GATS
Why the World should be worried about Gats
The WTO's Hidden Agenda By Greg Palast
The World Trade Organisation has plans to replace that outmoded political idea: democracy April 15, 2001 The Observer
The Globalizer Who Came In From the Cold, Observer, London Wednesday, October 10, 2001 JOE STIGLITZ: TODAY'S WINNER OF THE NOBEL PRIZE IN ECONOMICS by Greg Palast
Doha's Kamikaze Capitalists By Naomi Klein
Why the World should be worried about Gats
THE LAST FRONTIER
A global agreement
currently being negotiated will allow corporations to take over the world 's
public services whether people want it or not..If implemented, it will spell
the end of the public sector.
Maude Barlow explains why it must be stopped.
Wednesday If you were
Bolivian, you'd know why the world should be worried about GATS. Take a trip
back in time to spring 2000, to the city of Cochabamba in the South American
nation. Under pressure from the World Bank, the Bolivian government had just
sold off the city's public water system to a US water corporation. This was all
part of the World Bank's programme to 'streamline' the Bolivian economy in
other words, to open it up to Western based corporations. It was, the Bolivians
were assured, all in the name of economic efficiency.
The people of Cochabamba soon found out what that efficiency amounted to. Just
weeks after the corporate flag had been raised over what had been a public
utility, water rates were hiked up massively. Many of the peasant families of
Cochabamba were required to pay up to a third of their wages for their water
more than they spent on food. The charges were crippling, and there was no
alternative even collecting rainwater to drink was made illegal.
Complaints had no effect on the water company, whose aim was now profit rather
than public provision of a basic need. So Cochabambans took to the streets. In
April, hundreds, then thousands, joined in demonstrations against the
privatisation of this most basic resource. Four days of strikes brought the city
to a standstill. The government gave in and promised to lower water rates. Then
they changed their mind. The protests began again, and got bigger. Tear gas was
used, and martial law was declared. Cochabamba descended into chaos. Still the
government, and the company, refused to give way. Protest leaders were rounded
up at night. Dissenting media outlets were shut down. The profits of a foreign
corporation took priority over the everyday needs of the Bolivian people. But
those people did not give up. The protests grew still further. Eventually, after
the military shot a 17 yearold boy in the face for protesting, even the
government realised the game was up. Two days later, they signed an accord
agreeing to return the city's water supplies to public control.
But it was a victory that may not last. And next time, however big the protests,
the people will be wasting their time.
COMING YOUR WAY
Just a few months earlier, in the north American city of Seattle, the November
1999 meeting of the World Trade Organisation (WTO) was shut down also by
mass protests. It was, it seemed, an event that had stopped the forces of
corporate globalisation in their tracks at least for the time being.
But not so fast. Just months after the smoke and pepper spray had lifted and the
protesters and reporters had gone, government officials called the General
Agreement on Trade in Services or GATS. You probably haven't heard of GATS
few people have. That's the idea. But you should know what it will mean for
you. For those negotiations are still, quietly, going on. Their purpose is,
simply and starkly, to pries open the whole world's public services to corporate
takeover; to make the very concept of public services not only unlikely, but
probably illegal.
That's what GATS is about. If it had been in force last April, it would, quite
simply, have been illegal for the Bolivian government to re-nationalise the
Cochabamba water company. Good news for corporate profits. Bad news for people.
GATS is paving the way for the privatisation of public services across the
world. Nothing will be exempt education, healthcare, social services, postal
services, museums and libraries, public transport; all will be opened up to
corporate interests. Every and any service currently provided by governments in
the name of the public good will be opened up to private corporations, and run
for profit. GATS could, quite simply, be globalisation's last frontier: the end
of the very concept of notforprofit public services.
GATS will come into force in over 130 countries, quietly, and with little fuss,
in less than two years. If nothing is done.
WHAT IS GATS?
The General Agreement on Trade in Services is one of more than twenty trade
agreements administered and enforced by the World Trade Organisation. The GATS
was established in 1994, at the conclusion of the 'Uruguay Round' of the General
Agreement on Tariffs and Trade (GATT), which led to the WTO's creation. GATS was
one of the trade agreements adopted for inclusion when the WTO was formed in
1995. Negotiations were to begin five years later with the aim of 'progressively
raising the level of [trade] liberalisation'. These talks got underway as
scheduled in February 2000. The plan is to reach a final agreement by December
2002 less than two years away.
The mandate of GATS is the 'liberalisation of trade in services'. In plain
English, this means the dismantling of government barriers to the privatisation
of public services. Its aim is to make it impossible for governments to run
public services on a notforprofit basis, without the participation of private
companies. GATS will allow the WTO to restrict government actions relating to
public services through a set of legally binding constraints. Any government
disobeying the rulings of the WTO will face sanctions.
So what will happen if GATS is implemented? Charlene Barshefsky, the US Trade
Representative, can tell you. Before the GATS negotiations started early last
year, she asked the powerful US lobby group, the Coalition of Service
Industries, what it would want included in the GATS agreement. The European
Commission did the same with its industry coalition, the European Services
Forum. Between them, the corporations identified the following priority areas
for trade liberalisation: health care; hospital care; home care; dental care;
child care; elder care; education primary, secondary and postsecondary;
museums; libraries; law; social assistance; architecture; energy; water
services; environmental protection services; real estate; insurance; tourism;
postal services; transportation; publishing; broadcasting and many others.
The implications of this are chilling. It means that the 137 member countries of
the WTO are about to agree to open up all their public services, lock stock and
barrel, to free trade laws the same laws which have allowed the WTO to
strike down health, food safety and environmental laws in dozens of countries.
The corporate wolves are being allowed into the last remaining fold. And once
they get in, it will be too late to ever get them out.
A BRIEF HISTORY OF GLOBALISATION
How could this happen? How could governments be allowing this removal of the
most basic of rights without even asking or informing their people? To
understand the answer, it is necessary to go back to the origins of the world
trade system. In 1947, a new trade body the International Trade Organisation
was created, with a very different mandate to today's WTO. The ITO was to
promote orderly global trade under the jurisdiction of the UN. The pursuit of
trade was to explicitly take into account important social considerations,
including full employment and the human and social rights guaranteed by the UN's
Universal Declaration of Human Rights. The new ITO even had the right to
regulate transnational capital to ensure it served these social ends.
But the ITO was stillborn killed by the US, which was intent on building a
very different global trade and investment regime based on fewer, not more,
regulations; a regime which would benefit itself, its big corporations and its
international interests. So the US created the GATT and removed it from the
jurisdiction of the UN. Since the formation of the GATT in 1947, there have been
eight 'rounds' of trade negotiations, each focused on progressively spreading
the bounds of global trade. The first six rounds concentrated exclusively on
reducing tariffs (border taxes), and the growing power of the GATT went largely
unnoticed by civil society.
But the seventh 'Tokyo Round' (19731979) coincided with the emergence of the
socalled 'Washington Consensus' a global economic model based on the
principles of privatisation, free trade and deregulation and the rise of
giant transnational corporations who, because they were now global operations,
had escaped nation state regulations and wanted international deregulation as
well. These included giant service corporations eager to get their hands on
government monopolies, particularly in the social services sectors. For the
first time, the GATT began to deal in 'nontariff barriers' the rules,
policies and practices of governments, such as environmental laws and
publiclyfunded social services, that can impact on trade. The Uruguay Round of
negotiations (1986 1994) expanded the scope of subjects dramatically, naming
services for the first time, and covering many areas not normally associated
with trade.
WAKEY WAKEY WORLD
Suddenly, it became clear to many NGOs, social justice advocates and
environmentalists that, while they had been busy lobbying their governments and
the UN, much of the power they previously held had shifted quietly into a new
arena unelected, and largely unseen, global trade regimes. The architects of
the final agenda for the Uruguay Round wanted to put in place a body of rules
governing the global economy rules that would benefit them, and which would
be backed up by the powers and tools of a global government. It was the Uruguay
Round which led to the creation of the WTO the global policeman for the
trading agenda of rich corporations. Unlike the GATT, which was effectively a
business contract between nations, the WTO was given 'legal personality'. It has
international status equivalent to the United Nations, but with the addition of
having enormous enforcement powers.
Unlike any other global institution, the WTO has the legislative and judicial
power to challenge the laws, practices and policies of individual countries and
strike them down if they are seen to be too 'trade restrictive'. The WTO
contains no minimum standards to protect labour, human rights, social or
environmental standards; every single time (but one) that the WTO has been used
to challenge a domestic health, food safety, fair trade or environmental law,
the WTO has won. Over the past six years, the operations of the WTO show that it
has become the most powerful, secretive, and antidemocratic body on Earth,
rapidly assuming the mantle of a global government and actively seeking to
broaden its powers and reach.
CARVING UP THE SERVICES
Public services are next in line for the WTO's corporate battering ram. Global
corporations have been so successful in persuading governments everywhere that
their agendas are the same that the pursuit of corporate profit and the good
of society are one and the same that their access to many areas of public
life has already been improved. Now they want to go the whole hog.
Services is the fastestgrowing sector in international trade, and offers rich
pickings for canny corporations. And of all public services, health, education
and water are shaping up to be the most potentially lucrative. Global
expenditures on water services now exceed $1 trillion every year; on education,
they exceed $2 trillion; and on health care, they exceed $3.5 trillion. In many
parts of the world, what GATS will accelerate has already, tentatively, begun.
The USA might suggest a model for the dismantling of public services which GATS
will unleash all over the world. In America, health care has already become a
huge business, with giant healthcare corporations registered on the New York
Stock Exchange. Rick Scott, the president of Columbia, the world's largest
forprofit hospital corporation, is clear that health care is a business, no
different to the airline or ballbearing industry. He has publicly vowed to
destroy every public hospital in North America doctors, he says, are not
'good corporate citizens'.
Meanwhile, investment houses like Merrill Lynch are already predicting that
public education will be globally privatised over the next decade the way public
health has been. They say there is an untold amount of profit to be made when
this happens. The European Union recently announced that every publiclyrun
school in Europe must be twinned with a corporation by the end of the decade.
The conquest of foreign markets has now become a key common strategy among
higher education institutions around the world.
Many parts of the 'Third World' have been forced to dismantle their public
infrastructures in recent decades under International Monetary Fundimposed
structural adjustment programmes. In order to be eligible for debt relief, for
example, dozens of 'developing' countries have been forced to abandon public
social programmes over the last 20 years, allowing foreign corporations to come
in and sell their health and education 'products' to 'consumers' who can afford
them and leaving millions without basic social services. Latin American
countries are currently experiencing an invasion of US healthcare corporations
and Asian countries allow branch plants of foreignbased university and health
care chains. Recently, the World Bank has been forcing the same countries to
privatise their water services and are openly working with corporate water
giants like Vivendi and Suez Lyonnaise des Eaux, to establish their 'rights' to
profiteer in the Third World.
