The Mechanisms of Trade Agreements - The GATT & the WTO

A brief guide to the WTO Agreements

To best understand the WTO, it helps to look at its origins and subsequent developments. For basic information on the GATT and the WTO, I have relied on two useful books: Canada and the Uruguay Round Information Kit (published by the Government of Canada,1994), and The World Trade Organization: A Guide to the Framework for International Trade by Bhagirath Lal Das (published for the United Nations Conference on Trade & Development by Zed Books, Ltd., New York, 1999). While the Information Kit is filled with rah-rah endorsements, I found the latter book to be balanced and non-dogmatic in the main. Where I have quoted directly from these books or referred to documents provided by the WTO (www.wto.org), the Canadian Department of Foreign Affairs and International Trade (DFAIT) (www.dfait-maeci.gc.ca), and other sources, I have cited my source in-line. For sources posted on web sites, I have directly linked the site.

The idea for an international trade body was born in the wake of World War II, when nations were attempting to both rebuild Europe and establish measures and dialogues among nations to prevent a repeat of the War. Further to the reasoning of the postwar nations was a desire to promote open trade between countries to prevent a recurrence of the Great Depression, the depth and severity of which was widely attributed to the extreme protectionism of panicky governments in the 1930s. The United Nations convened a Conference on Trade and Employment in Havana, Cuba (ironically), to create an International Trade Organization as discussed at the Bretton Woods Conference. The Havana Charter, an agreement that promoted international trade, regulated commodity prices, and full employment, was drafted through that Conference.

The Havana Charter failed in the US Congress, and so other Members saw no point in pursuing an agreement that didn't include their most powerful peer. Then, out of the ashes of the Havana Charter came the General Agreement on Tarriffs and Trade, to which 23 countries - including the US - subscribed. Sadly, the GATT did not adopt the employment and labour rights provisions of the Charter. It was originally intended as an interim agreement that was built around the international trade chapter of the Charter, but assumed the role of the failed ITO more or less by default.

The original goals of the GATT were to open countries to international trade and work towards lowering tarriffs on imports. The GATT Member nations would meet regularly to discuss trade issues and progress towards its goals. Between 1947 and 1967 there were 6 such meetings, called Rounds, which built on the basic goals. Then, the Tokyo Round (that ran from 1973 to 1979) took the GATT into new territory, introducing disciplines on non-tarriff barriers to trade and counter-actions against unfair trade practices. While the Rounds had always been concerned with commercial trade, it started out with the modest goal of finding ways, through multilateral dialogue, to protect national interests while preserving open trade between the Members. It seems, however, that somewhere between the end of the Kennedy Round (1964 to 1967) and the end of the Uruguay Round in 1994, the agenda for the GATT negotiations has become largely driven by corporate economic interests rather than national economic interests. This is a really important distinction, and it is one to which I will return in more detail in Part III of this series.

The new direction taken in the Tokyo Round was further developed in the Uruguay Round (1986 to 1994), which saw a new focus on diluting protections and favourable treatment for developing countries, and introducing measures on investment, intellectual property rights, and trade in services. The inclusion of these Agreements was driven by the US, which threatened to walk out on the GATT unless it secured an agreement on trade in services (Gigantes, Philippe Deane, Is The Free Trade Deal Really Good For You? Stoddart Publishing Co. Ltd., 1988, p. 20). The US, in turn, was responding to pressure from US-based transnational corporations, particularly in the agribusiness and pharmaceutical sectors. Many other countries were strongly opposed to the inclusion of these measures, arguing that they did not properly belong in an agreement that was ostensibly about trade. I'll discuss this in more detail below. The signing of the GATT Uruguay Round Final Act in Marrakesh established the World Trade Organization, a new supranational entity for maintaining the disciplines of the WTO Agreements and for settling disputes.

This is the "boring" part of the series, but without understanding how these trade mechanisms work, we will not be able to discuss either the philosophies or the practical consequences of these mechanisms in a meaningful way. I'll try to keep the legalese to a bare minimum, but international trade law is rife with specific concepts and jargon that is specific to its core principles. These principles and mechanisms have resulted in a significant shift in governments' laws to conform with the WTO Agreements, as Members have been required to, as Bhagirath Lal Das puts it, "ensure the conformity of [their] laws, regulations, and administrative procedures with [their] obligations as provided in the annexed Agreements (Das, The World Trade Organization p. 50). Here's a quick summary of the family of WTO Agreements:

  1. Miltilateral Agreement on Trade in Goods
    1. Agriculture
    2. Sanitary & Phytosanitary Measures
    3. Textiles & Clothing
    4. Technical Barriers to Trade
    5. Trade Related Investments Measures (TRIMs)
    6. Anti-Dumping
    7. Customs Valuations
    8. Preshipment Inspections
    9. Rules of Origin
    10. Import Licencing
    11. Subsidies
    12. Safeguards
  2. General Agreement on Trade in Services (GATS)
  3. Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs)
  4. Trade Policy Review Mechanism
  5. Understanding on Dispute Settlements
  6. Plurilateral Agreements
    1. Civil Aircraft
    2. Government Procurement

General Principles

These are the general principles around which all of the WTO Agreements are based, and to which the Agreements must adhere in their application.

