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