October 1994

GATT: Trading Away the Future

Table of Contents

Features

by Robert Weissman

A Year in the Life of the GATT Business Lobby

by Andrew Wheat

Departments

Editorial: GATTocrisy

The Front: Delivering on Delaney

Interview: The Case Against GATT

An interview with James Goldsmith

Labor: The Tragedy of Child Labor

An interview with Kailash Satyarthi

Guest Column

Time for A New Protectionism

by Colin Hines and Tim Lang

Names in the News

Resources

Arctic Under Siege

A June 1994 Memorandum of Understanding between U.S. Interior Secretary Bruce Babbitt and the Committee of the Russian Federation on Geology would make the entire Arctic Ocean between northwest Alaska and the Russia �s Chukotsk Peninsula available for oil development. Local communities and the public were not consulted about the sale.

In response to the oil deal, a wide range of groups, including the Marine Conservation Council, the Bering Sea Fishermen�s Association, Greenpeace, the Sierra Club and Trustees for Alaska, wrote a letter to Vice President Al Gore stating, "We, as indigenous, commercial fishing and environmental organizations, are extremely disheartened by this initiative. We ask that you cease further progress on this plan." The letter noted that the oil lease conflicts with several federal and international initiatives, including the International Polar Bear Agreement, the Arctic Environmental Protection Strategy and the International Union on the Conservation of Nature.

Offshore drilling has long conflicted with the traditional activities of Alaska Natives and fishers, while posing a persistent threat to the environment. "Oil and gas operations in the Chukchi Sea will threaten ... important marine resources, through noise and the threat of an oil spill," an August 24 letter to Al Gore from the Indigenous People�s Council for Marine Mammals states. "We believe that the United States laws are not sufficiently protective [of wildlife], and we fear that the Russian government will be even more lax." Natives fear that the habitats of several species of marine birds, sea mammals and polar bears, which migrate and live in the area, will be harmed.

Greenpeace claims that challenges such as heavy sea ice flows, darkness for much of the year and extreme weather all render rapid oil spill response and cleanup virtually impossible.

"We are at a very early stage of this process," says Robin Cacy, public affairs officer at the Interior Department�s Outer Continental Shelf region. "A request for interest and comment went out in September to test the waters to see if there is any interest and what the concerns involved are."

Miller Cuts Staley Ties

Staley workers in Decatur, Illinois, have been on the picket line since they were locked out in June 1993. Tate & Lyle has been demanding massive concessions from Staley operations. The workers, members of the Allied Industrial Workers (AIW) union, have refused to accede to these demands, but instead of going on strike - which would have legally allowed the company to permanently replace them - they launched an aggressive in-plant strategy, featuring work-to-rule and similar tactics. This effort was so successful that Tate & Lyle responded by locking the workers out.

Since the lockout, the Staley workers have conducted a nationwide corporate campaign, calling for a consumer boycott of Tate & Lyle products, including Dominion Sugar, and asking Staley�s industrial customers to stop buying from Staley. Workers also asked Miller and other major Staley clients to cut contracts with Staley and other anti-union companies.

While claiming the decision to change suppliers from Staley to three others was "strictly a business decision based on price," Miller spokesperson Michael Brophy expresses hope that ending its ties with Staley would end the union�s pressure on Miller beer. Brophy also claims that the union�s campaign is "misdirected." "We can�t dictate labor policies to our vendors," he says. "As a unionized company, we should never have been the target of a corporate campaign."

"We will continue our campaign until we are satisfied that Miller is not moving their business to a producer that is aiding Tate & Lyle in their attack on workers in Decatur, [and] until Miller Brewing discontinues attacks on workers in other unions," says AIW spokesperson Mike Griffin. " In the spirit of solidarity, we recognize that an injury to one is an injury to all."

A.E. Staley did not respond to calls by Multinational Monitor.

