequences of a tribunal's hearing?
Wallach: After hearing the case, the tribunal issues a ruling.
The ruling is automatically binding unless there's a consensus
among all the countries -including the winning country-to stop
its adoption. Once it's adopted, there's a period that cannot
exceed 15 months during which the country that lost the case must
change its law to comply with the orders of the WTO.
Trade sanctions are automatically adopted if a country hasn't
changed its laws within a reasonable time period. For instance,
right now, the U.S. has challenged Europe's ban on the sale of
meat contaminated with artificial growth hormone residues. The
European public is outraged about the prospect of being forced
to eat this stuff. As a political matter, the European Union has
decided it can't change the policy, so as a result it is facing
hundreds of millions of dollars of trade sanctions every year
from the U.S. The kind of sanctions we're talking about include
a 100 percent tariff on oats exported to the U.S. from Europe.
Eighty percent of the oats imported for human consumption in the
U.S. come from Europe. Oats are a low-cost, nutritional food.
The price of oats has now doubled. So suddenly your cereal is
more expensive. And now we have a lose-lose situation, where consumers
in Europe have to have tainted meat and consumers in the U.S.
have to have their cereal too expensive.
There is no outside appeal from a WTO decision. There is only
an internal appeal to an appellate body whose staff is paid by
the WTO. So far the appellate body has not reversed a single one
of the 24 cases to have gone through the whole WTO system.
The track record of this whole system is that basically the
countries that have the money to file win. Of the 24 cases that
have made it through the system, the country which filed the case
won in all but three instances. The U.S. has filed nearly half
the cases and has by far been the big aggressor at the WTO. They
have the cash to use this tool and know that if they file they
typically win (though two of the three cases where the aggressor
that filed the case didn't win were U.S. cases). Very few cases
have been brought by developing nations, because it is a very
expensive process. They have to hire outside attorneys to really
start the case.
MM: How does the Technical Barriers to Trade agreement work?
Wallach: The WTO's Technical Barriers to Trade (TBT) Agreement
covers all standards except those related to food safety. The
basic rule of that agreement and also for the food standards agreement
is even for standards that treat domestic and foreign countries
identically (i.e. there is no discrimination against foreign products)
a country's level of protection is additionally capped.
The old GATT had a rule that said you can't discriminate between
domestic and foreign producers or products; the WTO additionally
sets value decisions. Under the TBT agreement, a country must
base its domestic standard on an international standard if such
a standard exists or its completion is imminent. The only exceptions
to using the international standard that are defensible are fundamental
climactic, geographic or technological problems. Rationales for
exceptions like "We don't trust that inspection system, so
we want to ban that toxin" are not allowed.
A case epitomizing the worst of the TBT is Canada's current
challenge against France's ban on asbestos. Canada is using the
TBT Agreement to argue that France cannot ban asbestos because
the international standards-at both the International Labor Organization
and the World Health Organization, which have been very heavily
influenced by industry-require a contained use of asbestos instead
of an absolute ban. Because those are the international standards,
the only legitimate defense under WTO rules that France can put
forward for why it does not have a "controlled use"
standard (i.e. regulating, containing and labeling, instead of
banning) would be fundamental climactic, geographic or technological
reasons. Obviously, France's issue isn't one of those three-their
issue is that the stuff kills people, it can't be regulated well,
there is no safe use of it, and so they want to ban it. Now the
whole European Union has decided to do the same thing, and it's
going to cause an even greater trade fight.
That case is still under dispute. It's unclear how it will
be ruled on, but if you interpreted the TBT as is, without putting
any political twist to tone it down, Canada would win its case.
MM: Does the WTO agreement on food safety- the Sanitary and
Phytosanitary Standards (SPS) Agreement-follow the same principles
as the TBT?
Wallach: Same outcome, different rules. The SPS Agreement-which
is GATT-ese for food safety standards-establishes that member
countries should base their food safety standards on international
standards. The food standards listed are those of the Codex Alimentarius,
a UN-affiliated body which is very heavily influenced by industry.
If a country's standards are less protective than Codex or at
the Codex level, they are defensible. If they provide a higher
level of protection than Codex, a country can only maintain them
if it meets a long list of tests.
The Sanitary and Phytosanitary Agreement is particularly pernicious
because it eviscerates the Precautionary Principle. It explicitly
requires that a certain level of scientific evidence is required
in advance of acting to protect food safety.
If a country's standard is higher than the international standard,
it must prove there is a certain level of scientific evidence
to support its regulation. The evidence must show not just that
a risk exists, but that in fact a risk exists that is at a certain
level of threat to your population, and that the way you intend
to deal with it is scientifically proven to be the way to do it.
Of course that's a fallacy-that's promoting science into what
are value decisions.
But that inappropriate elevation of science is used to basically
trip up the ability of any government to put the burden on a company
to prove their products are safe. The use of science in this way
requires that the governments prove a product is dangerous-exactly
the reverse of how many governments' regulatory systems work.
It was this backwards logic that was used to sack the European
ban on beef tainted with artificial hormone residues. Europe said,
"We know the hormones themselves are carcinogens. There is
not complete evidence about what happens when the hormone is ingested
as a residue in meat, as compared to direct exposure to the hormone
itself. And because there is no long-term data on its safety,
we as a precautionary matter are going to act to stop avoidable,
perhaps irreversible health harm to humans in the future. We intend
to ban this stuff until the industry can prove to us that it is
safe in the long-term." This was a ban that was for domestic
use, as well as for imported meat.
The SPS Agreement was used to rule against that ban because
the European Union had put the burden on the companies to prove
the beef was safe. Under these WTO rules, the governments have
to prove something is dangerous to keep it off the market.
That's for food products for humans. These rules also cover
invasive species issues. If the case deals with issues other than
human health - that is, with the health of an animal or plant,
i.e., the threat of some invasive species coming in and wiping
out some domestic plant or animal-the test is even more difficult.
In every SPS case that has been brought on plants and animals,
the law that's been challenged has been taken down.
MM: Even though there are a handful of cases, it doesn't seem
that the harms have been as bad as the rules might suggest.
Wallach: There are two answers to that. First, the WTO hasn't
been fully implemented yet. Some of the harshest rules related
to intellectual property and investment services will be applied
to the developing countries that are the majority of the 134 members
of the WTO over 10 to 15 years. So all of the wreckage that has
happened already has been with a good third of the rules not implemented
And even the rules that are implemented have not been fully
enforced. There are many instances of laws that are clearly outside
the rules where the cases have not been brought yet. This is why
we describe this as a subtle, slow-motion coup d'état -we've
seen countries not acting so as to avoid any future challenges.
And those are not as obvious or easy to document.
In one example we do know about-which we know is the tip of
the iceberg-the state of Maryland was going to pass a selective
purchasing law relating to the military dictatorship of Nigeria.
The U.S. State Department sent a platoon of lobbyists to Annapolis
three days before the vote, which had been expected to pass handily.
The State Department lobbyists said, "Stop. This will violate
WTO rules. You're going to lose, and we will charge you for the
defense. You're not even going to be at the defense table."
Ten votes swung and the Maryland legislation went down by one
Who knows how many other measures have been defeated that
My second response is that I'm surprised in the opposite way-that
so much damage has already happened, considering that a full third
of the WTO rules haven't been implemented and the rules that are
in force haven't been very well enforced.
There's already such a list of cases where either through
the chilling effect or through threats, laws have been sacked,
chilled, weakened. These are in addition to the 24 cases that
have gone through dispute resolution. The damage is much larger
than I thought it would be at this point, given the long phase-ins.
It is the WTO's actual record that is causing such a global build
up of opposition to it.