Now, through the GATS negotiations, these corporations want binding, global and
irreversible rules guaranteeing them access to government service contracts
everywhere in the world. And they are succeeding. Already, over 40 countries,
including all of Europe, have listed education within the realm of the GATS,
opening up their public education sectors to foreign based corporate
competition. Almost 100 countries have done the same with healthcare. As the new
talks progress, it will be very hard for any country to swim against the tide
even if any are brave enough to try.
WHAT 'S IN THE GATS?
The existing GATS agreement which is by no means finalised, and could get
even worse covers all service sectors and most government measures,
including laws, practices, regulations and guidelines, written and unwritten. No
government measure that affects trade in services, whatever its aim, even for
environmental or consumer protection, universal coverage or to enforce labour
standards, is beyond the reach of GATS. Nothing public is safe.
Essentially, the agreement would prohibit 'discrimination' against a foreign
corporation which applies to run a public services even if that corporation
has a bad track record in environmental or social areas. It has also already
been agreed that some existing WTO rules will apply 'horizontally' to public
services across the board, whether or not the area has already been listed with
the GATS. One such 'horizontal' rule is 'Most Favoured Nation', which says that,
once the corporations from one country are operating in your market, you must
allow the corporations from all countries in. This rule will apply to all
services, even ones still protected in some countries, like health and
education. Similarly, under the horizontal rule, all regulations in any given
sector, including social services, must be 'Least Trade Restrictive' in
English, all public services even social welfare will have to operate
market mechanisms. Defenders of GATS insist that its opponents are being
hysterical. There is nothing to worry about, they say. They point to the
'exemption' within GATS for some public services provided by governments.
Some countries, they will point out, have already claimed exemptions for their
publiclyfunded social security programmes. But it's not as simple as that. Under
GATS article 1.3C, for a service to be considered to be under government
authority, is must be provided 'entirely free'. That means that the service in
question must be completely financed by government and have no commercial
purpose. Since hardly any service sector in the world is entirely free, this
exemption is increasingly meaningless.
WHAT 'S PROPOSED FOR THE GATS?
In his new book, GATS, How the WTO's New 'Service' Negotiations Threaten
Democracy, Canadian researcher Scott Sinclair identifies the three priorities of
the current round of negotiations. First, GATS officials will attempt to expand
corporate access to domestic markets. Governments will be under great pressure
to list more of their services and exempt fewer. The most potent weapon will be
the push to have 'National Treatment' applied horizontally. National Treatment
is a fundamental tenet of free trade; it forbids governments from favouring
their domestic sectors over foreign-based companies. Already, National Treatment
applies to certain services in the GATS; the goal is to apply it across the
board.
On top of this, the powerful Western countries will be pressing for more binding
Market Access provisions, pressing 'developing' countries for guaranteed,
irreversible access to their markets, and diminishing democratic government
authority.
Secondly, GATS officials are seeking to place severe restraints on domestic
regulations, thereby limiting governments' ability to enact environmental,
health and other standards that hinder free trade. Article VI:4 calls for the
development of any 'necessary disciplines' to ensure that 'measures relating to
qualification requirements and procedures, technical standards and licensing
requirements do not constitute unnecessary barriers to trade'. Translation:
don't let your pesky national standards get in the way of foreign corporate
interests. This provision would also apply horizontally. Governments would be
compelled to demonstrate that regulations, standards and laws were 'necessary'
to achieve a WTOsanctioned objective, and that no less commerciallyrestrictive
alternative was available.
Third, the new talks are aimed at developing new GATS rules and restrictions,
intended to further restrict the use of government subsi dies, such as those
used in public works, municipal services and social programmes. A particularly
threatening development is the demand for an expansion of the blandsounding
'Commercial Presence' rules. Commercial Presence allows an 'investor' in one
GATS country to establish a presence in any other GATS country and compete not
only for business against domestic suppliers but for public funds against
domestic publicly funded institutions and services.
Together, these proposals will hugely expand the authority of the WTO in the
daytoday business of governments. They will make the exercising of democratic
control over the future of basic public services a virtual impossibility.
HOW GATS WILL AFFECT YOU
Every single aspect of public life will be affected by GATS. Already, as a
result of economic globalisation, every country in the world is undergoing a
fundamental transformation. Wealth is gushing to the top as a growing economic
chasm separates those who are benefiting from the system from an ever-expanding
underclass. To ensure what American education writer Jonathan Kozol calls
'survival of the children of the fittest,' a tiered system of education and
social security is becoming the norm all over the world as we collectively
abandon an earlier dream of universal rights. We are creating top schools and
healthcare systems for the elite of the world and a tiered system or no
system at all for those who don't count.
The GATS serves this corporate, profit-driven vision of society. It's important
to understand, in nononsense terms, what is at stake. Under the proposed GATS
regime, foreign health and education corporations will have the right to
establish themselves in any WTO country. They will have the right to compete for
public money with public institutions like hospitals and schools. Standards for
health and education professionals will be subject to WTO rules to ensure they
are not an 'impediment to trade'. Degree granting authority will be given to
foreign-based education corporations. Foreign-based telemedicine services will
become legal. And countries won't be able to stop the trans-border competition
of low cost health and education professionals.
Already, the WTO Services Division has hired a private company called the Global
Alliance for Transnational Education to document worldwide policies that
'discriminate against foreign education providers'. The results of this 'study'
will be used to pressure those countries that still retain a public education
sector to relinquish it to the global market. Disturbingly, GATS also includes
authority over 'environmental services' and natural resource protection. Our
parks, wildlife, river systems, and forests could all become contested areas as
global transnational 'environmental service' corporations demand the competitive
model for their 'management'. Profit hungry child care chains would invade every
country, as would prison chains like Wackenhut, with its reputation for violence
and abuse against both prisoners and staff. Virtually unlimited access to
foreign suppliers would have to be given to municipal contracts in construction,
sewage, garbage disposal, sanitation, tourism and water services.
Simply put, the 'commons' or what's left of it will come under full
assault if GATS is enacted. What used to be areas of common heritage, like seeds
and genes, air and water, culture and heritage, health care and education, will
be slated to be commodified, privatised and sold to the highest bidder on the
open market. Countries like Canada and France, which have (and cherish)
national, universal health care and education systems will lose them. Countries
like Britain and Chile, which once had universal social programmes, or the US,
which has never had public health care, will have a public model closed to them
in the future, as would countries like India and South Africa, struggling now to
ensure such rights to their people.
The ultimate end of this exercise is perhaps best summed up by one top US WTO
official, who said bluntly of the GATS/WTO process: 'Basically, it won't stop
until foreigners finally start to think like Americans, act like Americans and
most of all shop like Americans.'
WHAT CAN BE DONE?
If GATS is to be defeated, there really is no time to lose. The world needs to
wake up and fast to what is being done behind its back. We urgently need
an international movement of the kind that came together to fight the
Multilateral Agreement on Investment (MAI) and went on to shut down the streets
of Seattle. (For a list of groups and individuals already fighting GATS, see
below.) We need research on every aspect of the GATS in every country, and we
need to share it. We need to form common fronts in every country which would
include all the major sectors involved educators, health care workers and
advocates, public sector unions, environmentalists, farmers, writers and
artists, indigenous peoples, and others. We need solidarity, cooperation and
speed.
We need 'GATSFree Zones' on universities and high school campuses, churches and
local community centres. We need to go to our local governments and pass local
resolutions against GATS. We need to write letters to our governments and local
newspapers and alternative media publications. Simply put, we must make the GATS
a household word; and not a nice one.
Opponents of GATS and the mindset behind it should have three basic demands.
Firstly, we must call for a full moratorium on the GATS negotiations and on the
draconian provisions of the current agreement, such as the assault on domestic
regulation. It is entirely unacceptable that our governments are meeting behind
closed doors to carve up our rights for the benefit of their corporate friends.
This must stop immediately, while we take stock of the situation and take this
issue to the public. Essentially, we should demand that 'the commons' be removed
from free trade agreements altogether.
Secondly, we need ironclad guarantees from our governments that no future GATS
negotiations would prevent governments from providing good public services to
their citizens. Furthermore, we need a GATS that would seek to strengthen these
domestic programmes through international law, and encourage their development
around the world. Finally, we must move towards true public engagement in the
rules governing international trade. While we know that our governments are not
going to listen to us because we have good arguments, but because we have
political muscle, we must seek to create a global democracy in which governments
would serve their citizens and honour their commitments on human rights and
ecological stewardship. We must not sit silently by and allow these rights to be
traded away. The world's people said no to the MAI. Increasing numbers said no
to the Millennium Round of the WTO. We must now say no to the GATS. And we must
be heard. There really is no alternative.
Maude Barlow is head of the Council of Canadians and a campaigner for citizens' rights. She is the author of several books, including MAI: The Multilateral Agreement on Investment and the Threat to Canadian Sovereignty, with Tony Clarke. Her autobiography, The Fight of My Life: Confessions of an Unrepentant Canadian, was published in 1998.
From: The Ecologist magazine
no peace without justice,
john vance, editor
Peoples Bark News Berkeley
Berkeley, CA
www.freezepeach.cjb.net
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Gats
treaty explicitly aims to demote elected parliaments to 'advisory' comittee
by J.R. 1:55pm Tue Jun 19 '01
The World Trade Organisation
has plans to replace that outmoded political idea: democracy
Necessity test is mother of Gats intervention
The World Trade Organisation has plans to replace that outmoded political idea: democracy
Sunday April 15, 2001
The Observer
Trade Minister Dick Caborn says 'nothing' all day, and this keeps him very, very busy. Caborn is busy reassuring the nation that nothing in the proposed General Agreement on Trade in Services (Gats) threatens Britain's environmental regulations. Nothing in Gats permits American corporate powers to overturn UK health and safety regulations. Nothing in Gats, which is part of the World Trade Organisation regime, threatens public control of the National Health Service. The official statement of what Gats doesn't do goes on for pages and pages.
So I've been perplexed by Caborn and his EU sidekick, Pascal Lamy, rushing to Geneva and Washington and God knows where else to argue over the wording of rules that do nothing, change nothing and mean nothing.
But then last week 'something' came through on my fax machine. And this confidential document from the WTO Secretariat, dated 19 March, is something indeed: a plan to create an international agency with veto power over parliamentary and regulatory decisions.
When Winston Churchill said that 'democracy is the worst form of government except all those other forms that have been tried from time to time' he simply lacked the vision to see that in March 2001, the WTO would design a system to replace democracy with something much better: Article VI.4 of Gats. And this unassuming six-page memo, now modestly hidden away in secrecy, may one day be seen as the post-democratic Magna Carta.
