WTO and Free Trade

Rachel's Environment & Health Weekly

#674 October 28, 1999

In the U.S. (though not in Europe), a liberal is a person "who believes in a society that taxes the well-off and uses the proceeds to help the poor and unlucky."[1] In the U.S., liberalism is the political philosophy that expresses those ideas.

On the other hand, the "liberalization" of an economy (or "neo-liberal" economic policy[2]) has nothing to do with liberalism or being a liberal in the U.S. sense of that term. Liberalization means (according to the big Merriam-Webster dictionary) "to free from official control." That is what "neo-liberal" economics is about -- removing societal controls from markets. The goal of "liberalization" today is "global free trade."

Global free trade is a utopian goal, meaning that it embodies an impossible ideal: to remove all restrictions from markets. Free trade is utopian because it runs counter to the way humans have always behaved. When humans develop markets, they impose all kinds of restrictions on those markets.

U.S. history provides an excellent example of typical market restrictions and interventions. From the beginning, the U.S. developed its industrial base behind a wall of high tariffs (taxes on imported goods) to protect weak domestic industries against competition from Europe. Starting in the 18th century the federal government subsidized the construction of roads and later railroads. The western territories were taken from their original inhabitants with help from a host of government subsidies -- the government conducted land surveys; organized citizen militias and paid bounties for Indian scalps; promoted mineral exploration; and encouraged settlement by offering free land. Like every other country on Earth, the U.S. has always restricted and shaped market activity to promote its own particular societal goals.

Now supposedly things are going to change. For the past 25 years, a bi-partisan financial and political elite has made it a key goal to impose "free trade" on the U.S. and on the rest of the world -- to try to force every country in the world to remove restrictions from their markets. ("Structural adjustment" is the name for this activity when it is imposed on countries outside the U.S. by organizations like the World Bank and the International Monetary Fund.) After 25 years of evangelical effort, the utopian goal of "global free trade" has become a kind of civil religion in the U.S. People who favor international trade but not "global free trade" are stigmatized by the NEW YORK TIMES and the WALL STREET JOURNAL as "isolationists" or worse. Both major political parties are dominated by global free trade advocates -- Al Gore, Bill Bradley, George W. Bush, and Steve Forbes are all avid believers in global free trade. No choice here.

As we will see, the main proponents and beneficiaries of free trade are transnational corporations such as Gerber Foods, Chiquita, Kodak, Monsanto, Microsoft, the asbestos manufacturers, the lead industry, the major magazine publishers, and so on. Slowly, starting in the early 1970s, it dawned on the executives of these transnationals that the gospel of "free trade" -- if widely accepted -- could give them relief from the main factors that were causing their profits to stagnate. Those factors were (and still are):

(1) insufficient consumer demand for their products;

(2) the high cost of labor;

(3) the high cost and scarcity of raw materials;

(4) societal standards requiring openness and public accountability;

(5) laws respecting the rights of workers;

(6) legal protections for the natural environment.

As we will see, free trade doctrine and law now provide relief from each of these problems.

In carrying out their "global free trade" campaign over the past 25 years, the corporations didn't act alone. They funded other institutions that developed the rationale for global free trade and then spread the word -- new strategic organizations like the Business Roundtable, think tanks like the Heritage Foundation and the Cato Institute, private philanthropies like the Olin and Richardson Foundations, universities (mainly University of Chicago with help from scholars based elsewhere), and publications like NATIONAL REVIEW. Together these organizations developed a vision that emphasized maximum freedom -- a version of 19th century libertarianism expressed in the language of individual liberty but implemented as freedom from market restrictions, libertarianism for corporations. The new libertarian gospel successfully blended "global free trade" with the promise that U.S. institutions -- because of their inherent superiority -- are destined to spread worldwide. This gave "global free trade" a patriotic coloring AND made its future seem inevitable and irresistible.

Armed with the utopian vision, corporate lawyers began patiently re-working a group of existing international organizations, among them the World Bank, the International Monetary Fund, and the General Agreement on Tariffs and Trade (GATT). But they needed something new. They needed an agency with legal standing equivalent to that of the United Nations but one that wouldn't have to conduct its business in a fishbowl and wouldn't be subject to fickle popular controls. So over a decade they morphed an existing institution -- the GATT -- into a new agency with the needed characteristics. They called it the World Trade Organization (WTO) and it sprang to life in January, 1995. The WTO now has legal standing equivalent to the United Nations, but it operates largely in secret. It holds its meetings at undisclosed locations and times in Geneva, Switzerland, and makes decisions behind closed doors based on pleadings, evidence, and expert testimony that are confidential. Non-governmental organizations cannot submit documents to the proceedings, nor witness deliberations. WTO decisions are binding, world-wide.

