This page is an Excerpt from Chapter 12, “The Unholy Trinity: The IMF, World Bank, and WTO,” in Shaking the Gates of Hell: Faith-Led Resistance to Corporate Globalization by Sharon Delgado.
We are writing the constitution of a single global economy.—Former WTO Director-General Renato Ruggiero[i]
Let us now turn to the World Trade Organization, the third “person,” or rather, “personality,” of this Unholy Trinity of global rule-making institutions. Transnational corporations have been active from the beginning in promoting and attempting to extend the scope and authority of the WTO. And this is no wonder, since the WTO restricts the power of governments to regulate corporations or to interfere in their profit-making purpose. Former WTO Director General Renato Ruggiero put this in positive terms when he said, “We are writing the constitution of a single global economy.”[ii] The WTO has been called “a corporate Bill of Rights.”[iii]
It is impossible to talk about the formation of the WTO without also talking about the North American Free Trade Agreement (NAFTA), since their foundations were being laid at the same time. NAFTA went into effect on January 1, 1994, and the WTO on January 1, 1995. The same organizations that lobbied for the passage of NAFTA lobbied for the creation of the WTO. These included individual corporations, but corporations also pooled their resources to promote their interests by forming corporate coalitions such as USA NAFTA, an “army of more than two thousand member corporations and business coalitions,” Alliance for GATT Now, a coalition that claimed more than two hundred thousand businesses and lobbied for passage of the WTO, and America Leads on Trade, which worked to promote fast-track trade-negotiating authority. Corporations also lobbied, and continue to lobby, through established associations such as the Business Roundtable, U.S. Council for International Business, U.S. Chamber of Commerce, and the National Foreign Trade Council.[iv] Labor unions, environmental organizations, human-rights and consumer-safety groups all worked to defeat these agreements, but political leaders, Republicans and Democrats alike, bought (or were bought) into the dominant free-market ideology and sold out to corporate power.
Though similar in intent, there are important differences between NAFTA and the WTO. NAFTA is a regional free-trade agreement between Canada, the United States, and Mexico, while the WTO is a global establishment, based in Geneva, that sets polices and adjudicates trade disputes among the 150 member nations around the world. We will look at regional trade agreements like NAFTA later in this chapter. For now, we will focus on the WTO.
The WTO’s predecessor, the General Agreement on Tariffs and Trade (GATT), moved beyond simple regulation of tariffs and quotas in the mid-1980s, when it began considering cases that dealt with nontariff barriers to trade, which included labor, environmental, human rights, and consumer-safety laws that could have a negative impact on trade. GATT had a dispute-resolution process, but member nations often ignored its rulings because it had no serious enforcement power.
That changed radically after the formation of the WTO, which can enforce its decisions. Through the WTO, any member nation can challenge a law of any other member nation as being a nontariff barrier to trade. When a case is brought to the WTO, a tribunal of three trade bureaucrats hears arguments and makes its ruling behind closed doors. There are no requirements for these trade “experts” to have knowledge of environmental, labor, or human-rights issues. Those who serve on tribunals generally have past or present ties to corporations, and there are no conflict of interest restrictions. Documents, hearings, briefs, and records of proceedings are confidential; only the decision is announced. Only national governments can participate in these cases, even if state or local laws are being challenged. Countries that lose such disputes have three choices: they can voluntarily change the law, agree to pay fines, or face permanent tariffs imposed on their products.
The first WTO trade dispute was brought by Venezuela and Brazil, at the behest of its oil companies, challenging the U.S. Clean Air Act, which they claimed discriminated against foreign oil producers. The United States had enacted the law in 1990 to reduce air pollution caused by vehicle emissions, since studies showed that such emissions contribute to asthma and other respiratory problems and weaken the body’s immune system. Although domestic oil companies originally lobbied against the law, when faced by the WTO challenge six years later they claimed that they had spent $37 billion to implement the law. The U.S. Environmental Protection Agency (EPA) claimed that weakening the law would have adverse environmental impacts. Nevertheless, the WTO tribunal ruled against the United States, stating that “WTO members were free to set their own environmental objectives, but they were bound to implement those objectives only through measures consistent with [WTO’s] provisions.”[v] The United States amended its Clean Air Act to comply.[vi] The ruling generated a flurry of WTO activity, as several countries brought successful suits against various U.S. public-health and environmental laws.[vii]
WTO critics charge that such rulings and such concessions are a violation of national sovereignty. Sovereignty is not something that the United States (or any nation) gives up lightly. To enter into treaties with other nations requires a two-thirds vote of the U.S. Senate. Even then, compliance is enforced voluntarily by each participating country. Participation in the WTO, a trade agreement, required a simple majority vote in both houses. It was passed in a lame-duck session of Congress in December 1994, just a month before it went into effect. Yet it has the power to force the change of democratically enacted domestic laws, which goes far beyond the power of any treaty.