It begins by considering the difficult matter of how to punish nations that violate 'a balance between two potentially conflicting priorities: promoting trade expansion versus protecting the regulatory rights of governments'.
Think about that. For centuries Britain, and now almost all nations, has relied on elected parliaments, congresses, prime ministers and presidents to set the rules. It is these ungainly deliberative bodies that 'balance' the interests of citizens and businesses
Now kiss that obsolete system goodbye. Once Britain and the EU sign the Gats treaty, Article VI.4 of that treaty, the Necessity Test, will kick in. Then, as per the Secretariat's secret programme outlined in the 19 March memo, national parliaments and regulatory agencies will be demoted, in effect, to advisory bodies.
Final authority will rest with the Gats Disputes Panel to determine whether a law or regulation is, in the memo's language, 'more burdensome than necessary'. And Gats, not Parliament, will decide what is 'necessary'.
As a practical matter, this means nations will have to shape laws protecting the air you breathe, the trains you travel in and the food you chew by picking not the best or safest means for the nation, but the cheapest methods for foreign investors and merchants.
Let's get down to concrete examples. The Necessity Test has already had a trial run in North America via inclusion in Nafta, the region's free trade agreement. Recently, the state of California banned a petrol additive, MBTE, which has contaminated water supplies. A Canadian seller of the 'M' chemical in MBTE filed a complaint saying the rule failed the Necessity Test.
The Canadians assert that
California could simply require all petrol stations to dig up their storage
tanks and reseal them - and hire a swarm of inspectors to make sure it's done
perfectly. The Canadian proposal might cost Californians a bundle and would be
impossible to police. That's just too bad. The Canadian proposal is the least
trade-restrictive method for protecting the water supply. 'Least
trade-restrictive' is Nafta's Necessity Test.
If California does not knuckle under, the US Treasury may have to fork out $976
million in compensation to the Canadians.
The Gats' version of the the Necessity Test is Nafta on steroids. Under Gats, as proposed in the memo, national laws and regulations will be struck down if they are 'more burdensome than necessary' to business. Notice the subtle change. Suddenly the Gats treaty is not about trade at all, but a sly means to wipe away restrictions on business and industry, foreign and local.
So what 'burdensome' restrictions are sitting in the corporate cross-hairs? The US trade representative has already floated proposals on retail distribution. Want to preserve Britain's green belts? If some trees stand in the way of a Wal-Mart superstore, forget it. Even under the current, weaker, Gats, Japan was forced to tear up its own planning rules to let in the retail monster boxes.
The Government assures us that nothing threatens its right to enforce laws in the nation's public interest. Not according to the 19 March memo. The WTO reports that, in the course of the secretive multilateral negotiations, trade ministers agreed that a Gats tribunal would not accept a defence of 'safeguarding the public interest'.
In place of a public interest standard, the Secretariat proposes a deliciously Machiavellian 'efficiency principle': 'It may well be politically more acceptable to countries to accept international obligations which give primacy to economic efficiency.' This is an unsubtle invitation to load the Gats with requirements that rulers know their democratic parliaments could not otherwise accept. This would be supremely dangerous if, one day, the US elected a president who wanted to shred air pollution rules or, say, Britain elected a prime minister who had a mad desire to sell off the rest of his nation's air traffic control system.
How convenient for embattled chief executives. What elected congresses and parliaments dare not do, Gats would require. Under the post-democratic Gats regime, the Disputes Panel, those Grand Inquisitors of the free market, will decide whether a nation's law or a regulation serves what the memo calls a 'legitimate objective'.
While parliaments are lumbered with dated constitutional requirements to debate a law's legitimacy in public, with public evidence, and hearings open to citizen comment, Gats panels are far more efficient. Hearings are closed. Unions, as well as consumer, environmental and human rights groups, are barred from participating - or even knowing what is said before the panel.
Is the 19 March memo just a bit of wool-gathering by the WTO Secretariat? Hardly. The WTO was working from the proposals suggested in yet another confidential document also sent to me by my good friend, Unnamable Source. The secret memo, 'Domestic Regulation: Necessity and Transparency', dated 24 February, was drafted by the European Commission's own 'working party', in which the UK ministry claims a leading role.
In a letter to MPs, Trade Minister Caborn swears that, through the EC working party, he will ensure that Gats recognises the 'sovereign right of government to regulate services' to meet 'national policy objectives'. Yet the 24 February memo, representing the UK's official (though hidden) proposals, rejects a nation's right to remove its rules from Gats jurisdiction once a service industry is joined to the treaty.
Indeed, the EC document contains contemptuous attacks on nations claiming 'legitimate objectives' as potential 'disguised barriers' to trade liberalisation. Moreover, there is a codicil that regulation must not be 'more trade restrictive than necessary', ready for harvesting by the WTO Secretariat's free market fanatics.
Not knowing I had these documents in hand, Caborn's office this week maintained that Gats permitted nations a 'right to regulate to meet national policy objectives'.
I was not permitted to question the Trade Minister himself. However, the Caborn letter to MPs admits that his pleasant interpretation of Gats has not been 'tested in WTO jurisprudence'. This is, after all, the Minister who, with his EU counterparts, just lost a $194 million judgment to the US over the sale of bananas.
Now, I can understand how Caborn goofed that one. Europe argued that bananas were a product, but the US successfully proved that bananas were a service - try not to think about that - and therefore fall under Gats.
And that illustrates the key issue. No one in Britain should bother with what Caborn thinks. The only thing that counts is what George W Bush thinks. Or, at least, what the people who think for Bush think.
Presumably, Caborn won't sue the UK for violating the treaty. But the US may. In a way it already has. Forget Caborn's assurance - we need assurance from President Bush that he won't use Gats to help out Wal-Mart - or Citibank or Chevron Oil.
The odd thing is, despite getting serviced in the bananas case, Caborn and the Blair government have not demanded explicit language barring commerce-first decisions by a Gats panel. Instead, the secret 14 February EC paper encourages the WTO's Secretariat to use the punitive form of the Necessity Test sought by the US.
So there you have it. Rather
than attack the rules by which America whipped Europe, Caborn and the EC are
effectively handing George Bush a bigger whip.
www.observer.co.uk/business/story/0,6903 ...
The FTAA's Threat to Water Author Blank, International Forum on Globalization August 1, 2001 What is the FTAA?
At the 1994 Summit of the Americas in Miami, Florida, the leaders of the 34 nations of Canada, the United States, Central and South America and the Caribbean (excluding Cuba), agreed to sign a hemisphere-wide trade and investment pact called the Free Trade Area of the Americas (FTAA). At this meeting, former President Bill Clinton pledged to fulfill former President George Bush's dream of a trade agreement stretching from Anchorage to Tierra del Fuego. As envisioned, the FTAA would be the largest free trade zone in the world, as well as the most far-reaching trade and investment agreement ever signed. Newly elected President George W. Bush has committed to carry out his father's dream. The FTAA is scheduled for completion in 2005.
The FTAA negotiations were officially launched in Santiago, Chile, in September 1998. At this meeting, negotiators agreed to model the FTAA on the North American Free Trade Agreement (NAFTA) signed in 1994 by the U.S., Canada and Mexico, and the World Trade Organization (WTO) -- a trade liberalization organization with over 135 member countries established in 1995. Based on the NAFTA and WTO models, the FTAA goes far beyond these agreements in both scope and power.
For example, the FTAA, as it now stands, would introduce into the Western Hemisphere all of the disciplines of the proposed services agreement of the WTO - General Agreement on Trade in Services (GATS) - with the powers of the Multilateral Agreement on Investment (MAI) that was rejected by the Organization for Economic Cooperation and Development (OECD) in 1998, to create a new trade powerhouse with sweeping new authority over every aspect of life in the region. The FTAA also locks in and expands upon the Structural Adjustment Programs (SAPs) imposed on most of the countries of the region by the International Monetary Fund (IMF) and the World Bank.
Early on, citizens demanded that working groups on democratic governance, labor and human rights, consumer safety and the environment be included in the FTAA negotiations. This demand was rejected, and instead a Committee of Government Representatives on Civil Society was established, but with no mechanisms to incorporate civil society concerns and suggestions into the negotiations. At the same time, the business community was enjoying unprecedented direct involvement in the negotiating process through the American Business Forum. The result has been that corporate concerns dominate the negotiations while civil society is left behind.
April 2001 Quebec Ministerial Summit
During April 19-22, 2001, the leaders of the Western Hemisphere (excluding Cuba) met in Quebec City, Canada, to continue negotiations of the FTAA. Over 60,000 people were on the streets of Quebec protesting the meeting outside a specially erected fence, while over 200 solidarity protests took place across the U.S. and the hemisphere. At this meeting, these FTAA architects agreed to a draft of a negotiating document already finalized in Buenos Aires earlier in the month and to completing the FTAA by 2005. The pressure to implement the FTAA has been mounting in light of the defeat of the MAI at both the 1996 Ministerial meeting of the WTO, and at the OECD in 1998, and the shut-down of the Seattle Ministerial meeting of the WTO in December 1999. Many trade observers and pundits promoting the current global trade model have identified the FTAA as the natural heir of these failed projects and are fearful that another such failure could put the whole concept of these massive free trade agreements on the back burner for years.
Global Water Scarcity
It is clear that the earth's water systems cannot sustain our demands upon it. Over 30 countries are facing water stress and scarcity and over a billion people lack adequate access to clean drinking water. Science reveals that, because of operational limits and pollution, the earth's water system can support at most only one more doubling of demand, estimated to occur in less than 30 years. By the year 2025, as much as two-thirds of the world's population will be living with some serious condition of water shortage or in absolute water scarcity. A recent report by the National Intelligence Council, a group that reports to the CIA, echoed this sentiment, finding that the main resource problem in 2015 will be water and that the instability created by shortages of water "will increasingly affect the national security of the United States."
Fortune magazine notes that "water will be to 21st Century what oil was to the 20th." Who owns water and how much they are able to charge for it will be the question of the century. The privatization of water is already a $400 billion a year business globally, and a $100 billion a year industry in the U.S.. That makes it one third larger than global pharmaceuticals. Multinational corporations hope to increase profits from water even further by using international trade and investment agreements to control the flow and supply of water. The website of one Canadian water company, Global Water Corporation, puts it best: "Water has moved from being an endless commodity that may be taken for granted to a rationed necessity that may be taken by force."
In the past, the primary mechanisms through which multinational corporations profited from the provision of water were World Bank and IMF Structural Adjustment Programs (SAPs). Over the last few decades, the World Bank and IMF gave corporations access to the water systems of developing countries. Today, trade and investment agreements provide corporations with even greater access and rights to water systems in developed and developing countries. In addition, corporations are using trade and investment agreements to gain ownership over the world's ever-dwindling water supplies so that they will become the suppliers of last resort.
