International

the world trade system how it works and what’s wrong with it | september 2003 rod harbinson/www.diversityphotos.com the world trade system how it works and what’s wrong with it I august 2003

This briefi ng, one in a series entitled Sale of the Century? from Friends of the Earth International, examines the theories, impacts and institutions of world trade and assesses the infl uence of transnational corporations.

contents

10 reasons why the world trade system harms people and the planet I 2 10 reasons why the wto harms people and the planet I 4 who said what? – notable quotes about ‘free trade’ ? I 6 introduction I 7 why do we trade? I 8 what is trade? I 8 why trade? I 8 trade fl ows I 9 what is ‘free trade’ and what’s wrong with it? I 11 the history of ‘free trade’ I 11 ‘free trade’ theory and its fl aws I 11 the impacts of ‘free trade’ I 13 governments, corporations and trade issues I 21 the world trade organisation - past, present and future I 27 principles I 27 content, structure and processes I 28 the third ministerial conference, seattle I 29 the fourth ministerial conference, doha I 30 the fi fth ministerial conference, cancún I 31 conclusion I 37 key references and reading I 38 contacts I 40 other briefi ngs in this series include: the world trade system: winners and losers towards sustainable economies: challenging neoliberal economic globalisation trade and people’s food sovereignty

You are invited to reproduce information from this briefi ng, but asked to acknowledge Friends of the Earth International as the source of your information. For further information please see www.foei.org

friends of the earth international – august 2003 10 reasons why the world trade system harms people and the planet

1. the principles on which the 3. the trade system is increasing those unable to share in the knowledge trade system is based are inequality between the ‘haves’ revolution due to diffi culties relating to fundamentally fl awed: and ‘have-nots’: cost, language and literacy. The trade system protects the intellectual property The trade system pursues growth at The world trade system has increased the of knowledge-rich companies rather than all costs, through trade and investment wealth of a narrow band of society. The diffusing knowledge and transferring liberalisation, and sees economic winners have been both the developed technology. growth and increasing consumption countries and the wealthiest people, as ends in themselves. Key principles whilst poor countries and poor people of free trade, such as comparative have been increasingly marginalised. 6. the trade system is increasing advantage and export-led development, The impact of trade liberalisation has hit employment insecurity: have been discredited. The trade subsistence farmers particularly hard. system ignores the fact that increasing Trade liberalisation does not benefi t the Globalisation of the employment market consumption is depleting natural capital majority of the world’s population. and the mobility of companies and capital (the environment) on which the global has increased instances of fi rms moving economy is based. Increased trade also to take advantage of lower wages and means more transport, leading to a loss 4. the trade system does not weaker labour laws. However, threats of natural habitats and biodiversity and respect the environment: to relocate to other countries have also negative impacts on local communities. allowed companies to force reductions The trade system pays no heed to Trade and environmental policies have in labour, environmental and health equity and distribution and does little to come into confl ict at both the national standards in both rich and poor nations. promote development and environmental and international levels. Trade policies Mergers, acquisitions and corporate protection. are almost always given priority and restructuring are also leading to job losses environmental laws are frequently and increasing employment insecurity. undermined as a result. The powerful 2. the trade system is increasing infl uence of trade concerns has also economic instability: permeated important climate change 7. the trade system is bad for your negotiations and until early 2000 blocked health and safety: The deregulation of fi nancial markets negotiations on a Biosafety Protocol to and the revolution in information and regulate the use of and trade in genetically Companies are moving or expanding communication technology has stimulated modifi ed organisms under the Biodiversity operations in developing counties where massive growth in short-term capital Convention. work force health and safety regulations fl ows, undermining countries’ economies are lower. Occupational disease, injury during economic crises and increasing and death have taken a particularly the number of people in poverty. Trade 5. the trade system is increasing heavy toll in developing countries due to and investment in least developed inequality between the ‘knows’ globalisation. Health and safety standards countries - particularly in Africa - has been and ‘know-nots’: in industrialised countries have been concentrated on primary commodities. successfully challenged through the WTO. Because of fl uctuating commodity prices Knowledge - particularly information, Increased trade is also responsible for in global markets this also leads to communications and biotechnology - is increased air pollution. increased economic insecurity in these proving to be one of the key assets of a countries. ‘new’ economy. This has marginalised the ‘know-nots’ who have been kept out of the knowledge sector and excluded

2 I foei - the world trade system 10 reasons why the world trade system harms people and the planet

8. the trade system pits the weak more than 100 million people in the against the strong: developed world were living below the income poverty line. The trade system is Small companies are expected to exacerbating this situation, particularly compete in the global economy along by marginalising the poorest and least with the likes of Microsoft, Monsanto and infl uential communities around the world. Mitsubishi even though there is a massive difference in both wealth and economies of scale. The infl uence of transnational corporations in global trade policy is immense and growing.

9. the trade system has not advanced human development:

Because of confl icts between trade and other policies and because Gross Domestic Product (GDP) calculations regard fi nancial transactions relating to factors such as environmental damage, ill health and crime as positive contributions to the economy, the priority given by most governments to trade, globalisation and the pursuit of growth in GDP is contributing to declining quality of life for many people. For example, over the past 25 years, there has been increasing job insecurity, growing global crime, spread of diseases such as HIV, increasing civil unrest, greater traffi c and congestion and higher levels of climate changing gases in the air.

10. the trade system has not relieved poverty:

At the beginning of the new Millennium, more than a quarter of the developing world were still living in poverty and

foei - the world trade system I 3 10 reasons why the wto harms people and the planet

1. the wto is undemocratic: 4. wto rules regard development 7. the wto is eroding cultural and social issues as barriers to diversity: In spite of the one-country one- trade: vote structure of the WTO, powerful The WTO TRIPs Agreement allows countries still wield enormous infl uence, For example, the EU’s preferential import companies to expropriate knowledge from often determining negotiating agenda regime for Caribbean banana farmers local peoples in developing countries who, amongst themselves, and putting - aimed at supporting small scale growers in many cases, have been cultivators, pressure on smaller, poorly resourced where costs are high because of steep researchers and protectors of plants for countries to conform. The concerns of terrain, poor soils and climatic hazards thousands of years. The TRIPs Agreement rich communities, rich people and rich - was deemed incompatible with WTO permits (primarily Northern) transnational companies all appear to be heard more rules. companies to claim traditional plant readily by the WTO than those of the poor. varieties or plant uses as ‘inventions’ that must be respected the world over. Culture 5. wto rules regard environmental could also be further eroded if issues 2. the wto is untransparent and and health issues as barriers to surrounding the entertainment business unaccountable: trade: - for example, fi lms, broadcasting, music and publishing - are included under the The WTO provides only very limited WTO rules confl ict with many national General Agreement on Trade in Services. access for parliamentarians and civil laws and practices intended to promote society at large. Dispute settlements sustainability and protect the environment. and the Appellate Body are conducted in Most WTO agreements are based on 8. the wto could undermine closed sessions, with no public access the premise of sound, scientifi c evidence multilateral environmental and very little external input. The WTO which severely limits the application of the agreements: is exempt from conventions allowing precautionary principle. WTO rules have greater public access to information. In already been used to rule in favour of free Multilateral Environment Agreements that the past, there have been numerous trade and against various measures, eg have trade components - such as the reports of offi cials being unable to access hormone-treated beef. Kyoto Protocol on climate change and the information about the activities of their Biosafety Protocol which regulates trade own trade negotiators. in genetically modifi ed products - could be 6. wto rules regard labels and challenged under WTO rules. certifi cation systems as potential 3. the wto is increasing inequality barriers to trade: and food insecurity: 9. the ‘all or nothing’ approach of The certifi cation and labelling of the wto: WTO Agreements - such as the environmental and socially acceptable Agreement on Agriculture (AOA), the goods (such as timber or paper from Following agreement at the fourth Trade-related aspects of Intellectual well-managed sources and fairly traded Doha Ministerial negotiations are being Property Rights (TRIPs) and the Sanitary products) and products that concern treated, as in the last Uruguay Round of and Phytosanitary Measures Agreements consumers (such as GM foods) could be negotiations, as a ‘single undertaking’. - are increasing global inequality and undermined by WTO rules. This means that many different sectoral insecurity (particularly because of negotiations would be linked together and their impact on food production and the results either accepted or rejected consumption) and favour rich countries in their entirety. This can put smaller and big business. countries, many of whom do not have the

4 I foei - the world trade system 10 reasons why the wto harms people and the planet

capacity or the opportunity to participate in the full range of negotiations at a severe disadvantage. Thus, for example, many developing countries who were opposed to the results of the agriculture and TRIPs negotiations in the Uruguay Round were still forced to accept them or risk being isolated in the global economy.

10. infl uence at the wto can be ‘bought’:

Subsequent to a $500,000 company donation to the US Democratic Party, the US Government lodged a dispute in the WTO over the EU’s banana import regime. Some of the world’s largest companies paid hundreds of thousands of dollars in the hope of gaining privileged access to key ministerial and other negotiators at the 1999 WTO Seattle Ministerial Conference through the Seattle Host Organisation. They were able to attend receptions and dinners for heads of states, ministers and delegates with preferential seating depending on their fi nancial contribution.

foei - the world trade system I 5 who said what? – notable quotes about ‘free trade’

“Whoever commands the trade of the “Primary product exporters have the been sharply exacerbated as a result of world, commands the riches of the highest poverty: with more than 80% globalisation and liberalisation - will not world, and consequently the world of the people in mineral-exporting be affected by the absence of investment itself “. (Sir WalterWalter Raleigh) countries living on less than $1 a day barriers, as some of its proponents have at the end of the 1990s.” (UNDP, 2003a) suggested”. (Ricupero, 1999) “I think we ought to continue to expand trade…I do not believe that a country “The big story of the world economy “The pressures of global competition with 4.5 percent of the world’s people since the early 1980s has been have led countries and employers to can maintain its standard of living if the unleashing of market forces ... adopt more fl exible labour policies, and we don’t have more customers.” (TheThe The ‘invisible hand’ now operates work arrangements with no long-term President of the United States, June 1999) globally and with fewer countervailing commitment between employer and pressures from governments than employee are on the rise”. (UNDP, 1999) “The imbalances in economic growth, for decades ... Since the early if allowed to continue, will produce a 1980s the world economy has been “In many developing countries world gargantuan in its excesses and characterised by rising inequality and trade liberalization has resulted in grotesque in its human and economic slow growth”. (UNCTAD, 1997) deteriorating terms of trade…[and] has inequalities”. (UNDP, 1996) also increased volatility, threatening “Today, for the fi rst time, we are in the security of livelihoods and “The dominant belief in the links between step with public opinion. There’s a incomes”. (UNDP, 2003a) trade liberalisation and faster growth is national consensus about bad food. “a position that has become analytically People realise we need a different “UNEP has also pointed out that “more and empirically untenable”. (Rodrik, 2001) international logic than the economic, than half of the world’s population social and environmental dumping of could be living in severely water- “They have suppressed recognition of modern agriculture. We have to change stressed areas by 2032 if market forces the fact that the empirical cornerstone of the WTO so that it respects people’s drive the globe’s political, economic the whole classical free trade argument, cultural choices, does not destroy and social agenda”. (UNEP 2002a) capital immobility, has crumbled into the world’s peasantry and guarantees loose gravel”. (Daly and Cobb, 1989) fair trade for all”. (French Agriculture “The need to search for lower-cost Minister, The Guardian, 1999) locations which could lead to an “The absence of a robust positive expansion in low-wage economies… relationship between open trade “So far there is no empirical evidence Falling barriers to international policies and economic growth may to suggest that developing countries transactions allow TNCs to locate different come as a surprise given the ubiquitous are necessarily better off in terms of parts of their production processes claim that trade liberalization promotes attracting and retaining quality FDI across the globe to take advantage of the higher growth”. (UNDP 2003a) within the confi nes of multilaterally differences in costs, resources, logistics agreed disciplines in investment ... and markets”. (UN, 2002) “The theory that wealth would What is evident … is that the existence automatically ‘trickle down’ from the of investment rules will do little to rich to poor has been proved simply tackle the problem of distribution of wrong: rather, it now appears that the potential gains from trade and wealth can circulate and expand within FDI. Investment tends to concentrate geographical and economic class where capital is already present. boundaries to the exclusion of those Thus, imbalances between and within outside”. (Jacobs, 1996) countries - imbalances that have

6 I foei - the world trade system introduction

The current drive to liberalise trade costs is increasing daily as more and more promotes inequality, is undemocratic, people experience the negative impacts and degrades the environment, social of trade liberalisation. Change is in the air. structures and cultural diversity. Critically, In order to promote and encourage such the underlying principles on which change Friends of the Earth International the free trade system is based are aims in this publication to explain the fundamentally fl awed. The present trading basics of trade - what it is and why we do system promotes the free movement of it - along with an explanation of the wide goods, services and capital as a goal range of negative impacts that the current in itself, rather than ensuring that such process of trade liberalisation is having. international trade promotes sustainable We also delve into the workings of the and equitable development. Furthermore, WTO itself and look at issues relevant to trade rules can and do come into the 3rd, 4th and 5th WTO Ministerials (the direct confl ict with local, national and third being the famous Battle in Seattle). international measures to protect and Finally, we consider the involvement of key promote the environment, health and corporate lobby groups whose members development issues. have a considerable stake in the outcome of the WTO negotiations. Overall, because trade generally takes priority, World Trade Organisation (WTO) Other reports in this series include The rules work to encourage unsustainable World Trade System: Winners and resource use and an inequitable Losers, which looks in more detail at distribution of resources. Trade rules numerous sectors and case studies, in and trade fl ows have already had order to provide the interested reader severe, negative impacts on a broad with real facts and fi gures about some range of environmental and social of the impacts of trade liberalisation; issues of concern to Friends of the Earth and Towards Sustainable Economies: International’s member groups in, for Challenging Neoliberal Economic example, the areas of agriculture, food, Globalisation, which looks forward to services and investment. alternative options for organising fair and sustainable economies. Friends The main proponents of trade of the Earth International believes that liberalisation (especially the United States, a new and sustainable framework for the European Union, Canada and Japan, the regulation of trade for the twenty- known collectively as the ‘Quad’ countries) fi rst century needs to be based on the continue to drive negotiations forward principles of democracy, equity, reduced within the World Trade Organisation, consumption, co-operation and caution. despite the reluctance, lack of capacity In order to achieve such a framework, and indeed overt opposition of many broad reform of the global economy is a other, poorer countries and civil society prerequisite. groups around the world.