Easy Terms for Texaco

Texaco pulled out of Ecuador in 1992, after dumping nearly 17 million gallons of crude oil and 20 billion gallons of waste waters in the waterways of the Ecuadoran Amazon. Roads built by the company in the Amazon facilitated the deforestation of 2 million acres and incursion onto indigenous peoples� lands, according to the Rainforest Action Network.

The pollution from Texaco�s operations "has generated a substantial health crisis, and the indigenous people have lost ancestral lands and the conditions needed to preserve their culture," stated an October 5 letter from Ecuadoran indigenous leaders which denounces the settlement as inadequate and protests the exclusion of indigenous people from the negotiations.

The settlement is unfair," claims Shannon Wright, Rainforest Action Network�s Amazon Campaign coordinator. "If the plan is finalized, Texaco will get off easy with a partial cleanup."

"Our position is that the elected government of Ecuador is our negotiating partner," says Texaco spokesperson Michael Trevino. "They were our former partner in the Petroecuador consortium."

- Aaron Freeman

Editorial: GATTocrisy

MORE THAN THE NORMAL POLITICAL EXAGGERATION and bombast has characterized the Clinton administration�s effort to ram the new version of the General Agreement on Tariffs and Trade (GATT ) through Congress.

The administration�s effort to secure rapid congressional approval of the trade pact has been marked by the kind of distortion, deception and double-talk usually reserved for national security matters.

The purpose of these lies is clear: to cloud the debate on Capitol Hill, to distract the media and to confuse the public. And since criticisms of the new GATT�s potential intrusions into U.S. sovereignty are the arguments that have resonated with the most clarity for members of Congress and the public, it is in this area where administration claims have been most fantastic.

U.S. Trade Representative Mickey Kantor and his minions present a series of tall tales. First, they claim that the United States should not fear for its sovereignty in the new GATT, because the World Trade Organization (WTO ) which would be created by the new GATT would operate pretty much like the old GATT. Kantor and company fail to point out that the WTO would maintain a "legal personality" like the United Nations, with substantially more political power than the current GATT. They also ignore the fact that the WTO would operate a heavy-handed dispute settlement process that would have the power to authorize countries to impose trade fines and sanctions on the United States or other nations.

At least, Kantor responds, supermajority votes would be required before the WTO could change its own rules and impose them on the United States. In the current GATT system, Kantor says, only a standard majority is required - and therefore the new GATT is "much more protective of U.S. sovereignty" than the old. But in making this claim, Kantor ignores the fact - which he emphasizes in other contexts - that the current GATT does not run by its voting rules. The last GATT vote, in fact, was 1959. The current GATT system does operate by consensus, meaning the United States and every other nation maintains a de facto veto.

In the context of the dispute settlement process (the means by which a country can challenge another nation�s law as violative of GATT rules), the situation is even worse. Under the new GATT, the United States and other countries lose their current veto rights over the imposition of trade sanctions or fines against countries found to be violating GATT rules. And these perpetual sanctions would be automatic, unless all GATT member nations - including the country which brought an initial challenge - unanimously agreed to waive them.

As a final line of defense, Kantor and his cronies claim decisions issued by the WTO would have no effect on U.S. law (even as they claim the WTO would be a powerful means to pry open other countries� markets). Only Congress can change U.S. laws, they say. While it is certainly true that only Congress can change domestic laws, the WTO could force Congress into a cruel choice: repeal a law found to violate GATT rules, or pay tribute (in the form of fines or sanctions levied against the United States) to maintain it. Submitting to this choice would represent a staggering erosion of sovereignty.

When all of the administration�s inaccuracies and misstatements are corrected, when the layers of deception are stripped away, one argument does remain. It is a cynical, realpolitik argument: other countries will not use the WTO against the United States, because they will fear angering the world�s greatest economic power.

Representative Robert Matsui, D-California, the administration�s GATT point person in Congress, put the argument crudely, but more honestly than the administration would have countenanced from one of its own. The World Trade Organization "does not affect [U.S.] sovereignty one bit," he told the L.A. Times. "We can go our own way," he said. "The only sanction is we�d be kicked out of the WTO, and no one is going to kick us out."

