Feature

GATT: The Final Act

by Robert Weissman

 IF YOU LIKED NAFTA, you'll love the new GATT.

That view is shared by U.S. proponents and opponents of the Uruguay Round of the General Agreement on Tariffs and Trade (GATT), the latest version of the 122-nation agreement which governs world trade.

Consumer advocate and Uruguay Round GATT opponent Ralph Nader calls the new GATT, "NAFTA on steroids."

"GATT is a much bigger deal than NAFTA for many companies," agrees John Howard, director of international policy and programs at the U.S. Chamber of Commerce, a strong Uruguay Round supporter. "Some within industry say GATT is worth 10 NAFTAs combined," adds Kevin Shannon, director of international affairs for the Electronics Industry Association.

The Uruguay Round and the North American Free Trade Agreement are very similar in their orientation. Both cut tariffs. More importantly, both extend trade rules to new areas of the economy - to laws governing foreign investment in manufacturing, trade and investment in services and protections for intellectual property (patents, copyrights and trademarks), and to so-called technical barriers to trade, which include consumer, environmental and workplace safety regulations.

But the new GATT stakes are bigger, and the dynamics of the agreement are qualitatively different, than with NAFTA for a number of important reasons. While NAFTA only involves three nations, the Uruguay Round would involve most of the countries in the world and affects more than four- fifths of world trade. The Uruguay Round would create a standing organization, known as the World Trade Organization (WTO), to administer global trade rules and provide a structure for developing new rules. The WTO would be a major new international organization with significant powers, and would maintain a legal personality like the United Nations or the World Bank. And although the United States would be the most powerful player in the World Trade Organization, it would have a far less dominant role than it does in overseeing NAFTA. This is due both to the larger number of member countries in GATT and the fact that the two most powerful U.S. trading powers, Japan and the European Union, will be members of the WTO.

Supporters claim the Uruguay Round agreement will generate hundreds of billions of dollars for the U.S. and global economies over the next decade. Opponents dispute the validity of the estimates of economic gain, but focus their criticisms on the new GATT's political and legal effects. They charge it will substantially impair the ability of the federal, state and local governments to control corporate activity, to the detriment of environmental, consumer and worker well-being.

Although critics have voiced a range of far-reaching concerns about the Uruguay Round's effect on Third World societies and the global ecology, the final debate preceding implementation of the Uruguay Round will focus only on its effect on the United States. The U.S. Congress will vote on the Uruguay Round and on implementing legislation to conform domestic laws to the terms of the trade agreement in late November or early December. If Congress votes to approve the Uruguay Round, the World Trade Organization is expected to begin operations in January 1995.

The great GATT divide

 The battle lines in the Uruguay Round debate generally parallel those of the NAFTA controversy.

Opposing the Uruguay Round are: consumer groups, including Public Citizen, which is the leader of the anti-Uruguay Round coalition; environmental groups, which in contrast to their positions on NAFTA, are united in opposition to the Uruguay Round; organized labor, with the textile and garment workers' unions and the International Union of Electrical Workers as the most prominent critics; Ross Perot and his grassroots organization United We Stand America; and various right-wing individuals and organizations, including Pat Buchanan and Jesse Helms, R-North Carolina.

The opposition to the Uruguay Round is not nearly as vocal as their opposition to NAFTA was, however. Ralph Nader and Public Citizen have been the leading and most active opponents; a few unions have devoted some meaningful attention to the issue and Pat Buchanan and some other conservative forces have been staunch in their opposition. But the AFL-CIO has done little more than pass a resolution criticizing the Uruguay Round implementing legislation; most of the environmental organizations have generally ignored the issue; and despite an outcry from his United We Stand organization, Ross Perot was exceptionally quiet about the trade pact until September.

In significant part because the opposition has been less organized than it was for NAFTA, Uruguay Round proponents have also been less vocal than they were in the NAFTA row. But less vocal does not mean inactive.

The Office of the U.S. Trade Representative (USTR), headed by Mickey Kantor, has been the most aggressive of the Clinton administration's agencies. Kantor and his deputies have vigorously touted the purported benefits of the Uruguay Round on Capitol Hill, and moved quickly to respond to any sign of a threat to Congressional passage of the trade agreement.

The business community has organized itself into the Alliance for GATT Now, which claims 285 members. The Alliance is headed by Texas Instruments chief executive officer Jerry Junkins. Other pro- GATT coalitions include the Emergency Committee for American Trade, a 60 multinational company member group headed by pharmaceutical maker Abbott Laboratories chief executive officer Duane Burnham and the Pro-Trade Group. Standing business organizations, including the U.S. Chamber of Commerce, the National Association of Manufacturers, the Business Roundtable (made up of the chief executive officers of the largest U.S. corporations) and the Pharmaceutical Researchers and Manufacturers of America, have made passage of the Uruguay Round a top priority. The business groups have coordinated their efforts closely with the Clinton administration, and have spent millions on lobbyists and public relations firms who have helped put in place a comprehensive campaign of lobbying, advertising and mobilization of member companies.

