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#673 - The WTO and Free Trade--Part 1, 20-Oct-1999

What is being described as "the Protest of the Century" will take
place in Seattle, Washington, November 29 to December 3 amid
teach-ins, workshops, and strategy sessions all aiming to send a
powerful message to members of the World Trade Organization
(WTO), who will be in Seattle for the WTO's Third Ministerial
Meeting. Activists are calling for people from all nations and
all walks of life to make the journey to Seattle, to demand that
the WTO change its ways. But what is the WTO?

Although many environmental and community activists in the U.S.
know almost nothing about the WTO, in the 4 years since its
creation the WTO has emerged as the policy voice, the muscle, and
ultimately the fist of transnational corporations. Created by
international treaty in 1995, and now boasting 134 nations as
members, the WTO has written 700 pages of rules which add up to
an enforceable commercial code governing markets and trade
world-wide -- a code enforceable not by nation-states but by the
WTO itself. No doubt about it, the WTO is a powerful new system
of global governance.[1]

The structure of the WTO was designed by transnational
corporations, so it should come as no surprise that the WTO is
(a) radically undemocratic, fully insulated against pressure from
ordinary citizens; and (b) a vehicle for transnationals to
challenge and effectively repeal restrictions imposed on them by
nation-states.[1] The main idea that the WTO was set up to define
and enforce is "the global free market" or "global free trade."
But what is "free trade"?

Far back in the mists of time, when humans began trading shells
and beads with each other, the first markets emerged, but such
traditional markets were never free. All traditional markets are
embedded in societies and are regulated and restrained by those
societies for the purpose of maintaining social cohesion.
Familiar societal controls on markets include such things as:

** the Roman Catholic and Islamic religions' prohibitions against

** medieval guilds, which set minimum wages, and which set
standards and prices for goods;

** customary prohibitions or restrictions on the sale of certain
goods, such as public spaces, sexual favors, spoiled food, and
judicial decisions, for example;

** laws requiring government purchasing policies to give
preference to businesses run by people of a particular city or
region, or by women or minorities, or by some other identifiable

** regulations requiring that products be labeled with their
ingredients or with their method of production (such as
"organically grown"), and that the labels be certifiably true;

** laws discouraging monopolies, to promote competition;

** a guaranteed minimum income, regardless of employment,
traceable to 1795 in England;

** laws requiring that production methods should protect
endangered species (for example, that shrimp be harvested by
methods that do not kill rare sea turtles);

** prohibitions against child labor;

** government ownership of certain public-service enterprises
(municipal and state hospitals in the U.S., or the oil industry
in Mexico, for example);

** limits on the length of a work day;

** restrictions on 100% ownership of businesses by foreign

** tariffs intended to increase the price of imported goods as a
way of protecting domestic producers;

** government subsidies to promote particular industries -- for
example, planting many thousands of seedlings to assure a
domestic timber industry in the future;

** Etc., etc.

As anyone can see from this list, market restrictions can be
imposed by law, or merely by custom, with varying effects on
different members of a society. It is not possible to generalize
that all controls on markets are good or bad (though some free
trade zealots do assert that all market restrictions are
unnatural and evil).

In sum, history shows us, beyond any doubt, that, when humans
develop markets spontaneously, such markets are subject to
societal controls, which generally are aimed at maintaining
social cohesion. Governments impose market restrictions as part
of their primary duty, which is to provide security for the

Free markets -- markets that are free of restrictions,
regulations, and encumbrances -- do not occur spontaneously. Free
markets only appear when they are engineered by the relentless
application of state power. As a historical fact, free market
regimes are extremely rare.

For a very brief period, and in one country only, a free market,
or laissez faire, regime did emerge. In the latter half of the
19th century in England, a true free market economy functioned
for a brief time. It did not occur spontaneously -- it was
imposed by the brute power of the state, and at great cost to the
average citizen of the time.[2] (Charles Dickens wrote novels
about life during this period.) The British "free market"
experiment collapsed into the trenches of World War I and was not
heard from again until the ruling (business) class revived the
idea in the late 1970s in Great Britain, the U.S., Australia, and
New Zealand. Thus, actual experience with free market regimes is
quite limited, principally because such regimes are very
difficult to establish and maintain in the face of popular
opposition. If a democracy is alive and well, free markets soon
revert to traditional regulated markets because citizens demand
and expect a modicum of security, equity, and humane treatment.
Free market regimes are arguably efficient (in the narrowest
economic meaning of that word) but the historical record
demonstrates that they are exceedingly painful and costly for
ordinary working people, incompatible with democratic
institutions, and destructive of the natural environment. History
shows that, left unregulated, markets cannot take into account
that species are disappearing at unprecedented rates, economic
inequalities are growing ominously, and the lives of families and
communities are in tatters.

