Guaranteeing Corporate Rights

excerpted from the book

When Corporations Rule the World

by David C. Korten

published by Kumarian Press, 1995


The framework for a post-World War II economy, which had been worked out largely between the United States and Britain, called for the creation of three multilateral institutions: the World Bank, the International Monetary Fund (IMF), and an international trade organization. The latter organization was stillborn because of concerns in the U.S. Congress that its powers would infringe on U.S. sovereignty. The General Agreement on Tariffs and Trade (GATT) served in its stead, with a somewhat ambiguous status, as the body through which multilateral trade agreements were fashioned and enforced.

It was not until January 1, 1995, that the triumvirate was finally completed. A new global organization, the World Trade Organization (WTO), was quietly born during the Uruguay round of GATT. It was a landmark triumph for corporate libertarianism. A trade body with an independent legal identity and staff similar to that of the World Bank and the IMF is now in place, with a mandate to press forward and eliminate barriers to the free movement of goods and capital. The needs of the world's largest corporations are now represented by a global body with legislative and judicial powers that is committed to ensuring their rights against the intrusions of democratic governments and the people to whom those governments are accountable. What the World Bank and the IMF had accomplished in institutionalizing the doctrines of corporate libertarianism in low-income countries, the WTO now has a mandate and enforcement powers to carry forward m the industrial countries.

The World's Highest Judicial and Legislative Body

A key provision in the some 2,000 pages of the GATT agreement creating the WTO is buried in paragraph 4 of Article XVI: "Each member shall ensure the conformity of its laws, regulations and administrative procedures with its obligations as provided in the annexed Agreements." The "annexed Agreements" include all the substantive multilateral agreements relating to trade in goods and services and intellectual property rights. Once these agreements are ratified by the world's legislative bodies, any member country can challenge, through the WTO, any law of another member country that it believes deprives it of benefits it expected to receive from the new trade rules. This includes virtually any law that requires imported goods to meet local or national health, safety, labor, or environmental standards that exceed WTO accepted international standards. Unless the government against which the complaint is lodged can prove to the satisfaction of the WTO panel that a number of narrowly restrictive provisions have been satisfied, it must bring its own laws into line with the lower international standard or be subject to perpetual fines or trade sanctions The WTO's goal is the "harmonization" of international standards Regulations requiring that imported products meet local standards on such matters as recycling laws, use of carcinogenic food additives, auto safety requirements, bans on toxic substances, labeling, and meat inspection could all be subject to challenge. The offending country must prove that a purely scientific justification exists for its action. The fact that its citizens simply do not want to be exposed to the higher level of risk accepted by lower WTO standards isn't acceptable to the WTO as a valid justification.

Conservation measures that restrict the export of a country's own resources-such as forestry products, minerals, and fish products- could be ruled unfair trade practices, as could requirements that locally harvested timber or other resources be processed locally to provide local employment. Cases may also be brought against countries that attempt to give preferential treatment to local over foreign investors or that fail to protect the intellectual property rights (patents and copyrights) of foreign companies. Local interests are no longer a valid basis for local laws under the new WTO regime. The interests of international trade, which are primarily the interests of transnational corporations, take precedence.

Challenges may also be brought against the laws of state and local governments located within the jurisdiction of a member country, even though these governments are not signatories to the new agreement. The national government under whose jurisdiction they fall becomes obligated to take all reasonable measures to ensure the compliance of these state or local administrations. Such "reasonable measures" include preemptive legislation, litigation, and withdrawal of financial support.

The fact that local laws are subject to challenge under the WTO does not necessarily mean that they will be. However, there are numerous cases in which these same types of laws were successfully challenged under the previous, less stringent, GATT rules. Even before the GATT / WTO was ratified, the United States, Canada, the European Community, and Japan had each compiled extensive lists of one-another's laws that they intended to target for challenge once the agreement was m place.

Although the GATT-WTO is an agreement among countries, and challenges are brought by one country against another, the impetus for a challenge normally comes from a transnational corporation that believes itself to be disadvantaged by a particular law. That corporation looks for a government that can be encouraged to bring a challenge. It need not be the government of its country of incorporation; a challenge can be brought by the government of any country that can make a reasonable case that its economic interest is being harmed. For example, a U.S. company growing fruit in Mexico uses a pesticide that leaves a toxic residue on the fruit that complies with the international standard but is greater than the standard of the state of California. The corporation might convince the Mexican government to bring a case against the California standard under WTO. California would have no right to appeal an unfavorable WTO decision in either California or U.S. courts.