Not surprisingly, companies which stand to benefit most directly from the provisions of the Uruguay Round have been the most active proponents. Boeing, for example, expects the trade deal will undermine European efforts to subsidize the European Union-backed Airbus, which has emerged as Boeing's major competitor. Caterpillar, which is heavily dependent on export markets, claims the Uruguay Round's tariff reductions will help the company gain $350 million in additional sales by the year 2000, according to spokesperson Marsha Hausser. Texas Instruments' Jerry Junkins asserts that tariff cuts will translate into increased sales of $5 billion for his company and that strengthened intellectual property protections will aid it even further.

But the widespread business support for the Uruguay Round is driven primarily not by narrow calculations of direct benefits to particular companies, but by a broader, long-term vision which values the structural, deregulatory effect the Uruguay Round will have on the international economy.

The overall effect of the Uruguay Round would be to "level the playing field," says Bruce Bunch, a spokesperson for General Electric. "Leveling the playing field" can fairly be translated as preventing national governments from favoring domestic producers, and limiting governmental ability to regulate corporations in general. Achievement of these broad goals is fostered by what the Chamber of Commerce's Howard identifies as the key elements of the agreement: the reduction in tariffs, the expansion of trade rules to cover new areas and the creation of the WTO.

Prelude to the Final Act

 Unlike the national debate over NAFTA, which was waged as vehemently on Main Street as on Capitol Hill, the GATT dispute has largely been confined to the corridors of power in Washington, D.C. The limited scope of the debate is due in part to the agreement's inherent complexity, but is probably more a consequence of the national media's miserly coverage of the trade pact (justified on the grounds of the perceived dullness of a complex trade agreement and the belief that passage of the new GATT is inevitable), and the failure of the labor and environmental opponents of the agreement to mobilize their memberships around the issue. Nonetheless, there have been pockets of strident grassroots opposition to the new GATT, and these expressions of popular discontent have played a significant role in shaping the debate.

The Clinton administration had hoped to introduce the agreement and its implementing legislation into Congress early this past summer. The fast-track procedures under which Congress will consider the new GATT require Congress to vote on the agreement within 90 days, limit floor debate to 20 hours and prohibit amendments to implementing legislation. Despite these far-reaching restrictions, the Clinton administration hoped to push the agreement through Congress in a couple of weeks or less.

Legislative gridlock, poor strategic planning and opposition monkey-wrenching scuttled the administration's plans, however. The health care reform debacle and the extended debate over the crime bill diverted legislative attention away from the new GATT. The administration's poorly handled effort to include an extension of fast-track authority in the new GATT's implementing legislation sparked a heated and protracted controversy over whether future trade agreement's should include provisions on labor rights and environmental protection; when the skirmish could not be resolved, the administration reluctantly agreed to drop its request for extended fast-track authority, but not until several weeks had been wasted. A controversy over how to make up for federal government revenues lost due to the tariff cuts further slowed the process. And opponents of the new GATT were able to throw up obstacles to rapid passage of the agreement, notably by generating concern among state and local officials about how the trade agreement would impact their discretionary powers.

Opponents of the new GATT, led by Nader, also took to the radio airwaves to denounce the agreement and rally popular opposition. While the results did not approach the level of grassroots concern about NAFTA, they did have a noticeable effect on the dynamics of the debate on Capitol Hill. Talk radio- generated outrage led to the jamming of the phone lines of Minority Leader Senator Robert Dole, R- Kansas.

Motivated in part by a desire to sabotage President Clinton's entire legislative agenda, and in part by the flood of calls and letters opposing the new GATT, Dole announced his support for a postponement of the Congressional vote on the trade deal until early 1995.

 Dole's call for a delay in the vote earned him the wrath of the business establishment. The New York Times twice editorialized against his stand, in harsh and personalized attacks. And the business community leapt into action, with numerous corporate chief executive officers directing their persuasive powers at him, according to one business lobbyist. Ultimately, Dole retreated from his call for delay, but not until more time in the legislative session had been lost.

Finally, with the early October target adjournment date approaching, the Clinton administration introduced the Uruguay Round implementing legislation on September 27, hoping to ram it quickly through Congress. Their hopes foundered, however, on the opposition of Senator Ernest Hollings, D- South Carolina. Hollings, who heads the Senate's Commerce Committee, announced he would use his legislative prerogative to hold the bill in his committee for 45 days, far past the scheduled Congressional adjournment.

But the administration was determined to have the agreement approved in 1994. Even though the terms of the Uruguay Round do not require approval of the agreement until July 1995, early U.S. approval would pave the way for the World Trade Organization to begin operations on January 1, 1995. After negotiation with the administration, Congressional leaders agreed to call Congress back into session, after the November elections, for a rare lame duck session.

When Congress reconvenes, it will finally grapple, even if only briefly, with the chief criticisms made in the United States of the Uruguay Round: that the World Trade Organization will unacceptably infringe on U.S. sovereignty and that provisions of the Uruguay Round will undercut domestic consumer and environmental regulations.

Sacrificing sovereignty

 The formation of the World Trade Organization will put much more bite in the GATT framework, proponents and opponents agree. One of the ongoing business criticisms of the old GATT, in fact, is that it has been toothless, unable to enforce its own rules and unable to create new rules to address new realities.

In contrast to the dispute resolution mechanisms of the old GATT, the WTO would possess an ongoing rule-making ability, would operate by voting rather than consensus only, and would maintain a vastly enhanced dispute settlement machinery.