In February 1999 the National Post called Canada's water "blue gold" and demanded that the government "turn on the tap." Its business columnist, Terence Corcoran, wrote "The issue will not be whether to export, but how much money the federal government and provinces will be able to extract from massive water shipments. Using the OPEC model, they will attempt to cartelize the world supply of water to drive the price up." In fact, the "cartelization" has already begun. The aforementioned Global Water corporation has signed an agreement with Sitka, Alaska, to export 18 billion gallons per year of glacier water to China where it will be bottled in one of that country's "free trade zones" to save on labor costs. Corporations hope that the FTAA, together with its predecessors and models the NAFTA and the WTO, will force countries to grant them access to and ownership of the world's water supply regardless of the environmental, health or social consequences. Based on the NAFTA, the WTO and the draft FTAA negotiating documents that have been released, we can begin to paint a picture of the threats to water which are likely to be included in the FTAA. A description of these elements follows.
Provisions of the FTAA that Threaten Water
NAFTA CHAPTER 3 establishes the goods that are subject to the agreement's obligations. These include "waters, including natural or artificial waters and aerated waters." The NAFTA adds an explanatory note that "ordinary natural water of all kinds (other than sea water)" is included. In 1993, then U.S. Trade Representative Mickey Kantor said in a letter to an U.S. environmental group, "When water is traded as a good, all provisions of the agreement [NAFTA] governing trade in goods apply."
"NATIONAL TREATMENT" is a standard trade provision that guarantees that countries do not "discriminate" in favor of their domestic producers and against foreign producers. This means that if a locality provides any portion of its water systems through a private company, they can not have a preference for a local service provider who may have a greater commitment to the area and may be easier for the local community to oversee. Furthermore, once a permit is granted to a domestic company to export water, the corporations of all the other FTAA countries would have the same access rights to the commercial use of that water. For example, if a Bolivian company were granted the right to export Bolivian water, U.S. multinational corporations would then have the right to help themselves to as much Bolivian water as they wished.
CHAPTER 11, "INVESTOR STATE." This is a provision of the NAFTA favored by the U.S. government, among others, for inclusion in the FTAA. This provision gives investors (usually corporations) the right to sue a foreign government directly if they believe that their rights have been violated under the NAFTA. As a result of this provision, there have been a flurry of investor-state suits in North America under the NAFTA challenging environmental, health and safety legislation in the three NAFTA signatory countries.
If this investor-state provision is included in the FTAA, it could apply to water in at least two ways. If any FTAA country, state or province allows only domestic companies to export water, corporations in the other countries would have the right to financial compensation for "discrimination." Further, the very act of a government attempt to ban bulk water exports automatically makes water a commercially tradable commodity, triggering the FTAA. The very same law that excluded them would trigger foreign investors' FTAA rights, and they could demand financial compensation for lost opportunities.
In addition, Chapter 11 allows foreign corporations to sue a country if a government implements legislation that "expropriates" the company's future profits. For example, if a country privatized its water services and hired a foreign corporation to provide the service and then passed laws requiring improved environmental protections or worker safety, the corporation could argue that the laws were an expropriation of its profits and therefore illegal under FTAA rules.
NAFTA Chapter Eleven: Case Studies Involving Water
SUN BELT WATER INC. VS. CANADA. The first NAFTA Chapter 11 case on water was filed in the fall of 1998. Sun Belt Water Inc. of Santa Barbara, CA, is suing the Canadian government because the company lost a contract to export water to California when the Canadian province of British Columbia banned the export of bulk water in 1991. Sun Belt alleges that the ban contravenes NAFTA and is seeking $220 million in damages. However, it is clear that Sunbelt is more interested in access to British Columbia's water than the paltry $220 million they could win in the suit. As Sun Belt's CEO Jack Lindsay explained, "Because of NAFTA, we are now stakeholders in the national water policy in Canada."
ETHYL CORPORATION VS. CANADA. Chapter 11 was used successfully by the Virginia-based Ethyl Corporation to force the government of Canada to reverse its ban on the gasoline additive, MMT. In June 1997, Canada legislated a ban on the cross-border sale of MMT because it pollutes ground water and is, in the words of Canadian Prime Minister Jean Chretien, an "insidious neurotoxin." MMT is banned in Europe and California for the same reason. Ethyl used NAFTA to sue the Canadian government for $250 million in damages for lost future profits and for damaging their "good name" during the debate over the legislation in the Parliament. Rather than allow the case to go to a NAFTA tribunal where it feared it would lose, the Canadian government reversed its ban in July 1998 and paid Ethyl $13 million in compensation for its "trouble."
METHANEX CORPORATION VS. THE UNITED STATES. In July 1999, the Canadian corporation Methanex sued the U.S. government after California Governor Gray Davis, by executive order, mandated the removal of methyl tertiary butyl ether (MTBE) from gasoline sold in the state by December 31, 2002. The chemical has been associated with human neurotoxicological effects, with the potential to cause human cancer. The California MTBE ban is based on a 1998 University of California study which found, "There are significant risks and costs associated with water contamination due to the use of MTBE." The report concluded, "We are placing our limited water resources at risk by using MTBE." Once the ban is completely implemented, both domestic and foreign producers alike will be prohibited from using MTBE in gasoline sold in California. However, Methanex claims that California's ban violates NAFTA by limiting the corporation's ability to sell MTBE. Methanex is suing for $970 million. If a NAFTA tribunal finds for Methanex, the U.S. government can be held liable for the corporation's lost profits.
NAFTA and the WTO
Several other provisions of the NAFTA and the WTO, which are likely to be included in the FTAA, will dramatically impact the provision of water resources.
ARTICLE 315 OF THE NAFTA, "PROPORTIONAL SHARING." Under NAFTA Articles 315 and 309, no country can reduce or restrict the export of a resource once the trade has been established. Nor can the government place an export tax or charge more to the consumers of another NAFTA country than they charge domestically. Exports of water would have to be guaranteed to the level they had acquired over the preceding 36 months; the more water exported, the more water required to be exported. Even if new evidence were found that massive movements of water were harmful to the environment, these requirements would remain in place.
ARTICLE XI OF THE GATT at the WTO specifically prohibits the use of export controls for any purposes and eliminates quantitative restrictions on imports and exports. This means that quotas or bans on the export of water imposed for environmental purposes could be challenged as a form of protectionism.
PRODUCTION PROCESS METHODS. The WTO forces nations to forfeit their capacity to discriminate against imports on the basis of their consumption or production practices. Article 1, "Most Favored Nation," and Article III, "National Treatment," require all WTO countries to treat "like" products exactly the same for the purposes of trade whether or not they were produced under ecologically sound conditions. Even though commercial trade in water can be destructive to water sheds, the WTO could prevent countries from restricting that trade.
"LEAST TRADE RESTRICTIVE" The WTO requires that any law that a country may write to protect its water would also have to be the "least trade restrictive" law imaginable (as interpreted by a panel of trade lawyers). This vague language has already been the downfall of several environmental protection and public health laws and promises more of the same if included in the FTAA.
SERVICES. The FTAA Services Agreement is even more sweeping than the General Agreement on Trade in Services (GATS) at the WTO. The fundamental purpose of the services agreements are to constrain all levels of government in their delivery of services and to facilitate access to government contracts by transnational corporations in a multitude of areas, including water services. The FTAA Services Agreement, says the Negotiating Group, should have "universal coverage of all service sectors." Governments are granted the right to "regulate" these services, but only in ways compatible with the "disciplines established in the context of the FTAA agreement." The Services Agreement will apply to "all measures" affecting trade in services taken by governmental authorities at all levels of government. As well, it is intended to apply to non-governmental institutions "acting under powers conferred to them by governments."
Governments used to be unanimous in the belief that basic human services such as water, health care and education should not be included in trade agreements because these were essential components of citizenship. However, the NAFTA and the GATS began the process of eroding these basic human rights, which the FTAA will take to a whole new level. The framework of the FTAA Services Agreement represents sweeping new authorities of a trade agreement to overrule government regulation and grants huge new powers to service corporations under an expanded FTAA. For instance, if national treatment rights in services are included in the FTAA, all public services at all levels of government would be forced to open up for competition from foreign for-profit service corporations. This agreement would disallow any government or sub-national government from preferential funding to domestic service providers in services such as sewer and water services.
Cities and towns across the Western Hemisphere have been forced to privatize their water services due to World Bank and IMF Structural Adjustment Programs. The results have almost universally increased prices and a concurrent loss of access to water, failure to live up to promises of infrastructure improvement, loss of indigenous peoples' rights to water, worker layoffs, lack of consumer information on water quality and big profits for the privatizing corporation. The FTAA would lock in the policies of the SAPs and increase the number of areas forcedor coercedinto privatizing their water systems. The FTAA will grant water privatizers greater rights, reduce the ability of governments to ensure that the privatized systems function in ways that protect the environment, consumers and workers, and reduce the ability of citizens to follow the lead of Cochabamba's "water warriors," and take back rights to regional water sources.
Protecting Water from the FTAA
The only way to protect water from the FTAA, or any trade agreement, is to explicitly exclude it from the obligations of the agreement. However, it is time to ensure that regardless of which trade or investment agreement comes down the pike next, water will be protected as a human and planetary right rather than as a corporate commodity. Toward this end, members of the IFG Project on the Globalization of Water joined with citizens of Cochabamba, Bolivia, in December 2000 to draft a people's declaration on the global provision of water. The declaration, in its entirety, follows.
The Cochabamba Declaration We, citizens of Bolivia, Canada, United States, India, Brazil: Farmers, workers, indigenous people, students, professionals, environmentalists, educators, nongovernmental organizations, retired people, gather together today in solidarity to combine forces in the defense of the vital right to water. Here, in this city which has been an inspiration to the world for its retaking of that right through civil action, courage and sacrifice standing as heroes and heroines against corporate, institutional and governmental abuse, and trade agreements which destroy that right, in use of our freedom and dignity, we declare the following:
For the right to life, for the respect of nature and the uses and traditions of our ancestors and our peoples, for all time the following shall be declared as inviolable rights with regard to the uses of water given us by the earth:
(1) Water belongs to the earth and all species and is sacred to life, therefore, the world's water must be conserved, reclaimed and protected for all future generations and its natural patterns respected.
(2) Water is a fundamental human right and a public trust to be guarded by all levels of government; therefore, it should not be commodified, privatized or traded for commercial purposes. These rights must be enshrined at all levels of government. In particular, an international treaty must ensure these principles are noncontrovertable.