Why would a nation, especially the most powerful nation on earth, relinquish its sovereignty by sacrificing a domestic law that was enacted through the democratic process? The only way it makes sense is in the context of corporate globalization.
Most trade disputes are brought to the WTO by governments on behalf of their corporations. As we have seen, corporations lobby hard to get these trade agreements passed. They also contribute financially to government leaders who support them. These same corporations then use the WTO and other free-trade venues to attempt to shape the global marketplace to their advantage. Although transnational corporations engage in fierce competition, they are united in their support of trade agreements that restrict government interference in their ability to make profits. And in fact, the laws that are challenged at the WTO by governments on behalf of corporations are often the same laws that domestic corporations fight at home. The United States depends upon its corporations to help establish and maintain economic and geopolitical dominance in regions that it considers vital to its interests.
In short, the U.S. government sees its well-being as wrapped up with the well-being of its corporations. As Charlie Wilson, chairman of General Motors in 1955, said in Senate hearings, “What’s good for General Motors is good for the rest of America.”[viii] We are obviously not talking about the well-being of the people here. We are talking about the Powers.
Although the United States does not always win trade disputes, it has the lawyers and the money, supported by powerful corporations, not only to put up a good fight, but to intimidate less-privileged nations into changing their laws simply by threatening WTO action. An example is Guatemala.
In 1983 Guatemala passed a law based on World Health Organization (WHO) standards to encourage breast feeding and to alert new mothers to the risk of using baby formula or baby food as a breast-milk substitute. In order to make the information accessible to illiterate women, the law prohibited labels that depicted healthy babies on infant-formula and baby-food packaging. Infant mortality rates dropped significantly, and the United Nations Children’s Fund (UNICEF) held up the law as a model of success.
According to UNICEF, over 1.5 million infants die each year because mothers in poor countries substitute infant formula for breast milk. This leads to malnutrition when babies become dependent on formula and women cannot afford to buy it, and to death from diarrhea when formula is mixed with polluted water. Nevertheless, Gerber, which features the pudgy “Gerber baby” on its products and whose motto is “Babies are our business,” issued a threat to Guatemala that it would enlist the U.S. government in a challenge to the labeling law at the WTO. The government of Guatemala changed its law to exempt imports from its stringent labeling restrictions.[ix]
It is not just poor nations, however, that change their laws under threat of WTO action. The United States removed a provision in its Marine Mammal Protection Act (MMPA) after Mexico threatened to challenge it at the WTO. In 1988, a “dolphin-safe tuna” amendment to the MMPA was passed to protect dolphins from being trapped in tuna “purse seine” nets after a massive grassroots effort that included millions of children writing to Congress to “save the dolphins.” Rather than face the public’s outrage at a WTO ruling to overturn the popular law the Clinton administration, over a period of years, quietly weakened the provision, while allowing the “dolphin-safe” label to stand.[x]
Massachusetts had a preferential purchasing law that penalized companies that did business with Burma’s military dictatorship, which employs slave labor. The policy had been called for by Burmese human rights activists, was passed through grassroots citizen action, and was modeled after similar laws targeting business in South Africa under apartheid. The EU and Japan challenged this law in the WTO. The dispute was put on hold when a U.S. corporate front group called Engage*USA challenged the law in U.S. courts. The U.S. Supreme Court finally ruled that the Massachusetts law restricting purchases from Burma was illegal.[xi] A similar law focusing on Nigeria’s military dictatorship was on the verge of passing in Maryland but lost by one vote after U.S. State Department staff lobbied against it on the basis that it would violate the rules of the WTO.[xii] In this way, the threat of WTO action has a chilling effect on the creation of new laws. Njoke Njoroge Njehu of the Network for Global Economic Justice said, “If not for laws like this against businesses in South Africa, we would still be under Apartheid.”[xiii] Today such laws are illegal according to the WTO.