Conservative and progressive critics have warned of the effect of a strong WTO on U.S. sovereignty. "Not in 200 years has the United States dealt away so vast a slice of her liberty," writes Pat Buchanan.

"Decision-making power now in the hands of citizens and their elected representatives, including the Congress, would be seriously constrained by a bureaucracy and a dispute resolution body located in Geneva, Switzerland that would operate in secret and without the guarantees of due process and citizen participation found in domestic legislative bodies and courts," Nader testified before the Senate Foreign Relations Committee in June 1994. "As well as undermining democratic decision-making, establishment of the WTO would increase the primacy of the global trade rules over all other policy goals and domestic laws on the federal, state and local levels."

Rather than claim that critics' fears are exaggerated, or argue that the limits on U.S. sovereignty are worth the price, Clinton administration representatives have engaged in a pattern of replies that can only be considered duplicitous.

The sharpest point of contention related to sovereignty has been over the WTO's dispute settlement mechanism, by which it would resolve disputes over how its rules apply to concrete situations.

Following past GATT practice, the WTO would delegate authority for resolving disputes between nations to three-member panels, which would be composed of trade experts with no conflict-of-interest checks and which would meet in secret. The WTO would allow for a perfunctory appeal of panel decisions to an Appellate Body. The decision of the panel or Appellate Body would then be final, unless every single GATT member country - including the country which initially brought the complaint - decided to reject it. This "reverse consensus" requirement would be a 180-degree turnaround from past GATT practice, and means that nations, including the United States, would no longer have a de facto veto over GATT dispute panel decisions.

Mickey Kantor and other USTR officials have asserted that Congress would maintain full control over the passage, maintenance and repeal of U.S. laws under the WTO regime. "You cannot change any substantive right or obligation of the United States of America under the World Trade Organization without our consent," says Kantor. "No dispute settlement panel or any other ruling of the World Trade Organization can change or affect U.S. law. Only the Congress or a state legislature or a city council can change U.S. law."

 Critics denounce the USTR position as deceptive, emphasizing not only that the United States will lose its veto power over panel decisions under the WTO, but that the WTO panel decisions will carry enormous coercive power. If the WTO finds a country's laws to be "GATT-illegal," the country has two options. In the words of Nader, "it can pay or obey." That is, it can revise the GATT-illegal laws to conform with the WTO's ruling, or it can pay perpetual trade fines equivalent to the dollar value of market loss attributed by the complaining country to the challenged law. If the parties to a dispute cannot agree on a mutually acceptable fine, the prevailing country is entitled to levy cross-sectoral countervailing sanctions against the country maintaining the WTO-illegal laws. If the European Union filed and won a WTO challenge to a U.S. recycling law, for example, it could impose sanctions against, say, the U.S. telecommunications industry - thus motivating the telecommunications industry to lobby against a recycling law which it would otherwise not be concerned about.

Trade über alles

 One of the ways the Uruguay Round extends trade rules to new areas is in its explicit application of GATT rules to the category of "technical barriers to trade," which means product standards designed to protect the environment, consumer safety, worker health and similar ends.

From the perspective of the corporate backers of the Uruguay Round, in the last couple decades technical standards have developed into substantial barriers to international commerce.

But trade barriers are in the eye of the beholder. Critics of the Uruguay Round see many of the laws described as technical barriers by business interests as hard-fought citizen victories won in the democratic arena, providing important protections to people's and environmental well-being.

U.S. Uruguay Round opponents fear foreign-based companies will encourage their governments to challenge the generally more advanced U.S. health, safety and environmental regulations as unfair barriers to trade. Already, in reports published by the European Union, Japan and Canada , the major U.S. trading partners have identified a host of U.S. laws designed to protect consumer and environmental well-being that they believe to be illegal barriers to trade. A sampling of the U.S. laws on the hit-lists illustrates the wide array of laws that may be vulnerable to attack under the new GATT. These laws and regulations include: regulations limiting the level of lead permitted in ceramic dishes; domestic safety law covering electrical shavers; and a California law requiring glass containers for food and beverages to contain a minimum percentage of recycled glass.

Uruguay Round opponents also fear that U.S.-based companies may manipulate the process to challenge domestic laws as well. The Uruguay Round "will provide a great incentive for U.S. companies to Šrent-a-government' to pursue trade challenges of policies that could not be shaped to their liking through the democratic process," says Lori Wallach, director of Public Citizen's Trade Program.

The Clinton administration and business backers of the Uruguay Round dismiss fears about attacks on U.S. health and safety laws as overblown. Any U.S. law can be maintained, they insist, as long as it is "non-discriminatory," that is, treats domestic and imported products equally.

The problem is that GATT's longstanding non-discrimination principle has been expanded in the Uruguay Round into a battery of stringent tests which go far beyond any rational interpretation of non- discrimination. Any health, safety or environmental measure must be able to pass all of these tests, or it risks being declared GATT-legal.

Probably the most severe of these tests is the requirement that a health, safety or environmental measure be the "least trade restrictive means" to achieve a particular goal. The political infeasibility of a purportedly less trade restrictive alternative would not be a defense. Since legislators almost never consciously seek the least trade restrictive means to achieve a particular goal, and since the test lends itself to creative applications, virtually any safety law may be open to challenge.