Most Favoured Nation (MFN) Treatment

This means that a Member must treat every country as well as the best-treated country. That is, any benefits that are conferred to any other Member must be conferred to every Member. This applies to customs duties, all import/export duties and taxes, all charges connected with import/export, all transfer charges, the method of assessing charges, rules and formalities, internal taxes, and internal laws, regulations, and requirements that pertain to sale, transportation or use.

There are two important concepts related to MFN Treatment. The first is the concept of "like products" - that is, two products that are alike for trade purposes must be treated the same. The concept of "like products" is not clearly defined, and this has caused some controversy. The second important concept is "Unconditional Application of Benefits" - that is, MFN Treatment must be extended immediately and unconditionally to all Members, and balancing of treatments (i.e. neglecting to follow MFN for one product but compensating through preferential treatment of another product) is not allowed.

There are a few legitimate exceptions to MFN Treatment, including an enabling clause to allow special treatment for developing countries, an allowance for Customs Unions and Free Trade Areas to maintain special internal arrangements, and for the protection of morals and of human, animal or plant life.

National Treatment

This means that a Member must not discriminate between domestic and imported products, through any of the following means:internal taxes; laws, regulations, requirements affecting the sale, purchase, processing, transport, distribution or use of those products; laws requiring a product to be obtained domestically; and taxes, laws, or regulation that are applied in such a way that they protect or favour domestic products. This is even more far-reaching than it sounds, due to the broad nature of some of the terms. For example, even if a regulation applies to both domestic and imported goods (as in the case of some Canadian provinces that had minimum price regulations for wine and spirits), the exporting country can still challenge the regulation because the imported product should be allowed to be sold at a lower price than the domestic product. As such, the National Treatment principle is a major disincentive to governments adopting a product regulation, as the regulation can actually result in discrimination against the domestic product! As another example of a National Treatment issue, the Canadian Foreign Investment Review Agency (FIRA) had a regulation requiring foreign companies operating in Canada to purchase domestic goods. This local content "performance requirement" for foreign investment violated National Treatment, and the Mulroney government of Canada replaced FIRA with Investment Canada, an organization that sought out, rather than scrutinized, foreign investors.

General Exceptions

There are legitimate conditions for exceptions to the WTO Agreements, including preserving national security, protection of human health or safety, protection of animal or plant life, and protection of the environment. However, there are strict conditions to these exceptions. Before a country can pass a law that violates an Agreement, it must first publish its intention to do so, allow other Members to comment on the law, and then take those comments into consideration before enacting it. Any regulation or law that violates any of the WTO Agreements must still follow the General Principles of the WTO: Most Favoured Nation Treatment and National Treatment, and furthermore, the law or regulation must be necessary, least trade restrictive, and based on solid scientific evidence.

Necessary: this is an onerous burden, as a Member must prove that the goal of the law or regulation cannot be achieved through any means other than the exception.

Least trade restrictive: also a tough burden, a Member must prove that the law or regulation it is trying to preserve allows the freest trade possible under the circumstances.

Based on solid scientific evidence: this might be the most tricky rule, because many governments have banned or restricted certain products based on uncertainty about the product's safety. When a government decides to err on the side of caution, it is following the "precautionary principle." Unfortunately, in the rules of the WTO, a product must be regarded as safe until it is proven that it is unsafe. That is, the burden of proof is on the government to demonstrate that a product is unsafe. This is a reversal of traditional public policy in many countries, where the burden of proof was on the producer to demonstrate that it was safe.

These rules tend to introduce a "chill" factor on governments, who become reluctant to pass tough regulations for fear of WTO challenges. Of course, the conditions for surviving a challenge are very broad and hence wide open to interpretation. I will discuss a few examples of WTO challenges shortly, in order to demonstrate that the interpretation of these rules is driven by the goals of trade liberalization, not the goals of public safety or environmental protection.