In a ruling favorable to the United States, the WTO ruled against the European Union’s ban on beef containing residues of artificial hormones because the EU could not prove that hormone residues harm human health, even though evidence proves that the actual hormones do. The WTO approved $116.8 million per year in sanctions after the EU refused to change its law.[xiv]
The WTO, while claiming to promote free trade, actually is a highly regulated system of trade and investment based on a seven-hundred-page document of rules for governments to follow. It is actually “a global system of enforceable rules . . . where corporations have all the rights, governments have all the obligations and democracy is left behind in the dust.”[xv]
As Debi Barker and Jerry Mander state in their book, Invisible Government,
<EPI> The single, clearest, most direct result of economic globalization to date is a massive global transfer of economic and political power away from national governments and into the hands of global corporations and the trade bureaucracies they helped create. This transfer of power is producing dire consequences for the environment, human rights, social welfare, agriculture, food safety, worker’s rights, national sovereignty, and democracy itself.
Not all provisions in free-trade agreements restrict government regulations, only those that interfere with corporate profits. The WTO requires governments to establish and enforce laws that deal with intellectual property. These rules favor corporate rights over the rights of indigenous communities to the traditional plants they have used as medicine, and over the needs of HIV/AIDS patients and people from developing nations for cheap, generic drugs. Strong intellectual-property laws give a large advantage to people in industrialized nations, particularly the United States. Such provisions extend the power and increase the wealth of global corporations and their national allies, and place protection of property rights, that is, corporate rights, above protection of human rights.
NAFTA rules are based on many of the same principles and mechanisms as those of the WTO, but in some areas they go even further. For example, NAFTA’s Chapter 11 enables corporations to challenge governments directly. In this way, corporations can bypass the troublesome step of having to convince their home government to file cases on their behalf.
United Parcel Service (UPS), based in the United States, brought a NAFTA case against the government of Canada. Because Canada’s mail service is partially privatized and partially provided by the Canadian government, UPS claims that Canada is providing an unfair subsidy that interferes with free trade and cuts in on UPS’s potential profits. This case has been pending for years, with long, time-consuming, and expensive legal briefs being filed continuously by both sides.
Who has the money to continue these sorts of lawsuits? Corporations. If UPS loses this case, the only thing really lost is the (tax-deductible) cost of pursuing this dispute If UPS wins, it will be entitled to damages for estimated lost profits—past, present, and future. Who will pick up the tab? Canadian taxpayers.
An important exemption to WTO, NAFTA, and other free-trade agreements is the national security exemption. Discussion of this topic leads up to the last two chapters in this section, where I will discuss the police and military enforcement mechanisms of corporate globalization. For as we have seen, growing poverty, rising inequity, and ecological degradation lead to massive dislocation, social upheaval, and chaos, both within and among countries. The Powers that be must deal with these unpleasant but inevitable results of global free-market capitalism somehow. The national security exemption is a brilliant method that allows corporations to profit from tax dollars that subsidize government purchases of police and military hardware, the construction of prisons, the hiring of public or private “security” forces, and weapons for use at home and abroad, including foreign military sales. Since every government can decide for itself what constitutes national security, this exemption can be interpreted broadly, as in the case of Iraq, where the United States claimed a “national security exemption” in offering no-bid contracts to U.S. corporations in the rebuilding of Iraq’s infrastructure, which the United States had destroyed.
You would think that governments and multilateral institutions such as the IMF, World Bank, and WTO, would be moving in a more constructive direction, but many people both within and outside of these institutions believe that the current course is already set and is inevitable. Why, for instance, is the United States government not using its vast financial resources to create a better life for the majority of its people or for people around the world? Why does it support policies that trap people in generations of debt? Why does it allow domestic laws that protect people and the environment to be overturned?
Clearly, the United States and other nations see their interests as tied to corporate interests. As corporate power increases, however, the power of governments decreases, until governments, the lucky ones, end up riding on corporate coattails. But corporations, once they are truly globalized, have no loyalty at all, except to the bottom line. They are not even loyal to their “home” governments. They can even change nationalities at will.
