Slow Motion Coup d'Etat
Global Trade Agreements and the
Displacement of Democracy
by Lori Wallach
Multinational Monitor, January/February
In the 1980s, the same ideological and
business interests behind the Thatcher and Reagan "revolutions"
opened a second front in their campaign to create a world in which
the role of government would be shrunk and the fulfillment of
basic human rights and needs would be left to the mercies of markets
Their strategy was to transform the 1947
General Agreement on Tariffs and Trade (GATT) into a powerful
new system of global governance that would fence in the permissible
scope of accountable democratic governance. This new system of
global governance was envisioned to be an instrument to implement
one-size-fits-all, within scores of countries, the policies that
would enable corporate rule to thrive.
The GATT was a narrowly-cast 20-page trade
pact created after World War II to set tariff rates and quota
levels for trade in goods between countries. Countries met several
times a decade for a "round" of GATT negotiations during
which they agreed to cut tariffs or quotas further. In the United
States and some other nations, these new tariff and quota terms
would then be brought to legislative bodies for approval. However,
because the narrowly construed GATT and the notion of free trade
generally enjoyed broad support, these votes in the U.S. Congress
were not controversial.
Press and parliamentarians assumed it
was business as usual when GATT signatories met in Uruguay in
the mid-1980s to launch a periodic round of GATT talks. This lack
of scrutiny made these obscure "Uruguay Round" GATT
negotiations an ideal Trojan horse within which an expansive non-trade
policy agenda could be developed and signed, and that could then
be rolled in disguise through legislatures.
The Uruguay Round eventually resulted
in the creation of the World Trade Organization (WTO) in 1995.
The WTO totally transformed the nature and scope of "trade"
agreements - replacing a relatively brief list of objective norms
(domestic and foreign goods must be treated the same, for example)
that only applied to trade in goods between nations. The WTO in
contrast sets subjective policy establishing, for example, how
safe a country may choose to make its food supply through regulation
and imposed policies on a range of issues reaching far beyond
trade, including patents, investment rules and matters related
to the service sector. Contained within the legislation implementing
the WTO and in the pact's 900 pages were many Reagan Administration
proposals that already had been specifically rejected by the then-Democratic
Party-controlled U.S. Congress.
During the same period as the GATT Uruguay
Round negotiations, the Reagan administration also proposed negotiating
new regional "free trade agreements." A U.S-Canada Free
Trade Agreement was launched in 1988 and was replaced by the North
American Free Trade Agreement (NAFTA) in 1994. Like the WTO, NAFTA
exploded the boundaries of what was included in so-called trade
agreements. The deals are more accurately dubbed corporate globalization
REGULATING GOV'T, DEREGULATING BUSINESS
International commercial agreements, like
WTO and NAFTA, include a broad deregulatory agenda, slashing food
safety, environmental and other public interest protections by
labeling them "illegal trade barriers" that must be
eliminated. These pacts also promote commodification of common
resources by, for instance, requiring signatory countries to issue
patents on plant varieties or traditional medicinal plant uses
so that the planet's natural biodiversity and the 4? X common
heritage of the planet's people can be transformed into tradable
units of property for The WTO and NAFTA rules covering the service
sector operate to transform services like healthcare, education,
electricity and other basic utility essentials into commodities
by encouraging broad privatization and deregulation. The WTO and
NAFTA establish a right for foreign corporations to own, operate
or establish an unlimited array of providers of such critical
services, which now are often either provided by governments or
via highly regulated monopolies.