Now transnational corporations -- working through the governments
that they dominate[3] -- have spent roughly 20 years exporting the
"free market" model to all the nations of the world -- a utopian
experiment in social engineering that takes your breath away for
its scope, scale, and boldness. Even the most ruthless social
engineers of the 20th century -- Josef Stalin and Mao Zedong --did not
attempt social engineering projects on the scale of the
experiment that the free traders have undertaken today. And the
World Trade Organization (WTO) is the vehicle for enforcing this
colossal attempt to remake all of the world's economies according
to a single utopian idea.

In principle, WTO rules are established by consensus of all 134
members, but in practice the so-called QUAD countries (U.S.,
Japan, Canada and the European Union) can meet behind closed
doors and influence the rules. Within the WTO, the QUAD countries
are the 900-pound gorilla. Within the QUAD countries,
transnational corporations wield enormous influence, comparable
to the influence of the Christian Church in medieval Europe.[3]

The WTO allows countries to challenge each other's laws and
regulations as violations of WTO rules. Cases are heard and
decided by a tribunal of three trade bureaucrats, usually
corporate lawyers. There are no rules on conflict of interest,
nor is there any requirement that the three judges have any
appreciation of the domestic laws of the countries involved. The
judges meet in secret at locations and times that are not
disclosed. Documents, hearings, and briefs are confidential. Only
national governments are allowed to participate, even if a state
law is being challenged. There are no appeals to anyone outside
the WTO. Once a WTO ruling has been issued, losing countries face
3 options: They can (1) amend their laws to comply with WTO
rules; (2) pay annual compensation to the winning country; or (3)
face non-negotiated trade sanctions (penalties imposed on goods
that the losing country exports to other WTO countries).

In its short history, the WTO has already begun to repeal
environmental regulations and policies that took citizens 30
years to enact. For example, the WTO ruled in 1998 that the
precautionary principle (see REHW #586) is not a valid basis for
restricting markets because it is "non-scientific." When the
European Union banned the sale of hormone-treated meat within EU
countries, the U.S. lodged a formal complaint to the WTO. Despite
a lengthy report by independent scientists showing that some
hormones added to U.S. meat are "complete carcinogens" -- capable
of causing cancer by themselves -- (see REHW #666) the WTO's
3-lawyer tribunal ruled that the EU did not have a "valid"
scientific case for refusing to allow the import of U.S. beef.
The losing countries are now required to pay the U.S. $150
million each year as compensation for lost profits.

The WTO grew out of an earlier organization called the GATT
(General Agreement on Tariffs and Trade). The GATT mainly focused
on repealing tariffs, which are taxes on imported goods intended
to protect domestic producers against foreign competition. But
when the GATT merged into the WTO, the WTO gained the new
responsibility of opposing "non-tariff barriers to trade."
Non-tariff barriers to trade include such things as food safety
laws, product standards, rules on the use of tax dollars, and
investment policies.

Example: WTO has ruled that a nation cannot refuse to import
goods based on the methods by which those goods were produced
because such refusal constitutes an illegal "non-tariff barrier
to trade." Thus the WTO in 1998 declared illegal a U.S.
environmental regulation requiring that imported shrimp must be
caught by methods that minimize harm to endangered sea turtles.
In 1997, the WTO overturned part of the U.S. Clean Air Act, which
prevented the import of low-quality gasoline with a high
potential for air pollution. U.S. Environmental Protection Agency
has acknowledged that this WTO ruling "creates the potential for
adverse environmental impact." Thus at the behest of
transnational corporations the WTO can -- and will -- repeal any
nation's environment al protections.

Now the WTO is meeting in Seattle Nov. 29-Dec. 3 to initiate a
new round of talks, the Millennium Round. In this new phase, the
corporations that support the WTO intend to expand the WTO's
power and reach even further.

Activists are demanding that the WTO be opened uo to scrutiny and
that its record of performance be formally evaluated before any
new talks begin. They see the WTO as threatening democracy,
quality of life, environmental integrity, environmental justice,
and every nation's control of its own destiny. Clearly, a titanic
clash has begun. For information about attending the Seattle
protest, phone 1-877-STOP WTO. More next week.

-- by Peter Montague(National Writers Union, UAW Local 1981/AFL-CIO)and
Jim Puckett


[1] Lori Wallach and Michelle Sforza, WHOSE TRADE ORGANIZATION?:
D.C.: Public Citizen, Inc., 1999). ISBN 1582310017; telephone
(202) 588-1000.

[2] John Gray, FALSE DAWN (New York: The New Press, 1998). ISBN
1-56584-521-8, and Karl Polanyi, THE GREAT TRANSFORMATION
(Boston: Beacon Press, 1944). Paper edition ISBN 0-8070-5679-0.

[3] David Korten, WHEN CORPORATIONS RULE TO WORLD (West Hartford,
Connecticut and San Francisco: Kumarian Press and Berrett-Koehler
Press, 1995. ISBN 1-887208-00-3. And see Charles Derber,
CORPORATION NATION (New York: St. Martin's Press, 1998). ISBN

Descriptor terms: free trade; free markets; utopianism;
corporations' wto; world trade organization; seattle; protests;