Public Citizen's Wallach provided a list of illustrative potential challenges in October 1994 testimony before the Senate Commerce Committee. Under the least trade restrictive test, she explained:

o Canada could argue, as it did in an amicus brief, that a phaseout of all asbestos should not apply to the asbestos produced in Canada because the health risk of the relatively less hazardous Canadian can be controlled sufficiently through use restrictions.

 o If the United States decided to ban asbestos-lined brakes because U.S. workers are exposed to the asbestos when they install or repair the brakes, another country could argue that the ban is unnecessary because the workers could use protective clothing and ventilation to limit the risk.

o If the Occupational Safety and Health Administration (OSHA) phased out cadmium batteries because the cadmium leaches into ground water in landfills, a challenge could be mounted because most substitutes also contain heavy metals that would present similar problems.

o Recycling schemes and packaging requirements may be vulnerable. In past trade challenges, the European Court of Justice invalidated a component of a Danish recycling scheme requiring the use of reusable containers that could be handled by facilities in Denmark , and the U.S. complained that Ontario's imposition of higher taxes on recyclable beer containers than on reusable ones discriminates against U.S. beer, which is sold largely in cans, as compared with Canadian beer, which is sold largely in bottles.

In making their broadest critiques, Uruguay Round opponents argue that the least trade restrictive test encapsulates the basic thrust of the new GATT. Wallach says the Uruguay Round would impose on the world an ideology of "trade über alles," subordinating environmental, consumer and worker protections to the dictates of international commerce.

Nader says the imposition of the least-trade-restrictive principle as a controlling provision of the trade pact makes the new GATT "a Špull-down' not a Špull-up' agreement." Under this provision, he notes, "countries could not violate the WTO's rules by treating their workers, consumers or the environment too harshly. It is countries with more advanced protections in these areas that are the vulnerable ones."

Safe food or safe food companies?

 The most hotly contested substantive portion of the Uruguay Round has probably been the section on food safety, known as the sanitary and phytosanitary agreement.

The food safety section is quite similar to the section on technical barriers to trade, but it places a heavier emphasis on international "harmonization" of standards - in other words, the adoption of internationally uniform standards. While the Uruguay Round provisions on technical barriers to trade call for harmonization, international standards or standard-making bodies do not exist for many products. For food safety, an international body, the Rome-based Codex Alimentarius Commission, does exist, and it has promulgated a long list of standards.

Consumer advocates and public health-minded environmentalists have denounced Codex as an industry-dominated body. "Cracking the Codex," a 1993 report issued by the British National Food Alliance and Essential Information, the publisher of Multinational Monitor, found that, between 1989 and 1991, industry representatives accounted for 26 percent of all participants in Codex standard- setting committees came from Codex. Representatives from Nestle alone outnumbered the participants from more than 80 of the 105 countries participating in Codex proceedings from 1989 to 1991.

Not surprisingly, Codex standards are generally less stringent than those of the United States. "Trading Away U.S. Food Safety," an April 1994 study by Public Citizen's Patti Goldman and the Washington, D.C.-based Environmental Working Group's Richard Wiles, found that Codex has set pesticide tolerances for 40 pesticides for which the United States has set no tolerances for any food, including 6 pesticides classified as carcinogens by the U.S. Environmental Protection Agency. Overall, "there are 1,787 pesticide/crop combinations where Codex allows greater amounts of pesticide residues, and thus less health protections, than U.S. standards," the study concluded. Adoption of Codex standards would have startling results, the study found. "If Codex tolerances [were] adopted in all the situations where they are higher than U.S. tolerances, maximum allowable cancer risk from these pesticide/crop combinations would increase by a factor of 12."

Other U.S. food safety protections, outside of the area of pesticides, may also suffer from Uruguay Round pressures to harmonize with Codex standards. The European Union complained in its recent report on U.S. trade barriers, for example, that the Nutrition Labeling and Education Act, the law responsible for the new food product labels in the United States, sets standards different than those of Codex, and therefore discriminates against foreign food producers who must adhere only to lesser standards abroad.

To these and related concerns, Uruguay Round proponents have a simple answer. Under the provisions of the Uruguay Round, they emphasize, the United States can maintain pesticide and other food safety standards more stringent than those suggested by Codex, if they are "not maintained without sufficient scientific evidence" and are based on risk assessment techniques.

These neutral-sounding requirements serve Uruguay Round advocates well. Nothing could seem more reasonable than requiring that there be a scientific basis for departing from international norms. Allen Matthys, vice president for technical regulatory affairs of the National Food Processors Association, says simply, "GATT provides that [a country] may maintain in place anything you have dealing with food safety issues ... if they are justifiable." He adds, "The whole basis of science is to justify - if [a standard] won't stand that test, why are you doing it?"

But "Trading Away U.S. Food Safety" convincingly argues that food safety standard setting is not a purely scientific process, but a political process which is informed by science. A society's decision about how much risk and uncertainty it is prepared to accept is a purely political decision, one which science cannot make.

The Uruguay Round proponents' attempt to elevate science over politics is actually an effort to impose a particular political agenda on food safety standard setting - the agenda of the corporate food industry.