However, discontent with and opposition to the WTO’s drive to liberalise trade at all

foei - the world trade system I 7 why do we trade?

what is trade? why trade? However, in practice, the most important infl uence on international trade is probably Trade affects almost everything we do. “I think we ought to continue to expand the internal political and economic Put simply, it is the buying and selling trade…I do not believe that a country circumstances of the largest trading of goods and services. It does not have with 4.5 percent of the world’s people can blocks, the US and the EU. to involve a monetary transaction. It maintain its standard of living if we don’t might, for example, involve a simple have more customers.” The President of Take the US, for example. Economically, exchange of goods or services of mutual the United States, June 1999. the US remained strong throughout value between two people living locally. much of the 1990s (and indeed into the However, as the volume of goods and People, communities and nations have new millenium) and in a time of global services traded internationally increases, traded with each other for centuries in weakness absorbed production surpluses we tend to associate the word ‘trade’ order to fulfi l a number of goals. These from elsewhere. As a result, however, it more closely with global commerce and include: is also running a trade gap that reached long distance transport. Many of us think in excess of $435 billion in 2003. This particularly of shipping, which has been • Local scarcity. Few, if any countries in continues to infl uence the US’s position used to move products between nations the world can produce all of the goods on forthcoming negotiations. The US’s for thousands of years. and services that their populations need absolute priority is to open foreign or desire. markets and increase exports. This is also More often than not, it is individuals or partly the reason why the US was so keen companies that trade with each other. • To increase national infl uence. for China to become a member of the However, governments have played a Governments may have many different WTO (China eventually joined the WTO in particularly signifi cant role in international motives: to increase power, to promote December 2001). trade over the centuries, since they foreign policy, to infl uence economic have used either force or taxes (tariffs), and political decision-making in other subsidies and regulations to control it. countries, to foster economic links, or Government policies that intervene in to encourage international security and the trade system and support domestic promote a ‘way of life’. industries are known as ‘protectionism’. Policies that deregulate trade and aim for • For cultural and social reasons. non- intervention are referred to as ‘free’ Trade may be a way of maintaining or trade policies or trade liberalisation. reinforcing social bonds.

• Economic development. Trade is most often promoted as a means of increasing economic growth and wealth. Since this strategy is also being promoted by the most infl uential international fi nancial institutions - the World Bank and International Monetary Fund - it effectively determines the economic policies of many developing and developed countries.

8 I foei - the world trade system why do we trade?

trade fl ows $1,000 billion being services. By 2001, International trade is also dominated by these fi gures had increased to $6,000 major transnational corporations (TNCs), goods and services billion and $1,400 billion respectively almost exclusively based in the industrialised (which was in fact a slight reduction on world, with some 40% of international trade International trade in products and the fi gures for the year 2000, following taking place within these companies. services (see Tables 1a, 1b and 2) is the bursting of the global information The offi cial WTO list of service ‘sectors’ currently dominated by Western Europe, technology bubble, sluggish demand is all embracing and they touch nearly Asia and North America (particularly, in Western Europe, and the impacts of every aspect of society, the natural world the EU, Japan, Canada and the USA, September 11th). The vast majority of the and the environment. In total the list collectively known as the ‘Quads’). value of world merchandise trade (about covers about 160 separate sectors or Western Europe has a particularly large 75%) is accounted for by manufactured sub-sectors; the sectors are business, slice of the trade cake, although the USA goods, particularly transport machinery communications, construction and related is the single most powerful trading country and electronic equipment. Minerals and engineering, distribution, educational, in the world. agriculture - the ‘staples’ of the developing environmental, fi nancial, health and social, By the mid-1990s, world trade amounted world - together constitute only about 22% travel and tourism, recreational, cultural to some $5,900 billion annually, about of merchandise trade. and sporting, transport, and ‘others not $4,900 billion being merchandise and specifi ed elsewhere’(WTO, 1991).

table 1a: world trade in goods and services, 2001 (us$bn) World North America Latin America Western Europe CEE Africa Middle East Asia

Merchandise exports 5984 991 347 2485 286 141 237 1497 Merchandise imports 6270 1408 380 2524 267 136 180 1375 Services exports 1460 299 58 679 56 31 33 303 Services imports 1445 229 71 647 59 37 45 355 Source: WTO International Trade Statistics 2002, compiled from tables of trade by geographical region

table 1b: world merchandise and services trade, 1980 – 2002 (us$bn) 1980 1990 2002 World merchandise exports 2034 3448 6424 World merchandise imports 2075 3551 6685 World commercial services exports 364.3 783.2 1538.4 World commercial services imports 398 814.8 1522.3 Source: WTO International Trade Statistics 2002

foei - the world trade system I 9 why do we trade?

investments FDI is measured in infl ows and outfl ows. In 1980, world FDI fl ows were $55 billion. In addition to trade in goods and services By 1990 they reached $202 billion, but by there are now increasing fl ows of ‘foreign 2000 they skyrocketed to $1,492 billion (although they fell the following year direct investment’ or FDI. Basically, because of the economic circumstances this means that instead of or as well as mentioned above). trading, businesses are actually moving to foreign countries and establishing or buying into operations in those countries. This can provide them with a number of benefi ts, including better access to raw materials, new and easily accessible markets and cheaper operating costs.

table 2: world commercial services trade by region, 1990 – 2001, us$bn Imports 1990 Exports 1990 Imports 2001 Exports 2001 World 814.8 783.2 1454.7 1464.4 North America 125.4 151.2 234.2 295.0 Latin America 34.7 29.7 71.1 58.1 Western Europe 391.9 415.6 657.2 692.5 CEE 56.0 53.9 Africa 26.5 18.7 40.1 31.1 Middle East 45.5 33.4 Asia 178.8 131.5 350.6 300.4 Source: WTO International Trade Statistics 2002

table 3: investment flows - annual fdi inflows –1970 – 2001 us$bn 1970 1975 1980 1985 1990 1995 2000 2001 World 12.6 26.6 55.0 57.6 202.8 330.5 1,491.9 735.2 Developed Countries 9.5 17.0 46.5 42.7 164.6 203.3 1,227.5 503.1 Developing Countries 3.1 9.6 8.4 14.9 37.6 112.5 237.9 204.8 CEE 0.03 0.03 0.6 14.7 26.6 27.2 Source: UNCTAD on-line Handbook of Statistics, as of 7 July 2002

10 I foei - the world trade system what is ‘free trade’ and what is wrong with it?

the history of ‘free trade’ Since the 1970s, there has been a marked ‘free trade’ theory and its fl aws shift towards more open markets. In terms Towards the end of the Second World of GATT negotiations, the Tokyo Round The current economic system is War, a number of governments gathered saw the fi rst negotiations to reduce non- fundamentally fl awed. It pursues profi t at Bretton Woods - a town in the USA tariff barriers (NTBs) which are measures via trade and investment liberalisation at - and agreed to set up the International put in place by governments, other than all costs, despite signifi cant weaknesses Bank for Reconstruction and Development tariffs, that can impact on trade. Since in its philosophy, rules and operations. (the World Bank) and the International NTBs can include environmental and In particular, it assumes that trade Monetary Fund (IMF). The basic idea health standards this was, and still is, of liberalisation will automatically generate was to set up an international monetary great concern to civil society groups. The economic growth, even though it is now system, designed to help countries with last Uruguay Round of negotiations (1986- clear that there is scant evidence for this balance of payments problems and to 1994) also expanded the scope of the [UNDP 2003a]. Its focus on constant avoid the sort of protectionist measures GATT dramatically, bringing in agriculture economic growth leads to ever-increasing and competitive devaluations which had and services for the fi rst time, and - fi nally (and thus unsustainable) rates of resource been held largely responsible for the - creating the new and powerful World use. It pays little heed to the needs of the 1930s depression. Trade Organisation. The Uruguay Round poor and disenfranchised of the world. It was also exceptional in that it covered deals only with the monetary economy A third pillar of the system was the areas not normally associated with trade. and fails to address a range of issues formation of an International Trade These were termed ‘trade-related’ (and related to peoples’ quality of life. How Organisation (ITO) designed to liberalise subsequently gave rise to agreements on can a system that has so many apparent international trade. However, disputes trade-related intellectual property rights drawbacks have so many supporters? arose between the United States and the and trade-related investment measures). United Kingdom as to the form it should One reason seems to be the faith that take. The ITO eventually emerged in a Several of the agreements concluded those supporters have in the theory signifi cantly revised form as the General during the Uruguay Round were notable underpinning free trade. Since the Agreement on Tariffs and Trade (GATT) for their exceptional bias towards rich late 18th Century, various economists, in 1947. countries and big business - in particular, businessmen and politicians have argued the Agreement on Agriculture (AOA) and against intervention in international The GATT was a simple agreement the Trade-related Intellectual Property trade. Protectionism, they say, stifl es designed to reduce and bind (not Rights (TRIPs) Agreement (see below). international trade and is uneconomic, increase) customs tariffs (border taxes). ineffi cient and leads eventually to job In the four decades that followed, Those same countries continue to push losses. Instead they argue for what they the GATT became the spearhead for for both liberalisation and regulation, call ‘free trade’ or ‘trade liberalisation’. The international trade liberalisation, through according to the needs of their theory of free trade was further developed its negotiations to reduce tariffs. transnationals, in these and other sectors by David Ricardo’s theory of comparative in current negotiations. Most have also advantage. Since the formation of the GATT in consistently ignored the calls of civil 1947 there have been eight ‘rounds’ of society (and indeed some developing trade negotiations. The fi rst six ‘rounds’ countries) for a review of the impacts of concentrated exclusively on tariff the last Uruguay Round of negotiations. reductions. But the seventh ‘Tokyo’ Round (1973-1979) coincided with a changing approach to trade liberalisation.

foei - the world trade system I 11 what is ‘free trade’ and what is wrong with it?

