GATT, NAFTA, and the subversion
of the democratic process

written by Ralph Nader and Lori Wallach

exerpted from the book The Case Against the Global Economy
Edited by Jerry Mander and Edward Goldsmith

WTO: The global enforcer

The World Trade Organization (WTO), the new "governing" structure [of GATT], was crafted at the end of the Uruguay Round negotiations [in the Fall of 1994] to organize and enforce this new system of limits on every nation's laws and policies. The new global agency was not in the original plans for the Uruguay Round when its terms of reference were agreed upon in 1986. The WTO was hatched to provide a global executive branch that would judge a country's compliance with the rules, enforce the rules with sanctions, and provide the legislative capacity to expand the rules in the future.

The WTO gives the trade rules both a permanent organizational structure (powers that GATT did not have) and the kind of "legal personality" enjoyed by the U.N., the World Bank, and the I.M.F. The binding provisions that define the WTO's functions and scope do not incorporate any environmental, health, labor, or human rights considerations. Moreover, there is nothing in the institutional principles of the WTO to inject any procedural safeguards of openness, participation, or accountability. The WTO provides no mechanism for nongovernmental organizations to participate in its activities and, in several key provisions, requires that documents and proceedings remain confidential.

The WTO "dispute resolution system" is the mechanism that enforces WTO control over democratic governance. Disputes are not decided by democratically elected officials or their appointees but by secret tribunals of foreign-trade bureaucrats from a preset roster. Only national government representatives are allowed to participate in the dispute resolution process. State and local government representatives (such as a state attorney general), citizens, and the press are locked out.

For U.S. citizens, the notion of delegating "judicial" review to forums that do not have the procedural safeguards of the U.S. federal and state judicial systems is troubling. Trade dispute panels, whether in the WTO, NAFTA, or I988 Canada-U.S. Free Trade Agreement, share highly problematic traits:

1 - Tribunals have no guarantee of impartiality or economic disinterest of decisionmakers.

2 - There is no required disclosure of potential conflicts of interest. (In a recent timber dispute under the Canada-U.S. Free Trade Agreement, two of the five members of the panel were attorneys from firms representing Canadian lumber interests directly affected by the case.)

3 - All documents, transcripts, and proceedings are secret.

4 - No media and no citizens can sit in and observe the proceedings. And there is no outside appeal or review available.

The WTO text lists qualifications for dispute tribunal members that ensures they will represent only a "trade uber alles" perspective. The qualifications primarily include experience in a country's trade delegation or experience as a lawyer on a past trade dispute. Such qualifications produce panelists with a uniformly pro-trade perspective.

There is no mechanism to expose such panelists to any alternative perspectives or expert opinions on environmental, health, labor, consumer, or human rights issues. The WTO tribunal rules also forbid identification of panelists who have supported particular positions and conclusions, adding an additional layer of secrecy and lack of accountability.

Ironically, the only specific procedural requirement for WTO tribunals is that they be conducted in secret. Unlike complaints, briefs, and affidavits in the U.S. court system, documents presented to the WTO tribunals are kept confidential. Thus it is only as a result of a Public Citizen lawsuit that the U.S. Trade Representative (USTR) must finally release the U.S. submissions to the GATT panels. Even so, these submissions are censored by USTR officials in order to conceal the arguments of the other party. Documents from other parties in the dispute are still not available. So, if a state law were to be challenged, governors or state attorney generals would only have access to those documents or proceedings that the federal government chose to make available.

The old rules and the new

A comparison of the rules of the old GATT and the recently established WTO reveals much about the intentions of the people who created the system. At nearly every turn, with nearly every rule, the clear intention is to diminish if not eliminate the democratic process, not only in the internal operations of the GATT bureaucracy and the WTO but also among Member nations. The new rules clearly favor the largest, most developed, and most powerful nations. Here are some examples of those rules:

1 - Unlike the old rules of GATT, the new WTO requires that all members agree to be bound by all the Uruguay Round accords. The old GATT rules did not require this all-or-nothing standard. From a trade perspective, this rule seems a good idea because it eliminates free riders- countries that do not accept certain provisions but benefit from other countries' compliance. But from the point of view of democracy, the rule forces many countries, usually small ones, to accept trade in areas that might be undesirable in the long run. Their choice is to agree or to forfeit participation in the world trade system. Such all-or-nothing international laws are very rare, because they pose choices incompatible with national sovereignties.