Dispute Settlement Process

The dispute settlement process was greatly strengthened in the Uruguay Round, with the addition of schedules and timetables for faster resolution If a Member feels that it is adversely affected by another Member's trade policy, it can file a complaint to the Dispute Settlement Board. The board will first provide for consultation between the Members to resolve the dispute; Members are encouraged to resolve disputes indepentently of the dispute settlement board. If this does not work, then the affected Member requests a Panel to rule on the complaint. Panels are composed of 3 or 5 arbitrators mutually chosen by the Members, and listen to both arguments, as well as any third party input from other Members. The Panel process is, of course, confidential. The Panel will rule on the complaint, and if it rules against the offending Member, then that Member is allowed to appeal to the Appelate Body. If the appeal is rejected, then the offending Member must state its intention regarding the ruling. If the offending Member refuses to comply with the ruling, then the affected Member is allowed to take retaliatory measures against the offending Member to a sum equal to the damages it has incurred. These retaliatory measures are cross-section and cross-agreement; that is, the affected Member can apply conter-measures through other Agreements.

The significant thing about the dispute settlement process is that it overwhelmingly favours rich countries over poor ones, for two distinct reasons: poor countries have less access to the "high-powered legal expertise" that is necessary to make their case (from Trade and the WTO by Washington State University); and poor countries have less recourse to take counter-measures. A small country that is trying to retaliate against a large country through countervailing measures (tarriffs on imports from the offending country) may hurt its own economy more than it will the large country. A large country can simply afford to ignore retaliation from a small country and swallow the miniscule costs of lost exports.

Other problems with the dispute settlement process include the fact that the panels and expert advisors are experts in international trade, not the environmental, social, or other fields that often bear on disputes. As a result, these issues do not weigh heavily in the panels' considerations, and the panel decisions are always driven foremost by the goal of trade liberalization, not the goals of enviromental, labour, or social protections (from Trade and the WTO by Washington State University).

Following are more detailed explanations of the highlighted WTO Agreements.

Technical Barriers to Trade (TBTs)

Technical (or Non-Tarriff) barriers to trade are laws, regulations, etc., that discriminate against imported products on the basis of their characteristics, any related processes or production methods, and any administrative provisions with mandory compliance. Governments are encouraged to adopt international trade standards wherever possible in order to avoid setting TBTs.

Trade Related Investment Measures (TRIMs)

Basically, the TRIMs agreement limits the ability of Members to impose performance requirements on foreign firms operating within their jurisdictions. Prohibited limits include specifying that products of domestic origin must be purchased or used, specifying that a proportion of products of domestic origin must be purchased or used, restricting exports by an enterprise, and specifying that a certain proportion of purchased products must be produced domestically, and restricting the purchase or use of imported products.

General Agreement on Trade in Services GATS

Services include transport, telecommunications, financial services, business services, cultural industries, distribution, construction, health and social services, and education. The GATS establishes rules requiring countries to open these "markets" to foreign firms, even though these fields have traditionally been either highly regulated or publicly provided. Liberalization clearly requires governments to eliminate regulations and to allow foreign commercial firms to provide services that were previously public.

Because so many other countries were opposed to this Agreement, it was only ratified after the inclusion of many exceptions. Members agreed to all of the measures except those to which they specifically declared an exception. The allowed exceptions include limits on the number of suppliers (e.g. through mandatory licencing of providers), limits on total value of service transactions, limits on total quantity of service operations or output, restrictions on requirements regarding the type of legal entity that is allowed to provide the service (e.g. government, non-profit organization, corporation, etc.), and limits on the participation of foreign capital.

Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs)

Early in the Uruguay Round, many Members objected to the inclusion of intellectual property rights IPRs) in a trade agreement, arguing that it belonged elsewhere. The US insisted, however, and early talks were restricted to IPRs that were trade-related. Over time, it became clear that the TRIPS Agreement was not really concerned with trade at all, but was simply another vehicle for strengthening corporate rights across the GATT Members. IPRs include patents, copyrights, trademarks, geographical indicators (e.g. a product specifying it is from a certain region, like Champagne), industrial designs, layout designs of integrated circuits, and undisclosed information (e.g. corporate contracts with governments, such as to purchase a state corporation). Patent protection is for 20 years, copyright protection is for 50 years, and trademark protection is for 7 years with unlimited renewability. The TRIPs Agreement protects product patents rather than simply process patents. With a process patent, another company would be allowed to develop a different process to produce the same good, but with a product patent, the product itself is protected, and all possible methods of producing it are covered by the Agreement.

The objectives of the TRIPs Agreement are an exercise in hilarity:

  1. Promotion of technical innovation
  2. Transfer of tehcnology
  3. Contribution to mutual advantage of producers and users of technical knowledge conducive to social and economic welfare, and
  4. Contribution to the balance of rights and obligations

Of course, the outcome of the TRIPs Agreement directly contradicts these objectives. Product patents discourage technical innovation - not to mention competition itself! - by forbidding other companies to improve upon processes. Wide coverage of patents in a trade agreement actually discourages transfer of technology because the patents for the technology are held by a small number of corporations from maily industrialized countries. The high prices associated with proprietary products - especially in essential fields, like medication - put users in poor countries at a distinct disadvantage. And as for the balance of rights and obligations, the rights are all given to the corporations and the obligations are all placed on the Member governments. Apparently the WTO considers this to be a good balance.