the theory of comparative advantage

This theory states that nations should box 1: the theory of comparative advantage specialise in producing what they are best at, and that they should then trade If country A is better at producing food than country B, and country B better at with other nations (see Box 1). Free trade producing clothes than A, both will be better off specialising in the production of theory has more or less become gospel those goods and trading with each other. This is known as ‘absolute advantage’. amongst many economists, and the If on the other hand country A is much more superior at food production WTO calls it “...arguably the single most and slightly more superior at clothes production than Country B, it might be powerful insight in economics” (WTO, expected that country B will ‘lose’. However, comparative advantage theory says undated). that, country A should invest in specialising in producing the good which it is comparatively more superior at making (food). Country B should still specialise However, the theory is based on the in what it does best (clothes) and the countries should trade. It is benefi cial for fact that capital is immobile and will be both countries because, the theory argues, it is more economically effi cient. invested domestically. This is patently untrue in today’s globalised world of transnational corporations, international its value (some M$250 billion) in just six ‘development’ because it refl ects peoples’ money markets and massive fi nancial months. This can only lead to increasing income rather than their real quality of transactions, where capital moves to economic insecurity and the lowering of life. GDP counts the cost of health care, wherever products can be produced at the international standards as companies pollution clean-up and the renovation of least cost - and does so at the touch of a compete in the global market place. habitats as positive contributions to the button. For example, in 2001, total world nation’s wealth. Thus GDP can continue cross-border investment fl ows amounted Respected economists and writers to rise, yet peoples’ quality of life can to US$735 billion (which was itself a 50% Herman Daly and John Cobb have deteriorate. This helps to explain the decrease on the previous year’s fi gure of criticised academic economists and apparent contradiction of rising GDP in US$1,491 billion as the global economy free market proponents for failing to many countries and the sharp increase in faltered in the wake of September 11th and re-examine comparative advantage criticism being leveled at the WTO. the bursting of the information technology theory saying: “They have suppressed speculation ‘bubble’). (UNCTAD 2002) recognition of the fact that the empirical Notably, total cross border holdings of cornerstone of the whole classical free level playing fi elds equity securities (effectively ‘non-direct’ trade argument, capital immobility, has foreign investment) topped a much larger crumbled into loose gravel”. (Daly and One of the most oft-quoted phrases in US$5 trillion in the same year (twice the Cobb, 1989) the free trade lexicon is that it provides a volume seen just four years earlier). (IMF, ‘level playing fi eld’ for international trade. 2003) This is highly erroneous. Level playing measuring wealth using gpd fi elds are only relevant in competition Thus, it is now the case that some countries between equals - there is no point in will have or can acquire absolute advantage The ‘freeing of trade’ has been Doncaster Rovers regularly competing and that others will lose out completely. For accompanied by global economic growth on the same playing fi eld as Manchester example, the currency crisis that hit South (albeit unevenly distributed) as measured United, Barcelona or Vasco da Gama. East Asia in 1997 saw massive ‘capital by Gross Domestic Product (GDP). Yet small scale producers are expected fl ight’, resulting in, amongst other things, However, GDP is seriously defi cient to compete in the global economy along the Malaysian stock market losing 40% of as a measure of ‘social welfare’ or with the likes of Microsoft, Monsanto and

12 I foei - the world trade system what is ‘free trade’ and what is wrong with it?

Mitsubishi even though there are massive markets, all prices refl ect the true costs and developmental impacts. The following wealth differences. The free trade focus - economic, social and environmental - of give a good indication of the scope and on ‘leveling the playing fi eld’ exacerbates a product and there are no monopolies, range of the problem. these imbalances. oligopolies or cartels. This just does not happen. increasing inequality the myth of free trade and ‘Free trade’, both on its own and as part of economic growth a wider free market economic paradigm, Trade liberalisation is associated with has become widely accepted the world increasing inequality both between New economic studies indicate that over. Free market ideology stems very and within countries. United Nations the prevailing belief that free trade much from a ‘western’ view of the world Development Programme (UNDP) fi gures automatically brings about economic which sees individual and/or private show that in 1960, the 20% of the world’s growth – and hence human development power as the most legitimate conception population living in the richest countries - is misplaced. To quote the authors of a of freedom. A major part of this world- were thirty times richer than the poorest recent UNDP report: “The absence of a view is a belief that free market capitalism 20%. By 1997, they were 74 times richer robust positive relationship between open is the only viable socio-economic (UNDP, 1999). According to UNDP: trade policies and economic growth may system and is thus ‘right’ for everyone. “The imbalances in economic growth, if come as a surprise given the ubiquitous However free market ideology - a belief allowed to continue, will produce a world claim that trade liberalization promotes in competitiveness, market forces and gargantuan in its excesses and grotesque higher growth.” (UNDP 2003a) private ownership - is very much rooted in in its human and economic inequalities” western culture and psychology and is not (UNDP, 1996). In fact, what seems to happen is that necessarily applicable across the world. countries tend to decrease trade barriers Trade liberalisation directly benefi ts those after they experience economic growth already trading and enjoying economies (UNDP, 2003a). In other words, today’s the impacts of ‘free trade’ of scale. There appears to be no evidence rich countries have accumulated their to support the ‘trickle down’ theory wealth behind protective trade barriers, Trade liberalisation does not, as is often that this wealth is then passed onto rather than as a result of opening their claimed, benefi t all. The main winners the rest of society. As Michael Jacobs markets. from trade liberalisation so far have been concludes: “The theory that wealth would developed countries (in particular the automatically ‘trickle down’ from the rich Dani Rodrik, a prominent Harvard EU, the USA and Canada), transnational to poor has been proved simply wrong: economist, describes the dominant belief corporations, the already rich and rather, it now appears that wealth can in the links between trade liberalisation wealthy, those with access to information circulate and expand within geographical and faster growth as “a position that and the owners of large farms. The main and economic class boundaries to the has become analytically and empirically losers include developing countries, exclusion of those outside” (Jacobs, untenable”. (Rodrik, 2001) the poor, employees, subsistence and 1996). Shockingly, 1.2 billion people small farmers, women, and those without are still obliged to manage on less than access to information (see The World one dollar a day (UNDP, 2003b) and 2.8 other fl aws Trade System: Winners and Losers, FoE billion people survive on less than $2 a for further details). day (UNDP, 2002). Free market theory is also based on the ideal of ‘perfect competition’ where, The current trade system, as According to UNCTAD: “The big story of the amongst other things, there is perfect administered by the WTO, has a wide world economy since the early 1980s has knowledge about all products and range of negative social, environmental been the unleashing of market forces ... The

foei - the world trade system I 13 what is ‘free trade’ and what is wrong with it?

‘invisible hand’ now operates globally and terms of trade…[and] has also increased agriculture: with fewer countervailing pressures from volatility, threatening the security of governments than for decades ... Since the livelihoods and incomes.” (UNDP(UNDP,, 2003a). The increasing emphasis on international early 1980s the world economy has been as opposed to local and national trade, characterised by rising inequality and slow Overall, the situation of least developed is having an extremely severe impact growth” (UNCTAD, 1997). countries (LDCs) in relation to trade is in agriculture. Small farmers are being deteriorating. Between 1970 and the displaced (and at best taken on as small In fact, in the 1990s, the richest 20% of mid 1990s, LDCs suffered a cumulative holders in poor conditions, with unfair the world’s population had 95% of all decline of 50% in their terms of trade contracts and without compensation) commercial lending, 94% of all research and (which means that the revenue from a as land is increasingly turned over to development, 86% of world gross national given volume of exports can now only production for export. For example, product, 82% of world trade, 81% of all purchase half the previous quantity of land under soya production in Brazil domestic investment, 81% of all domestic imports that could have been bought) has jumped from 200,000 to 12 million savings and 68% of all Foreign Direct (UNDP, 1997). The UNDP has recently hectares in Brazil in the last thirty years Investment (FDI). In contrast, the poorest confi rmed the deteriorating trade position and Brazil is now the world’s second 20% has only 1% of world GDP and 1% of of poorer countries. Whilst most of the major exporter of soy beans and soybean FDI (UNDP, 1999; Kocherry, 1999). world’s richest countries improved their meal. Similarly, Indonesia is deliberately terms of trade between 1980 and 1998, 19 and rapidly increasing land under palm economic and developmental of the world’s 25 poorest countries (where oil production. Already the world’s second impacts data is available) experienced declining major exporter, it plans to increase its terms of trade over the same period. In palm oil exports from 4.9 million tonnes in The trade system has negative economic both Nigeria and Uganda, their terms of 2001 to around 10 million tonnes within impacts that often appear to be trade fell by about 70% (UNDP, 2001). fi ve to eight years. Similarly, in the US, completely ignored by governments. The United Nations Development Programme (UNDP) provides some of the box 2: the contrasting experiences of viet nam and haití (extracted most authoritative reporting on country from UNDP, 2003a) economic performance and income. However, this reporting has recently “Consider Viet Nam and Haiti. Since the mid-1980s Viet Nam has taken a changed making historical comparisons gradual approach to economic reform, following a two-track programme. It diffi cult (see Box 2). What these fi gures engages in state trading, maintains import monopolies, retains quantitative do tell us is that during a period of restrictions and high tariffs (30-50 per cent) on agricultural and industrial imports increased world trade (1975 to 1999), and is not a member of the World Trade Organisation (WTO). Yet it has been income and growth in sub-Saharan phenomenally successful, achieving GDP growth of more than 8% per year since African countries and in least developed the mid-1980s, sharply reducing poverty, expanding trade at double-digit rates countries remained stagnant or fell. This and attracting considerable foreign investment. And despite high trade barriers, it is hardly a ringing endorsement in support has rapidly integrated with the global economy. of world leaders who claim that increased trade is of direct economic benefi t to Haiti, meanwhile, undertook comprehensive trade liberalization in 1994-95, poorest countries and will lift them out has slashed import tariffs to a maximum of 15 per cent and has removed all of poverty. In fact the authors of an even quantitative restrictions (US Department of State, 1999). Yet its economy has more recent UNDP report had this to gone nowhere, and its social indications are deteriorating. And despite being a say: “In many developing countries trade WTO member, it has made little progress in integrating with the global economy.” liberalization has resulted in deteriorating

14 I foei - the world trade system what is ‘free trade’ and what is wrong with it?

the average size of a farm tripled between has had, and looks set to continue to grown on 56 million ha of land across 1935 and 1987, and 300,000 farms have, disastrous consequences for the globe in 2002. Notably, numerous disappeared between 1979 and 1998. existing small-scale agriculture and rural companies have already patented the communities (for an extensive analysis of technology with Syngenta holding at The impact of the Uruguay Round and proposals concerning this issue, see least eight such patents (ETC, 2003). illustrates well the cavalier treatment being Friends of the Earth’s briefi ng Trade and In addition, companies are developing meted out to many poorer countries. At People’s Food Sovereignty (FoEI, April research and/or patents into traitor the end of the last Round, WTO members 2003)) technology whereby the traits of GM knew that the least developed countries plants only respond to the application of and net food importing developing proprietary chemicals. The promotion of countries (NFIDCs) would face problems trips, farm-saved seed and patented varieties, backed by legal action, because of the WTO’s Agreement on technology transfer: poses a signifi cant threat to food security Agriculture (because of the prediction of in the developing world. higher food import bills, price instabilities Through the enforcement of the WTO’s and reduced availability of food aid). The TRIPs Agreement, farmers are prevented The TRIPs Agreement is also a signifi cant FAO calculated that the food import bill for from saving seeds from the previous barrier to securing technology transfer for low-income food defi cit countries would year’s crops. According to the UN, roughly the development of Southern farming or be $9.8 billion higher in 2000 compared to 1.4 billion people around the world industry. The technology is clearly aimed 12 years previously (an increase of 55%) depend on farm-saved seed for their at those who can afford it and reap the and of this increase, $3.6 billion would food security. For example, under WTO- benefi ts. be as a result of the Uruguay Round enforced patent law Monsanto has the (FAO, 1995). More recent studies have right to take farmers to court if they collect international competitiveness: confi rmed the deteriorating position for and use seeds from its patented plant NFIDCs; between 1993/4 and 1997/98, varieties. Monsanto has actively enforced Furthermore, obsession with ‘international the cost of cereal imports increased by these rights. In 1998, for example, it competitiveness’ - the very basis of trade 47% (it should be mentioned that the sent out a letter to 30,000 US farmers, rules - threatens to increase job insecurity results of these studies depend heavily informing them of 425 seed piracy cases and undermine attempts to impose costs on when they were conducted because already pending and warning them of the on national industries through regulation of the wildly fl uctuating global cereal signifi cant fi nancial penalties they might or taxes. The increasing ease with which prices during the 1990s which reached face if caught reusing Monsanto’s seeds. companies can relocate production means a low in 1993 ,a high in 1996 but fell (Resurgence, 1988) that they are also able to play countries thereafter) (FAO, 1998). On the basis of off against each other, reducing costs FAO predictions, member governments Furthermore, Monsanto’s ‘terminator and standards everywhere - often without agreed to compensate affected countries. gene’ technology that makes plants sterile relocating at all. However, this promise has never been could help the company to enforce its fulfi lled. patent rights, by physically preventing farmers from growing crops from saved trade sanctions: The WTO’s Agreement on Agriculture seeds. Although Monsanto previously (AOA), established during the last agreed not to commercialise its terminator Following successful trade disputes, Uruguay Round of negotiations, has technology, it now seems all set to countries can be authorized, by the WTO exacerbated this problem, because it reverse that decision. This could have far- Dispute Settlement Body, to levy trade unashamedly pits small farms against reaching impacts, given that Monsanto’s sanctions on imports from a challenged larger, more ‘effi cient’ agribusinesses genetically-engineered seed traits were country, if that country does not amend its in both the North and the South. This

foei - the world trade system I 15 what is ‘free trade’ and what is wrong with it?