"Trading Away U.S. Food Safety" details a number of ways in which the Uruguay Round provisions will require the United States and other countries to lower their food safety protections. First, in the face of cutting-edge technologies, such as food irradiation and biotechnology, Uruguay Round principles would often require a nation to expose itself to uncertain risks. Rather than requiring a manufacturer to bear the burden of proving that a product is safe, a country would have to prove that it is unsafe. Second, the Uruguay Round requirement that standards more stringent than those of Codex not be "maintained without sufficient scientific evidence" may require a nation to prove that its standard is justified by the "best" science or "the preponderance" of science. "Thus, the Uruguay Round invites other countries and dispute settlement panels to second-guess the sufficiency of the scientific evidence underlying legislative and regulatory decisions, turning the trade process into a battleground for dueling science," the study predicts. Third, the risk-assessment requirement would preclude countries from preventing exposures to low-level pollutants on the grounds that the combined effect of such exposures have dangerous and uncertain effects. Science is unable to predict the interactive health effect of tens of thousands of varying exposures - and thus preventative policies designed to eliminate this risk could not be justified under the Uruguay Round.

In sum, "Trading Away U.S. Food Safety" concludes, "the Uruguay Round science and risk assessment criteria could have a severe impact on food safety standards based on [political] value judgments, opening the door to potential invalidation of domestic food safety standards that are based solely on prevention of potential health risks or on consumer preferences in the face of uncertain risks."

This claim is not hysterical. It is firmly grounded in the historical experience of persistent corporate attacks on food safety. Longstanding corporate efforts to abolish the Delaney Clause, the U.S. law that prohibits the use of cancer-causing pesticides that concentrate in processed foods, provides perhaps the best example.

The European Union has identified the Delaney Clause in its report on U.S. trade barriers as an unfair barrier to trade. And it has urged the U.S. Environmental Protection Agency to revise the Delaney Clause on the grounds that it is not based on "sound science."

The National Food Processors Association, a long-time leading foe of the Delaney Clause, agrees with the European Union that the cancer-prevention law may be ripe for a Uruguay Round challenge. Matthys criticizes the Delaney Clause's absolute ban, and says it ignores the principle that "the dose makes the poison," which "is where science has gone." A trade challenge to the Delaney Clause "is appropriate because it is no longer based on science," he says.

A corporate bill of power

 Unless there is a surge of citizen outrage in the weeks before Congress returns from its recess to vote on the Uruguay Round, the new GATT is likely to be resoundingly approved. The Clinton administration and its big business allies' exceedingly optimistic claims about the trade agreement's purported benefits and misleading dismissals of its potential hazards are likely to drown out the warnings of opponents.

Approval of the Uruguay Round would enshrine, Nader says, "a corporate bill of powers" in international and national law. It would tightly circumscribe the ability of national, state and local governments to regulate corporate activity, and it would exert a strong "chilling" effect on future governmental efforts to advance non-commercial living standards in the consumer, worker, environmental, health and safety arenas.

"The result [of passage of the Uruguay Round] would be expanded control by multinational corporations over the international economy and an increased capacity to undo the most vital health, safety and environmental protections won by citizen movements across the globe, or at the least, to keep future advances at bay," Nader told the House Small Business Committee in April 1994. "The WTO would give multinational corporations the lever to hold back or weaken central protections of people in the United States by a practical erosion of our domestic sovereignty through an external layer of regulatory bureaucracy that pull standards down, but not up."

Sidebar

Secrets of the WTO

INTERNATIONAL TRADE POLICY-MAKERS are coming more and more to mimic the behaviors of national security bureaucrats. Their obsession with secrecy is startling, and hazardous to democracy, critics say.

Some of the most scorching criticism of the World Trade Organization (WTO) that would be established by the Uruguay Round has focused on the shroud of secrecy that would cover the proposed new organization.

The WTO's proposed dispute settlement process "is riddled with provisions denying access to governmental deliberations that are an affront to the democratic traditions of this nation," wrote 51 leaders of major U.S. news organizations to President Clinton in a September 1994 letter. Among the signers of the letter were: Paul McMasters, president of the Society of Professional Journalists and executive director of The Freedom Forum First Amendment Center; Greg Favre, president of the American Society of Newspaper Editors; Lawrence Beaupre, vice president of the Associated Press Managing Editors Association; and Dorothy Gilliam, president of the National Association of Black Journalists.

"All of us urge you to restore democratic openness to this crucial process," wrote the news organization leaders. "To do otherwise would break a sacred pact with the American people."

All proceedings of the dispute settlement tribunals would be conducted in secret, closed to both the news media and the public. Documents presented to the panels would be kept confidential (although countries would be permitted to release their own briefs). There would be no means for direct public input into the dispute settlement proceedings, through, for example, public comment or amicus briefs. And there would be no public transcript. And the Appellate Body decision-making process would be similarly cloaked in secrecy.

Further accountability problems would plague the panels. The tribunals would be staffed by three trade experts drawn from countries not involved in the case they would judge. In cases where consumer or environmental laws were challenged, there would be no requirement for the selection of even a single panelist with expertise in these areas. The tribunal members would not be subject to conflict-of-interest rules or even disclosure requirements, and there would not be general guarantees of panel impartiality or economic disinterest.

U.S. Trade Representative Mickey Kantor and other U.S. trade officials have acknowledged the procedural flaws of the World Trade Organization, but claim they can be corrected once the WTO is up and running. In response to criticisms of the WTO's secrecy, Kantor told the House Ways and Means Committee in June 1994, "I share these concerns and have made it quite clear that we will insist that the World Trade Organization develop rules of procedure for all of its bodies ... that provide real access to the public and transparency." About the dispute settlement process, he said, "There should be the opportunity for the public to participate through written submissions and other means. These proceedings themselves should be open to the public."