A sampling of WTO Panels

Beef

The European Union (EU) banned imports of US and Canadian beef on the grounds that policymakers and the European public felt that hormone-injected beef is unsafe. The EU appealed to the "precautionary principle," through which it would be allowed to restrict imports while more scientific evidence was collected. The US challenged this, "saying that the fears regarding hormones had too little scientific merit to permit application of the precautionary principle. The WTO agreed with the US and ruled against the EU. In mid-April, 1999, the EU refused to comply with the WTO's ruling. The EU states that this is not a matter of a trade dispute as much as it is a matter of consumer rights" (from Trade and the WTO by Washington State University).

That is, the ban on hormone-injected beef was not seen to be necessary for protection of human health. The desire of Europeans for the ban was strictly irrelevant to the Panel's decision. Interestingly, the Panel's decision seems to have been made, in part, because the US and Canada do not ban hormone-infected beef ("WTO beef ruling raises concerns" The Globe & Mail, May 15, 1997). The EU even offered to allow imported hormone-injected beef as long as it was labelled as such, but the US and Canada rejected this on the grounds that it constituted discrimination against like products ("Ambassadors say Canada unreasonable in food disputes," The Globe & Mail, July 27, 1999).

This opens up the very real possibility that any law or regulation based on public health and precaution can be challenged in the WTO. Trade proponents argue that the principles of the Agreements and the dispute settlement system are designed to make international trade more consistent and predictable. It is a bitter irony that this consistency and predictability has come at the expense of consistency and predictability in a country's ability to form domestic policies.

Tuna

Another example of a failed attempt at an exception was the US Marine Mammal Protection Act, which banned the domestic sale of tuna that had been caught in large nets that killed dolphins. The practice was killing tens of thousands of dolphins a year and dolphins were at risk of extinction. The law applied to domestic as well as foreign companies, so it did not violate National Treatment.

Nevertheless, a GATT panel found "that the US could not embargo imports of tuna products from Mexico simply because Mexican regulations on the way tuna was produced did not satisfy US regulations" (from www.wto.org). Specifically, as explained by Das, "the prohibition had been imposed on a production method which was not related to the product, in the sense that catching the tuna was not in any way affecting [the tuna's] characteristics" (Das, p. 149). Astoundingly, since the method of catching tuna that was driving dolphins to extinction was not affecting the tuna itself, the argument that the exception was necessary to protect animal life was overturned!

GMOs

Now, the government of Sri Lanka has banned the import of genetically modified food crops "until the ongoing debate in the western countries over the safety of GM food is resolved" (from the Government of Sri Lanka www.priu.gov.lk). This is an appeal to the precautionary principle if ever there was one, and the US is considering a challenge through the WTO. The US is a major exporter of genetically modified organisms (GMOs), and biotech companies insist that GMOs be treated exactly the same as conventional foods for trade purposes. The argument of the Grocery Manufacturers of America, an industry lobbying group, is that "proposals calling for mandatory biotech labels - such as those under consideration in California and the United States Congress - could be seen by some consumers as warning labels...implementation of mandatory labeling schemes 'confounds government authorities' and raises potential barriers to international trade" (news release, "GMA: Mandatory Biotech Labels Falsely Imply Safety Concerns, Raise Trade Barriers" April 26, 2000 www.monsanto.com). An article on the University of Washington "Gateway to the World Trade Organization" site explains the different positions on the issue:

Canada and the US, among others, will push for strict international rules in the WTO that would force countries to accept genetically modified foods, unless they have strong scientific proof that the foods are dangerous. EU trade experts state that under the US regulatory scheme, genefoods are treated the same as traditional foods, and there is no proof that they are safe...Consumer groups, environmentalists and many scientists say that proper risk assessment has not been done and the consequences could be disastrous if genetic engineering goes awry (Cameron Chapman, "Agriculture and the WTO," University of Washington www.washington.edu

The biotech industry hangs on the rules of solid scientific evidence, calling the precautionary principle a thinly veiled non-tarriff barrier to trade. Further, industry lobby groups insist that labelling of GMO foods - a fall-back position for some Members who want to ban them - amounts to discrimination of like products. It is unlikely that the Sri Lankan ban on GMOs will survive a WTO challenge.

