For Their Eyes Only
by Greg Palast
New Internationalist magazine, July 2002
When secret documents land in Greg Palast's hands, he spots
the killer shark lurking in the free-trade pool.
When Churchill said, 'democracy is the worst form of government
except all the others', he simply lacked the vision to see that
the World Trade Organization would design a system to replace
democracy with something much better - Article VI. 4 of the General
Agreement on Trade and Services, or GATS.
Last year an extraordinary document, dated 19 March 2001,
marked 'confidential', came through my fax machine from the WTO
Secretariat. This unassuming six-page memo which the WTO modestly
hid away in secrecy may one day be seen as the post-democratic
Magna Carta. It contained a plan to create an international agency
with veto power over parliamentary and regulatory decisions.
The memo begins with considering the difficult matter of how
to punish nations that violate 'a balance between two potentially
conflicting priorities: promoting trade expansion versus protecting
the regulatory rights of governments'.
Think about that. For a few centuries Britain, America and
now almost all nations have relied on elected parliaments, congresses,
prime ministers and presidents to set the rules. It is these ungainly
deliberative bodies that 'balance' the interests of citizens and
Now kiss that obsolete system goodbye. Once nations sign on
to the GATS, Article VI. 4 - otherwise known as The Necessity
Test - will kick in. 'Then, per the Secretariat's secret programme
outlined in the 19 March memo, national parliaments and regulatory
agencies will be demoted, in effect, to advisory bodies. Final
authority will rest with the GATS Disputes Panel to determine
if a law or regulation is 'more burdensome than necessary'. And
the GATS panel, not Parliament or Congress, will tell us what
As a practical matter, this means nations will have to shape
laws protecting the air you breathe, the trains you ride in and
the food you chew by picking, not the best or safest means for
the nation, but the cheapest methods for foreign investors and
Let's get down to concrete examples. The Necessity Test had
a trial in North America via inclusion in NAFTA, the region's
free-trade agreement. The state of California had banned a gasoline
additive MBTE, a chemical cocktail that was found to contaminate
water supplies. A Canadian seller of the 'M' chemical in MBTE
filed a complaint saying California's ban <>n the pollutant
fails the Necessity Test.
The Canadians assert, quite logically, that California, rather
than ban MBTE, could require all petrol stations to dig up storage
tanks and reseal them, and hire a swarm of inspectors to make
sure it's done perfectly. The Canadian proposal might cost Californians
a bundle and might be impossible to police.
But that's just too bad. The Canadians assert their alternative
is the 'least trade-restrictive' method for protecting the California
water supply. 'Least trade-restrictive' is NAFTA's Necessity Test.
If California doesn't knuckle under, the US Treasury may have
to fork over $976 million to the pollutant's Canadian manufacturer.
The GATS version of the Necessity Test is NAFTA on steroids.
Under GATS, as proposed in the memo, national laws and regulations
will be struck down if they are 'more burdensome than necessary'
to business. Notice the subtle change from banning 'trade-restrictive'
rules (NAFTA) to 'burdensome' rules.
Suddenly, the GATS treaty is not about trade at all, but a
sly means to wipe away restrictions on business and industry,
foreign and local.
What burdensome restrictions are in the corporate cross-hairs?
The US trade representative has already floated proposals on retail
distribution. Want to preserve Britain's greenbelts? Well, forget
it - not if some bunch of tries are in the way of a Wal-Mart superstore.
Even under the current, weaker GATS, Japan was forced to tear
up its own planning rules to let in the retail monster boxes.
The Blair Government assures us that nothing threatens the
right to enforce law in the nation's public interest. But not
according to the 19 March memo. The WTO reports that, in the course
of the secretive multilateral negotiations, trade ministers have
agreed that, before the GATS tribunal, a defence of 'safeguarding
the public interest... was rejected'.
In place of a public interest standard, the Secretariat proposes
a deliciously Machiavellian 'efficiency principle'. 'It may well
be politically more acceptable t<> countries to accept international
obligations which give primacy to economic efficiency.' This is
an unsubtle invitation to load the GATS with requirements which
rulers know their democratic parliaments could not accept. This
would be supremely dangerous if, say, one day, the US elected
a president named 'Bush' who wanted to shred air-pollution rules
or, say, Britain elected a prime minister named 'Blair' with a
mad desire to sell off his nation's air traffic control system.
How convenient for embattled chief executives: what elected congresses
and parliaments dare not do, GATS would require.