This arrogant and imperialist argument - that the United States will simply slight its international obligations when it so chooses - is reprehensible.

It is also mistaken. The WTO - with its automatic imposition of perpetual sanctions or fines against domestic laws found to violate GATT rules - would give all countries enormous leverage over the internal laws of the United States, quite apart from the threat of ousting the United States from the organization. And other countries are likely to exercise it against U.S. health, safety and environmental protections. Since 1980 and the adoption of GATT rules covering "non-tariff trade barriers" (an umbrella term referring to labor, environment, health, safety and other product standards), foreign countries have brought more challenges against the United States than the United States has brought against other nations.

Matsui is right about one thing. To see who will win and lose from the new GATT, it is appropriate to undertake a realpolitik analysis. Such an analysis suggests that approving the new GATT and joining the WTO would require a substantial sacrifice of U.S. sovereignty, a subordination of domestic health, safety and environmental laws to multinational commercial interests. It can also be expected that the United States, operating at the behest of its multinational corporations, would use the new machinery ruthlessly against foreign countries� domestic laws and regulations.

In other words, the new GATT would constitute yet another mallet with which multinational corporations of all nationalities could bludgeon citizens across the globe.

The Front

The agreement resolves a 1989 lawsuit against EPA brought by the Natural Resources Defense Council (NRDC), the State of California, AFL-CIO, Public Citizen, and a California farmworker. The suit alleged that EPA routinely allows residues of cancer-causing pesticides in numerous processed foods, in violation of the Delaney Clause of the Federal Food, Drug and Cosmetic Act, which prohibits additives in processed foods that "induce cancer in man or animal."

"This settlement is great news for consumers, farmers and the environment," says Jennifer Curtis, NRDC senior research associate. "People should be able to eat food without poisons, farmers and farm workers should be able to grow food without being exposed to dangerous chemicals, and the environment and wildlife should not be haunted by the toxins we use."

The 36 pesticides are some of the most widely used on the market. Among them are: alachlor, an herbicide used on soybeans and peanuts; benomyl, a fungicide used on apples, citrus, grapes, rice and tomatoes; captan, a fungicide used on grapes, plums and tomatoes; and dicofol, an insecticide used on many types of fruits and vegetables. The settlement also calls for EPA to review within five years an additional 49 carcinogenic pesticides that will be eliminated if they are found in processed foods at higher concentrations than raw food.

The agreement will be submitted for approval to the U.S. District Court in Sacramento at a hearing in late-fall 1994. Prior to the hearing, industry groups will have an opportunity to comment on the settlement.

"NRDC seeks to force EPA to pursue the Delaney Clause to its irrational, illogical extreme," says Juanita Duggan, senior vice president for government affairs for the National Food Processors Association (NFPA), the largest U.S. food trade association. "EPA has stated that the pesticides at issue are safe."

Without commenting directly on the settlement, Jay Vroom, president of the American Crop Protection Association (ACPA), which represents pesticide manufacturers, criticized NRDC for "appear[ing] to wish to create a national food scare."

"These pesticides have long been identified as carcinogenic," responds Laurie Mott, senior scientist at NRDC. "Our intention is to get the government to follow the law."

Industry groups detest the Delaney Clause because of its zero-tolerance principle, and have lobbied Congress heavily to abolish it. They prefer a "risk assessment" model to the uncompromising Delaney Clause. Risk assessment would allow residues that expose consumers to a "minimal" risk - a hypothetical increased risk of one cancer death in one million.

The risk assessment model has been sharply criticized by environmentalists. They argue that in its narrow focus on single pesticides, the model ignores the cumulative risk of multiple pesticides that may be used on a single food. The model also overlooks the potential interactive effects of multiple pesticides being used. They also charge that risk assessment ignores certain high-risk populations - young children, the elderly and disabled, for example.