WTO judges are trade bureaucrats, usually corporate lawyers. There are no rules preventing them from having conflicts of interest in the matters they decide. There is no appeal to any outside organization; WTO rulings can only be appealed to another panel within the WTO itself. The WTO enforces its own rules by imposing sanctions against rule-breakers. Any country that breaks the rules repeatedly will find itself shunned, locked out of world commerce, without anyone to buy from or sell to at competitive prices. The WTO has no army but it has real power. (Of course the military apparatus of the developed countries, especially the U.S., is the ultimate enforcer of WTO decisions, though it is definitely not considered polite to mention this.) At present, the WTO is the closest thing we have to a world government but it is explicitly designed to serve the interests and needs of transnational corporations, not of people.

The WTO was created by international treaty; 134 nations have now signed on. Representatives of the 134 nations are meeting in Seattle, Washington November 29-Dec. 3 to discuss ways to expand the WTO's power even further. But there is now almost 5 years of WTO history to scrutinize and based on this history, representatives of labor, human rights, environment and community development organizations will journey to Seattle for a peaceful "Protest of the Century" to express their displeasure with the WTO. They want the WTO opened up to public examination before any consideration is given to expanding the WTO's power. (To learn more about protest-related activities, telephone 1-877-786-7986.)

The WTO serves the needs of corporations very effectively. To begin with, those who can afford to lodge a complaint with the WTO almost always win. Of 22 cases brought before the WTO in the last 5 years, 19 have been settled in favor of the party bringing the challenge. This means that big companies that can get their government to go to bat for them have a major advantage over small companies and small nations.

Example: The current accepted approach to environmental protection is called "pollution prevention" or "clean production." Pollution prevention is the highest stated goal of U.S. Environmental Protection Agency. It means not creating dangerous pollution in the first place -- often by banning dangerous substances. For example, the U.S. has banned lead from gasoline and DDT from farming because the U.S. concluded in the 1970s that there was no safe way to "manage" such substances after they were created.

Now the WTO has declared such product bans illegal. WTO rules forbid banning toxic substances -- the WTO only allows toxics to be regulated using risk assessment. Thus the WTO is an effective hammer for breaking apart the modern structure of environmental protection and returning the world to older "end of pipe" pollution controls. Large corporations had little difficulty meeting "end of pipe" regulations defined by "risk assessments." Under this older system, corporate experts and lawyers could usually battle regulatory officials to a standstill. Furthermore, the "end of pipe" system favored large corporations over small ones because big companies could afford the experts and lawyers to make the system work for them. Bans are a different kettle of fish -- once a ban is enacted, there is no "wiggle room" for corporate experts and lawyers. Product bans affect large and small businesses alike, removing the advantage that large corporations enjoyed under the "end of pipe" system.

Now the European Union has announced its intention to ban electronic products that contain lead, mercury, cadmium, hexavalent chromium and halogenated flame retardants by the year 2004. The EU also intends to require that 5% of the plastics in electronic components must be recycled, and further the EU intends to make electronics manufacturers responsible for their products from cradle to grave -- the manufacturer retains responsibility for ultimate disposal. (Such approaches are being used successfully in Germany today.)

Acting on behalf of the American Electronics Association (IBM, Motorola, Microsoft, Raytheon, etc.) the Clinton/Gore administration immediately filed an aggressive challenge to the EU's proposal. The EU proposal is WTO-illegal for many reasons, the U.S. says. And the U.S. is almost certainly right.

If the U.S. wins the electronics dispute, which seems very likely, Congress will not have to raise these issues because the EU's attempt to impose pollution prevention on the electronics industry will have been declared illegal by bureaucrats in Geneva, Switzerland, and their decision will override U.S. (and European Union) law.

Thus the WTO is an excellent vehicle for ridding the world of product bans for pollution prevention. The electronics giants don't even have to fight this battle themselves -- the free trade enthusiasts within the U.S. government, led by environmentalist Al Gore, are fighting it for them. For corporations, "global free trade" as embodied in the WTO is a dream come true.

And this is just the beginning.

World Trade Organization