Antoni's Wire Service

Date: Thu, 27 May 1999 12:14:58 -0300
From: Antoni Wysocki
To: Antoni's Wire Service
Subject: free traders need dispute settlement mechanism


In light of the scuttling last fall of the Multilateral Agreement on Investment, and continuing tensions in the World Trade Organization (WTO), proponents of international free trade have discovered a spot of bother lately. There are two major faultlines : the long-standing division betwixt the developing and the developed countries and another, much newer fissure which has opened between the United States and the European Union.

Since the end of offcial colonialism nations in the South have vainly struggled to improve their economic position vis-a-vis the North. For a brief period the emphasis in developing countries was on import-substitution and other autarkic measures. However, these steps towards the so-called New International Economic Order were reversed with a vengeance : first by the debt crisis, which allowed the International Monetary Fund (IMF) to step in and "adjust" economies to suit creditors in New York and London; later by the demise of the Soviet Union which left America the unchallenged ruler of the globe.

Third World states have attempted to accomodate the new realities by implementing the neoliberal prescriptions of the Washington consensus but the promised reward for good behaviour - foreign investment - has remained elusive. Thus, "[b]etween 1983-1992, the largest net transfer was to the US at an average of $100 billion a year, and in 1995, it was to the tune of $119 billion" (1).

Many in the South had hoped that the World Trade Organization (WTO), which is empowered to compel members to conform to international trade protocols, would at least lead the North to accept the medicine it had administered to the developing countries by dismantling protectionist policies at home. However, the WTO has made very little progress in areas of prime concern to the Third World, such as agriculture, while great strides have been made in the deregulation of telecommunications, financial services and other sectors which are of importance to the North.

The resulting resentments have been exacerbated by certain recent events. First, over the past six months there has been considerable lobbying by rich countries for a "Millenium Round" of WTO negotiations; this flies in the face of calls from India and other developing nations to undertake a comprehensive review of what the WTO has wrought to date before contemplating further liberalization.

Second, Bill Clinton has indicated that he wants labor and environmental standards to be incorporated in new WTO disciplines (2). His hand is likely to be strengthened on this point by an offer extended to him in April by the Sierra Club and the National Wildlife Federation : the two organizations promised to lobby Congress to grant "fast track" authority to Clinton in return for a promise from him that specific environmental protection measures would become US policy at the WTO (3). Fast track - which allows the US executive to present trade agreements to Congress not subject to amendment, but only to approval or complete rejection - is often said to be necessary for the conclusion of important US trade initiatives.

Yet in the South such standards are widely regarded as disguised trade barriers. The US, it is observed, achieved its present might through the virtual extermination of the aboriginal American population, the exploitation of slaves and the despoliation of the natural world. Many Third World prolocutors - while not suggesting that it is essential to recreate the US record in detail - argue that they must not be deprived of their primary source of comparative advantage : the willingness of populations in the South to endure conditions which people in the North now deem intolerable. Even commentators who reject this line of thought express considerable bitterness about the hypocrisy of the US in lecturing other countries on human rights when its own ledger of abuses - at home and abroad - is full to overflowing, but passes unremarked (4).

Third, there is the circus which is standing in for what should be the hiring of a new Director-General of the WTO. As I outlined in 'A few ideas on (over)running the planet' the US has done all in its power to thwart the candidacy of Supachai Panitchpakdi - a Thai who was long the clear favorite amongst Third World delegations - and promote that of New Zealander Mike Moore.

The May 17th edition of BRIDGES Weekly Trade News Digest revealed speculation that both men might be urged to withdraw their applications to make way for a compromise candidate - BRIDGES mentioned four contenders, all of them from developing or newly industrialized countries - but compromise is not part of Washington's lexicon. A May 26th report from Agence France Presse quoted US ambassador Rita Hayes as firmly resisting any motions other than that put on behalf of Moore : "'There is only one proposal on the table and that is the chairman's proposal,' Hayes said" (5). US intransigence on this matter can hardly increase the Third World's faith in the WTO.

If strained relations between South and North are old news the increasing estrangement of the European Union from North America is somewhat more novel. While historically France has distanced itself from US foreign policy, Germany and the United Kingdom have tended to align themselves closely with Washington; and all of these states, under the aegis of the Organization for Economic Cooperation and Development, have traditionally found a broad coincidence of commercial interests.