Britain's government can brush off the green-haired anti-GATS
protester, but can't ignore the objections of the British Medical
Association (BMA) jittery about GATS' control over the National
Health Service. In the journal, The Lancet, the BMA nervously
questions European Trade Commissioner Pascal Lamy's assurances
that 'interpretation of the rules [must not be] settled by disputes
procedures', that is, the GATS panel. One defender of GATS calls
the BMA's accusation 'hysterical'.
But after reading the 19 March internal memo, hysteria may
be the or right prescription. The Secretariat's memo makes no
e? concession to sovereign interpretation of the rules. Under
the post-democratic GATS regime, the Disputes Panel, those Grand
Inquisitors of the Free Market, will decide whether a nation's
law or a regulation serves what the memo calls a 'legitimate objective'.
While parliaments and congresses are lumbered with dated constitutional
requirements to debate a law's legitimacy in public, with public
evidence, with hearings open to citizen comment, GATS panels are
far more efficient. Hearings are closed. Unions, consumer, environmental
and human-rights groups are barred from participating - or even
knowing what is said before the panel.
Is the 19 March memo just a bit of wool-gathering by the WTO
Hardly. The WTO was working from the proposals suggested in
yet another confidential document also sent to me by my good friend,
Unnameable Source. The secret memo, 'Domestic Regulation: Necessity
and Transparency', dated 24 February 2001, was drafted by the
European Community's own 'working party' in which Britain's ministry
claims a lead role.
In a letter to MPs, Britain's then Trade Minister Dick Caborn
swears that, through the EC working party, he will ensure that
GATS recognizes the 'sovereign right of government to regulate
services' to meet 'national policy objectives'. Yet the 24 February
memo, representing Britain's official (though hidden) proposals,
rejects a nation's right to remove its rules from GATS jurisdiction
once a service industry is joined to the treaty. Indeed, this
official and officious document contains contemptuous attacks
on nations claiming 'legitimate objectives' as potential 'disguised
barriers' to trade liberalization. Moreover, that nasty little
codicil borrowed from NAFTA, that regulation must not be 'more
trade restrictive than necessary', is promoted in the secret EC
document, ready for harvesting by the WTO Secretariat's free-market
Not knowing I had these documents in hand, Britain's Trade
Ministry still insisted when I called that GATS permitted nations
a 'right to regulate to meet national policy objectives'. I was
not permitted to question Dick Caborn himself (and in the post-GATS
future, I understand, no mortal may gaze directly upon him). But
let us suppose, for a moment, that Caborn believed what his press
office said on his behalf: that there is nothing to fear from
GATS, especially because Britain can opt in or out of clauses
as it chooses.
Don't count on it. According to Professor Bob Stumberg of
Georgetown University, Washington DC, the WTO has suggested that
the Necessity Test, the shark in the swimming pool, will be applied
'horizontally', that is, to all services. No opt-outs.
A Caborn letter to MPs admits that Blair's pleasant interpretation
of GATS has not been 'tested in WTO jurisprudence'. In other words,
he doesn't actually know if a GATS panel will rule as in his fantasies.
This is, after all, the minister who, with his European counterparts,
lost a $194 million judgment to the US over the sale of bananas.
Now, I can understand how Caborn goofed that one. Europe argued
that bananas are a product, but the US successfully proved that
bananas are a service - try not to think about that - and therefore
fall under GATS...
And note: America doesn't grow bananas - so how did it get
in this dispute anyway? Did it have anything to do with the fact
that Carl Lindner, Chief of the Chiquita Banana Company, is one
of the top donors to both Democrats and Republicans?
And that illustrates the key issue. No-one in Britain should
bother with what some domestic trade minister thinks. The only
thing that counts is what George W Bush thinks. Or at least, what
the people who think for George think.
Presumably, Britain's trade minister won't sue his or her
own country for violating the treaty. But the US might. It has.
Forget Caborn's assurance - we need assurance from President Bush
that he won't use GATS to help WalMart, Citibank or Chevron Oil
beat the hell out of Britain or Canada (or California for that
The odd thing is, despite getting serviced in the bananas
case, the Blair Government and the European Commission have not
demanded explicit language barring commerce-first decisions by
a GATS panel. Instead, the secret 24 February EC paper encourages
the WTO's Secretariat to use the punitive form of The Necessity
Test sought by the US.
So there you have it. Rather than attack the rules by which
corporate America whipped the planet, Blair and the EC are keen
to hand George Bush a bigger whip.
This is an extract from The Best Democracy Money Can Buy,
Pluto Press. www.gregpalast.com
You can find the leaked GATS documents in the Special Features
section of www.newint.org
Trade Organization (WTO)