Elsewhere in the world, tobacco companies have repeatedly used trade agreements to fight health reforms intended to reduce harm from cigarette smoking. When Taiwan was working on a law that would ban cigarette sales in vending machines, restrict public smoking areas, prohibit all forms of tobacco advertising and promotion, and fund a public education campaign to encourage people to give up smoking the U.S. trade representative responded to complaints from transnational tobacco companies by threatening to call for trade sanctions against Taiwan-even though these laws would affect domestic Taiwanese tobacco companies and U.S. imports equally. After bans on foreign tobacco companies were repealed in Korea as a result of similar pressure, the percentage of male teenage smokers rose from 1.6 percent to 8.7 percent of the male teen population.

When a challenge to a national or local law is brought before the WTO the contending parties present their case in a secret hearing before a panel of three trade experts-generally lawyers who have made careers of representing corporate clients on trade issues. There is no provision for the presentation of alternative perspectives, such as amicus briefs from nongovernmental organizations, unless a given panel chooses to solicit them. Documents presented to the panels are secret except that a government may choose to release its own documents The identification of the panelists who supported a position or con elusion is explicitly forbidden. The burden of proof is on the defendant to prove that the law in question is not a restriction of trade as defined by the GATT.

When a panel decides that a domestic law is in violation of WTO rules, it may recommend that the offending country change its law. Countries that fail to make the recommended change within a prescribed period face financial penalties, trade sanctions, or both

Under the proposed rules, the recommendations of the review panel are automatically adopted by the WTO sixty days after presentation unless there is a unanimous vote of WTO members to reject them. This means that over 100 countries, including the country that won the decision, must vote against a panel decision to overturn it-rendering the appeals process virtually meaningless.

As was GATT, the WTO is a trade organization, and its mandate is to eliminate barriers to international trade and investment. The national representatives who vote in its councils are specialized trade representatives whose primary mandate is to open other markets to exports from their own countries. Responsibilities for maintaining foreign exchange balances; full employment; health, safety, and environmental standards; and protecting the democratic rights of citizens fall under the jurisdictions of other bureaucracies. It may reasonably be anticipated that the WTO will follow the pattern of GATT in giving trade goals precedence over all other public policy concerns

The WTO has legislative as well as judicial powers. GATT allows the WTO to change certain trade rules by a two-thirds vote of WTO member representatives. The new rules become binding on all members. The WTO is, in effect, a global parliament composed of unelected bureaucrats with the power to amend its own charter without referral to national legislative bodies.

Because economic activities have assumed such a large role in modern societies, control of economic rules is one of the most important powers in the world today. Under the WTO, a group of unelected trade representatives will become the world's highest court and most powerful legislative body, to which the judgments and authority of all other courts and legislatures will be subordinated.

Governance in the Corporate Interest

The world's major transnational corporations have had a highly influential insider role in GATT negotiations and will be similarly active in the WTO. They are especially well represented in the U.S. delegations, which have had a pivotal role in shaping the GATT agreements. The key to this corporate access is the U.S. Trade Act of 1974, which provides for a system of trade advisory committees to bring a public perspective to U.S. trade negotiations. The trade committees must conform to the Federal Advisory Committee Act of 1972, which sets guidelines for the membership of all such federal advisory committees. The public representation must be "fairly balanced in terms of points of view represented and the functions to be performed by the advisory committee." Advisory committee processes are also required to be open to public scrutiny.

The U.S. trade representative's office has chosen to define this requirement to mean only that the advisory committee membership must be representative of the business community with regard to "balance among sectors, product lines, between small and large firms, among geographical areas, and among demographic groups." A study by Public Citizen's Congress Watch released in December 1991 found that of 111 members of the three main trade advisory committees, only two represented labor unions. An approved seat for an environmental advocacy organization had not been filled, and there were no consumer representatives. The trade panels rarely announced their meetings to the public and never allowed the public to attend.