(3) Water is best protected by local communities and citizens who must be respected as equal partners with governments in the protection and regulation of water. People's of the earth are the only vehicle to promote democracy and save water.
For additional information on the Free Trade Area of the Americas, the International Forum on Globalization Project on the Globalization of Water or other water and globalization issues, please contact Antonia Juhasz, director of IFG's Water Project at (415) 561-3490, ajuhasz@ifg.org.
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Who owns the US Government?
Below are "Contributions From Selected
Industries to Federal Candidates
and Parties, 1990-2000" in the U.S.
$117,711,747 - Oil and Gas
$ 58,426,889 - Automotive
$ 51,070,027 - Electric Utilities
$ 35,242,032 - Chemical and Related Manufacturing
$ 24,756,971 - Forestry and Forestry Products
$ 17,945,784 - Mining
$ 6,950,843 - Total Environmental Contributions
Source: Center for Responsive Politics
as printed in Sierra Club Magazine, March/April 2001 issue, page 19.
The Multinational Monitor
April 2001 - VOLUME 22 - NUMBER 4
NAFTA's Investor
"Rights"
A Corporate Dream,
A Citizen Nightmare
By Mary Bottari
The North American Free Trade Agreement (NAFTA) includes an array of new
corporate investment rights and protections that are unprecedented in
scope and power. NAFTA allows corporations to sue the national government
of a NAFTA country in secret arbitration tribunals if they feel that a
regulation or government decision affects their investment in conflict
with these new NAFTA rights. If a corporation wins, the taxpayers of the
"losing" NAFTA nation must foot the bill. This extraordinary attack on
governments' ability to regulate in the public interest is a key element
of the proposed NAFTA expansion called the Free Trade Area of the Americas
(FTAA).
NAFTA's investment chapter (Chapter 11) contains a variety of new rights
and protections for investors and investments in NAFTA countries.
Specifically, Article 1110 of NAFTA guarantees foreign investors
compensation from the NAFTA governments for any direct government
expropriation (i.e., nationalization) or any other action that is
"tantamount to" an "indirect expropriation." In addition,
Article 1102
provides for "national treatment," which means that governments must
accord to companies of other NAFTA countries no less favorable treatment
than they give to their own companies. Article 1105 contains a "minimum
standard of treatment" provision, which includes vague prose about fair
and equitable treatment in accordance with international law.
If a company believes that a NAFTA government has violated these new
investor rights and protections, it can initiate a binding dispute
resolution process for monetary damages before a trade tribunal offering
none of the basic due process or openness guarantees afforded in national
courts. These so-called "investor-to-state" cases are litigated in the
special international arbitration bodies of the World Bank and the United
Nations, which are closed to public participation, observation and input.
A three-person panel composed of professional arbitrators listens to
arguments in the case, with powers to award an unlimited amount of
taxpayer dollars to corporations whose NAFTA investor privileges and
rights they judge to have been impacted.
Corporate investors have used these unprecedented NAFTA investment
protections to challenge national and local laws, governmental decisions
and even governmental provision of services in all three NAFTA countries.
To date, companies have filed more than a dozen cases, claiming damages of
more than US$13 billion [see "The Chapter 11 Dossier"].
"TANTAMOUNT TO EXTORTION"
In the largest Chapter 11 suit yet brought against the United States, the
Canadian corporation Methanex in 1999 sued the U.S. government for $970
million because of a California executive order phasing out the sale of a
Methanex product. Methanex claims that California's phase-out of methyl
tertiary butyl ether (MTBE), a gasoline additive, violates the company's
special investor rights granted under NAFTA because the California
environmental policy limits the corporation's ability to sell MTBE. If a
NAFTA tribunal decides that California's environmental policy violates
NAFTA's investor protections, the U.S. government can be held liable for
the corporation's lost profits from not selling MTBE.
The case is "a clear threat to California state sovereignty and democratic
governance," says Martin Wagner of the California-based Earthjustice Legal
Defense Fund. If Methanex succeeds, California will be under pressure to
rescind its executive order, to lessen the damage award.
Associated with human neurotoxicological effects, such as dizziness,
nausea and headaches and found to be an animal carcinogen with the
potential to cause human cancer, MTBE has been found in ground water and
drinking wells around California. On March 25, 1999, California required
the removal of MTBE from gasoline sold in the state by December 31, 2002.
Governor Gray Davis declared that "on balance, there is significant risk
to the environment from using MTBE in gasoline in California."
Methanex claims that adding MTBE to gasoline reduces air pollution.
However, a 1998 University of California at Davis (UC-Davis) report, which
informed the government action, found that "there is no significant
additional air quality benefit to the use of oxygenates such as MTBE in
reformulated gasoline." The report found "significant risks and costs
associated with water contamination due to the use of MTBE." The report
noted that "MTBE is highly soluble in water and will transfer readily to
groundwater from gasoline leaking from underground storage tanks,
pipelines and other components of the gasoline distribution system." It
also noted that the use of MTBE in motor boat fuel results in
contamination of surface water. The report concluded that "[w]e are
placing our limited water resources at risk by using MTBE."
On the basis of the UC-Davis findings, California moved to ban MTBE.
Methanex's response was to drag the California policy into NAFTA Chapter
11 litigation, demanding MTBE be allowed or $970 million be paid.
In its amended claim, Methanex alleges that the California ban
discriminates against MTBE in favor of ethanol, a similar U.S. product,
and is therefore a violation of NAFTA's national treatment rules. As
evidence, Methanex cites the executive order which requires the California
Energy Commission to look into development of a California ethanol
facility. Methanex alleges that Archer Daniels Midland (ADM), a principal
producer of ethanol in the United States, influenced the governor's
decision with $210,000 in campaign contributions, arguing that the ban
stands in violation of NAFTA's fair and equitable treatment rules.
Finally, Methanex claims that the ban was not the "least trade
restrictive" method to fix the water contamination problem, and thus
violates NAFTA requirements that companies be treated fairly and "in
accordance with international law." The relevant laws cited by Methanex
are the rules of the World Trade Organization, which require countries to
use the least trade restrictive means to achieve environmental and public
health goals.
"These cases are tantamount to extortion," says Martin Wagner.
"This is a
situation in which someone is causing a harm and then making the assertion
that they will stop that harm only upon payment of a fee. In the
California case, Methanex is selling a chemical and saying to the U.S.
government, 'If you want us to stop, you have to pay us.' This is even
more appalling when you consider that the victims of this extortion are
the people of California, who don't want their drinking water contaminated
by MTBE."
The California case has drawn comparisons to the 1998 case brought against
Canada by the U.S.-based Ethyl Corporation [see "Another NAFTA
Nightmare,"
Multinational Monitor, October 1996]. In that case, Ethyl sued Canada for
$250 million after Canada banned the gasoline additive
methylcyclopentadienyl manganese tricarbonyl (MMT) because of health
risks. The state of California had banned MMT and the U.S. Environmental
Protection Agency (EPA) was working on a similar regulation. Ethyl claimed
the Canadian ban violated NAFTA because it "expropriated" future
profits
and damaged Ethyl's reputation. After learning that the NAFTA tribunal was
likely to rule against its position, the Canadian government revoked the
ban, paid Ethyl $13 million for lost profits to date, and, as part of a
settlement with Ethyl, agreed to issue a public statement declaring that
there was no evidence that MMT posed health or environmental risks.
Methanex brought its NAFTA case to the United Nations Commission for
International Trade and Law (UNCITRAL), the arbitration regime of the
United Nations. The case is now pending. Under UNCITRAL rules, not only
are the citizens of California shut out of this proceeding, but so are the
governor and the attorney general of California, the state whose policy is
in question. California officials must rely on the Office of the U.S.
Trade Representative (USTR) to defend the interests of California
residents in this closed tribunal.
DELIVER THIS
In a case that seeks to push the limits of Chapter 11, the U.S.-based
United Parcel Service (UPS) is pursuing a NAFTA Chapter 11 case against
Canada for $100 million, arguing that the fact of the Canadian postal
service's involvement in the courier business infringes upon the
profitability of UPS operations in Canada.
In this case, the first NAFTA investor-to-state case against a public
service, UPS is attempting to stretch the NAFTA Chapter 11 provisions in
an entirely new direction. Canada Post is a "Crown corporation" owned
by
the people of Canada. Canada Post has not received direct taxpayer support
for about a decade and has been paying income tax since 1994.
UPS claims that by integrating the delivery of letter, package and courier
services, Canada Post has cross-subsidized its courier business in breach
of NAFTA rules. For example, UPS argues that permitting consumers to drop
off courier packages in Canada Post letter mail postal boxes unfairly
advantages Canada Post as against other courier services. Other alleged
forms of cross-subsidization include:
* Using letter carriers to pick up courier packages from the mail boxes
and "transport them in vehicles that form part of the infrastructure of
the Canada Post monopoly."
* Sorting courier packages at "Canada Post's letter mail monopoly sorting
facilities across Canada."
* Transporting courier packages on airplanes and trucks chartered by the
mail service.
* Selling courier services at post offices.
* "Precluding franchisees at Canada Post retail outlets from selling of
any courier product other than Canada Post's."
* Permitting courier consumers to use postal stamp meters on courier
packages.
* "Having the regulatory definition of 'letter' changed from 450 grams to
500 grams in order to expand its letter mail monopoly."
"UPS is entitled to receive the best treatment available in Canada with
respect to the treatment of its investment," UPS argues in its claim.
"This treatment would include having equal access to the postal
distribution system provided" to the postal service's courier operations.
Failure to provide such equal treatment, UPS alleges, violates the
national treatment obligations of Chapter 11.
In a cable by the U.S. Embassy in Ottawa that Public Citizen obtained
under a Freedom of Information Act request, UPS Canada Legal and Public
Affairs Vice President Allan Kaufman was characterized as "very confident
the Government of Canada stood to lose its fourth and largest Chapter 11
challenge with the UPS case," and Kaufman signaled that the corporation
would be open to settlement.
Former Canadian Foreign Minister Don Mazankowski responded to these
arguments in a February 2001 column in the Globe & Mail. He argued that
Canada treated UPS with an even hand by allowing UPS access to the market
on the same terms as any Canadian corporation, that UPS is not subject to
any additional taxes or duties and that the company is governed by the
same laws as any Canadian corporation.
"The UPS claim is unique. Unlike the other NAFTA-based foreign investor
claims which have sought to recoup investments, UPS is using NAFTA Chapter
11 provisions in a strategic offensive to secure a greater share of the
Canadian market," asserts Canadian trade attorney Steve Shrybman. "UPS
is
arguing that because Canada Post provides public mail services, it
shouldn't also be providing integrated parcel and courier services. In an
era when monopoly and commercial service delivery is commingled, few
public services including health care and education would be immune from
similar corporate challenges."