But critics dismiss these aspirations as empty rhetoric. U.S. negotiating power was at its zenith during the horse-trading surrounding the actual Uruguay Round negotiations, they point out, and there is little reason to suspect other nations will make concessions on behalf of openness and accountability when there is less opportunity to extract reciprocal concessions in other areas.

Moreover, the secrecy which has enveloped the Office of the U.S. Trade Representative (USTR) itself in recent years casts doubt on the sincerity of Kantor's claims, these critics charge.

"Congress should take a hard look at the closed and secretive nature of the USTR before considering the GATT Uruguay Round, which will make this bad system worse," said Public Citizen President Joan Claybrook in announcing the filing of two lawsuits against the USTR office in October 1994. The first suit, filed by Public Citizen and the Center for Auto Safety, seeks to require the USTR to disclose the GATT panel submissions of other nations. The second suit, filed by Public Citizen and the Sierra Club, seeks to reverse a USTR order that closed all trade advisory committee meetings to the public.

"The administration keeps promising to open up trade policy-making, yet their legal action locks citizens out," says Lori Wallach, director of Public Citizen's Trade Program.

- R.W

 

Sidebar

The GATT Numbers Game

THE PRO-GATT RESPONSE to arguments that the Uruguay Round would undermine consumer, worker and environmental health and safety laws is that the United States and the world cannot afford to turn down the economic growth that the Uruguay Round would deliver.

But how much of a rise in the economic tide can be expected from the Uruguay Round? And will that tide raise all boats or will it just raise some while capsizing others?

The figure of choice for most GATT fans in the Clinton administration, for example, is that approval of the Uruguay Round would yield $1 trillion in additional growth in the U.S. gross national product over the next 10 years. This is quite a dazzling figure, one that brings to mind the old consumer maxim: If it sounds too good to be true, it probably is.

 Honest pro-GATT economists are willing to acknowledge that global tariff cuts are likely to have only a modest effect on the world economy. At a GATT conference at the Brookings Institution in July 1994, for instance, University of Michigan economist Alan V. Deardorff, said, "The [Uruguay] Round itself, at least in its economic effects, may not make a big difference. Its effects on the world economy will be largely beneficial, but those effects that economists have been able to quantify are rather small, while the sizes of other effects are necessarily uncertain."

 The U.S. Trade Representative (USTR) does not seem to be not bound by such scholarly candor.

 Compare the USTR's favored growth estimate, for example, with other estimates and you may wonder whether the figure that the Clinton administration hypes to Congress, the media and the public is based on anything firmer than wishful thinking. Dwarfed by the administration's 10-year $1 trillion growth figure are the Organization for Economic Cooperation and Development estimate of $160 billion, the Institute for International Economics estimate of $42 billion, and the Economic Policy Institute's (EPI) estimate of $7 billion. The administration's estimate is 525 percent higher than the next largest estimate and 14,186 percent higher than the EPI estimate for the same 10-year period. Yet trade reporters parrot the administration's numbers without question.

According to Dean Baker, an EPI economist who has analyzed the studies on which the USTR numbers are based, the administration had to go as far afield as Australia to find an estimate to its liking. It adopted a misleadingly optimistic economic model generated by the Centre for International Economics (CIE), an Australian think tank. Baker says a fundamental flaw of the CIE model is that it assumes that government spending, a hefty slice of the overall GNP pie, will not fall - even though GATT reduces the tariff revenues governments collect. If government spending is to remain steady as treasuries collect less tariff revenue, governments will have to raise money elsewhere to offset these losses. Any new taxes would be at the expense of the Uruguay Round's tax break, which the U.S. Treasury Department touts as "one of the largest international tax cuts in history."

 Building a new story on top of the CIE's house of cards, the USTR then inflated the estimate further by assuming that, in addition to the Uruguay Round's direct or "static" gains, the economy will enjoy indirect or "dynamic" gains that result from phasing out the "inefficiencies" or "distortions" that tariffs impose on the market. Baker recognizes the existence of dynamic gains. But he says that the USTR ventures far beyond any credible economic evidence when it assumes that these dynamic gains will be three times bigger than GATT's direct gains.

 Though most economists endorse GATT, the USTR's economic alchemy strays far from the pack of credible academics and even from that of the government's own International Trade Commission (ITC). In an analysis of how different U.S. economic sectors would likely fare under the Uruguay Round, an ITC report published in June 1994 predicted modest growth.

 Of the 58 economic sectors analyzed in "Potential Impact on the U.S. Economy and Industries of the GATT Uruguay Round," the ITC predicted that the round's impact on 48 of these sectors would be small to negligible, with the value of GATT-related exports in those particular sectors rising or falling by up to 5 percent. Several sectors would experience "modest" export gains of between 5 percent and 15 percent, including chemicals, recorded media, electrical equipment and components, telecommunications and fruits, vegetables and grains.

Just one sector would enjoy an export boost of more than 15 percent: pharmaceuticals. Its exports would be buoyed by the imposition of tougher intellectual property rules that would, among other things, undermine the affordable drug policies of such countries as India and Argentina [See "Patents vs. People," Multinational Monitor, June 1994].