AIDS drugs

A number of the largest pharmaceutical companies in the world challenged the governments of South Africa and Brazil over their decisions to give generic drug makers licences to cheaply produce desperately needed AIDS medications for their citizens. Pharmaceutical companies that hold the patents for these drugs are calling this expropriation of potential profits and are calling the laws allowing generic licences violations of the TRIPs Agreement. South Africa and Brazil are calling the AIDS crises in their countries national emergencies and argue that their drug policies are valid exceptions to the TRIPs Agreement. Poor citizens of these countries simply cannot afford the high prices of these drugs, but the US is threatening trade sanctions in retaliation nonetheless. Dr. Gro Harlem Brundtland, Dirctor-General of the World Health Organization, openly questions the global trade regime in an address to the London School of Economics:

We need to ask ourselves: which essential global public goods are unlikely to be developed or distributed at a reasonable price through normal market forces alone?...Today, most biotechnology research is carried out in the developed world, and is primarily market-driven. It is inevitable therefore, if this pattern continues unchanged, that the knowledge and technology gap between developed and developing countries will widen, and that the health needs of poor nations will fail to get the attention they deserve (Dr. Gro Harlem Brundtland, "Globalization as a Force for Better Health" a lecture to the London School of Economics www.who.int).

Of course, the WHO has no binding authority in this matter, so its stance on drug policies of poor countries is a moral rather than institutional support. It remains to be seen how this debate will play out.

Where it's all going: The MAI and the WTO Millenium Round

In 1995, the year that the WTO came into existence, another organization of countries began discussing liberalization of investment flows. The Multilateral Agreement on Investment (MAI) was an initiative undertaken through the Organization for Economic Cooperation and Development (OECD), a group of 29 industrialized countries, to liberalize investment flows across borders. This was a response to the widely held belief among transnational corporations that the TRIMs agreement in the WTO did not go far enough to entrench investors' rights. The talks started quietly - some might say secretly - in 1995, and became an issue in 1997 when a leaked working copy of the agreement was circulated among NGOs. The government of Canada quickly moved from silence to denial to obfuscation to defence (see Tony Clarke and Maude Barlow, MAI: The Multilateral Agrement on Investment and the Threat to Canadian Sovereignty Stoddart Publishing Co., Ltd., Toronto, 1997 for more details).

The most concise description of the MAI that I've come across has been a WTO report from 1996, and bears repeating here:

The main features of the proposed agreement are as follows: the centrepiece is a "top down" approach to liberalization of investment regimes through the application of national treatment and MFN treatment standards to both the establishment and the subsequent treatment of investment; a broad, asset-based definition of investment; provisions on country specific reservations; standstill and roll-back obligations [my emphasis]; provisions on transparency of domestic laws, regulations and policies; a limited set of general exceptions; standards for the protection of investments (general treatment standards and specific standards on expropriation and compensation, transfer of funds, protection from civil strife, and so forth); and dispute settlement procedures through state-state arbitration and investor-state arbitration [my emphasis] (from "Trade and foreign direct investment," a report by the WTO, October 9, 1996www.wto.org).

The Standstill obligation means that once a country has agreed to a certain level of liberalization, it cannot subsequently introduce any laws, regulations or programs in the future that restrict investments. The Roll-back obligation means that the MAI Member countries must agree to gradually reduce and eventually discard any "non-conforming" exceptions over time. In this sense, the "provisions on country specific reservations" would be regarded as temporary measures that would need to be eliminated eventually. The investor-state arbitration refers to some kind of provision similar to the NAFTA Chapter 11 rule that allows corporations to sue governments directly for "expropriation," or any law or regulation which results in the corporation making less money than it would if the law or regulation didn't exist.

When the profile of the MAI was finally raised such that it became a public issue, the business press came out swinging. The editorial board of the Financial Post, for example, was blunt in their endorsement of the MAI. "Clearly it's in Canada's interest to pursue a treaty that would create a 'charter of rights' for multinationals...Sure there are concerns about sovereignty, but signatories can still set domestic policy, as long as it is non-discriminatory. And there are always 'reservations' [although these would be only temporary]. In fact, the long list of exceptions - Canada wants culture off the table - has MAI negotiators bogged down. Environmental and labour issues are also slowing talks ("MAI is worth the effort," The Financial Post, January 27, 1998). The Globe & Mail reports that "the international business community has also been arguing that the massive list of proposed exceptions is watering down the deal, making it almost not worth signing." Big business lobbying groups came right out and said that these exceptions had no place in the agreement at all, and should belong "with the United Nations and its International Labour Organization, rather than in trade and investment deals ("Get ready. Another trade agreement is coming down the pike," The Globe & Mail, November 29, 1997). Of course, the UN and the ILO have no powers of enforcement, so any 'policing' from these parties will be strictly cosmetic.