This case is also proceeding under UNCITRAL rules and the Canadian Union
of Postal Workers and other interested parties are attempting to
intervene.
THE FAST TRACK TO EXPANDED CHAPTER 11
The "expropriations" that have been challenged under Chapter 11 are
nothing like the government seizure of property that is generally conveyed
by the term. Instead, corporations have used the provision to challenge or
seek compensation for what are called "regulatory takings" in the
United
States - regulations which supposedly take away the entire value of a
property. While a conservative legal movement has worked for two decades
to espouse the theory of regulatory takings, with some success, regulatory
takings suits continue to face significant judicial hurdles in U.S.
courts. The Chapter 11 cases take this "regulatory takings" logic to a
new
extreme.
While these expansive investor rights currently are included only in
NAFTA, plans are underway to incorporate similar provisions in the FTAA.
FTAA is a proposed NAFTA expansion to all 34 countries of the Western
Hemisphere (but for Cuba). The Bush administration has signaled that it
wants the controversial fast-track trade negotiating authority in order to
negotiate the FTAA. Once Congress delegates its trade negotiating
authority to the president via fast track, it limits its own role to a
single up-or-down vote on trade agreements' implementing legislation,
which cannot be amended.
There is no guarantee the Bush administration will succeed in its effort
to win fast track, or in its attempts to impose investment provisions in
the FTAA.
Canada, which has been badly burned in a series of Chapter 11 cases, is no
longer a believer. Canadian Trade Minister Pierre Pettigrew has declared
that Canada will not sign FTAA if investor-to-state enforcement of broad
regulatory takings rights are included, and Canada has called for a review
of Chapter 11 within NAFTA.
Whether Canada will hold to these positions, and whether it can organize
other countries to join it amidst the complex FTAA negotiations in which
the United States is the dominant player, remains to be seen. In the
meantime, environmentalists, public health groups, California residents
and many others concerned about the broad regulatory takings provisions
will continue to press for their removal from NAFTA and their exclusion
from the FTAA. Mary Bottari is director of Global Trade Watch's
Harmonization Project.
The chapter 11 dossier:
Corporations exercise their investor "rights"
Corporations have filed more than a dozen cases under NAFTA's Chapter 11
investment provisions, which enable corporations to sue governments for
infringements of their "investor rights." Since they are conducted in
confidential arbitral processes, inaccessible to public scrutiny and
participation (in contrast to open proceedings in domestic courts),
information on ongoing cases is sketchy. Available information on 15 of
the cases is summarized below.
SUITS AGAINST CANADA
ETHYL CORPORATION
In this first investor-state case, Ethyl Corporation of the United States
sued the Canadian government for $250 million and obtained, in 1998, a
settlement of $13 million for the Canadian ban on the gasoline additive,
MMT, a nerve toxin [see "Another NAFTA Nightmare," Multinational
Monitor,
October 1996]. The ban was reversed.
S.D. MYERS
In October 1998, U.S.-based S.D. Myers Inc., which treats transformers
containing toxic PCBs, filed a claim for $30 million for losses it claims
to have incurred during a one-and-one-half-year ban (1995 to 1997) on the
export of PCB wastes from Canada. The Canadian federal government states
that Canada is bound by international conventions that stipulate that PCBs
must be destroyed in an environmentally sound manner, and that U.S.
standards for PCB disposal are not as high as Canada's. The wastes were
destroyed in a Canadian facility in Alberta, and the export ban was
revoked in 1997. The U.S. government also controls cross-border movement
of PCBs. In November 2000, the arbitral tribunal found that the ban did
contravene the investment chapter regarding national treatment and minimum
standards of treatment of foreign investors, and it is now determining
whether S.D. Myers suffered damages. In the meantime, the Canadian
government has applied to the (domestic) Federal Court to have the
tribunal's partial award set aside, arguing that the case concerned
cross-border trade, not a Canadian investment, and that the award
conflicts with a well-established Canadian policy requiring disposal of
PCBs and PCB wastes in Canada to comply with the Basel Convention on the
Control of Transboundary Movements of Hazardous Wastes and Their Disposal.
SUN BELT WATER INC.
This California-based company is suing Canada for the decision of the
provincial government of British Columbia to refuse consent for the
company to export bulk water from BC. The government subsequently enacted
the Water Protection Act, which bans bulk water exports and inter-basin
diversions by domestic and foreign investors alike. In a colorful claim
which alleges a decade of "smelly" actions by successive BC
governments,
Sun Belt Water expounds on the growing world-wide demand for water,
assumes that water export must be a positive benefit (ignoring
environmental and conservation requirements) and makes extreme claims of
improprieties by the BC government and BC courts. In a BC court action,
Sun Belt did not achieve its desired result. It is therefore using NAFTA
Chapter 11 to seek damages of "between" $1 billion and $10.5 billion.
Besides using the investment chapter for very dubious business practices,
the case raises the fundamental issues of the uses of the investment
chapter to evade the result of an action in a domestic court, and to
challenge a non-discriminatory policy and legislation by a subnational
(provincial) government.
POPE AND TALBOT
The US-based lumber company Pope and Talbot has sued Canada, claiming
approximately $510 million for alleged breaches of the NAFTA investment
chapter related to changes in the profitability of its timber export
business in Canada. Softwood lumber exports from Canada to the United
States have been a source of contention and repeated trade disputes for
decades. Forest products are among the most important exports from Canada,
representing billions of dollars in export earnings, and over 90 percent
of these products are exported to the United States. In 1996, in yet
another attempt to resolve the ongoing timber wars, the Canadian and U.S.
federal governments signed the Canada-US Softwood Lumber Agreement,
governing exports of softwood lumber from four Canadian provinces, British
Columbia, Alberta, Ontario and Quebec. The agreement, which will expire at
the end of March 2001, establishes quotas for exports for each province,
and requires producers to provide certain information regarding exports
and pay an export levy if their exports exceed their particular quota. In
arriving at such export agreements, the Canadian government consults
extensively with industry. Pope and Talbot claimed that Canada has
breached the NAFTA investment requirements regarding national treatment,
most-favored nation treatment, minimum standard of treatment and
performance requirements. The company's lawyers are critical of the
Canadian government for its public release of the Notice of Intent to
Submit a Claim, calling the release a "serious breach of international
procedure." Pope and Talbot's operations are located in British Columbia.
During the period of the softwood memorandum, BC's share of total softwood
exports has declined relative to total Canadian softwood exports; Pope and
Talbot argue that this decline is related to the agreement, and amounts to
a breach of the NAFTA chapter. (Others point to the loss of BC's
traditional markets in Asia, related to the Asian economic crisis.) In an
interim award, the tribunal rejected the claim that expropriation had
occurred, but decided to continue hearings on claims relating to national
treatment and minimum standards of treatment. This case is an important
indication of how far-reaching the impacts of the NAFTA investment chapter
are and of how broadly multiple governmental powers and decisions may be
challenged by an individual corporation for a huge compensatory claim.
UNITED PARCEL SERVICE
UPS has filed a notice of intent to sue Canada for $100 million, alleging
that Canada favors the public postal service, Canada Post, regarding
provision of courier services [see "NAFTA's Investor
"Rights""].
KETCHAM INVESTMENTS & TYSAM INVESTMENTS
U.S.-based Ketcham Investments and Tysam Investments jointly own West
Fraser Mills, a timber company. Ketcham and Tysam allege in a December
2000 notice of intent to file a claim that their timber quota under the
U.S.-Canada Softwood Lumber Agreement was arbitrarily cut, denying them
rights afforded Canadian companies. They are seeking C$10 million in
damages.
Suits Against the United States
LOEWEN
The B.C-based Loewen Group is suing for compensation arising from alleged
discrimination, denial of minimum standard of treatment and expropriation,
claiming that a $500 million Mississippi state court verdict against it
amounts to a breach of NAFTA. The verdict came in a suit brought against
Loewen by a Mississippi company, O'Keefe, alleging fraudulent practices
and other anti-competitive practices. Loewen was denied an appeal of the
court decision due to a state law which requires an appellant to post 125
percent of the damage award ($625 million in this case) which Loewen could
not post. (Loewen eventually settled the claim for $175 million.) The
company seeks to recover $775 million in damages, interest and legal
expenses through this investor-state claim and alleges that the
Mississippi decision against it was based on anti-Canadian bias. A
tribunal has agreed to hear the case. This case demonstrates, as does Sun
Belt, the use by a corporation of the NAFTA Investment chapter to
essentially reverse the results of domestic court proceedings, and to
circumvent the course of normal commercial civil litigation. Having lost
to a competitor in the courts, it claims compensation from the U.S.
federal government.
METHANEX CORP.
In June 1999, this Vancouver-based company announced that it will sue the
U.S. government for $970 million due to a California order to phase out
use of the chemical MTBE (methyl tertiary butyl) a methanol-based gas
additive, by late 2002 [see "NAFTA's Investor "Rights""].
MONDEV
In September 1999, Mondev International Ltd., a Montreal-based real estate
development firm, filed a claim against the U.S. government for $16
million. The case arises from the refusal of the city of Boston to permit
it to expand a mall into a vacant lot in the 1980s although Mondev had a
contract with the city. Mondev successfully sued the city and its
redevelopment authority for $16 million, but the court decision was
reversed on appeal due to state law protecting the redevelopment authority
from liability. Mondev seeks to recover the damages through the NAFTA
Chapter 11 investor-state route.
ADF GROUP
ADF, a Canadian fabricator of structural steel for complex structures, is
suing the United States, seeking $90 million in compensation. ADF entered
into a contract with Shirley Contracting Corporation to provide materials
for construction of a Virginia highway interchange. ADF sought to
fabricate products in Canada, using U.S.-made steel. U.S. federal
government authorities held that this arrangement ran afoul of a "Buy
America" requirement. ADF proceeded to attempt to fulfill the contract
using its U.S. facilities and subcontracting to other U.S. facilities. It
alleges the Buy America rules violate Chapter 11 requirements for national
treatment and for bans on performance requirements.
SUITS AGAINST MEXICO
METALCLAD
This case involves a claim by U.S.-based Metalclad, a waste-disposal
company, that the Mexican state of San Luis Potosi breached Chapter 11 of
NAFTA in refusing permission for a waste disposal facility.
The governor deemed the plant an environmental hazard to surrounding
communities, and ordered it closed down on the basis of a geological audit
performed by environmental impact analysts at the University of San Luis
Potosi. The study had found that the facility is located on an alluvial
stream and therefore would contaminate the local water supply. Eventually,
the governor declared the site part of a 600,000 acre ecological zone.