trade rules. Since these trade sanctions the French Government appears to have (FDI), where companies actually move do not have to be levied in the same waned - José Bové just been released into or have signifi cant share holdings sector, this allows considerable room from a further term of imprisonment for in companies in other countries, can for political maneuvering, with politically his part in direct actions that took place in have a marked, negative impact on sensitive sectors often the prime target. 1998 and 1999, challenging the planting local economies, small businesses and of genetically modifi ed crops in France. labour standards if it is at the expense of For example, several small companies in domestic development and environmental the UK - including Beamglow and Arran foreign investment as a protection . (see The World Trade System: Aromatics (manufacturing folding cartons contributing factor: Winners and Losers, FoE for further detail and bath products respectively) - were and case studies) seriously affected by sanctions under the There are increasing concerns regarding ‘banana wars’ between the EU and the the liberalisation of the fi nancial and Nevertheless, attracting inward US. Turnover dropped, jobs were lost and investment sectors - and the increasing investment is still regarded by many the situation caused considerable anxiety movement of short-term (often governments as being unquestionably and uncertainty amongst employees speculative) capital. The fi nancial crisis in good for development. The failed (sanctions imposed under the banana Asia, for example, precipitated massive Multilateral Agreement on Investment dispute were lifted during 2001 when the and almost instantaneous capital fl ight. (MAI), which was being negotiated in the EU changed its preferential treatment for Not only were growth prospects severely OECD, and now the investment proposals imports from the Caribbean). reduced but there was a human cost before the WTO, are being promoted on as well - including increased prices for the basis that, without an attractive (i.e. In France, also hit by sanctions, farmers essential goods, bankruptcies and even deregulated) investment regime, nations responded furiously and demonstrations suicides. Spending on social welfare and will not attract FDI and will not ‘develop’. involved damage to a half-constructed environmental protection was slashed as Not only is FDI not necessarily benefi cial, McDonalds restaurant and the well (see Box 3). Foreign direct investment it does not automatically lead to imprisonment of several protesters. Moreover, the leader of the French farmers, José Bové, was released after a number of weeks to a chorus of sympathetic comments from French Ministers, including the Prime Minister Lionel Jospin, who was reported to have box 3: gdp and growth commented that “Mr Bové’s cause is just”. In 1999, the UNDP reported that between 1975 and 1997 (using 1987 US$), The then Agriculture Minister said: “Today, average GDP per capita in industrialised countries increased by approximately for the fi rst time, we are in step with public 50%. Conversely, average per capita GDP for least developed countries fell by opinion. There’s a national consensus approximately 15% (UNDP, 1999). about bad food. People realise we need a different international logic than the The UNDP reports slightly different fi gures in 2001; that GDP per capita annual economic, social and environmental growth was -1.0% for sub- Saharan Africa between 1975 and 1999, +0.2% for dumping of modern agriculture. We have least developed countries and +2.0% for OECD countries (UNDP, 2001). to change the WTO so that it respects people’s cultural choices, does not destroy the world’s peasantry and guarantees fair trade for all” (Guardian, 1999). In the meantime the sympathetic position of

16 I foei - the world trade system what is ‘free trade’ and what is wrong with it?

‘development’ or increased employment. However, the empirical evidence in possible for every nation to export more Second, there is no link between support of export-led development is than it imports. Where will the surplus deregulating foreign investment rules and poor. A focus on export-led development go?” (Kierans and Stewart, 1989). attracting FDI (see Box 4). generally pushes countries into cash crops or increased mineral production The issues surrounding export-led As Rubens Ricupero, Secretary General with associated, severe negative development (see Box 6 for examples) of UNCTAD recently commented: “So far impacts on the environment and on and the role of the IMF and the World there is no empirical evidence to suggest local communities. (see The World Bank in shaping trade policy confi rms that developing countries are necessarily Trade System: Winners and Losers, that the trade system cannot be divorced better off in terms of attracting and FoE for further detail and case studies). from the other variables such as structural retaining quality FDI within the confi nes In addition, not everyone can develop adjustment, the vagaries of capital and of multilaterally agreed disciplines in through the expansion of their export commodity (speculative) markets, and the investment ... What is evident … is that sector. One of the “unspoken truisms external debt of countries. the existence of investment rules will do of international trade” is that “...it isn’t Furthermore, heavy debt burdens little to tackle the problem of distribution of the potential gains from trade and FDI. Investment tends to concentrate where capital is already present. Thus, box 4: all the world’s a loser. The 1997 asian economic imbalances between and within countries collapse - a global crisis with global effects caused by a - imbalances that have been sharply global trade system exacerbated as a result of globalisation and liberalisation - will not be affected by the absence of investment barriers, as Cause: Speculative capital poured into the relatively immature Asian fi nancial some of its proponents have suggested” markets to take advantage of the growth in the tiger economies. At the fi rst (Ricupero, 1999). signs of economic problems, this capital fl owed out again almost overnight. This was made possible because of deregulated fi nancial markets. export-led development and debt Effects: It is estimated that over 50 million more people in Asia fell into as contributing factors: poverty. In East Asia alone, unemployment increased by 3.3 million. The only major growth economy in the developed world - the US - had to absorb As a result of governments’ wholesale surplus and cheap production from Asia causing unemployment and a very acceptance of free trade theory as being large trade defi cit in the US. Impacts were also felt elsewhere around the in the public interest, the policies of the world. For example, cheaper exports from Thailand also caused the closure WTO, the IMF and the World Bank have focused on encouraging countries to follow of a German Electronics company in the UK with the loss of 1,100 jobs. a ‘liberal free market’ agenda. Export-led development - the (re)structuring of an Following the Asian crisis, global economic growth slowed down to about economy towards producing goods for 2%, its lowest level for fi ve years. Export commodity prices also declined, export markets in order to afford more with severe impacts on African countries dependent on primary raw imports and stimulate economic growth materials. - is a further fundamental part of current western free market economic policy. Source: UNDP, 1999.

foei - the world trade system I 17 what is ‘free trade’ and what is wrong with it?

on developing countries encourage governments to agree to export-led development programmes and to allow increased exploitation of natural resources for export in order to generate foreign exchange. The export-led development programmes of the Bretton Woods institutions have reinforced this short- term and damaging approach, creating a vicious circle in which world markets are oversupplied, commodity prices tumble, and poverty-stricken countries are forced to increase exports. Thus rich, importing countries have ready access to cheap box 5: foreign direct investment (fdi) supplies of natural resources and have, in fact, incurred an ecological debt to the A signifi cant proportion of FDI is accounted for by cross border mergers and countries of the South which far outweighs acquisitions. These are renowned for leading to job losses. Subsequent to one the offi cial fi nancial debt of the South. such merger (of BP and Amoco) 7,000 redundancies were announced. Moreover, Impoverished countries unable to diversify in 1998 BP-Amoco axed a further 3,000 jobs because, despite the fact that it still their economies are amongst the poorest made a massive $4.5 billion profi t, this was a drop from $6.5 billion the previous in the world. Authors of a UNDP report year. In 1999, BP-Amoco acquired American oil company Arco resulting in a state that “Primary product exporters further 2,000 job losses. In 2000, Chevron acquired Texaco with the predicted have the highest poverty: with more than loss of 4,000 jobs. 80% of the people in mineral-exporting countries living on less than $1 a day at In 2001, China attracted US$47bn in FDI. This makes China the largest recipient the end of the 1990s.” (UNDP,(UNDP, 2003a) of foreign investment in both the region and in the developing world: and UNCTAD predicts that it could even outstrip the US in the near future. Although China In addition, heavily indebted countries has recently joined the WTO, it is not renowned for its deregulatory approach are often forced to slash environmental to investment or any other sector of its economy. FDI is much more likely to be and social spending, making it extremely attracted to countries with a large market, basic infrastructure and a good skills diffi cult for governments to pursue base. This compounds the concept of ‘trade abandonment’ in which the majority sustainability objectives. of FDI goes to a minority of countries whilst the others are abandoned in a supposedly globalised economy.

Source: UNCTAD, 2000.

18 I foei - the world trade system what is ‘free trade’ and what is wrong with it?

environmental and health impacts

The current trade system has a wide range of impacts on the environment and box 6: export-led development - experiences in the philippines, health, including increasing resource ghana and indonesia use and pollution, and confl ict with international, national and local laws and In the 1960s and 1970s, the Philippines became one of the top four timber exporters practices that promote sustainability and in the world. In the process, 90% of its forests were lost. The country subsequently protect the environment (see The World became a timber importer with 18 million impoverished forest dwellers and an Trade System: Winners and Losers, FoE external debt of US$50 billion in 2001 (up from $17 billion in 1980). Despite its for further detail and case studies). focus on export-led development, 40% of its population is now living below the poverty line. resource use: Ghana’s Economic Recovery Programme was launched in 1983 and has seen over US$2 billion of foreign investment in the mining sector. Compared with agriculture, The trade system effectively ignores however, this heavy investment in environmentally-damaging open-cast mining the fact that increasing consumption has generated miniscule returns and low employment rates for the people of is depleting natural capital (ie. the Ghana (this level of FDI constituted 56% of FDI to Ghana over the past decade, environment) on which the global but generated only 1.5% of GDP. Over the same period agriculture generated economy is based. Increased trade also 36% of Ghana’s GDP.) (FoE, 2002) In the Wassa Fiase area of the country, said means more transport and thus more to have the single largest concentration of mines in the African continent, people pollution. Since the economic system have reported being evicted from their homes and farmlands by soldiers making does not recognise limits to global dawn raids to claim land for use as mining concessions. They are paid little or no resources or the pollution-absorbing compensation, yet this primarily agrarian community has lost its main source of capacity of the ecosystems, it is inherently food and income. and undeniably unsustainable.

In Indonesia, the operation of the Grasberg copper and gold mine has been UNEP has confi rmed that tropical forests described as representing one the world’s worst known cases of environmental and marine fi sheries have been seriously degradation and human rights’ abuses. Over 230,000 tonnes of ore tailings are over-exploited and that globalisation is dumped into rivers every day (IIED, 2002), killing fi sh and plant life and devastating also leading to species invasion. The the riverine rainforest). Villagers have been forcibly resettled including 2,000 global marine catch increased by 35% people in 1998 alone. (FoE, 2000) between 1975 and 1999 (UNEP, 2003a) and one out of every six people depends on fi sh for protein. Yet 75% of the world’s fi sheries are over-fi shed or fi shed at their biological limit (WRI, 2003).

Similarly, 350 million people are directly dependent on forests for their survival. Yet global forest cover has declined by 46% since pre-agricultural times (WRI, 2003). Demand for wood continues to increase (both for domestic fuel consumption and

foei - the world trade system I 19 what is ‘free trade’ and what is wrong with it?

for export) and the global production air transport which in turn increase air the average person living in Africa. The of wood products is now some 43% and water pollution and worsen climate North American also consumed over higher than in 1970 (UNEP 2003b). change. In 1997, the OECD attempted six times as much water and ten times 106 million hectares of forest (roughly to assess the potential impact of the as much energy as the African (UNEP, the same size as Egypt) has been lost Uruguay Round of negotiations on 2003c). since 1990 (UNEP 2003b). An analysis transport and related pollution, looking of the conservation status of 10,000 tree also at experiences in North America, species (out of an estimated world total under the North American Free Trade confl icting with international of 100,000) found that over half were Agreement (NAFTA) and in the EU. It rules to protect the environment: globally threatened as defi ned by the found worrying evidence at the time to International Union for the Conservation indicate that increments in international In spite of claims that no multilateral of Nature and Natural Resources (IUCN) trade were mostly being borne by road environmental agreements have ever (UNEP, 1999). haulage and heavy goods vehicles; and been challenged in the WTO, WTO rules that energy use and various air pollutants and trade interests have already had Importantly, the increase in global trade were markedly heavier for trucking than a marked effect on some international of wood products has also stimulated other forms of transport. It also found agreements and ongoing negotiations the invasion of alien species often with the sequence of liberalisation of trade in designed to protect the environment and dramatic ecological impacts (since transportation services to be of particular promote development. These include those species frequently have no importance, leading in Europe, for the Kyoto Protocol which sets out natural predators). The US, for example, example, to a relative increase in the more legally binding reductions in greenhouse restricted imports of packing materials to damaging forms of transport (such as gases. Because of the objections from prevent the accidental importation of the road transport, which was liberalized fi rst) the US (under heavy pressure from the destructive Asian long horned beetle, but at the expense of more environmentally- country’s fossil fuel-dependent TNCs the beetle has nevertheless since been friendly forms of transport (such as rail). such as Exxon-Mobil, see below) and found at various sites in the US. At the (OECD, 1997). other developed countries, the Protocol same time, timber certifi cation designed to has been severely watered down. Other promote the production and consumption Importantly, transport services are now multilateral environmental agreements of sustainably produced timber could be being negotiated under the WTO’s GATS (MEAs) that have trade components - like constrained by WTO rules. 2000 negotiations (see below) with the Convention on International Trade in freight transport and maritime transport Endangered Species (CITES) and the UNEP has also pointed out that “more both on the table. The outcome of these Biosafety Protocol - would also appear to than half of the world’s population could negotiations could well have a signifi cant remain vulnerable to challenge through be living in severely water-stressed areas impact on air and water pollution and the WTO. by 2032 if market forces drive the globe’s climate change. political, economic and social agenda” (UNEP 2002a). Forty-one out of every 100 confl icting with national rules to people live in water-stressed river basins. inequitable consumption: protect the environment: Already, 20% of normal global river fl ows are extracted for human use and 60% of The global economy is currently The WTO’s dispute settlement system major river basins are interrupted by dams characterized by inequitable consumption. has also been used several times to (WRI, 2003). For example, in 1999, the average overturn national legislation designed to consumption of a North American person promote environmental protection and It is also widely recognized that increased (as measured by how much money is health. Whilst the details of each case trade leads to increased road, sea and spent) was 34 times as much as that of differ, an overall pattern has emerged -