Though the rhetoric of the IMF and World Bank has been about development and raising the standard of living, the actual effects of these multilateral bureaucracies has been to integrate poor nations into a world economy dominated by global corporations and powerful nations. They have used structural adjustment policies (SAPS) to “pry open” the economies of developing nations, creating complete dependency.
How can global corporations further pry open the U.S. economy and the economies of other industrialized nations? How can they finish what they started during the Reagan Revolution in the 1980s? How can they bypass the messiness of the democratic process altogether while gutting regulatory agencies and eliminating troublesome laws that interfere with corporate profits? How can they perpetuate the “smoke and mirrors” illusion that nation-states have power, while eliminating the very laws that governments use to protect the rights and well-being of their people? How can they privatize the potentially lucrative public-services sector, including publicly funded hospitals, schools, libraries, prisons, utilities, water services, and social services, and offer these and all other services up for sale to the lowest bidder? How can they ensure that wealthy, industrialized nations will ultimately be as dependent upon the global system that they dominate as are poor and indebted nations? How can they bring structural adjustment policies home? How can global corporations extend their power and consolidate their dominance over people, their governments, and the earth itself? The answer: they create trade agreements and global bureaucracies that convince governments to do this for them, institutions like NAFTA and the WTO, which essentially take the matter out of government hands.
Why should local government, states, or national governments be restricted in their ability to set standards for the common good of their people? As we consider principles that can provide a basis for a more hopeful future, the principle of subsidiarity must be mentioned here. Subsidiarity reverses the present top-down approach to governance that is exhibited by global bureaucracies like the IMF, World Bank, and WTO, which dictate and restrict what governments can or cannot do. The principle of subsidiarity is based on the idea that participatory democracy is more easily expressed at the local level where people can directly affect governing institutions. With subsidiarity the primary locus of decision making would be local, with communities networking regionally, nationally, and even globally in a “bottoms-up” approach. Decision making would move up to the next level of government only when necessary to meet social and ecological goals that cannot be met at a local or regional level or when human rights are being violated.
The principle of food safety and food security is another basic principle for a future where people will be able to sustain themselves and their families. Local, regional, state, and national governments must have the right to protect the food local food production and the safety of the food supply. Global bureaucracies must not interfere with the rights of governments to limit food imports, set and enforce safety standards, and restrict the sale of foods based on the precautionary principle.
Governments, trade agreements, and global institutions must honor the right of independent trade unions to organize and must restrict child labor and forced labor. People have a right to a job with dignity and those who are unemployed, underemployed, or who work in the nonmoney economy have the right to sustenance. Policies that force subsistence dwellers and small farmers off the land must be reversed.
[i]. UNCTAD, “UNCTAD and WTO: A Common Goal in a Global Economy,” http://www.unctad.org/TEMPLATES/webflyer.asp?docid=3607&intItemID=2298&lang=1 (accessed 3/6/07).
[iii]. Lori Wallach, “Slow Motion Coup d’Etat: Global Trade Agreements and the Displacement of Democracy,” Multinational Monitor 26, nos. 1 & 2 (Jan./Feb. 2005), http://multinationalmonitor.org/mm2005/012005/wallach.html (accessed 3/6/07).
[iv]. Sarah Anderson and John Cavanagh with Thea Lee and the Institute for Policy Studies, Field Guide to the Global Economy (New York: The New Press, 2000), 72–73.
[v]. Lori Wallach and Michelle Sforza, Whose Trade Organization? Corporate Globalization and the Erosion of Democracy (Washington, D.C.: Public Citizen, 1999), 19.
[vi]. Ibid., 19–21.
[vii]. Ibid., 21.
[viii]. David Hartman, “What’s Good for General Motors . . .” Chronicles, May 2002, http://www.chroniclesmagazine.org/Chronicles/May2002/0502Hartman.html (accessed 3/6/07).
[ix]. Wallach and Sforza, Whose Trade Organization? 115–18.
[x]. Ibid., 22–25.
[xi]. Ibid., 172.
[xiii]. United Methodist Church, “World Trade Organization: The Whole World—In Whose Hands?”
[xiv]. Ibid., 52.
[xv]. The Working Group on the WTO/MAI, A Citizen’s Guide to the World Trade Organization (Washington, D.C.: Public Citizen, July 1999), 3.