WTO: TNCs versus the people
As the November World Trade Organisation (WTO) ministerial meeting approaches strong disagreements between member states remain with the very real prospect of another Seattle. At the Seattle ministerial meeting in November 1999, Third World countries united to block proposals from the EU, the USA and other industrialised countries for negotiations on new issues. An informal meeting of the General Council of the WTO held on July 30-31 this year failed to resolve these differences, let alone agree on a draft joint declaration for adoption at the next meeting in Doha (Qatar) in November.Third World countries continue to demand that many long-standing problems be resolved first and existing agreements be implemented. This week, Anna Pha, the Editor of The Guardian, begins a new series which looks at the WTO, its origins, its agreements and their implementation and the conflicting demands of the Third World and industrialised countries. In 1944 the Bretton Woods conference established gold as a standard and set up two international financial institutions with the purpose of creating greater financial stability and facilitating free trade around the world. The International Monetary Fund (IMF) was to deal with short term funds for countries facing temporary balance of payment problems, and the International Bank for Reconstruction and Development (the World Bank) was to provide long-term assistance primarily to governments requiring loans and finance for infrastructure and development needs. In 1946, the US sponsored negotiations seeking to establish a third body, an International Trade Organisation, to promote freer trade and to regulate trade policies. The ITO was stillborn, but a general agreement on Tariffs and Trade (GATT) was signed in 1948, with 23 nations signing on. GATT, the IMF and WB played an important role during the period of post-war reconstruction and initially gave considerable assistance to governments in providing economic stability and infrastructure for the emerging transnational corporations. Technically GATT was not an organisation but a treaty, with contracting parties, that gradually assumed many of the functions planned for the ITO. GATT's preamble lists its objectives as the conduct of trade relations with a view to raising living standards, ensuring full employment, expansion of production, exchange of goods, raising incomes and demand (for goods), and the full use of world resources. Contracting parties agreed "to contribute to these objectives by entering into reciprocal and mutually advantageous arrangements directed to the substantial reduction of tariffs and other barriers to trade, and to the elimination of discriminatory treatment in international commerce". Ongoing process There were eight separate rounds of negotiations: the Geneva Round in 1947, Annecy (1948); Torquay (1950); Geneva (1956); Dillon (1960-61); Kennedy (1964-67); Tokyo (1973-79); and the Uruguay Round (1986-94). The earlier rounds focused on tariffs and trade in manufactured goods, greatly assisting industrialised countries to gain access to third world markets. The Uruguay Round was noteworthy for its comprehensive nature covering 15 areas including trade in clothing and textiles, agriculture, trade in services, trade related investment measures, natural resources, trade related intellectual property rights, and sanitary and phyto-sanitary measures which deal with a wide range of food standards, including chemical and pesticide contamination, additives, labelling, packing and inspection. Unlike previous rounds, it was a total package, all or nothing. Countries could not choose which agreements to sign, as in the past. GATT principles Countries signing the GATT treaty committed themselves to two basic principles. The first, known as "most favoured nation" (MFN) treatment, obliges parties to grant each other equal treatment: a benefit related to trade (e.g. tariff reduction, lower tax rate) given to one (most favoured) nation must be extended to all members of GATT. The second main principle is "national treatment" (NT). This states that an imported product must be treated no less favourably than a domestic product in respect of taxation, rules, requirements relating to sale, purchase, transportation, distribution, or use of the product. No member country can have a regulation laying down, for example, that a certain percentage of a product must come from domestic sources. GATT (and now WTO) negotiations are based on the principle of "reciprocity" and the "principal supplier rule". Under the principal supplier rule negotiations begin bilaterally between the exporter of the largest volume of a product, the "principal supplier", who asks another country to reduce tariffs on that product in exchange for an equivalent concession (reciprocity) from the other country on a different item. For example, if Australia agrees to lift tariffs on cars from Japan, it should also agree to lift tariffs on cars from all other member countries of GATT — they should all be given the same of equivalent favourable treatment as given to Japan. Reciprocity allows countries to offer tariff reductions in return for equivalent concessions from trading partners on other items. Once agreement is reached other countries enter the process, and the outcome is binding on all other countries through the MFN rule. If a country cannot offer something, it cannot request a tariff reduction. In practice this means that the major developed countries negotiate reductions among themselves in secret, with Third World countries locked outside but having to abide by the outcomes. GATT and now the WTO, favours the exclusive use of tariffs as the only form of trade assistance. Other forms, such as tax concessions, subsidies, quotas etc, are to be eliminated or phased out. All countries are supposed to receive equal tariff treatment (the so-called level playing field), regardless of the fact that some are in a more advantageous position in regard to their level of development, level of competitiveness, technology and bargaining power. Loss of sovereignty The above principles, along with the rules governing tariffs, remove much of a government's ability