Within the rarefied reaches of the European Commission and the US State Department this mutual sympathy still holds apparently. As adumbrated in the May/99 issue of Le Monde (6) a "Transatlantic Economic Partnership" is currently being investigated by US and EU trade officials (never mind the fact that the European Parliament has twiced rejected schemes of this sort.) Of late, though, increasing citizen opposition in Europe to WTO rulings favoring the US (and sometimes Canada) has riven the compact of the rich countries compelling elected politicians - as opposed to the appointees of the European Commission - to take heed. Even Tony Blair, Bill Clinton's (and Monsanto's) staunchest ally, has had to rescind his support for genetically engineered crops in the face of massive public mobilization.

As noted above, Canada has tended to side with the US against the European Union - e.g., Ottawa is, in common with Washington, currently seeking WTO approval to penalize the EU for interdicting shipments of beef laced with synthetic hormones. The Canadian government's enthusiasm for WTO disciplines has evidently not diminished as a result of the successful US challenge to legislation designed to preserve our magazine industry.

On the other hand the Chretien administration has belatedly discovered some difficulties with the North American Free Trade Agreement (five years after Chretien was elected on a promise either to renegotiate or to abrogate NAFTA.) The May 3rd edition of BRIDGES (7) described an attempt by Sergio Marchi, Canada's International Trade Minister, to obtain assent from NAFTA partners to alter the infamous investor-to-state dispute mechanism of the treaty's Chapter 11.

Interestingly, on April 20 the Financial Post (8) had quoted an anonymous senior civil servant as saying - in advance of the Minister's proposal - that this proposition was a non-starter and the best Canada could hope for would be identic memoranda from the other NAFTA signatories supporting a narrower interpretation of Chapter 11. As predicted by the Post's source the motion was rejected (by Mexico's Trade Minister; the US representative remained tactfully silent despite the fact that, to date, one Canadian, six US, and no Mexican corporations have used Chapter 11 to sue governments.) BRIDGES, meanwhile, characterized Marchi's action as prompted by pressure from non-governmental organizations. Yet, if functionaries in his department knew the Minister's effort was quixotic it can only be assumed that Marchi was equally aware; hence his proposal was nothing but a cynical maneuver designed to give the impression that he wished to act in the public interest.

In sum, as ever, critics of the dynamics of international trade and investment are not lacking in the South but, as so often before, the North is managing to hold them at bay through a combination of coercion and bribery. Canada - unique in having an economy which, while larger than that of the vast majority of countries, is diminutive in comparison to the major players (US, EU, and Japan) - continues in practice to cleave to neoliberal doctrine while the Chretien administration does its best to pretend that it cares what citizens think about these issues.

The real area to watch, however, is the European Union. Large enough, if its 15 member states act consentaneously, to go head-to-head with the United States, the EU also has a fairly progressive and politicized citizenry as well as domestic political arrangements (e.g. proportional representation) which permit greater control over elected officials than does the "first past the post" system in use in, inter alia, Canada and the US. On the other hand the structure of the EU itself is rather undemocratic (the balance of power resides with the appointed members of the European Council and Commission, rather than with the popularly elected Parliament) and the technocrats at the top are thorough-going neoliberals. The key question is to what extent the ordinary people of the EU are able to take command of the institutional apparatus created by the Maastricht Treaty. The outcome of the globalisation project may largely depend on their success or failure.



(1) 'Financial liberalization hasn't yielded expected results,' by Chakravarthi Raghavan, Third World Economics, August 16-31/97.

(2) See 'WTO & other news from BRIDGES'.

(3) 'WTO: Voices Speak Out In Favour Of A Re-Balancing New Round And Against Further Liberalization,' BRIDGES Weekly Trade News Digest - Vol. 3, Number 18, 10 May, 1999. There is a searchable archive of BRIDGES back issues accessible through a series of links from The Institute for Agriculture and Trade Policy's bulletins index.

(4) A chilling account of how the US government has smashed domestic opposition in the late 20th century is given in Ward Churchill's Agents of Repression (South End Press 1990.) A good recent review of Washington's brutality overseas can be found in Martha K. Huggins' Political Policing (Duke University Press 1998.)

(5) 'Support for NZ man widens in world trade chief contest, official says,' Agence France Presse, Geneva, May 26/99.

(6) 'Watch out for MAI Mark Two,' by Christian de Brie, Le Monde, May 1999.

(7) 'NAFTA Ministers: Canada Proposes To Narrow Investor-State Provison,' BRIDGES Weekly Trade News Digest - Volume 3, No. 17, 3 May, 1999.

(8) 'Ottawa pushes for reform of NAFTA lawsuit provisions,' by Ian Jack, The Financial Post, April 20, 1999.