20 I foei - the world trade system what is ‘free trade’ and what is wrong with it?

almost all decisions to date have favoured on agriculture, to attempt to force through governments, corporations and the ‘trade’ interest over environment and new rules relating to biotechnology and trade issues health concerns. An exception to this is the use of the precautionary principle (for the recent asbestos dispute (Canada further information on the GM dispute go Transnational Corporations (TNCs) objected to a French ban on production, to www.foe.co.uk). dominate world trade and about two- trade and sale of the product). The WTO’s thirds of all trade is now accounted for by dispute panel bodies ruled that members food safety: just 500 companies. They are thus able are free to set an appropriate level of to exert considerable infl uence in trade protection in relation to public health (the One particular WTO agreement, the negotiations and the establishment of WTO does allow trade restrictions where Sanitary and Phytosanitary (SPS) trade rules. they are deemed necessary to protect Agreement has already been invoked human, animal or plant life or health) by the WTO when ruling on food issues, Firstly, their views are generally given and that the health risks constituted most notably the EU ban on the imports considerably more weight than those of a legitimate factor in determining the of hormone-treated beef due to consumer the rest of civil society (in part this may be likeness of products. However, elsewhere and health concerns (see disputes, because many free traders believe – disputes continue to overturn or impose above). The SPS requires that appropriate wrongly – that what is good for companies sanctions on national legislation in risk assessment, involving an analysis will always be good for the rest of society). various countries, for example, imports of of the available scientifi c evidence, As a result, they are granted extensive dirty oil and hormone-treated beef. The must be undertaken before action (ie an access to high-level decision makers, imposition of punitive sanctions is fueling import ban) can be taken. If the risks are both within governments and the WTO. public opposition to the WTO in countries unknown, and thus little or no scientifi c The WTO’s Director General, Supachai such as France, the UK and the US (see evidence exists, ‘provisional measures’ Panitchpakdi, for example, established The World Trade System: Winners and can be taken as a temporary measure an ‘informal business advisory body’ in Losers, FoE for further details and case whilst the risks are being assessed (this June 2003, inviting powerful corporate studies of the trade disputes mentioned in brings with it questions regarding the legal lobby groups, such as the International this section). ‘adequacy’ of the risk assessment and the Chamber of Commerce (see below) and interpretation of results). This severely Nippon Keidanren (again, see below) to limits the application of the precautionary participate. gm trade dispute: principle, which the EU argued in the beef-hormone case, despite the fact that Secondly, the trade liberalisation process The 2003 US-led challenge to the the principle is now widely recognised in can work to drive down standards European Union’s de facto moratorium on international law. world-wide, leading to what is known as genetically modifi ed crops seems all set the ‘race to the bottom’. Governments to take the confl ict between trade rules anxious to attract foreign investors may and the environment to new heights. If do so in a variety ways, all of which can Europe fails to lift the moratorium, the be said to be harmful for the environment. WTO could grant the US the right to These include ensuring that resource impose several hundred million dollars values or rents are kept artifi cially low, in trade sanctions on EU products. avoiding the introduction of energy and Furthermore, the US, intent on using environmental taxes and relaxing or failing trade rules and negotiations to the benefi t to introduce stringent environmental of its biotechnology sector can also be regulation. For example, it has been expected to use ongoing negotiations reported that India has been ‘rolling back’ under the WTO’s Doha mandate, including a number of environmental laws in order

foei - the world trade system I 21 what is ‘free trade’ and what is wrong with it?

to accommodate foreign investment including the loosening of forestry box 7: transnational corporations regulation for the pulp and paper industry (FoEI, 2001). Even using value-added measures (ie profi ts plus salaries rather than total sales) 29 of the world’s top 100 economic entities are TNCs. In 2000, the richest ten Cheap labour costs and low labour TNCs earned a combined US$410 bn (again value-added), which was more than standards are also attractive to foreign the GDP of Australia and 0.9% of the world’s GDP. The wealthiest companies, investors. In a report on UNCTAD’s such as General Motors and Exxon Mobil, each even out-ranked relatively well-off World Investment Report 2002 this was countries such as New Zealand and the United Arab Emirates (UNCTAD, 2002b). described as “the need to search for Whilst governments are bound by international law and UN conventions, there lower-cost locations which could lead to exists no comparable level of international regulation for TNCs. an expansion in low-wage economies… Falling barriers to international transactions allow TNCs to locate different parts of their production processes across the globe to take advantage of the differences in costs, resources, logistics and markets.” (UN, 2002). box 8: chiquita

Thirdly, to remain competitive and Within days of Chiquita - a major US banana multinational - making a $500,000 effi cient, companies are consolidating donation to the Democratic Party in the USA, the US Government lodged a through mergers and acquisitions. This complaint against the EU’s banana import regime that favoured Caribbean banana process has resulted in the loss of many producers. Chiquita’s bananas are mainly from Latin America. jobs as well as creating massive global monopolies and oligopolies which further increases their economic and political infl uence. undue infl uence

Whilst member governments make up the composition of the WTO, TNCs play a very infl uential role in what is negotiated and decided. A particularly clear example of this was the involvement of the Intellectual Property Committee (IPC) of the US (see www.ieeeusa.org), which brought together 13 major US corporations (including Monsanto, DuPont and General Motors), in the drafting and promotion of what came to be the WTO’s Trade Related aspects of Intellectual Property Rights (TRIPs) Agreement. As

22 I foei - the world trade system what is ‘free trade’ and what is wrong with it?

James Enyart of Monsanto is reported investment and biotechnology, calling for extremely infl uential corporate lobby to have said “Industry has identifi ed a the removal of barriers to investment in group which was established under the major problem in international trade. It this sector. It also supports the EU’s aim chairmanship of Andrew Buxton, at the crafted a solution, reduced it to a concrete of expanding the WTO to include new request of the European Commission. Its proposal and sold it to our own and other issues such as investment liberalisation; specifi c mandate is to focus on “strategy governments.” (Shiva, 2003) calls for the elimination of all tariffstariffs and and objectives for the new round of WTO non-tariff barriers (ie standards) relating services negotiations”. It is chaired by Friends of the Earth is particularly to non-agricultural products; and opposes Christopher Roberts, who was Director- concerned with the unbalanced the use of the precautionary principle or General of Trade Policy in the UK from involvement of industry in the creation of discrimination between products on the 1987 to 1997; and its high-level meetings trade policy. Governments give too much basis of how they have been produced of CEOs are held with members of weight to industry concerns, and too little and processed (known in the WTO as UK Whitehall departments, the Bank to other sectors of civil society. Public ‘production and processing methods’ or of England and the Financial Services interest organisations and concerned PPMs). Authority in attendance as observers. The individuals need a much greater voice in IFSL claims to offer members “privileged domestic trade policy development and at access to those who infl uence decisions” the WTO. the transatlantic business and states that it “focuses on emerging dialogue: and developed economies wherever At the international level, three key there is an actual or potentially signifi cant lobby groups are the International The TABD (www.tabd.org)was re- market”. Chamber of Commerce (ICC), the launched in June 2003 in order Transatlantic Business Dialogue (TABD) to reinvigorate transatlantic trade and Liberalisation of Trade in Services relationships, especially after September other corporate lobby groups in (LOTIS). 11th. The TABD involves over 100 the us: corporate leaders advising both the highest levels of the EU and US In the US, corporate lobby groups are the international chamber of administration on trade policy and on the extremely infl uential. For example, through commerce: companies’ positions regarding the WTO the Intellectual Property Committee (see negotiations. It hosts regular high-level above), the US Council for International The ICC (www.iccwbo.org)describes itself conferences with trade offi cials from Business (www.uscib.org) and the as “The world’s only truly global business around the world. Its post-September Biotechnology Industry Organisation organisation” and offersoffers members “direct 11th 2002 leadership team was headed (BIO), whose recommendations on access to national governments all over up by Phil Condit (Chairman and CEO adopting an aggressive, long-term the world through its national committees”. of The Boeing Company) and Sir strategy to deal with ‘biotech trade issues’ ICC members represent the A-Z of the Charles Masefi eld (Vice Chairman of seem to have been adopted almost corporate world, with Aracruz, British BAE Systems). The TABD is fully behind wholesale by the US Administration (see Aerospace, Coca-Cola, Dow Chemical, completion of the WTO’s Doha agenda. www.bio.org). Many corporate lobby Exxon, Ford, General Motors and a host groups sit on US advisory committees. of others participating in this infl uential body. The ICC is headed up by Jean-René lotis: us advisory committees: Fortou of Aventis SA and its Commission on Biosociety is chaired by Dr Willy de A member of International Financial In the US, the private sector plays a Greef of Syngenta. Unsurprisingly, it Services London (IFSL), LOTIS pivotal role in trade negotiations through takes particularly strong positions on (www.lotis.org) is a little known but the mechanism of advisory committees.

foei - the world trade system I 23 what is ‘free trade’ and what is wrong with it?

According to the USTR, this process was the european services forum Sutherland, former GATT Director General extremely successful during the Uruguay (esf): and now chairman of BP. Round and in initiatives through the Asia- Pacifi c Economic Co-operation (APEC). The ESF was set up specifi cally to The primary objectives of the private promote the “liberalisation of services other infl uential lobby groups in sector advisory system are: markets throughout the world in the eu: connection with the GATS 2000 ● to consult with the US government on negotiations.” Its purpose is to liaise These include the Union of Industrial and negotiation of trade agreements; with European Commission offi cials and Employers Confederations of Europe ● to assist in monitoring compliance one high-level EC trade offi cial, Robert (UNICE) which has regular meetings and with the agreements; and Madelin, has even commented that “We contacts with the Commission (in fact, its ● to provide input and advice on the are going to rely on [the ESF] just as contacts are so good that Commission development of US trade policy. heavily as on member state direct advice President Romano Prodi graced out-going in trying to formulate our objectives” UNICE President Georges Jacobs’ leaving The Advisory Committee on Trade Policy (Transnational Institute, 2002). Companies party in July 2003) (for more information and Negotiations (ACTPN) is appointed by thus invited to participate in EC trade go to www.unice.org). the President. The committee has about policy decision-making include Barclays, 45 members mostly from representative BT, Marks & Spencer plc, Accenture, Another key lobby group, representing elements of the US economy with Microsoft, Vivendi Environnement and American fi rms based in the EU, is international trade interests. Its mandate Suez. Andrew Buxton, CEO of Barclays the American Chamber of Commerce is to provide overall policy guidance on Bank, initiated the ESF and chairs its (www.amcham.be), which has a lobbying trade issues. This committee has the ear high-level European Service Leaders’ arm based in Brussels and is described of the President and participants include Group. As well as lobbying on GATS, by The Economist magazine as “The representatives from TNCs such as Dell, the ESF has also been pushing hard for most effective lobbying force in town”. IBM, Sony and Weyerhauser. At the next the inclusion of new issues in the WTO Heavyweight membership includes AOL level are the policy advisory committees – especially investment liberalisation and Time Warner, Boeing, Cargill, Chiquita, to the USTR in the areas of agriculture, negotiations on government procurement Coca Cola, ExxonMobil, Goldman Sachs, defense, intergovernmental policy, labour, (which it estimates to be worth 7.1% of McDonalds, Microsoft, Monsanto, Nike, trade and environment and trade in Africa. global GDP). Syngenta and Walt Disney. ‘AmCham’ There are also 26 technical, sectoral and as it is known, prioritises increased functional advisory committees, which are market access and services liberalisation; composed of experts from their respective the european roundtable of and also supports a new multilateral fi elds. All these committees advise the industrialists (ert): framework on investment in the WTO. highest positions in the USTR. ERT has pushed for investment In the EU, the process is no less formal. liberalisation for a long time. Its members other country committees: Many corporate lobby groups play an include the largest TNCs in Europe important role but a select few appear to - including AstraZeneca, Bayer, BP, Again, formal links exist in Japan between wield the greatest infl uence. Carlsberg, Fiat, Nestlé, Renault, Royal companies and government offi cials. Dutch/Shell, Suez and Unilever. Its main This is conducted through Nippon objective has been to get investment Keidanren (the Japanese Business into the WTO. To this end, the ERT has Federation, (www.keidanren.or.jp). They established a working group on foreign have over fi fty different committees, economic relations. At its head is Peter including on Trade and Investment