On the flip side, a flood of imports would cause the U.S. textiles and apparel sector to suffer a contraction of more than 15 percent. Even GATT proponents agree that textile and apparel workers, a disproportionate number of whom are women and minorities, will pay the highest price for GATT.

The WEFA Group, formerly Wharton Econometrics, forecast a loss of 647,000 apparel and textile jobs in the first 10 years. Trade Research and Analysis, an independent economic consulting firm, estimated that the Uruguay Round's phase-out of the Multi-Fiber Agreement governing international trade in this sector will result in the loss of almost one million U.S. jobs, or a 55 percent downsizing in this sector. The American Textiles Manufacturing Institute study estimated 1.1 million of these jobs would be lost.

 - Andrew Wheat

 

Sidebar

Hit List of U.S. Laws

THE EUROPEAN UNION, Japan and Canada issue annual reports listing U.S. laws and regulations they believe to be unfair barriers to trade. The named laws touch on an incredibly broad cross-section of governmental activity, from food safety protection to banking regulation to the Nuclear Non-Proliferation Act. A small sampling of laws on the European Union and Canada's hit lists illustrates the point:

 o Inland Waterway Transportation: Major U.S. waterways (Mississippi-Missouri and Tennessee- Tombigbee river systems) are maintained by the federal government. There are no lockage fees or tolls, but barge operators pay fuel taxes targeted at new construction. Canada claims this system constitutes a subsidy to inland transportation.

 o Anti-Drug Program: The Federal Aviation Administration requires all employees performing sensitive and security-related functions to undergo a drug test. The EU is opposed to the law because of its extraterritorial reach and claims it interferes with foreign employee relationships.

 o Pesticide Inspection: Canada alleges that shipments of agricultural products are occasionally subject to long delays due to inspections at the U.S. border, particularly pesticide testing, and claims that these delays amount to an unfair trade barrier.

 o Prohibited Pests: Federal law requires importers to guarantee the absence of pests including the pear leaf blister moth on apples and pears. The EU criticizes the United States for prohibiting pests that are not widespread in the United States because it is not a scientific approach.

 o Prohibited Pathogens: Federal law prohibits the importation of fruits and vegetables of pathogen-free regions of an EU Member State adjacent to regions in which a given pathogen is known to occur. The EU claims this is an undue trade obstacle.

 o Prohibited Meat: Federal law prohibits the importation of several uncooked meat products, to the chagrin of the EU.

 o Continuous Inspection: Federal law allows the importation of egg products only under strict conditions, including continuous inspection of the production process. The EU claims periodic inspection would be adequate.

 o Federal Aviation Regulation: Federal law requires all U.S. aircraft maintenance anywhere in the world to be done by Federal Aviation Administration-certified foreign repair stations. EU claims it takes too long to get certified.

 o Communications Act of 1934: The EU charges that the federal requirement that common carriers of broadcast waves seek authorization from the Federal Communications Commission to construct new lines, extend existing lines, acquire or operate new lines is an unfair trade practice.

o Marine Mammal Protection Act: Federal law limits the acceptance level of dolphin mortality in U.S. tuna fishing operations in the Eastern Tropical Pacific Ocean and provides for sanctions against other countries that fail to apply similar standards. The EU and Canada charge this is a law with GATT- illegal extraterritorial effects.

 o The Buy America Act of 1933 plus at least 13 other government procurement-related federal laws favor domestic over foreign suppliers of a good or service, thus making them vulnerable to GATT challenges.

 o Invoicing and Reporting: Canada claims federal laws regarding customs administration are too lengthy and delay the entry of goods and services into the country, allowing perishables to spoil.

 o Labeling: The Nutrition Labelling and Education Act of 1990 requires food companies to follow a precise, consumer-friendly labeling scheme. The EU claims these rules improperly differ from international standards.

 o National Electric Code: Federal, state and local laws require product testing and certification of the safety of numerous electrical products and parts thereof. The EU claims these rules impose unjustified costs on foreign producers.

 o Fastener Quality Act of 1990: Federal requirements aim to deter the introduction of sub- standard industrial fasteners into the United States. The EU claims compliance is too costly.

 o Futures Contracts: The Commodity Futures Trading Commission approved a Chicago Board of Trade proposal for a "buyer's call option," which allows the buyer of future contracts the option to request delivery of products of "U.S. origin only." Canada claims this rule unfairly discriminates against foreign commodities.

 o Automobile Labeling: The Transportation Appropriations Act of 1992 requires automakers and car dealers to place labels on new cars detailing where parts were produced. The EU claims this is not useful information and imposes a burden on foreign-made goods.

 o Nuclear Non-Proliferation Act of 1978: Under the Nuclear Cooperation Agreement, the United States must obtain certain consent rights over reprocessing, enrichment and storage or alterations in form and content of nuclear material supplied by the United States to a foreign country in accordance with a nuclear agreement. The EU alleges the law has illegal extraterritorial effects.

 o Glass Steagall Act: Federal law prohibits bank subsidiaries of a foreign controlled bank incorporated in the United States from owning a securities firm. Although Glass Steagall imposes the same restrictions on domestic banks, the EU charges it is an unfair barrier to trade.

 o Federal Power Act: Any construction, operation or maintenance of facilities for the development, transmission and utilization of power on land or water over which the federal government has control are to be licensed by the Federal Energy Regulatory Commission. The EU complains that such licenses are only granted to U.S. citizens or corporations organized under the law of the state.

 o Nuclear Energy Act: Federal law requires a license for the operation, transfer, receipt, manufacture and production of facilities that produce or use nuclear materials. But it forbids licenses to be granted to a foreign individual or a foreign-controlled corporation; the EU charges this constitutes an unfair trade barrier.

