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 businesses.

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 is 'necessary'.

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 merchants.

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 Secretariat?

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 fanatics.

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 matter).

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.

You can find the leaked GATS documents in the Special Features section of

World Trade Organization (WTO)

Index of Website

Home Page