Metalclad sought compensation of some $90 million for expropriation and
for violations of national treatment, most favored nation treatment and
prohibitions on performance requirements. This figure is larger than the
combined annual income of every family in the county where Metalclad's
facility is located.
In August 2000, a tribunal found that Mexico had breached the Investment
chapter and awarded Metalclad $16.7 million, the amount it had spent in
the matter. In this case, Metalclad proceeded to begin construction of the
facility without having local approvals, claiming that it had assurances
from the Mexican federal government. The case raises important questions
about whether governments retain the authority to enact environmental
controls on foreign investors and about the powers of local governments.
The Mexican government has appealed the award to the Supreme Court of
British Columbia, since hearings of the case were held in British
Columbia, and the Canadian government and government of Quebec have
intervened.
WASTE MANAGEMENT INC.
This case involves a claim filed in 1998 against the Mexican government
for $60 million by Waste Management, Inc. It concerns an exclusive 15-year
concession to its subsidiary to provide solid waste management to
Acapulco. The company claims that it was guaranteed payment by the state
of Guerrero and the Mexican federal development bank, Banobras, and that
the obligations have not been met, constituting actions tantamount to
expropriation.
DESONA/AZINIAN
U.S.-based DESONA and its individual investors, Robert Zinian et. al.
filed this claim for over $14 million and costs in 1997 against the
Government of Mexico. The claim related to a waste management business in
Mexico. Desona claimed that a long series of unfair and conflicting
decisions and actions by local authorities contributed to its losses, and
culminated in the forcible removal of its managers from its waste
collection and landfill business in Naucalpan, a suburb of Mexico City on
four days notice.
The case was dismissed by the arbitral panel in November 1999, in a
scathing decision critical of the company's actions and record of
dishonesty. However, since the case turned on the finding of invalidity of
the contract on which the claim was based, it does not assist governments
and citizens regarding the problem of the impact of Chapter 11 claims on
legislative actions.
CEMSA/FELDMAN
This is the first NAFTA investor-state suit involving a tax issue. U.S.
investor Feldman, sole owner of the corporation CEMSA, filed a claim
against the Mexican government in May 1999 for $50 million, alleging that
his company was wrongly denied excise tax rebates and export rights for
its cigarette exporting business. Again, allegations of numerous irregular
actions by Mexican authorities are made, including that CEMSA was required
to provide invoices from its vendors which stated the amount of tax
included in the purchase price. However, CEMSA claims that the tax
authorities did not require that manufacturers provide this information,
so that CEMSA could not comply with the requirement.
ADAMS
This case involves a dispute over title to and use of land on which U.S.
investors had built vacation homes. A group of Mexican landowners won a
claim in Mexican courts that the disputed land had been illegitimately
taken from them by the Mexican government, which later authorized its use
by the U.S. investors. The Mexican Supreme Court ordered the land returned
to the landowners, and Mexican authorities did subsequently return the
land, including the vacation homes on it. The U.S. investors are seeking
$75 million in compensation under Chapter 11.
- Michelle Swenarchuk
it's = it is. Its means something
belonging to it.
The apostrophe is only for letters or words left out; it's a contraction of a
lengthier grouping. So, the plural of 2 is 2s. But
the 2's style is the type style belonging to it at that time, or the style of
the 2.
In the case of its, however, the word is the possessive without an apostrophe.
Brutalization of language, a major asset accrued to humans, leaves us without
the technique by which to go on in directions in which
we'd like to go.
http://www.essential.org/monitor/mm2001/01april/corp1.html
http://www.gregpalast.com/detail.cfm?artid=78&row=0
The Globalizer Who Came In From the Cold
Observer, London Wednesday, October 10, 2001
JOE STIGLITZ: TODAY'S WINNER OF THE NOBEL PRIZE IN ECONOMICS
by Greg Palast
The World Bank's former Chief Economist's accusations are eye-popping - including how the IMF and US Treasury fixed the Russian elections
"It has condemned people to death," the former apparatchik told me. This was like a scene out of Le Carre. The brilliant old agent comes in from the cold, crosses to our side, and in hours of debriefing, empties his memory of horrors committed in the name of a political ideology he now realizes has gone rotten.
And here before me was a far bigger catch than some used Cold War spy. Joseph Stiglitz was Chief Economist of the World Bank. To a great extent, the new world economic order was his theory come to life.
I "debriefed" Stiglitz over several days, at Cambridge University, in a London hotel and finally in Washington in April 2001 during the big confab of the World Bank and the International Monetary Fund. But instead of chairing the meetings of ministers and central bankers, Stiglitz was kept exiled safely behind the blue police cordons, the same as the nuns carrying a large wooden cross, the Bolivian union leaders, the parents of AIDS victims and the other 'anti-globalization' protesters. The ultimate insider was now on the outside.
In 1999 the World Bank fired Stiglitz. He was not allowed quiet retirement; US Treasury Secretary Larry Summers, I'm told, demanded a public excommunication for Stiglitz' having expressed his first mild dissent from globalization World Bank style.
Here in Washington we completed the last of several hours of exclusive interviews for The Observer and BBC TV's Newsnight about the real, often hidden, workings of the IMF, World Bank, and the bank's 51% owner, the US Treasury.
And here, from sources unnamable (not Stiglitz), we obtained a cache of documents marked, "confidential," "restricted," and "not otherwise (to be) disclosed without World Bank authorization."
Stiglitz helped translate one from bureaucratise, a "Country Assistance Strategy." There's an Assistance Strategy for every poorer nation, designed, says the World Bank, after careful in-country investigation. But according to insider Stiglitz, the Bank's staff 'investigation' consists of close inspection of a nation's 5-star hotels. It concludes with the Bank staff meeting some begging, busted finance minister who is handed a 'restructuring agreement' pre-drafted for his 'voluntary' signature (I have a selection of these).
Each nation's economy is individually analyzed, then, says Stiglitz, the Bank hands every minister the same exact four-step program.
Step One is Privatization - which Stiglitz said could more accurately be called, 'Briberization.' Rather than object to the sell-offs of state industries, he said national leaders - using the World Bank's demands to silence local critics - happily flogged their electricity and water companies. "You could see their eyes widen" at the prospect of 10% commissions paid to Swiss bank accounts for simply shaving a few billion off the sale price of national assets.
And the US government knew it, charges Stiglitz, at least in the case of the biggest 'briberization' of all, the 1995 Russian sell-off. "The US Treasury view was this was great as we wanted Yeltsin re-elected. We don't care if it 's a corrupt election. We want the money to go to Yeltzin" via kick-backs for his campaign.
Stiglitz is no conspiracy nutter ranting about Black Helicopters. The man was inside the game, a member of Bill Clinton's cabinet as Chairman of the President's council of economic advisors.
Most ill-making for Stiglitz is that the US-backed oligarchs stripped Russia 's industrial assets, with the effect that the corruption scheme cut national output nearly in half causing depression and starvation.
After briberization, Step Two of the IMF/World Bank one-size-fits-all rescue-your-economy plan is 'Capital Market Liberalization.' In theory, capital market deregulation allows investment capital to flow in and out. Unfortunately, as in Indonesia and Brazil, the money simply flowed out and out. Stiglitz calls this the "Hot Money" cycle. Cash comes in for speculation in real estate and currency, then flees at the first whiff of trouble. A nation's reserves can drain in days, hours. And when that happens, to seduce speculators into returning a nation's own capital funds, the IMF demands these nations raise interest rates to 30%, 50% and 80%.
"The result was predictable," said Stiglitz of the Hot Money tidal waves in Asia and Latin America. Higher interest rates demolished property values, savaged industrial production and drained national treasuries.
At this point, the IMF drags the gasping nation to Step Three: Market-Based Pricing, a fancy term for raising prices on food, water and cooking gas. This leads, predictably, to Step-Three-and-a-Half: what Stiglitz calls, 'The IMF riot.'
The IMF riot is painfully predictable. When a nation is, "down and out, [the IMF] takes advantage and squeezes the last pound of blood out of them. They turn up the heat until, finally, the whole cauldron blows up," as when the IMF eliminated food and fuel subsidies for the poor in Indonesia in 1998. Indonesia exploded into riots, but there are other examples - the Bolivian riots over water prices last year and this February, the riots in Ecuador over the rise in cooking gas prices imposed by the World Bank. You'd almost get the impression that the riot is written into the plan.
And it is. What Stiglitz did not know is that, while in the States, BBC and The Observer obtained several documents from inside the World Bank, stamped over with those pesky warnings, "confidential," "restricted," "not to be disclosed." Let's get back to one: the "Interim Country Assistance Strategy" for Ecuador, in it the Bank several times states - with cold accuracy - that they expected their plans to spark, "social unrest," to use their bureaucratic term for a nation in flames.
That's not surprising. The secret report notes that the plan to make the US dollar Ecuador's currency has pushed 51% of the population below the poverty line. The World Bank "Assistance" plan simply calls for facing down civil strife and suffering with, "political resolve" - and still higher prices.
The IMF riots (and by riots I mean peaceful demonstrations dispersed by bullets, tanks and teargas) cause new panicked flights of capital and government bankruptcies. This economic arson has it's bright side - for foreign corporations, who can then pick off remaining assets, such as the odd mining concession or port, at fire sale prices.
Stiglitz notes that the IMF and World Bank are not heartless adherents to market economics. At the same time the IMF stopped Indonesia 'subsidizing' food purchases, "when the banks need a bail-out, intervention (in the market) is welcome." The IMF scrounged up tens of billions of dollars to save Indonesia's financiers and, by extension, the US and European banks from which they had borrowed.
A pattern emerges. There are lots of losers in this system but one clear winner: the Western banks and US Treasury, making the big bucks off this crazy new international capital churn. Stiglitz told me about his unhappy meeting, early in his World Bank tenure, with Ethopia's new president in the nation's first democratic election. The World Bank and IMF had ordered Ethiopia to divert aid money to its reserve account at the US Treasury, which pays a pitiful 4% return, while the nation borrowed US dollars at 12% to feed its population. The new president begged Stiglitz to let him use the aid money to rebuild the nation. But no, the loot went straight off to the US Treasury's vault in Washington.
Now we arrive at Step Four of what the IMF and World Bank call their "poverty reduction strategy": Free Trade. This is free trade by the rules of the World Trade Organization and World Bank, Stiglitz the insider likens free trade WTO-style to the Opium Wars. "That too was about opening markets," he said. As in the 19th century, Europeans and Americans today are kicking down the barriers to sales in Asia, Latin American and Africa, while barricading our own markets against Third World agriculture.
In the Opium Wars, the West used military blockades to force open markets for their unbalanced trade. Today, the World Bank can order a financial blockade just as effective - and sometimes just as deadly.