 - Megan McConagha

 

Sidebar

A Third World View of GATT

Professor M.D. Nanjundaswamy is president of Karnataka Rajya Sangha, a group that has been in the forefront of opposition against the General Agreement on Tariffs and Trade (GATT) Uruguay Round in India. This interview was excerpted with permission from The Telegraph.

Multinational Monitor: In which areas will India suffer under the Uruguay Round?

 M.D. Nanjundaswamy: Countries like India would suffer in all sectors. Not only in the agriculture sector but also the industrial and service sectors. As a farmers' organization, we took up the issue of intellectual property rights (IPR) because for us, it is the most important issue in the entire agreement.

Agriculture was included in the GATT negotiations for the first time in the Uruguay Round. And for the first time, IPR was introduced to agriculture. We look at this exercise of GATT as the last effort at survival of an otherwise collapsing capitalist system.

 Industrialized countries were steeped in recession and were groping in the dark, trying to search for a sector which does not face recession at any point of time. That was food. So they are trying to gain control over world affairs by controlling the food sector.

That is exactly the reason why they wanted agriculture to be included in GATT negotiations and brought under IPR. They want to have control over farmers by controlling the production and distribution of seeds. They will control the seeds by patenting them. They want to convert countries like India into markets for their agricultural surplus.

MM: What about the impact on pharmaceuticals?

 Nanjundaswamy: Under the new IPR regime, not only pharmaceuticals, but whatever scientific research we are trying to develop will be affected. In the pharmaceutical sector, the prices of medicines will be so high that the Indian people will not be able to afford even ordinary drugs.

MM: You talked about capitalism being on the verge of collapse. On the contrary, hasn't the collapse of communism given capitalists a chance to gloat over its spoils?

 Nanjundaswamy: I attribute the collapse of the Soviet Union to the economic policies it pursued. Russia neglected its food security and became dependent on food imports. That is the single major reason for the collapse of the Soviet Union, apart from doctrinal defects. Countries like India will face a similar fate when the new GATT regime comes into force.

MM: What are your comments on the argument that it is better to be part of GATT than staying out of it?

 Nanjundaswamy: GATT submits India to a neo-colonialist relationship. We would not be reducing ourselves to a colony of one power, but to that of the G-7 countries. We will be slaves under a collective colonial rule.

MM: But how can India alone reject GATT when 116 other countries are becoming a party to it?

 Nanjundaswamy: If 116 other countries are committing a mistake, it does not mean that India should also do so. It can give leadership to a new model of development and a new pattern of relationship.

In any case, India is not in a position to globalize itself. At a time when the role of the state is still very necessary in solving the basic problems of the people, the state cannot sacrifice its powers to multinational corporations.

MM: What do you think will be the consequences of not signing the agreement?

Nanjundaswamy: Nothing will happen; the heavens will not fall. We are in a situation where we have nothing that we absolutely need to export. Whatever we produce can be properly distributed in the country. It is ridiculous for a country such as India to think of competing in the export market.

I do not approve of exporting even ready-made garments when half the people are naked. I do not approve of exporting food items when our own people are half-starved. Why should we fool ourselves into thinking that we are a country which deals in exports?

MM: How can one country enforce fair trade when all others have submitted to so-called free trade?

 Nanjundaswamy: You can dictate your own terms of trade when you have your own model of development. While trying to reach the goal of self-reliance, we may have to follow an isolationist policy for some time. The big powers have followed isolationist policies totally in a few cases and partially in some others. Even the United States did not want agriculture to be included in earlier GATT rounds. Russia had a total isolationist policy behind the Iron Curtain and China behind the Bamboo Curtain.

MM: Are there any advantages for India in GATT?

Nanjundaswamy: There are no positive points at all for India in GATT. The advantages would go to affluent countries that generate surpluses.

MM: Wouldn't GATT open up the export market for Indian farmers?

 Nanjundaswamy: Only marginally. You may find the world prices attractive, but as a country you will be forced to buy food at exorbitant prices.

MM: Can we afford to close all our doors and follow an isolationist policy? Don't we need modern technology to improve our standards?

 Nanjundaswamy: Yes, technology minus the IPR. Trade is linked with ideology.

Trading with self-respect cannot be done after repeatedly devaluing your currency.

MM: What is the alternative you are suggesting?

 Nanjundaswamy: We have to develop our own model of development. This is a country which produced Mahatma Gandhi, whose thoughts are still relevant. His basic approach was self-reliance with self-respect.

MM: Have the times not changed since the days of Gandhi?

 Nanjundaswami: The times have not changed, even after 50 years. Fifty years is a short time in the life of humankind.

MM: Are not the countries now more interdependent on each other?

 Nanjundaswamy: Yes, but interdependence under what terms? Fraternal relationships are understandable but not exploitative ones. We believe in fair trade, not just free trade.