This concern regarding the "watering down" of the MAI process was addressed by the OECD negotiating group in a leaked document that made the roll-back obligation of the MAI - a gradual reduction of exceptions until liberalization would be applied universally - quite clear. "Negotiators have been exploring ways of limiting the scope and application of all exceptions so as to capture the maximum degree of liberalization to which countries are wiling to commit and to assure legal security and predictability of investment regimes...[Countries asking for exceptions must] provide for future liberalization of investment regimes" ("Canada seen in fight to win MAI clauses," The Globe & Mail, Feb. 17, 1998).

Once they stopped denying that the talks were going on, Ottawa started insisting that it wanted "strong language on the rights of governments to protect environment and labour standards through a non-binding commitment [italics mine] in the MAI" ("Disagreements put global MAI talks at risk," The Globe & Mail, January 23, 1998). The government added "that it should be similar to wording in the North American free trade agreement: a non-binding recommendation to maintain environmental and labour standards [italics mine]" ("Investment talks face final stretch," The Globe & Mail, January 12, 1998). Amazingly, it seems that by this late stage in the negotiaions, the US was pushing for "tough" standards, in order to prevent some countries from capitalizing on lax regulations. Mexico, for example wanted to "be allowed to use their comparative advantage to attract investment." However, Canada wouldn't endorse the US proposal. Marchi discussed binding commitments in late 1997. "What we want to ensure is that we do as much as we can [on environmental and labour provisions]...but at the same time, you don't want to go to the Cadillac version, the binding version, with most countries seeking an exemption from that" ("Ottawa resists US push on global deal." The Globe & Mail, October 23, 1997). In any case, under the roll-back obligation, any exception that a country managed to secure would merely postpone the inevitable dismantling of social, environmental, and labour protections.

The WTO Millenium Round

Ultimately, as the April 1998 deadline for the MAI loomeded, it became clear that too many countries were asking for too many exceptions. When France walked away from the talks over a dispute about cultural protection, the talks collapsed altogether. The OECD announced a six month break, after which talks would resume anew, but the rest of the OECD members abandoned the platform. Far from being the end of the agreement, governments started shopping around for a new forum in which to pursue an investment agreement. The WTO was an obvious next step, especially as it had already started down the investment road with the TRIMs Agrement. Sergio Marchi, in arguing for the MAI to be moved to the WTO, said, "It is also logical that, at the end of this journey, the rules for investment be housed under the same roof" ("Trade minister blames OECD for anxiety over MAI," The Hamilton Spectator, April 24, 1998). The Globe and Mail editorial board argued that "The talks should be restarted by moving them to the WTO. This is the course that Canada favours. Investment could join agriculture and services on the agenda of the next round of trade negotiations, expected to begin in 2000" ("Reviving MAI," The Globe & Mail, October 22, 1998). Renato Ruggeiro, then Director-General of the WTO, endorsed this move. "A lack of rule and policy coherence poses a danger to security and predictability, which are the basic goals of trade and investment agreements ...Only a multilateral negotiation in the WTO, when appropriate, can provide ... a global and balanced framework" (press brief, WTO www.wto.org. The Globe & Mail editorial board joined the choir, warning that without clear rules that protect foreign investment, the investment might not flow so freely. "That flow [of foreign investment] is impeded and vulnerable [italics mine] without internationally accepted rules on how countries should treat investments made by foreigners ("Reviving MAI," The Globe & Mail, October 22, 1998).

The November 1999 Ministerial Conference in Seattle was supposed to set the agenda for the Millenium Round of negotiations. A number of serious issues were on the table, the foremost of which are further liberalization of the TRIMs and GATS Agreements. A renegotiated TRIMs Agreement would embody more elements of the failed MAI, throwing the future of current labour, environmental an social policy regulations into question. The GATS Agreement, on which US negotiators felt they had made too many compromises in the Uruguay Round, has a built-in requirement for further liberalization, opening the door to. Mike Moore, Director-General of the WTO, adressed the importance of these issues at a speech before the Seattle meeting, saying that "many of the new issues reach inside borders, raising complex questions about the way economies are organized in an integrated world" (Mike Moore, speech to the Transatlantic Business Dialogue, Berlin, October 29, 1999 www.wto.org).

Of course, Seattle turned out to be a disaster for the WTO organizers. There is a tremendous wealth of information available if you're looking for details of the protests, so I'll forego delving into those for now. The important lesson for the WTO negotiators ought to be that these debates can no longer be held in a vacuum, that public participation is essential to the continued functioning of these agreements. The important lesson for the protesters ought to be that it's time to start coming up with detailed arguments for changes or alternatives to the WTO system and its internal values. This work is already in progress, and I'll look at some of the more ambitious ideas in Part IV of this series.

One final note on the WTO: the next meeting is expected to happen in the state of Qatar, ruled by the Emir Sheikh Hamad bin Khalifa Al-Thani, and far from the prying eyes and determined voices of the protesters.

