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#674 - The WTO and Free Trade--Part 2, 27-Oct-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." (See discussion in REHW #673 last week.)

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.[3,pgs.30-32;4] 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. More next week.

--Peter Montague(National Writers Union, UAW Local 1981/AFL-CIO)

=====

[1] Economist Paul Krugman defines a liberal this way in PEDDLING
PROSPERITY (New York: W.W. Norton, 1994), pg. xiv. ISBN
0-393-03602-2. In Europe, on the other hand, a liberal is one who
believes in free trade; see Godfrey Hodgson, THE WORLD TURNED
RIGHT SIDE UP (Boston: Houghton Mifflin, 1996), pg. 11.

[2] "Neo-liberals" are people who are working to liberalize
economies in modern times. The first people who worked to
liberalize economies were men like Adam Smith (THE WEALTH OF
NATIONS, 1776) who worked in the late 18th century to replace the
economic system called mercantilism which had imposed strict
governmental controls over economic activity.

[3] Lori Wallach and Michelle Sforza, WHOSE TRADE ORGANIZATION?:
CORPORATE GLOBALIZATION AND THE EROSION OF DEMOCRACY (Washington,
D.C.: Public Citizen, Inc., 1999). ISBN 1582310017; telephone
(202) 588-1000.

[4] Jim Puckett, WHEN TRADE IS TOXIC: THE WTO THREAT TO PUBLIC
AND PLANETARY HEALTH (Seattle, Washington: Asia Pacific
Environmental Exchange and Basel Action Network, 1999).
Electronic version available after November 4 from the BAN
website at www.ban.org. For a printed version contact
jpuckett@ban.org. It will be mailed to you if you can send a
donation to Basel Action Network (online donation) or by mailing
a check donation to: Basel Action Network, c/o Asia Pacific
Environmental Exchange, 1827 39th Ave. E., Seattle, WA. 98112.

Descriptor terms: world trade organization; wto; bans; pollution
prevention; structural adjustment; free trade; gatt; nafta;