The agreements also create new protections
for corporations, for instance by requiring all signatory nations
to establish new monopoly-style, intellectual property rights
(patents, copyrights) for a vast array of knowledge and items
from seeds and plant varieties to medicines - many of which are
otherwise available for unrestricted use. In exporting the U.S.
monopoly patenting system which has contributed to high drug prices,
the WTO and NAFTA's intellectual property rules undercut poor
countries' capacity to make essential medicines available to their
These trade agreements established new
rights for foreign investors to operate, while limiting governments'
authority to set the terms of such foreign investment to ensure
that it benefits residents of the host country not just the foreign
investor. For instance, the special privileges granted foreign
investors under NAFTA forbid countries from using capital controls
to avoid currency crashes during economic crises, even though
such policy instruments have proven time and again to be vital
for avoiding economic meltdowns. Both NAFTA and the WTO contain
foreign investment protections that forbid governments from using
the policies such as requiring that manufactured goods include
a percentage of domestic content, or that a percentage of products
be exported - that were essential components of the industrial
policies employed by the fast-growing Asian economies. Indeed,
no country has moved from poverty except by employing the very
policies forbidden by WTO and NAFTA. Thus it is not surprising,
if horrifying, that grinding poverty has worsened in many developing
countries that followed the WTO/International Monetary Fund model
most faithfully, while countries like China, Vietnam and Malaysia
that have either remained outside the WTO or selectively implemented
its terms, have grown dramatically, bringing many to a better
standard of living.
In yet another torturous twist, NAFTA
and the WTO protect subsidies given to agribusiness for exporting
commodities, while certain domestic subsidies to support small
farms or ensure food sovereignty are characterized as "illegal
All of these new corporate rights are
enforced by a new, powerful and binding dispute resolution system
unlike anything from any past trade agreement or included in environmental,
human rights or other treaties. A key WTO provision requires nations
to "ensure conformity of their laws, regulations and administrative
procedures" to the WTO's terms.
Any national or local policy of a WTO
or NAFTA signatory nation that falls outside WTO or NAFTA's terms
even if it has nothing to do with trade per se is challengeable
as an "illegal trade barrier" before a WTO or NAFTA
tribunal. These panels are comprised of three trade officials
meeting behind closed doors. Nations whose policies are judged
not to conform to WTO or NAFTA rules are ordered to eliminate
them or face permanent trade sanctions.
A CORPORATE BILL OF RIGHTS
While both WTO and NAFTA represent an
audacious power grab, many of the rules of NAFTA are considerably
more extreme than the rules of the WTO.
Because WTO negotiations included scores
of countries - including some progressive European nations and
many large developing countries such as India and Brazil - it
was possible to generate a critical mass of push-back against
some of the most extreme proposals emanating from the Reagan administration.
In contrast, the power imbalance inherent
in the U.S. relationship with Mexico and Canada meant that NAFTA
was more of a dictation than a negotiation, and the first Bush
Administration was able to insert into NAFTA the most complete
and extreme version of the corporate-friendly agenda it favored.
NAFTA is considered the gold standard for mechanisms furthering
corporate globalization because it includes service sector privatization
and deregulation, government procurement deregulation and foreign
investor protections that go well beyond the WTO's rules on these
For instance, NAFTA requires signatory
countries to provide foreign investors a much more expansive list
of new privileges than is required under WTO rules, including
privileges that extend beyond the property rights guaranteed by
the U.S. Constitution. NAFTA gives foreign investors the right
to be compensated for the costs domestic environmental or health
regulations applicable to all businesses might pose to their expected
future profits, for example.
Under NAFTA, foreign corporations and
investors are empowered to privately enforce these new privileges
and rights where the WTO renders all disputes between governments.
NAFTA contains a mechanism allowing foreign investors to sue signatory
governments in private NAFTA tribunals demanding cash compensation
for government policies that do not satisfy the NAFTA-guaranteed
minimum standard of treatment for foreign companies.
Neither Congress nor the public must be
given notice of these NAFTA investor cases, so it is unclear how
many have been filed. However, more than 40 cases are known to
date and several have been decided.
In one case, the government of Mexico
paid Metalclad, a U.S. toxic waste company, $16 million in damages
after a NAFTA tribunal ruled that a Mexican municipality's refusal
to grant a construction permit for a toxic waste treatment facility
in an environmentally sensitive area violated Metalclad's NAFTA
In another case, Canada paid the U.S.
corporation Ethyl $12 million in compensation and reversed a ban
on a toxic gasoline additive called MMT after Ethyl filed a NAFTA
Not even international environmental and
human rights treaties are free from these attacks: in another
case, a U.S. corporation called S.D. Meyers received millions
in compensation after a NAFTA tribunal ruled that Canada's implementation
of the Basel Convention, an international treaty on the handling
of toxic waste, had limited S.D. Meyer's business opportunities
in PCB toxic waste disposal trade.