24 I foei - the world trade system what is ‘free trade’ and what is wrong with it?

(chaired by the CEO of Mitsubishi about $26 million to the Republican party In the UK, for example, several well-known Corporation in 2003), Environment and throughout the year 2000 in the run up to (and much-loved) national manufacturers Safety (chaired by Fujitsu’s CEO in the presidential election, of which Exxon have moved production abroad, including 2003) and Comprehensive Strategy (in donated over $1 million (President Bush Hornby model train-makers and Waterford 2003, the chair was the Chairman of himself received $1.9 million). Within days Wedgewood producers of crystal and Toyota). Nippon Keidanren is strongly of assuming the Presidency, George Bush china (both to China); and Dyson, supportive of bringing investment into the pulled out of the Protocol. who manufacture vacuum cleaners (to WTO, completing the Doha negotiations Malaysia). The increasing tendency of and developing bilateral and regional companies to ‘outsource’ their activities investment treaties. falling global standards and job is another version of the same activity, insecurity with Microsoft outsourcing hardware production to Hungary, for example. the infl uence of tncs on global Falling standards and job security are This ability to shift production from one environmental/trade agreements mainly infl uenced by three important country to another pushes companies processes. The fi rst is that governments, in to put pressure on governments in all TNCs exert considerable infl uence in their attempts to attract inward investment, countries to minimise labour and other negotiations leading to global multilateral are lowering environmental, health and costs, creating a downward spiral and an environmental agreements (MEAs). safety standards and reducing the rights increasingly insecure workforce. Prior to the successful adoption of the of workers. The second is that companies Biosafety Protocol in early 2000, a small infl uence governments not to enact more Investment negotiations are also creating group of GM exporting countries, under exacting legislation because it will make pressure to keep standards to a minimum, pressure from their TNCs, had been domestic companies less competitive as has already been seen in the North responsible for the demise of previous (known as ‘policy chill’). The third is the American Free Trade Agreement negotiations to agree the Protocol. Such threat by companies to workers: that they (NAFTA). There are already several infl uence continues to be signifi cant. At will move abroad unless their employees well-known examples of companies present, corporations and pro-biotech accept poorer working conditions. These using NAFTA’s ‘Chapter 11’ provision countries are attempting to stop countries three factors contribute to what is known on investment to overturn (and indeed implementing strict measures on biosafety as the ‘race-to-the bottom’. demand compensation for) environmental at the national level. legislation in other countries. For example, To remain competitive, companies are US-based company Metalclad claimed Similar experiences have characterized increasingly searching for low cost $90 million in compensation was due the development of the Kyoto Protocol on production areas - in terms of labour costs from the Mexican government because climate change. The US withdrew from (both in terms of union activity and wages), of locally-initiated legislation preventing negotiations following intense pressure the weakest environmental standards or the establishment of a hazardous waste from fossil-fuel dependent TNCs such lax health and safety regulations. This treatment facility. NAFTA ruled in favour as Exxon-Mobil, under the premise that is being fueled by governments further of Metalclad, eventually ordering Mexico commitments to reductions in greenhouse enticing companies through subsidies and to pay the company $16.7 million in gases would reduce the competitiveness tax-related incentives. According to UNDP, compensation. of the US economy. Companies such “the pressures of global competition as Exxon are keen to maintain their have led countries and employers to pre- eminent position, in Exxon’s case adopt more fl exible labour policies, and as the world’s largest producer, trader work arrangements with no long-term and marketer of petroleum products. commitment between employer and It is reported that oil companies gave employee are on the rise” (UNDP, 1999).

foei - the world trade system I 25 what is ‘free trade’ and what is wrong with it?

monopolies and job insecurity

In today’s highly competitive global market, there is even more pressure on companies to reduce costs (this is partly driven by the need to increase profi ts to appease shareholders).This has sparked a trend for corporate restructuring, rationalisation and consolidation, primarily through mergers and acquisitions. The process of globalisation is thus driving a process that can actually increase unemployment and job insecurity whilst concentrating trade in the hands of the larger players and knocking out smaller, less competitive companies. This has serious implications for employment, consumer choice, value for money and prices. Recently, this consolidation has been most evident in the oil sector (see Box 4).

26 I foei - the world trade system the world trade organisation - past, present and future

The last Uruguay Round of negotiations principles intellectual property has entered a market. led to the formation of the WTO. This means that charging customs duty Whereas the GATT was an agreement In terms of helping trade fl ow as freely (tariff) on an import is not a violation of with ‘contracting parties’ and served as possible, the WTA is founded on national treatment even when locally- as a negotiating forum, the WTO is two fundamental principles,that of produced products are not charged an a recognised international body with Most Favoured Nation status (MFN) equivalent tax. However, whilst such tariffs ‘members’, which is responsible for and National Treatment (NT), both of are permitted, members negotiate their monitoring and enforcing the World Trade which are designed to act against trade reduction and ‘bind’ them at the WTO. Agreement (WTA) which sets out the discrimination. There is also a set of After tariffs have been reduced or bound, legal basis for trade policy. The Uruguay further ‘annexed’ agreements that deal raising them unilaterally is prohibited, Round was the longest, most tortuous with potential trade barriers in more other than in exceptional circumstances and most controversial set of negotiations specifi c aspects of trade policy. such as a balance of payments crisis. in the GATT’s history. The Uruguay Round was concluded in 1994 and the WTO formed in 1995. By April 2003, the WTO’s most favoured nation status (mfn) membership stood at 146. The WTO’s website can be accessed at www.wto.org. Although the phrase ‘most favoured nation status’ suggests some kind of special The WTO is responsible for administering treatment for one particular country, in these agreements and, according the WTA it means non-discrimination to the WTO Secretariat, it has three - treating all countries equally. Each main objectives; “...to help trade fl ow member is bound to treat all the other as freely as possible, to achieve members equally as ‘most-favoured’ further liberalisation gradually through trading partners. If a country improves negotiation, and to set up an impartial the benefi ts that it gives to one trading means of settling disputes” (WTO, partner, it has to give the same ‘best’ undated). treatment to all the other WTO members so that they all remain ‘most-favoured’. There are a few exceptions allowed (such as the Generalised System of Preferences or GSP) but, in general terms, MFN is intended to ensure that each WTO member treats other members equally.

national treatment (nt)

National treatment means that imported and locally-produced goods should be treated equally. The same applies to foreign and domestic services, and to foreign and local trademarks, copyrights and patents. National treatment only applies once a product, service or item of

foei - the world trade system I 27 the world trade organisation - past, present and future

content, structure and processes structure countries’ trade policies and compliance with WTO rules - the trade policy review content - the annexed agreements The WTO is an intergovernmental mechanism. organisation with a secretariat based As well as the main text of the GATT in Geneva. The Director General is 1947, the WTA comprises a number of appointed by the members (governments) dispute settlement further ‘annexed agreements’. The most while the rest of the staff are employed basic function of these agreements is as in any other organisation. Its highest Perhaps the most important function to incorporate the principles of national decision-making body is the Ministerial of the WTO is its dispute settlement treatment and most favoured nation status Meeting which takes place approximately role. The rules are administered by into other, more specifi c, areas of trade every two years. Within the WTO is a the Dispute Settlement Body (DSB). policy. These include: General Council made up of member In the event of a dispute between two representatives that meets periodically to Members, the DSB initially attempts to ● Agreement on Technical Barriers to discuss issues that can be referred to the solve the problem through consultation, Trade (TBT) Ministerial Meetings. mediation and conciliation. If a settlement has not been reached after 60 days a ● Agreement on Sanitary and Dispute Settlement Panel (DSP) can be Phytosanitary Measures (SPS) processes - trade negotiations requested. A DSP then holds hearings and monitoring and produces a panel report which goes ● Agreement on Trade-Related to the DSB for adoption unless an appeal Investment Measures (TRIMs) The WTO acts as an international forum is lodged, in which case the Appellate for trade negotiations. This takes place Body (AB) produces a further (and fi nal) ● Agreement on aspects of Trade- mainly through the General Council of the report for the DSB. Related Intellectual Property Rights WTO, through Ministerial Conferences (TRIPs) and through periodic ‘rounds’ of One of the critical differences between multilateral trade negotiations. The WTO the GATT and the new WTO is that no ● Agreement on Subsidies and also has a variety of committees and one country can hold up a dispute panel Countervailing Measures (SCM) councils at which particular aspects decision in the WTO. Thus the WTO is of trade policy are discussed and much more powerful than the old GATT. ● General Agreement on Trade in recommendations to the General Council Services (GATS) are made.

● Agreement on Agriculture (AOA) Free trade theory works on the basis that those involved in trade have to ● Agreement on Textiles and Clothing know as much as possible about the (ATC) conditions of trade. The WTO therefore stipulates that regulations and policies ● Agreement on Government should be transparent. The WTO tries to Procurement (GPA) achieve this transparency in two ways. Firstly, governments have to inform the The last of these agreements, the GPA, WTO and fellow members of specifi c is currently a ‘plurilateral’ or voluntary measures, policies or laws through agreement, signed up to by some, rather regular ‘notifi cations’. Secondly, the WTO than all the members. conducts regular reviews of individual

28 I foei - the world trade system the world trade organisation - past, present and future

the third ministerial conference, ● Disagreements amongst developed Trade Commissioner) referred to them seattle 30 november – 3 december countries. There were disagreements as ‘medieval’ (although the EU has since 1999 between developed countries that also made good use of anti-democratic fora remained unresolved. In particular, such as mini-Ministerials – to which only At the end of November 1999, the heads of France, Norway and Japan maintained a select group of countries are invited state of WTO members met in Seattle, USA varying degrees of resistance to – to force through its agenda). (For for the Third WTO Ministerial Conference. proposals to reduce agricultural detailed personal accounts of the WTO’s World leaders were planning to initiate support, the EU and the US were strong-arm tactics, from developing another ‘round’ of trade negotiations. at odds over agriculture and a row country negotiators themselves, read However, the Ministerial collapsed because between the European Commission Power Politics in the WTO, by Aileen governments present could not agree and EU member states over whether Kwa of Focus on the Global South. an agenda for the proposed ‘Millennium to discuss biotechnology played a (www.focusweb.org)) Round’. It failed due to: signifi cant part. If the Ministerial had been concluded, ● Confl icts between developed and ● Shockingly poor procedures. the failed negotiations would have developing countries as to what The procedures employed during involved ‘trade-offs’ on four key issues should be on the agenda. Right from the meeting were the fi nal straw - the Singapore issues (investment, trade the start, some developing countries, for many countries. It was highly facilitation, government procurement and particularly in Africa and Asia, were inappropriate that the chair was also competition), agriculture, the environment opposed to the inclusion of any new the main trade negotiator for the US, and biotechnology. These issues were the issues, because of a lack of capacity, Charlene Barshefsky. Ms Barshefsky key areas of concern of the largest trading concerns that uncontrolled foreign appeared to be manipulating the blocs, the US and the EU. It appears investment will not benefi t them, and agenda to suit US concerns and that the US only agreed to investment the track record of the WTO whose refused to acknowledge that she issues (championed by the EU) once current agreements (on issues like knew about objections to procedures the EU had agreed to some of the US agriculture and intellectual property from developing countries. Basically, demands on agriculture. Similarly, the rights) have been biased towards some countries found themselves US also came out in support of some of rich countries and worked against overruled in working groups, unable to the environmental issues that were being the poorer countries. They were keen attend smaller ‘green room’ meetings proposed by the EU, in return for the to prioritise ‘implementation’ issues (either because they were refused EU’s acceptance of the US proposal for surrounding some of the agreements access or didn’t know about them) the biotechnology working group. In the but developed countries consistently and sometimes found themselves in end, however, the talks collapsed and the refused to deal with this issue. meetings without the right negotiating deals were left undone. papers. At least one group (the African ● Opposition from civil society. The group) found itself trying to negotiate civil disturbance in Seattle, with about internally without interpretation when 50,000 demonstrators, indicated the their interpreter was asked to leave to strength of opposition from groups assist a US-backed meeting on trade around the world, from Northern and and labour instead. Southern countries. It illustrated the breadth of opposition to the proposed The WTO is notorious for its use of round and revealed unprecedented undemocratic and secretive processes. cooperation between different public- In Seattle, even staunch pro-free trader interest groups in different countries. Pascal Lamy (the European Union’s

foei - the world trade system I 29 the world trade organisation - past, present and future