Stiglitz is particularly emotional over the WTO's intellectual property rights treaty (it goes by the acronym TRIPS, more on that in the next chapters). It is here, says the economist, that the new global order has "condemned people to death" by imposing impossible tariffs and tributes to pay to pharmaceutical companies for branded medicines. "They don't care," said the professor of the corporations and bank loans he worked with, "if people live or die."
By the way, don't be confused by the mix in this discussion of the IMF, World Bank and WTO. They are interchangeable masks of a single governance system. They have locked themselves together by what are unpleasantly called, "triggers." Taking a World Bank loan for a school 'triggers' a requirement to accept every 'conditionality' - they average 111 per nation - laid down by both the World Bank and IMF. In fact, said Stiglitz the IMF requires nations to accept trade policies more punitive than the official WTO rules.
Stiglitz greatest concern is that World Bank plans, devised in secrecy and driven by an absolutist ideology, are never open for discourse or dissent. Despite the West's push for elections throughout the developing world, the so-called Poverty Reduction Programs "undermine democracy."
And they don't work. Black Africa's productivity under the guiding hand of IMF structural "assistance" has gone to hell in a handbag. Did any nation avoid this fate? Yes, said Stiglitz, identifying Botswana. Their trick? "They told the IMF to go packing."
So then I turned on Stiglitz. OK, Mr Smart-Guy Professor, how would you help developing nations? Stiglitz proposed radical land reform, an attack at the heart of "landlordism," on the usurious rents charged by the propertied oligarchies worldwide, typically 50% of a tenant's crops. So I had to ask the professor: as you were top economist at the World Bank, why didn't the Bank follow your advice?
"If you challenge [land ownership], that would be a change in the power of the elites. That's not high on their agenda." Apparently not.
Ultimately, what drove him to put his job on the line was the failure of the banks and US Treasury to change course when confronted with the crises - failures and suffering perpetrated by their four-step monetarist mambo. Every time their free market solutions failed, the IMF simply demanded more free market policies.
"It's a little like the Middle Ages," the insider told me, "When the patient died they would say, 'well, he stopped the bloodletting too soon, he still had a little blood in him.'"
I took away from my talks with the professor that the solution to world poverty and crisis is simple: remove the bloodsuckers.
*
A version of this was first published as "The IMF's Four Steps to Damnation" in The Observer (London) in April and another version in The Big Issue - that's the magazine that the homeless flog on platforms in the London Underground. Big Issue offered equal space to the IMF, whose "deputy chief media officer" wrote:
"... I find it impossible to respond given the depth and breadth of hearsay and misinformation in [Palast's] report."
Of course it was difficult for the Deputy Chief to respond. The information (and documents) came from the unhappy lot inside his agency and the World Bank.
From The Observer, London.
Confidential documents show top corporate executives met secretly with government officials to set the pro-business agenda for the current WTO talks. This may be the smoking gun that proves corporate collusion in the WTO process.
By Greg Palast
Special to CorpWatch November 9, 2001
LONDON -- Three confidential documents from inside the World Trade Organization Secretariat and a group of captains of London finance, who call themselves the "British Invisibles," reveal the extraordinary secret entanglement of industry with government in designing European and American proposals for radical pro-business changes in WTO rules. One set of documents, minutes of the private meetings of the Liberalization of Trade in Services (LOTIS) committee, obtained by BBC television's Newsnight program and CorpWatch, record 14 secret meetings, from April 1999 and February 2001, between Britain's chief services trade negotiators, the Bank of England and the movers and shakers of the Euro-American business world. Those attending the closed LOTIS include Peter Sutherland, International Chairman of US-based investment bank Goldman Sachs and formerly the Director General of the World Trade Organization. LOTIS is chaired by The Right Honorable Lord Brittan of Spennithorne Q.C., who, as Leon Brittan headed the European Union. He currently serves as Vice-Chairman of international banking house UBS Warburg Dillon Read. Other LOTIS members include the European chiefs of US service industry giants Morgan Stanley Dean Witter, Prudential Corporation and PriceWaterhouseCoopers. LOTIS is an outgrowth of the self-styled, "British Invisibles," more formally known as the Financial Services International London group. They were joined at various times by specially-invited members of the European Commission's trade negotiating team. The minutes indicate that the government officials shared confidential negotiating documents with the corporate leaders as well as inside information on the negotiating positions of the European community, the US and developing nations. At the meeting held on February 22nd of this year, Britain's chief negotiator on the General Agreement on Trade in Services (GATS) made reference to the European Commission's paper on industry regulation which had been privately circulated to LOTIS members for their comment. GATS is a far reaching agreement that would affect every public service from healthcare and education to energy, water and transportation. It would challenge national environmental, labor and consumer laws as barriers to trade making these and other critical services totally unregulated, say critics. Barry Coates, director of the WTO watchdog organization the World Development Movement, said he was surprised to learn that the LOTIS industry members received documents which the British government had refused to give his organization, even papers "which they told us did not exist." Coates, in Qatar today to monitor the WTO confab, was somewhat amused that the minutes indicate that LOTIS members, whose companies represent over $100 billion in assets, seemed fixated on countering the arguments and actions of Coates' low-budget organization. Two of the LOTIS meetings concentrated on hiring consulting firms and academics to provide the government agencies with answers to the World Development Movement's arguments which question GATS and the wider globalization agenda. The minutes noted that "the pro-GATS case was vulnerable when the NGOs asked for proof of where the economic benefits of liberalization lay." Reuters executive Henry Manisty offered his news service to the LOTIS propaganda effort. Manisty told the LOTIS group he "wondered how business views could best be communicated to the public." Reuters, he said, "would be most willing to give them publicity." "For a long time conspiracy theorists thought there had been secret meetings between governments and corporations," said Coates. "Looking at these minutes, it was worse than we thought. [The WTO GATS proposals] are a stitch-up between corporate lobbyists and government."
A Question of Necessity?
Besides having advance or exclusive access to otherwise confidential governmental negotiating documents, the minutes indicate that the industry chiefs, as members of the European Services Forum, held exclusive meetings with the "Article 133" group, which sets the European Commission's trade policies. The Article 133 group's deliberations are supposedly confidential. At least one such gathering with the Article 133 committee, held on October 30th has been independently confirmed by investigators from the Dutch think tank Corporate Europe Observatory. Two other sets of documents suggest that LOTIS and other corporate lobbyists appeared to have been astonishingly successful in getting Western governments to adopt their plans to radically expand the reach of the GATS treaty. A confidential memo dated March 19th obtained from inside the WTO's Secretariat, written four weeks after the LOTIS meeting on the matter, indicates that European negotiators had accepted industry-favored amendments to GATS Article VI.4, known as the "necessity test." The necessity test requires nations to prove that their regulations -- from pollution control to child labor laws -- are not hidden impediments to trade. Industry wants the WTO to employ a necessity test similar to the one in the North America Free Trade Agreement which has worked to reverse local environmental rules. For example, Mexico has been forced to pay $17 million to an American corporation, Metalclad, for delaying the operation of the company's toxic waste dump and processing plant. Local Mexican officials had attempted to block the plant's operation on the grounds that it was built without a construction permit, and would not have received one, as the plant handling toxins was placed above the area's drinking water supply. According to the secret March 19 memo from the Working Party on Domestic Regulation, issued to WTO members by the organization's Secretariat, European negotiators reached a private consensus to change the worldwide GATS agreement to include a much stronger form of the necessity test than found even in NAFTA. The Agreement between the US, Canada and Mexico only requires that a nation's regulations be "least trade restrictive." Under the GATS, as proposed in the memo, national laws and regulations would be struck down if they are "more burdensome than necessary" to business. The difference between the NAFTA language and the proposal for GATS is subtle, but the effect would be enormous. The language in the WTO memo effectively removes trade from the equation. Rather, a nation would have to adopt rules which are, in the memo's words, the most "efficient" -- that is to say those which carry the lowest cost to business.
NAFTA on Steroids
The changes, as proposed, would slash regulatory controls over local businesses as well as foreign operators seeking entry to a market. For example, the State of California banned the gasoline additive MBTE because pollutes ground water. The Canadian maker of the additive has sued the United States under NAFTA on the grounds that banning the chemical was not the "least trade restrictive" choice for stopping ground water contamination. California could have, the Canadians argue, chosen to dig up and repair thousands of gas station holding tanks and established a giant new inspection system. While the cost of the alternative, running into billions of dollars, could effectively force California to back away from protecting its ground water, it would permit Canada to continue to export the contaminant. California is fighting Canada's interpretation of the necessity test before a NAFTA disputes panel. But under the language proposed for WTO, the state would have no defense. Lori Wallach of Global Trade Watch, Washington DC, calls the proposed language GATS language changes, "NAFTA on steroids." The WTO Secretariat's proposals follow lines suggested in another confidential document from the European Community's Working Group dated February 24 and entitled "Domestic Regulation: Necessity and Transparency," issued just after LOTIS meeting on the matter with European trade negotiators. Spokespersons for Britain's Department of Trade and Industry, a leader in the EC Working Group, responded to our discovery of the documents by stating that the GATS changes, as proposed, would still allow nations their "sovereign right to regulate services" to meet "national policy objectives." However, according to the confidential March 19 memo, in the course of secret multilateral negotiations trade ministers have agreed that, before a WTO tribunal, a defense of, "safeguarding the public interest... was rejected." In place of a "public interest" defense, the WTO Secretariat suggests in the memo that the trade body adopt an "efficiency principle." This has the advantage, states the official Working Group paper, of allowing Presidents and Prime Ministers hostile to environmental protection regulations to eliminate them -- not through votes of a nation's congress or parliament, but through an edict of WTO which a nation would be powerless to reverse. "It may be politically more acceptable," says the memo, "to countries to accept international obligations which give primacy to economic efficiency." If, for example, the Bush Administration would rather not reduce the arsenic contamination of water from mining operations, despite congressional legislation and decisions by regulatory panels, it could eliminate the anti-pollution laws by acceding to orders of a WTO disputes panel that found regulation "more burdensome than necessary." Unlike US congressional, regulatory and court proceedings, WTO disputes panel deliberations and submitted evidence are closed to the public and the records sealed. A World Trade Organization spokesman acknowledged the authenticity of the March 19th note. However, he said the internal discussion document could not be read to suggest that WTO have the, "power to strike down national laws or regulations." Barry Coates of the World Development Movement disagrees, "At its heart, it is a direct attack on the democratic process."
Greg Palast can be seen today, Friday November 9th, reporting on the WTO Doha conference, on Britain's premier news program, Newsnight. You can view this program live at 17:30 EST. The program will remain at this location for 24 hours after which time it will be linked from www.gregpalast.com Greg Palast is an investigative journali