to take measures to protect or encourage local industry as against foreign investors or imported goods. For example, it means that the Australian Government cannot give local orange growers assistance to compete against imports from Brazil or elsewhere. It cannot give the car parts industry protection by insisting that a certain percentage of parts be made in Australia. The various provisions of the Uruguay agreement are being phased in as countries negotiate agreements on their implementation. Each country has a schedule for reducing tariffs and other forms of assistance and removing preferential treatment to domestic corporations. Australia, for example, has schedules to phase out tariffs in the car, and clothing and textile industries. Third World sold short The Uruguay Round lasted for eight years and a great deal of opposition was expressed to some of the areas being negotiated. The Third World countries opposed the introduction of new agreements on trade related services and intellectual property rights. They were anxious to fully implement existing agricultural and manufacturing agreements first, as the industrialised countries had not removed the barriers to imports from third world countries. Under incredible pressure and coercion from the EU and US, they reluctantly agreed to the introduction of new areas of negotiation on the basis that they would also receive benefits in the areas of direct concern to them. Great promises were made by the leading industrialised countries in return for accepting the new agenda. These promises have not been honoured. Towards the end of the Uruguay Round, Third World countries were also coerced into accepting the creation of the World Trade Organisation, which came into existence on January 1, 1995. GATT agreements came under the jurisdiction of the WTO. Unlike GATT, which was a treaty with various agreements, the WTO is an organisation with a number of powerful mechanisms for enforcing agreements and resolving disputes. In practice, the dispute settlements procedures have not enabled governments, Third World countries in particular, to take protective measures in the interests of their people. The various dispute committees and panels set up under the agreement have tended to favour free trade rather than the health, safety or environmental concerns of nations. Governments have been, in practice, robbed of a considerable amount of their independence and sovereignty by the application of WTO rules. Offending countries can be subjected to retaliation by other members. Retaliation takes the form of discriminatory action against that country to inflict an equivalent amount of damage. For example, one country that has restricted the entry of, or imposed too a high tariff on clothing from another country, can face retaliatory penalties in that same area or in a completely different area of trade. This right to retaliate in a different area of trade made GATT and now the WTO machine an extremely powerful weapon of enforcement, particularly against Third World countries. For example, if a Third World country were to refuse entry to a US bank, it would not cripple the US economy or hurt the bank. But the retaliatory imposition of a hefty tax on minerals or sugar entering the US could mean ruin for the people of a small struggling economy. The WTO has become one of the most important and powerful international organisations along with the WB and the IMF. While the WTO expects considerable transparency from governments, its own methods of working are shrouded in secrecy as the most powerful dominant countries negotiate deals and force these on to other member countries. The negotiating delegations are not just made up of government officials and technical experts, but representatives from the transnational corporations whose interests the WTO serves. Its agreements have had a profound and devastating effect on the poorer countries of the world and on many people in the industrialised countries as well. TNCs drive WTO agenda The need for GATT and more recently the WTO arose as a consequence of the huge expansion in trade around the world, the rapid growth of huge transnational corporations and advances in technology. The transnational corporations (TNCs) that now dominate international trade, want to remove the various "barriers", that either inhibit their operations or cost them additional money and hence eat into their profits. These "barriers" include tariffs; industry assistance and import quotas; environmental regulations; taxation of profits, restriction of capital flows and foreign investments; health and safety regulations; local content rules such as for media; and many other areas in which governments protected the health and safety of people, or assisted or protected the development of domestic industries and services. At first GATT agreements focused on trade in goods, reflecting the rapid post-war expansion in international trade. In the last few decades the focus reflects the exponential growth in foreign investment. The TNCs now demand that restrictions on foreign investment; capital flows; intellectual property rights (patents, licences etc); and trade related to the provision of services be lifted. These changing needs and demands of the TNCs led to the introduction of the new items in the Uruguay Round in the 1990s and the push by the US and the EU for agreement on a new round at Doha. But there is growing and deep-seated opposition to the direction the organisation is taking. This was seen in the massive demonstrations in Seattle streets in November 1999 by trade unionists, environmentalists, NGOs and many other organisations and individuals. Inside the conference the governments of the Third World countries also refused to bow to the demands of the TNCs and the governments of the industrialised countries. It was a combination of these two factors that led to its collapse. Opposition by Third World countries this time is even greater and even better organised and co-ordinated, except that it will be much more difficult for demonstrators to get anywhere near the conference site.
* * *Next week: The trade in intellectual property rights agreement (TRIPS) and its effect on people.