Ryan McGreal
May 12, 2001

Postscript to Newsletter #2

Over the weekend, I came across a research paper sponsored by Industry Canada in 1998, entitled Broad Liberalization Based on Fundamentals: A Framework for Canadian Commercial Policy. As I'm sure you can imagine, this made for less than riveting reading. However, the chapter on Future Policy Issues caught my attention in a section regarding Canada's agenda vis-a-vis the WTO. It bears repeating here as an afterthought to the argument in last week's newsletter.

Even before the singing of the Uruguay Round's Final Act, there was much discussion of the next round of multilateral trade talks. This proposed round was initially referred to as the "Green" round, reflecting the expressed need for multilateral discipline in efforts to protect human rights or environmental policy. It seems clear now that there exists an extremely ambitious and promising agenda for a new trade round, with at least the following key elements:

Services - Extend national treatment more generally.

Investment - Extend coverage to all investment issues, not only those that are (nominally) trade-related.

Competition policy - Address key elements of anti-competitive behaviour, and begin the broader task of developing consensus for wider coverage.

Environment - Improve the interface between multilateral trading rules and trade aspects of environmental agreements, thereby strengthening them.

Rights - Establish clear restrictions on trade sanctions ostensibly responding to inadequate protection of worker or human rights.

Subsidies - Link subsidization definitions and remedies to new discussions on investment and services.

Goods trade - Follow up on the Uruguay Round progress in agriculture, textiles and clothing, and look ahead to the eventual goal of removing MFN border measures on all products.

(Randy Wigle, Broad Liberalization Based on Fundamentals: A Framework for Canadian Commercial Policy Industry Canada Research Publications, November 1998, p. 29)

Now, most of this stuff is standard-brand liberalization rhetoric; but a couple of the points really stuck out as indicative of the divide between the promise and the reality of 'humanizing' trade agreements. In the points on Services and, particularly, on Investment, there is no indication here that Industry Canada would try to preserve the traditional role of the public sector in providing key services such as health care, education, social services, corrections, etc. And unless I'm reading this wrong, the point on Rights is particularly chilling. Note the careful words endorsing "clear restrictions on trade sanctions ostensibly responding to inadequate protection of worker or human rights." That is, this would not restrict Members from violating worker or human rights, but would restrict other Members from taking action against violaters of worker or human rights!

Now, my guess is that this is a response to the troublesome US Helms-Burton Act, through which the US has authorized itself to unilaterally apply trade sanctions against countries that trade with Cuba. The stated purpose for this law is to stop the "massive, systematic, and extraordinary violations of human rights" that the US claims is happening in Cuba, and that ostensibly represents "a threat to international peace" (Cuban Liberty and Democratic Solidarity (LIBERTAD) Act of 1996, Title I Sec 101; from the US Library of Congress). Unsurprisingly, this kind of extraterritorial bullying by the US government was met with outrage in the WTO, where the EU and Canada called it a violation of international law.

To be sure, the WTO does not want its Members acting unilaterally against other states, but in any case, the US has a long and ugly history of ignoring international law when it is not convenient. The question is, why is there no push to make protection of human rights itself a binding commitment for the WTO? Why is it that binding protection of investor rights is on the table, but calls for protections of citizens are referred to the (non-binding) UN Universal Declaration on Human Rights, particularly in this so-called "Green" round?

This question will be discussed further in Parts III and IV of this series..

Ryan McGreal
May 14, 2001

Previous: Newsletter #1 | Next: Newsletter #3

Comments

From: Dan Parker
Date: Monday, 14 May 2001
Subject: Re: Newsletter #5

Ryan, I think one has to be aware of the some possible larger plays on the free trade movement. It's obvious that the trade barrier and national treatment policies are directed at creating a world government. The method of implementation is the issue. I think it is a conscious effort to drive down living standards in the west, in order to have a more equitable world. There are statements from Trilateral Commission members and others to this effect. What is lost is Bucky Fuller's concept of bringing everyone up, as to quality of life, without bringing anyone down. Quite possible, but not by unimaginative, uncreative, power jockeys.

The cluminess of it could also be planned, in that people who are made desperate would look on communism with more favour. Believe it or not, the evidence against this political ideology has not dented the blind beliefs of some of the players. Again it is a case of power stupifies, and secretive, unaccountable power stupifies greatly. I think the best countervail is not to go head to head against it, but work on a ju-jitsu move, for the good of all, including the fading current power dynamics.

I'm working on a local currency project and some low level interest free ideas. Below is a link on a rough draft of a web page on the latter. A webpage on the local currency will be next, once I know a bit more about what I doing. Any feedback, content ideas etc. are more than welcome. I have another project that might also help coming up.