the fourth ministerial conference, environment, regional agreements and agreement to exist, might be removed. doha 9-15 november 2001 dispute settlement. Negotiations were also extended throughout the fi nal night to force through The WTO’s fourth Ministerial Conference From the point of view of many civil society agreement. (FGS, 2002). Nevertheless, took place in the shadow of September organizations, one of the high points of India resisted until the end, managing to 11th (in fact just two months later) which the Ministerial was the fi nal agreement on secure a note from the Chairman clarifying signifi cantly infl uenced its outcome. The TRIPs and publ c health. This is intended that negotiating modalities on the ‘new US in particular, as part of its effort to to permit developing countries to secure issues’ would only be agreed by explicit round up a coalition of states to combat medicines at reasonable cost (through consensus, leaving room for developing terrorism, was able to insist that support procedures such as parallel importing or countries to reject those issues at the next for the multilateral trade system was compulsory licensing of generic drugs). Cancun Ministerial. essential from any country claiming (To read the Declaration on TRIPs and to be opposed to terrorism. This extra Public Health, go to http://www.wto.org/ Doha was also notable in that trade and pressure not to upset the trade ‘apple english/thewto_e/minist_e/min01_e/ environment – especially the relationship cart’ allowed the WTO to put together a mindecl_trips_e.htm) between WTO rules and multilateral package of negotiations. It also allowed environmental agreements - became an the EU to push through agenda items on However, the United States, under issue for formal negotiation rather than the ‘new’ or ‘Singapore’ issues, making pressure from its pharmaceutical industry, discussion. the launch of negotiations a key agenda has since back-tracked on this agreement item for the next Ministerial (in Cancún). to the consternation of developing country The fact that the location of the Ministerial WTO members. As a result it remains an was both small and remote also meant issue of considerable controversy. that there was no sizeable civil society representation (around 200 civil society The other principle point of disagreement NGOs were permitted access). in Doha concerned the extraordinary manoeuvres employed by both the EU The main outcome of the Ministerial was and the WTO Secretariat to ensure that the effective launch of a new ‘round’ of the EU’s goal of including the Singapore trade negotiations, since all negotiations issues (investment, competition, trade agreed to (with the exception of those facilitation and government procurement) about dispute settlement) are considered in the new set of negotiations would be to be part of a ‘single undertaking’ (which met. For example, draft proposals from means that the deal is not complete until developing countries were excluded all parts have been agreed, effectively from the fi nal draft text sent to Doha linking the different sectors). The Doha for consideration by Ministers and no Declaration brought together the on- differences of opinion were refl ected going ‘built-in’ agenda items (already (leaving Ministers in Doha to assume that mandated by the last Uruguay Round there had been agreement where there of negotiations) such as agriculture and had in fact been none). Calls were made services, and new negotiations on issues to Ministers in developing country capitals including implementation and special and (as opposed to their more knowledgeable differential treatment, market access for trade negotiators in Geneva), along with non-agricultural goods, TRIPs, rules on suggestions that a WTO waiver, that anti-dumping and subsidies, trade and the allows the EU/ACP Cotonou partnership

30 I foei - the world trade system the world trade organisation - past, present and future

the fi fth ministerial conference In particular, the EU’s determination to Key issues being negotiated include the cancún, mexico, 10 – 14 force the new ‘Singapore’ issues onto the following: september 2003 WTO’s agenda in the face of developing country opposition, whilst at the same time agriculture (This section contains a general overview resisting pressure to alter its domestic of WTO negotiations in 2003 and agricultural support systems, is likely to As with all WTO negotiations, the prospects for the Cancún Ministerial. For be a key fl ash-point. (see ‘Agriculture’ and agriculture negotiations are ostensibly a detailed explanation of FOEI’s position ‘Investment’, below). about liberalisation (ie opening markets on each of these issues, please refer and reducing domestic and export to FOEI’s 2003 Cancún position papers This is likely to be compounded by support). They began in early 2000, published separately at www.foei.org/ US intransigence (coupled with EU under Article 20 of the WTO Agriculture Cancun) resistance) when it comes to resolving Agreement. The Doha declaration then the issues that are of most importance to set deadlines for the negotiations (1 Following the Doha Ministerial, the EU developing countries – in particular, the January 2005). and US Governments, along with the implementation (or lack of implementation) WTO Secretariat, have many of the of previous WTO agreements; and special The Cairns group of agricultural exporters negotiations they want up and running, as and differential treatment for developing is targeting agricultural subsidies in a package or ‘round’ that is supposed to countries. The US has also, single- Europe. (The Cairns group consists of be completed by January 2005. Bearing handedly, prevented the conclusion of a Australia, Canada, New Zealand and a this in mind, one would expect the EU working agreement on TRIPs and public number of developing countries including and the US to portray or ‘spin’ the WTO’s health. All of these negotiations are Argentina, Brazil, Malaysia and Thailand, 5th Ministerial meeting in Cancún as little currently stalled and dead in the water. all of whom operate with few or without more than a mid-term review of the set agricultural subsidies). However, any such of negotiations already agreed. Their Finally, in spite of the fact that they are change (which would be delivered via main priority would therefore be to give both members of the powerful ‘Quad’ reforms to the EU’s Common Agricultural the impression that negotiations are grouping (which also includes Canada Policy) can be expected to generate proceeding reasonably well and that the and Japan), the EU and the US fail to see intense opposition amongst European trade ‘bicycle’ is riding along smoothly. eye to eye with each other on a number of farming and rural communities and is issues (although this is not necessarily true likely to be extremely diffi cult for the EU However, there are numerous pot-holes in of their chief respective trade negotiators, as a whole to deliver (although it may the road, which may well cause the trade Pascal Lamy and Robert Zoellick). try to argue that it has already delivered bicycle to fall over completely. Curiously, Lingering disagreements over numerous through previous reforms of the CAP). most of them are of the US’s and the previous WTO disputes, and current rows EU’s own making. They can be broadly over trade in biotechnology and food aid, A number of developing countries are categorized as tensions between (i) the EU could all contribute to what is shaping up also pushing to be allowed to protect their and developing countries; (ii) the US and to be an explosive mix in Cancún. domestic agricultural production from the developing countries; and (iii) the EU and impact of cheap imports (which undercut the US. These tensions have developed A failure to reach agreement in Cancún local production and undermine domestic dramatically in the months since the Doha would mean that the WTO would be most food security) through the designation package was agreed and look all set to unlikely to meet its overall negotiating of “special products to be protected and bring the Cancun ministerial grinding to a deadline, which has been set at 1 January for the provision for special safeguard halt. (They are also remarkably similar to 2005. It would also severely damage the measures. the intergovernmental dynamics in position WTO’s credibility. before the 3rd Seattle Ministerial).

foei - the world trade system I 31 the world trade organisation - past, present and future

As countries jockey for position in the in agricultural products. There is little on very slowly (for further information go to agriculture negotiations, all eyes will be offer in the current negotiations for small wwww.gatswatch.org). As of mid-June on the EU in Cancun. If it makes or is farmers in the South (with the possible 2003, only 26 countries, most of them perceived to have made no signifi cant exception of the special safeguards developed, had submitted their initial movement on this issue, talks will stall. clauses if those survive negotiations) or offers in response to the initial requests. However, if it succeeds in convincing for the maintenance or development of The Doha Declaration set a deadline of other countries that it has or will change sustainable agricultural systems. 1 January 2005 for the conclusion of the its agricultural support systems or market GATS negotiations. (For more information access limitations, there may then be (For further information from FoEI about on FOEI’s position on GATS go to movement in other sectors. But would this food sovereignty and about the impacts www.foei.org) be a good move? of trade liberalisation on people and their environment, go to www.foei.org). The answer is no. What has actually non-agricultural goods happened over the last decade (since the Uruguay Round was completed and services Another key strand of negotiations the Agreement on Agriculture signed) is focuses on increasing market access that the developed world has succeeded GATS 2000, the WTO’s negotiation to for industrial (ie non-agricultural) goods, in maintaining high levels of domestic liberalise services, is now well underway, particularly by targeting high tariff ‘peaks’ support, continuing to subsidise its own with many countries, including the US and and tariffs that discriminate against value- farmers (primarily the wealthiest ones), the EU, having tabled requests for others added products (this tariff ‘escalation’ whilst forcing open developing country to open various service sectors, including discourages exporters from processing markets and inducing those same water and energy services, air and their raw materials before exporting them countries to focus their own production maritime transport, tourism, and health and, as a result, protects processing on export markets. At the same time, the and education services. Many of these industries in the importing countries). TRIPs Agreement is being used by large could have extensive environmental and agribusiness transnationals to expropriate developmental implications, for example Pre-Cancun proposals have included knowledge from farmers and indigenous access to water supplies, increased the complete elimination of tariffs in peoples in developing countries. As far pollution from transport and increased seven sectors, including electronics and as large farms and agribusiness are fossil fuel extraction. Furthermore, electrical goods, fi sh and fi sh products concerned, both in the North and the environmental services listed focus on and stones, gems and precious metals South, this mix has been a recipe for ‘end-of-pipe’ post-pollution services (in (with potential environmental impacts in success. For small farmers, local food other words, remedial services that apply all three sectors). Some countries have economies and the environment it is an after a problem has occurred). also suggested including forest products ongoing disaster. and energy products, as “environmental Although countries should now be goods”, within the scope of the non- These factors need to be borne in mind responding with offers and entering into agricultural goods negotiations. The when considering the current state bilateral negotiations with each other, “environmental goods” negotiations of negotiations. What might further what is actually happening is that various required under Paragraph 31(iii) of the agricultural liberalisation be expected countries (especially the developing Doha Ministerial Declaration has been to achieve? One can only answer that, countries whose markets are being subsumed under the broader non- on the basis of past experience, any targeted for market liberalization) are agricultural goods negotiations. The way outcome will probably benefi t large waiting to see what happens with other in which liberalisation negotiations will agribusinesses able to invest in and negotiations in which they have an take place in other industrial sectors is benefi t from increased international trade interest and negotiations are proceeding also up for grabs, with deep divisions

32 I foei - the world trade system the world trade organisation - past, present and future

emerging between developed and requested. Proposals submitted by (TRIMs). TRIMs – which only applies developing countries. In particular, the developing countries are warped to to trade in goods - bars countries from outcome of obscure negotiations over refl ect developed country perspectives, imposing several kinds of performance tariff-reducing ‘formulae’ – which will or dropped from the negotiating agenda requirements (conditions) on foreign determine the extent to which different altogether. The tactic of insisting that a investors. TRIMs obligations were countries open their markets - could have particular issue be discussed in a non- supposed to apply to developing countries very signifi cant impacts on developing negotiating forum has also been used by from 1999/2000 but this is now the subject countries with higher tariffs and on tariffs developed countries to block negotiations of further negotiation within the WTO in environmentally-sensitive sectors. on that particular issue. Hence, due to the under ‘implementation’ (as developing These negotiations will also, at some resistance shown by developed countries countries have experienced great diffi culty point, focus on non-tariff barriers (ie to the proposals submitted by developing in implementing even the Uruguay Round health and environmental standards), but countries in these negotiating areas, the agreements). Investment in services nothing specifi c is known about these negotiations have bogged down and the is also under discussion as part of the discussions yet. end-2002 deadlines were missed. ongoing GATS Negotiations (where it is referred to as ‘Mode 3’). A key question in Cancun will be whether developing country issues – investment the EU and its partners succeed in their special and differential treatment efforts to establish what is effectively a bill and implementation issues Investment liberalisation is one of the of rights for transnational corporations, highly contentious ‘new’ issues that the signifi cantly extending the reach of The Doha Ministerial Declaration required European Union has been trying to insert existing provisions. For example, a new countries to also negotiate on, and into the WTO’s agenda since before investment negotiation could: provide for clear solutions to, issues that the fi rst Singapore Ministerial in 1996. have been raised by developing countries In Cancun, WTO member states are ● Stop governments acting to develop in the WTO since 1996 – i.e. how to scheduled to decide whether to proceed their domestic industries, with severe operationalise and make more effective with investment negotiations based implications for developing countries; the special and differential treatment on an “explicit consensus” concerning provisions in favor of developing countries, the modalities (parameters) for those ● Be used to challenge environmental and how to address the implementation negotiations. This was fi nally agreed at and public protection policies and to (or non-implementation) of current WTO the Doha Ministerial, when the European claim compensation for ‘expropriated’ agreements in a manner that would favor Union and its allies applied extraordinary investment (as has happened in North developing countries. pressure to the many developing countries America under NAFTA); that do not want these negotiations to These negotiations were supposed take place. Since then, however, there ● Establish a new dispute settlement to have been concluded, or at least has been much debate about whether or system that allows companies to substantially advanced, by the end of not developing countries will be able to challenge governments directly, at the 2002. However, developed countries use the Doha language (including a fi nal international level (again, as in NAFTA); (led by the US and the EU), despite their clarifying note from the Chair in Doha, ● Prohibit the use of capital controls rhetoric about supporting the development written at India’s request) to block further that can be critical to creating a stable needs of developing countries, have negotiations. continued to oppose any changes in the context for sustainable development; and WTO rules that would provide developing To a certain extent, investment is already countries with more trade policy fl exibility dealt with under the WTO’s Agreement ● Make the considerably more stringent and trade opportunities that they have on Trade-Related Investment Measures

foei - the world trade system I 33 the world trade organisation - past, present and future