The corporate interest, in contrast to the public interest, was well represented. The study found that ninety-two members of the three committees represented individual companies, and sixteen represented trade industry associations-ten of them from the chemical industry. Members of the Advisory Committee for Trade Policy and Negotiations, the most important of the panels, included such corporate giants as IBM, AT&T, Bethlehem Steel, Time Warner, 3M, Corning BankAmerica, American Express, Scott Paper, Dow Chemical, Boeing Eastman Kodak, Mobil, Amoco, Pfizer, Hewlett Packard, Weyerhaeuser, and General Motors-all of which were also members of the U.S. Business Roundtable. Of the corporate members, all but General Motors were represented by either the chairman of the board or the president-in most instances, whichever of these officers functioned as chief executive officer (CEO). According to Public Citizen's Congress Watch:

"Advisory committees are so intertwined with governmental trade negotiators that panel members require security clearances. One of the perks of membership is a special reading room filled with classified documents available for perusal by nongovernmental advisors. To enable trade advisors' opinions regarding the current GATT talks to reach negotiators more quickly, a database has been established that instantly puts an advisory committee member's words at the negotiators' fingertips. Government sponsors of the trade advisory system take enormous trouble to keep trade advisors fully informed of every twist and turn in the negotiating process. Despite their enormous influence, the corporate trade counselors work in near total obscurity."

A 1989 Department of Commerce document described the involvement of advisory committee members in the 1979 Tokyo round of

"The advisory members spent long hours in Washington consulting directly with negotiators on key issues and reviewing the actual texts of proposed agreements. For the most part, government negotiators followed the advice of the advisory committee. Whenever advice was not followed, the government informed the committees of the reasons it was not possible to utilize their recommendations."

.Of the ninety-two corporations represented on the three trade advisory panels, twenty-seven companies or their affiliates had been assessed fines by the U.S. Environmental Protection Agency (EPA) totaling more than $ 12.1 million between 1980 and 1990 for failure to comply with existing environmental regulations. Five-DuPont, Monsanto, 3M, General Motors, and Eastman Kodak-made the EPA's top ten list of hazardous waste dischargers. Twenty-nine of the member companies or their affiliates had collectively contributed more than $800,000 in a failed attempt to defeat California's Safe Drinking Water and Toxics Enforcement Act, a statewide initiative to require accurate labeling on potentially cancer-causing products and to limit toxic discharges into drinking water. Twenty-nine had put up over $2.1 million in a successful bid to defeat another California initiative called Big Green, which, among other provisions, would have set tighter standards for the discharge of toxic chemicals.

Clayton Yeutter, in his capacity as U.S. secretary of agriculture under George Bush, stated publicly that one of his main goals was to use GATT to overturn strict local and state food safety regulations. He rationalized, "If the rest of the world can agree on what the standard ought to be on a given product, maybe the US or EC will have to admit that they are wrong when their standards differ."

The WTO's global health and safety standards relating to food are set by a group known as the Codex Alimentarius Commission, or Codex. It is an intergovernmental body established in 1963 and run jointly by the UN Food and Agriculture Organization (FAO) and the World Health Organization (WHO) to establish international standards on things such as pesticide residues, additives, veterinary drug residues, and labeling. Critics of Codex observe that it is heavily influenced by industry and has tended to harmonize standards downward. For example, a Greenpeace USA study found that Codex safety levels for at least eight widely used pesticides were lower than current U.S. standards by as much as a factor of twenty-five. The Codex standards allow DDT residues up to fifty times those permitted under U.S. law.

Governmental delegations to Codex routinely include nongovernmental representatives, but they are chosen almost exclusively from industry. One hundred forty of the world's largest multinational food and agrochemical companies participated in Codex meetings held between 1989 and 1991. Of a total of 2,587 individual participants, only twenty-six came from public-interest groups. Nestle, the world's largest food company, had thirty-eight representatives. A Nestle spokesperson explained, "It seems to me that governments are more likely to find qualified people in companies than among the self-appointed ayatollahs of the food sector.'