Regards,
Dan Parker

From: Dan Parker
Date: Tuesday, 15 May 2001
Subject: Re: Newsletter #5

> Ryan McGreal Wrote:
> Thanks for the feedback. The WTO authorities insist that they do not
> represent a supranational tier of government, but only a body that
> administers a trade agreement.

dp: By any definition they *are* a supranational tier of government. They also represent an older one, although some of them will not know this.

> There is some truth to this claim;
> governments do not have to ratify trade agreements, and have been able
> to do so in the past because of "public apathy." However, the MAI
> failed mainly because France pulled out of the talks, and France pulled
> out mainly because so many of its citizens were so vociferous in their
> opposition.

dp: Yes, a temporary setback in the plans to increase the powers of the supernational government. FTAA and the EU are efforts on a different scale.

> So here's my question: are the ministers at these trade agreements
> stupid or cynical? Stupidity implies that they've bought into the trade
> liberalization arguments, while cynicism implies that they know the
> truth and simply prefer to cater to corporate interests. Honestly, I
> don't know how they could possibly not know the truth about what
> they're doing, but at the same time their obvious contempt for the
> public may mean that they reflexively disregard any and all opposition.
> From correspondence with officials at DFAIT, I get a sense that they're
> completely beholden to this value system; now whether this is because
> they've had some kind of transformative experience on the road to
> Damascus or because they're a "bought priesthood" (in Chomsky's words)
> is anybody's guess. I'm inclined to think that the ministers are the
> former and that the ministry bureaucrats are the latter.

dp: There are a lot of people forced to lie in order to make a living, and many also that will rationalize inanities in the name of a needed world governing structure.

> In terms of your theory that it's an attempt to bring down western
> living standards, I'm not sure if it's that simple. The wealth of the
> industrialized world respective to the developing world has not really
> changed, but within both industrialized countries and developing
> countries, the gulf between rich and poor is widening. Trickle-down
> economics didn't work 70 years ago or 20 years ago and it doesn't work
> now.

dp: I believe I gave more than one reason, the main one being it is a move to create a world government. There are several more minor and major ones of course. The living standards reason was ennunciated quite clearly on a few occasions by players (ie. Trilats). It also fits with the Club of Rome et al. mantra it would take three earths for everyone to live at western standards. What is not mentioned is that the positive feedback in our monetary system and GDP measurements, have led to wastefulness that is too stupid to be believed. Never mind that by concentrating on quality of life, many standard of living issues would become moot.

> I think our trade agreements are mainly driven by corporate
> interests, which haven't really changed in a century. In the mid 1930s,
> the National Association of Manufacturers was building opposition to
> the New Deal, which it regarded as a power grab that was going to
> encroach upon manufacturers' freedom, through a slick PR campaign that
> sounds suspiciously like the drivel coming from corporate hacks and
> their friends in trade and industry ministries today. Anticommunism is
> less prominent these days, except insofar as it is held out as the
> "only" alternative to free market capitalism, and we know where "that"
> leads. This is the "End of History" approach to the ideological war,
> which hangs on positing a false alternative and making it stick.

dp: The corpse have gained some additional freedom from the banks in that non-banks are now creating over half the money. Still the BIS should not be underestimated. Keep in mind the standard M.O. is the Hegelian dialectic. Create, or encourage an enemy to create, serious social problems, and then come in with the solution, which entails dictatorial power.

"The standard of living of the average American has to decline...I don't think you can escape that."
--Paul Volker (Council on Foreign Relations, Trilateral Commission)

"Economic ties will determine the strength or weakness of many international linkages in this new era, including security relations. At best, economic interdependence can become a new glue."
Robert Zoellick (CFR)

"To restore a more equitable relationship between government authority and popular control, {there must be} contralized economic and social planning ..centralization of power within Congress ... a program to lower the job expectations of those who receive a college education..."
--Samuel Huntington (CFR), Michael Crozier, and Joji Watanuki

"The Free Trade system works destructively. It breaks up old nationalities and carries antagonism of proletariat and bourgeoisie to the uttermost point...the Free trade system hastens the Social Revolution. In this revolutionary sense alone ... I am in favor of Free Trade."
-Karl Marx

"The return of Free Trade as an issue and the expanded proletarianisation of the developing world gives the left an opportunity to once again present a Marxist critique as an alternative to the right wing political agenda we now face."
- Eugene Plawiuk - 150th Anniversary of the Communist Manifesto, 1998 - presented by the Industrial Workers of the World.

Trotsky was also big on this concept (keep in mind Trotsky et al were financed by Wall Street and Lenin by the Warburg banking empire in Germany).

"There is no proletarian, nor even a communist movement, that has not been operated in the interests of money, in the direction indicated by money, and for the time being permitted by money- and that without the idealists amongst its leaders having the slightest suspicion of the fact".
- Spengler, Decline of the West.

Regards,
Dan Parker

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