In pending actions, a Canadian tobacco
company has challenged the tobacco settlements made by assorted
U.S. states as a disadvantage to their expected market share in
the United States. And a Canadian mining company has just filed
a claim for $300 million against the U.S. government because California
denied it a permit to dig an open-pit mine on land deemed sacred
by a California Indian tribe.
Meanwhile, an array of U.S. health and
environmental policies have been weakened to meet WTO or NAFTA
rules: imported meat is now permitted even if the foreign plants
in which it is processed do not meet U.S. safety standards; U.S.
Clean Air Act regulations, dolphin-safe tuna labeling and Endangered
Species Act have all been successfully attacked in trade tribunals
- meaning dirtier gasoline was allowed for sale in the most polluted
cities and that dolphin-safe labels on tuna cans no longer means
no dolphins were killed in the tuna harvest.
THE POWER OF OBFUSCATION
How could such a far-reaching rewrite
of domestic policy have been sneaked past the public, press and
Congress? The NATO and NAFTA were designed by corporate lobbyists
purposely to be inaccessible. The agreements were negotiated in
closed sessions where corporate leaders act as official advisors
to governments. For instance, when the WTO and NAFTA were negotiated,
over 500 corporate representatives were operating as official
U.S. trade advisors. These presidential appointees have security
clearance and are allowed to attend negotiations and have access
to the confidential negotiating texts. The agreements are written
in "GATTese," a language understood only by trade lawyers.
In the early 1990s, when the WTO and NAFTA votes occurred, attempts
by groups such as Public Citizen to warn about these pacts' true
implications were dismissed as simply unbelievable.
If such an autocratic, anti-democratic
governance system had been imposed over elected governments around
the world by force, human rights monitors and UN inspectors would
have been dispatched.
Instead, the NAFTA and WTO's silent slow
motion coup d'etat against democratic governance everywhere will
be reversed only by citizen activism and campaigning.
There is resistance to expanding the WTO/NAFTA
model - abroad and in the United States, only the most visible
manifestation of which were the protests in Seattle at the 1999
WTO Ministerial Meeting. The reasons for resistance are clear:
In 2005, 10 years since the "TO and NAFTA, U.S. wages have
remained flat. A $600 billion trade deficit puts the United States
in a precarious position of depending on foreign investment to
keep the already-falling dollar from crashing. Meanwhile, the
export of high-paying jobs with health and benefits in fields
such as tax preparation, medicine and law is on the rise, with
even conservative estimates indicating a loss of at least another
three million jobs over the next decade.
It would be one thing if the decline in
the U.S. standard of living contributed to improving the conditions
for the majority of the world's population living in poor countries.
However, the WTO/NAFTA model is a lose-lose with wealth extracted
by supercorporations from both rich and poor countries' workers,
farmers and small businesses.
If progressive forces are able to defeat
a proposed deal to expand NAFTA to Central America - the Central
American Free Trade Agreement (CAFTA), signed in May 2004 but
not approved by Congress because of a dearth of support - the
era of "trade agreements" being hijacked to impose a
retrograde corporate agenda worldwide may be over.
Of the Bush administration's second-term
priorities, CAFTA remains one that does not enjoy even widespread
support among Republicans. Its rejection could spell the end of
the even more astounding proposal to expand NAFTA to 31 nations
in a Free Trade Area of the Americas. There is momentum to restrain
corporate rule, yet only the energy and will of engaged citizens
at home and abroad can make 2005 the year the turnaround begins.
Lori Wallach is director of Public Citizen's
Global Trade Watch and co-author with Patrick Woodall of Whose
Trade Organization? A Comprehensive Guide to the WTO.
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