2 - When countries join the WTO, they authorize the WTO to conduct ongoing negotiations on WTO provisions; many may never be submitted for approval by any elected legislatures. Only a simple majority vote is required to initiate these WTO negotiations; under the old GATT that vote had to be unanimous. Thus the new rules lead to a higher potential for coercion of small nations by larger ones.

3 - Perhaps the most ominous change is this one: WTO rules and restrictions are now enforceable as regards all existing federal, state, and local laws, and future laws too. As the text says, "Each Member shall ensure the conformity of its laws, regulations and administrative procedures with its obligations as provided in the annexed agreement." So, U.S. law and the laws of every other nation must "conform" to the WTO and each other. Perhaps with this provision in mind, the Clinton administration announced that all future U.S. environmental proposals would be put through trade reviews that ensured their compliance with U.S. trade obligations. In effect, the administration voluntarily sacrificed U.S. sovereignty.

4 - Under yet another WTO provision, a law of a Member nation can be challenged if "the attainment of any objective (of the WTO) is being impeded" by the existence of the law. The vagueness of this provision makes it possible to "smuggle" into the WTO's grasp many national laws that would seem to be free of any implications for trade.

5 - One additional point of difference concerns the WTO's attack on its Members' democratic and sovereign decision making: Under the old GATT rules, there had to be unanimous approval of all GATT's contracting parties before trade sanctions were imposed on a GATT nation by the other nations. Under the new WTO rules, the determinations by WTO tribunals become automatically binding. This holds unless all Member countries vote to stop the decision within ninety days. This is another case where antidemocratic procedural rules determine much of the out come; the obvious result is that few, if any, tribunal decisions would ever be voted down unanimously. This requirement of consensus to stop the action of an international institution rather than to authorize it is uniquely empowering for the WTO; it means its bureaucratic decisions will be honored and feared, thus further intimidating any resistant strains among nations. Under the old GATT, the opposite rule applied: Decisions were not adopted unless all countries agreed; any single country had the right to block a GATT ruling and thus maintain greater autonomy.

Thus the Bush administration was able to freeze an old GATT tribunal ruling against the Marine Mammal Protection Act, which prevented the import of Mexican tuna caught in a manner that also killed dolphins. A GATT tribunal called that an illegal trade barrier, but Bush, under massive public pressure, was able to veto the ruling by the requirement of unanimity. The new WTO removes all countries' veto power and effectively their ability to maintain laws that protect people or the environment from WTO challenge.

As mentioned above, the WTO rules require that Members' future laws also comply with WTO rules. So WTO Member countries are now required, when promulgating new federal, state, or local laws, to take into account whether or not the new law will conform with WTO rules. Thus the WTO has a chilling effect on policies that are now being written and rewritten with the fear of a future WTO challenge in mind. In some cases, such as a I994 child labor law proposed in the U.S. Senate, conflict with the WTO was a primary weapon used to squash the bill's progress. To avoid the time and expense of later having to defend a law against a WTO charge, countries can use regulatory discretion, annual budgets, or legislative reauthorization to alter democratically achieved laws to meet WTO rules.

Another example of the WTO's effect occurred in the I995 New York State budget. Buried in the voluminous state legislation was a list of laws to be eliminated because they conflicted with the rules of the WTO. The list included a tropical timber procurement ban, a law requiring that state contractors only purchase from Northern Ireland companies that maintain certain human rights standards (called the MacBride Principles), and a small preference for New York-produced food. Luckily, an enterprising reporter discovered the provisions. The embarrassing revelations and the outrage they generated ultimately forced New York Governor Pataki to withdraw the provisions-at least for the moment. However, such stealth rollbacks of democratically supported policies undoubtedly lurk in other state-level proposals, and the provisions could be tucked into some other bulky state legislation later.