provisions of some existing bilateral these issues onto the WTO’s agenda be as transparent as possible, ‘non- investment treaties (BITs, between two (and to insist that that they be accepted discriminatory’ and subject to the WTO’s countries) multilaterally binding. as a package). They are also likely to be binding dispute resolution system. controversial in Cancun. Investment liberalisation remains hugely Government procurement could also be controversial following the demise of ‘Competition policy’ may turn out to an issue of concern for local authorities the Organisation for Economic Co- be a deceptive term for the proposed in many different countries. For example, operation and Development (OECD)’s negotiations. International rules that binding WTO rules on procurement could similar proposed Multilateral Agreement would effectively stop the mega-merger- discourage offi cials from promoting ‘green on Investment (MAI) (MAI negotiations mania that has recently been sweeping procurement’ that favours environmentally ceased in 1998 due to disagreements the globe and placing larger amounts benefi cial products (such as certifi ed between governments and pressure from of trade into the hands of a smaller and wood from sustainable sources, minimum civil society groups.) smaller number of giant transnational recycled content in paper or energy corporations, would indeed be benefi cial effi cient vehicles). Whilst it is diffi cult to The strongest proponents of WTO (if developed outside the WTO). However, predict the precise nature of investment investment negotiations have been the whilst hard core cartels do get a mention, liberalisation or government procurement European Union, Japan, Switzerland, the European Union’s proposals are negotiations, should they go ahead, there Norway and South Korea. However, primarily focused on another kind of is certainly a possibility that any such investment negotiations have been competition – domestic competition negotiations could eventually undermine opposed by a number of developing regulations that might constitute trade local or national government mechanisms countries, including India, Malaysia, barriers to foreign TNCs. Removing these to protect local economies and the Zimbabwe, Tanzania, Zambia, Kenya, regulations could in fact undermine the environment, including procurement Belize, Uganda and Sri Lanka. India ability of developing countries to control conditions. At worst, even if an agreement remains outspoken in its opposition and their economies and foster their own were only to focus on transparency (as may refuse to agree to the required ‘explicit domestic companies. Furthermore, the currently proposed) there could be a risk consensus’ in Cancun. The US, whilst not EU’s proposal would allow the WTO to of local authorities facing signifi cantly a vocal supporter of an investment treaty oversee the development of national higher implementation costs and the risk in the WTO (no doubt because of the competition law, ensuring conformity with of being drawn into international legal benefi ts it derives through its own bilateral WTO rules. disputes and massive compensation investment treaties), is nevertheless calling payments, which would undoubtedly see for any agreement to apply to a broad Government procurement is particularly off all but the bravest of legislators. range of types of investment (ie portfolio signifi cant for some of the poorest investment as well as FDI). developing countries, where the There is already an Agreement on government is the main economic agent Government Procurement in the WTO. It (ie a signifi cant proportion of GDP is covers such issues as transparency and competition policy, government being handled via government contracts). non-discrimination but it is plurilateral and procurement and trade facilitation. Developing countries are suspicious is only signed by about 30 countries. At of any discussions that could lead to the First WTO Ministerial in Singapore, These three issues are also ‘Singapore deregulation and the prohibition of their it was agreed to set up a working issues’. Like investment, they were right to control government procurement. group on Transparency in Government proposed by the European Union at the However, the industrialised countries are Procurement to further transparency WTO’s fi rst Singapore Ministerial in 1996. keen to gain additional market access issues with the intention of developing In spite of stiff opposition from developing in the developing world by forcing elements to include in an eventual countries, the EU continues to try to force government procurement decisions to multilateral agreement. Many developing

34 I foei - the world trade system the world trade organisation - past, present and future

countries remain adamantly opposed to The TRIPs negotiations are currently multilateral environmental launching negotiations on Government focused on the issue of public health agreements (meas) Procurement, as proposed by the EU. – may developing countries sidestep the provisions of TRIPs if they need to Environmental issues continue to be Trade facilitation negotiations are intended provide cheap ‘generic’ medicines, to pushed strongly by the EU. Negotiations in to dismantle the bureaucratic hurdles combat malaria and HIV/AIDS as well as the Committee on Trade and Environment importers have to jump. Whilst this sounds other diseases, such as cardiovascular (CTE) have focused primarily on the reasonable, from the environmental disease, to the poor in their countries? compatibility or otherwise of existing WTO perspective, such negotiations could be It was thought that agreement had been rules and specifi c trade obligations in signifi cant were they to focus on removing reached on this in Doha – indeed it was multilateral environmental agreements. ‘bureaucratic’ health and environmental considered by many to be one of the They are scheduled to be concluded by 1st regulations enforced at borders. only positive outcomes of that Ministerial. January 2005. However, the US, at the insistence of its pharmaceutical industry, has since There are approximately 200 multilateral trips backtracked on this agreement, and environmental agreements in place today, negotiations have focused on the import a number of which contain provisions The Agreement on Trade-Related of such generic drugs by countries that related to trade and trade rules. In addition, Intellectual Property Rights (TRIPs) don’t have any productive capacity (with trade measures constitute one of the most impacts on peoples’ ownership of and the implication that those countries might important instruments for effective national access to food and seeds and has the sell them on, simply to make a profi t). implementation of MEAs. The CTE’s potential to signifi cantly reduce genetic This also promises to be a fl ash-point in task is to clarify the relationship between diversity. It permits northern TNCs Cancun. these trade obligations and WTO rules. to claim traditional plant varieties or Some Member states have suggested plant uses as ‘inventions’ that must be The TRIPs negotiations are also focusing focusing on the relationship between the respected the world over. TRIPs was fi rst on ‘geographical indications’ (labels which WTO and those six MEAs whose trade brought into the GATT in the Uruguay indicate that a product is from a particular obligations are considered to be ‘specifi c’ Round and implemented in a way that region). The 5th Ministerial is the deadline and ‘mandatory’ in nature. Other countries favoured large Northern corporations. for developing a register of geographical propose to focus not only on specifi c and TRIPs and the use of patents indications for wines and spirits. There mandatory trade obligations but to include expropriates knowledge from farmers is also debate as to which products from the national trade measures used to and indigenous peoples in developing which countries should receive what level implement MEAs as well. As a result, the countries who, in many cases, have been of protection. discussion currently underway in the WTO cultivators, researchers and protectors is focusing primarily on the following MEAs of plants for thousands of years. This Mandated reviews of TRIPs in its and the ‘specifi c trade obligations’ they practice is commonly referred to as entirety (including its compatibility with establish, although it has not ruled out a ‘biopiracy’. Biopiracy is not the result the Convention on Biodiversity) and broader approach: of the absence of intellectual property TRIPs Article 27.3(b) (which deals with right (IPR) systems in the developing patentability or non-patentability of plant ● The Montreal Protocol, which regulates world but a direct consequence of the and animal inventions, and the protection the production, consumption and export imposition of western style IPR systems of plant varieties) appear to be moving of substances which damage the ozone (based on the US patent regime) through slowly if at all. layer (chlorofl uorocarbons - CFCs); the TRIPs Agreement. ● The Basel Convention which controls trade or transportation of hazardous

foei - the world trade system I 35 the world trade organisation - past, present and future

waste across international borders; In general, there is a very signifi cant risk those who think these issues should be ● The Convention on International Trade that the negotiations could result in the considered in the WTO; and those who in Endangered Species (CITES); WTO: believe they should be dealth with in other “appropriate” fora (such as the Kyoto ● The Cartagena Protocol on Biosafety, ● Setting rules or criteria for the use of Protocol). This presents another potential which regulates trade in genetically trade obligations in current and future hazard for MEAs. modifi ed organisms; MEAs; In short, whatever approach is taken, ● The Stockholm Convention on ● Defi ning a set of MEAs, or a set of no ‘safety net’ for MEAs is likely to be Persistent Organic Pollutants; and specifi c trade obligations, that are forthcoming in Cancun. As a result, WTO- consistent and thereby deeming FoEI and other NGOs are calling for the ● The Rotterdam Convention on the others to be WTO-inconsistent negotiations to be removed to a more Prior Informed Consent Procedure regardless of their merits; neutral forum, such as the UN. (PIC) for Certain Hazardous Chemicals and Pesticides in International Trade. ● Making provision for WTO supervision (For details of FOEI’s position on MEAs of national implementation of see www.foei.org) Most of the intergovernmental discussion MEAs resulting in a limitation of since the Doha decision to negotiate on governments’ rights to regulate in the relationship between MEAs and trade favour of the environment; and/or biotechnology and other issues rules has focused on how to structure the negotiations. The principle question ● Setting rules that may effectively Notwithstanding the successful has been how to defi ne a specifi c trade prevent the adoption or implementation negotiation of the Biosafety Protocol, obligation (STO). Whereas most countries of MEA-mandated trade measures by there is still a possibility that trade in support the initial proposal of Australia any WTO Member or MEA Party. biotechnological products could creep to look at specifi c and mandatory trade onto the WTO’s agenda before or during provisions only, some countries, led by The alternative conceptual approach, Cancun, not least because of ongoing the EU and Switzerland, are in favour of asking for a political statement about the transatlantic hostility over hormone- a broad defi nition which includes national relationship between the WTO and MEAs, treated beef and genetically-modifi ed implementation measures, Conference as proposed by the EU and Switzerland, organisms and products (including the of the Parties (COP) decisions and other is also unlikely to offer any safeguards new US challenge to the EU’s de facto MEAs such as the Convention on Climate for MEAs. The main reason for this is moratorium on GM products). It is possible Change and the Kyoto Protocol. that the WTO will never decide any that talks on biotechnology could crop up wording that would go beyond “mutual in any one of a number of the proposed These apparent details could have supportiveness”, which is effectively the WTO negotiations, including reviews of extremely important consequences for status quo. The WTO would certainly not the TRIPs Agreement (see TRIPs above), MEAs. For example, the use of trade put environmental rules above trade rules. as part of agriculture, or separately, as a measures that are left to the discretion of A statement about mutual supportiveness new, ‘stand-alone’ issue. MEA members could be deemed to be will mean little should a confl ict between a WTO-inconsistent. So too could decisions MEA and a WTO agreement arise. (Full details of all of FOEI’s positions taken by the MEAs’ COPs that are not on the above issues can be found at codifi ed in annexes or protocols or ratifi ed There has also been debate in the CTE www.foei.org.) by the full membership. on trade measures in specifi c sectors such as forests and energy, with clear lines of disagreement emerging between

36 I foei - the world trade system conclusion

The world needs trade rules that refl ect society’s current values and needs. Existing trade rules and institutions and indeed the current global economic system are out of date and do not do this. Instead, they have contributed to increasing global inequality as well as undermining biological and cultural diversity. They are still based on the pursuit of profi t regardless of social and environmental costs; and inequitable access to, and the overuse of, limited natural resources. Critically, current rules also prevent the maintenance and development of locally-appropriate and sustainable systems of commerce. A new and sustainable framework for the regulation of trade for the twenty- fi rst century needs to be based on the principles of democracy, equity, reduced consumption, co-operation and caution. In order to achieve such a framework, broad reform of the global economy is a prerequisite.

For these reasons, it is vital that governments reject proposals to expand the mandate of the World Trade Organisation. They should agree instead to review and rectify both the current trade system and the economic context within which that system operates. It is time to develop a system of international trade that promotes self-determination, environmental protection, sustainable livelihoods, equity and cultural diversity, amongst all nations and people.

foei - the world trade system I 37 key references and reading

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38 I foei - the world trade system key references and reading

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foei - the world trade system I 39 contacts

contact details for friends of central america the earth International’s trade, environment and sustainability Ambika Chawla Programme COECOCEIBA-FoE Costa Rica PO Box 12423-1000 international 1000-San José Costa Rica Ronnie Hall Tel / Fax: 506 223 3925 FoE (England, Wales & Northern Ireland) E-mail: [email protected] 26-28 Underwood St. London N1 7JQ United Kingdom europe Tel: 44 20 7490 2665 Fax: 44 20 7490 0881 Alexandra Wandel E-mail: [email protected] Friends of the Earth Europe (FoEE) Web Site: www.foe.co.uk 29, rue Blanche B-1060 Brussels africa Belgium Tel: 32 2 5420185 Theo Anderson Fax: 32 2 5375596 FoE Ghana E-mail: [email protected] Private Mailbag Web Site: www.foeeurope/trade/about.htm General Post Offi ce Accra latin america Ghana Tel: 233 21 512312 Alberto Villarreal Fax: 233 21 512313 REDES - FoE Uruguay E-mail: [email protected] San Jose 1423 11 200 Montevideo asia Uruguay Tel/fax: 598 2 9082730 Meenakshi Raman E-mail: [email protected] Sahabat Alam Malaysia 27 Lorong Maktab 10250 Penang north america Malaysia Tel: 60 4 227 6930 David Waskow Fax: 60 4 227 5705 FoE (United States) E-mail: [email protected] 1025 Vermont Ave, NW, 3rd Floor Web Site: www.surforever.com/sam Washington DC 20003 United States Tel: 1 202 783 7400 Fax: 1 202 783 0444 E-mail: [email protected] Web Site: www.foe.org

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