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
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
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
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
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,
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
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
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
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
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
Corporations Rule the World