As a legal matter, the WTO's rules and powerful enforcement mechanism promote downward harmonization of wages, environmental, worker, and health standards and the undermining of democratic procedures and policies. However, in practice, the race to the bottom set off by the WTO is even more devastating than the sum of the WTO's provisions. Both NAFTA and GATT have actual provisions requiring harmonization of environmental, safety, food, and other standards. For instance, under NAFTA, the trucking industry is working through a land transportation harmonization committee to get an increase in truck weights and lengths for all North American trucks. Such a move would lower U.S. safety standards through the back door.

By giving up the right to make investment in a country conditional on certain standards or the entry of products into domestic markets conditional on compliance with national rules, countries have eliminated whatever leverage they had on corporate behavior. U.S. corporations long ago learned how to pit states against each other in "a race to the bottom" to profit from whichever state would offer the most miserable wages, the most lax pollution standards, and the lowest taxes. Now, via NAFTA and GATT, multinational corporations can play this game at the global level. After all, externalizing environmental and social costs is one way to boost corporate profits. Paying child laborers slave wages in some countries may increase a U.S. firm's bottom line. It is a tragic lure that has its winners and losers determined before it even gets underway: Workers, consumers, and communities in all the countries lose, short-term profits soar, and the corporation "wins."

Under the WTO, the race to the bottom is not only in standard of living, environmental, and health safeguards but in democracy itself. Enactment of the free trade deals virtually guarantees that democratic efforts to make corporations pay their fair share of taxes, provide their employers a decent standard of living, or limit their pollution of the air, water, and land will be met with the refrain, "You can't burden us like that. If you do, we won't be able to compete. We'll have to close down and move to a country that offers us a more hospitable climate." This message is extremely powerful-communities already devastated by plant closures and a declining manufacturing base are desperate not to lose more jobs. They know all too well that threats of this sort are often carried out.

Stopping Globalization

One of the clearest lessons that emerges from a study of industrialized societies is that highly centralized commerce is environmentally and democratically unsound. Some international trade is useful and productive, while other global trading favors corporate advantages over those of workers, consumers, and the environment.

But societies need to focus their attention on fostering community-oriented production. Such smaller-scale operations are more flexible and adaptable to local needs and environmentally sustainable production methods. They are also more easily subjected to democratic control, less likely to threaten to shift their operations abroad, and more likely to perceive their interests as overlapping with community interests.

Similarly, allocating power to reachable governmental bodies tends to increase citizen power. Concentrating power in international organizations, as the trade pacts do, tends to remove critical decisions from citizen control. You can talk to your city council representative but not to some faceless international trade bureaucrat in Geneva, Switzerland.

If a foreign country's simple cry of "nontariff trade barrier" can jeopardize local or state laws, if a country must pay a bribe in trade sanctions to maintain its own laws, if a company claims that the burden of citizen safe guards are so great that it will pick up stakes and move elsewhere, then global living standards will continue to spiral downward.

In the United States, where most wages are at their lowest level in real terms since President Johnson initiated the war on poverty in 1964, a major swath of the American population is working harder to earn less. Polling continues to show a growing "anxious" class. A sense of despair and loss of control is at least part of the explanation for the tumultuous electoral behavior of the past two U.S. federal elections. This new anxious class is politicized and looking for answers.

We must make the clear connection between our local problems and the multinational corporate drive for economic and political globalization. If we don't, then others will blame these increasing problems on other causes. "It's the immigrants!" "It's the welfare system!" "It's greedy farmers or workers!" Allowing the camouflage of the real causes of these multifaceted problems means that citizens are divided against each other to the benefit of the corporate agenda.

We now face a race against time: How will citizens reverse the devastating globalization agenda while democratic options and institutions are still available? The degree of suppression and subterfuge necessary to continue to globalize will be hard to maintain in the presence of any democratic oversight. To obtain this oversight and to actually reverse NAFTA, GATT, and the push to globalization will require a revitalized citizenry here and abroad. There will be no dearth of provocations.

exerpted from the book:
The Case Against the Global Economy
Edited by Jerry Mander and Edward Goldsmith

published by Sierra Club Books
85 Second Street
San Francisco, CA 94105

World Trade Organization