Protecting Information Monopolies

Many of the GATT-WTO provisions have been put forward as necessary to ensure the efficient functioning of competitive markets. Yet the GATT-WTO does nothing to limit the ability of transnational corporations to use their economic power to drive competitors out of the market by unfair means; absorb competitors through mergers and acquisitions; or form strategic alliances with competitors to share technology, production facilities, and markets. Indeed, one area in which GATT calls for strengthening government regulation and standards is its agreement on intellectual property rights-patents, copyrights, and trademarks. Here the call is for strong government intervention to protect corporate monopoly rights over information and technology.

Particularly ominous is the extension through the GATT-WTO of international patent right protection of genetic materials, including seeds and natural medicinals. U.S. companies have aggressively pursued patent protection for seeds and genetic materials in the United States, convincing the U.S. government to extend patent protection to all genetically engineered organisms, from microorganisms to plants and animals-excluding only genetically engineered humans. By patenting the processes by which genes are inserted into a species of seeds a few companies have effectively obtained monopoly rights over genetic research on an entire species and on any useful products of that research. These companies have been pressing hard to turn such patents into worldwide monopolies under the GATT-WTO. In 1992 Agracetus, Inc., a subsidiary of W. R. Grace, was granted a U.S. patent on all genetically engineered or "transgenic" cotton varieties and has applications pending for similar patents in other countries accounting for 60 percent of the world's cotton crop, including India, China, and Brazil, and in Europe. In March 1994, it received a European patent on all transgenic soybeans and has a similar patent pending in the United States.

Through the ages, farmers have saved seed from one harvest to plant their next crop. Under existing U.S. patent law, a farmer who saves and replants the offspring of a patented seed is in violation of patent law. The move to globalize the protection of seed and other life-form patents has been the subject of massive demonstrations by farmers in India, who realized that under the GATT-WTO agreements, they could be prohibited from growing their own seed stocks without paying a royalty to a transnational corporation.

The industry view of what is right and proper with regard to people's rights to their means of subsistence has been clearly expressed by Hans Leenders, secretary general of the industry association of corporate seed houses and breeders:

"Even though it has been a tradition in most countries that a farmer can save seed from his own crop, it is under the changing circumstances not equitable that a farmer can use this seed and grow a commercial crop out of it without payment of a royalty.... The seed industry will have to fight hard for a better kind of protection."

Measures extending patent protection over genetic materials are promoted on the ground that they will speed the advance of agricultural research and improve global food security. Critics argue that such patents stifle research by preventing the use of genetic materials and techniques by any researcher not working under specific license granted by the patent holder. Vandana Shiva, a leader of the Southern opposition to the patenting of life-forms, says, "This is just another way of stating that global monopoly over agriculture and food systems should be handed over as a right to multinational corporations.'' What we are seeing is a blatant effort by a few corporations to establish monopoly control over the common biological heritage of the planet.

A review of the accomplishments of the three Bretton Woods institutions brings their actual functions into sharp focus. The World Bank has served as an export-financing facility for large Northern-based corporations. The IMF has served as the debt collector for Northern-based financial institutions. GATT has served to create and enforce a corporate bill of rights protecting the rights of the world's largest corporations against the intrusion of people, communities, and democratically elected governments.

The Bank and the IMF celebrated their fiftieth anniversary in 1994. Citizen organizations from around the world marked the event by organizing a global campaign around the theme "Fifty Years Is Enough." Fifty years of Bretton Woods has indeed been far more than enough. The world's people and environment can scarcely afford more.

World War II did not end the global domination of the weak by strong states. It simply cloaked colonialism in a less obvious, more beguiling form. The new corporate colonialism is no more a consequence of immutable historical forces than was the old state colonialism. It is a consequence of conscious choices based on the pursuit of elite interest. This elite interest has been closely aligned with the corporate interest in advancing deregulation and economic globalization. As a consequence, the largest transnational corporations and the global financial system have assumed ever greater power over the conduct of human affairs in the pursuit of interests that are increasingly at odds with the human interest. It is impossible to have healthy, equitable, and democratic societies when political and economic power is concentrated in a few gigantic corporations. We have created a system that is now beyond the control even of those who created it and whom it richly rewards for serving its ends. Indeed, the system is now turning against them as well. In Part IV, we examine the nature and dynamics of this system.

When Corporations Rule the World