"A risk assessment is like a captured spy," former EPA Chief Administrator William Ruckelshaus once said. "Torture it enough and it will tell you anything."

In comparing the Delaney Clause mechanism to the risk assessment model, NRDC�s Mott notes, "the Delaney Clause is the only statutory handle that bars exposure to carcinogens. Any level of cancer that can be avoided should be."

But NFPA�s Duggan disagrees. "Regardless of the outcome of this settlement," he warns, "NFPA will continue to urge Congress to replace the Delaney Clause with science-based legislation that recognizes there is no such thing as zero risk."

- Aaron Freeman

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 �ber 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 �rent-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 �ber 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 �pull-down� not a �pull-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

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

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

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

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.

Feature

A Year in the Life of the GATT Business Lobby

THE MOST POWERFUL U.S. business lobbies have banded together to avoid the near miss they endured when Congress narrowly approved the North American Free Trade Agreement in November 1993. Many of this united front�s bizarre antics in pursuit of the multinational power grab known as the Uruguay Round of the General Agreement on Tariffs and Trade (GATT ) would be laughable but for the fact that the business lobbies involved are funneling millions of dollars into Washington - where money and power stride hand in hand.

Since big business formed the Alliance for GATT Now in February 1994, this umbrella lobby has amassed a long - though questionable - corporate membership list, become a devoted Congressional pen pal, and has run up a seven-figure GATT lobby bill. While the Alliance declines to reveal the exact amount it is spending, Elizabeth Wright, the manager of federal government relations for Texas Instruments , the multinational that is spearheading the Alliance�s efforts, describes it as "a multi-million dollar campaign."

For the multinationals, Uruguay Round lobbying amounts to an investment in a dream that has been eight years in the making. During this time, multinational trade advisory panels huddled in Geneva with trade representatives, drawing up their wish list for a new world order in which trade takes precedence over all other values. The final Uruguay Round GATT agreement and the World Trade Organization (WTO) it would establish represent the consummation of the global corporations� near- decade-long efforts.

Counting unhatched chickens

The financial resources commanded by the founding members of the Alliance make it a serious force to be reckoned with. Yet the Alliance�s support is not what it would lead the public to believe. Some of the businesses that it claims as members in circulars mailed to Congress disavow Alliance membership. Astute members of Congress may have wondered why, for example, their local utility is lobbying for GATT.

Representatives of Washington D.C.�s Potomac Electric Power Company (PEPCO) were baffled when asked by Multinational Monitor about their Alliance membership. After much investigation, Beverly Perry of the utility�s government relations office discovered how PEPCO found its way onto the Alliance list. Like many other companies whose officers are members of the powerful Business Roundtable, an organization comprised of leaders of the largest U.S. corporations, PEPCO became a member of the Alliance by default. Perry said the Alliance sent what she called "a negative option letter" to Roundtable members, saying it would list them as an Alliance member unless they specifically asked to be excluded from it. At PEPCO and many other companies, this negative option letter apparently got junk-mail treatment - making these unwitting companies de facto supporters of the GATT lobbyists.

Given such tactics, it is not hard to see how the Alliance makes the leap from a membership list of 285 business groups and corporations (some of which don�t know they are members) to the claim that it represents 200,000 businesses.

The impartial media�s lobby

Apart from utilities such as PEPCO, another group of alleged Alliance members that invites skepticism are media conglomerates. The Alliance claims as members such media giants as the Gannett Company (the largest U.S. newspaper chain), Times Mirror Company (whose papers include the Los Angeles Times, Baltimore Sun, and Newsday), and Capital Cities/ABC .

It would not be surprising if media giants of this size have an interest in GATT�s fate. But it would be unusual for them to advertise their bias by openly supporting an entity such as the Alliance. Indeed, spokespeople for Times Mirror and Gannett told Elizabeth Paukstis of Fairness and Accuracy in Reporting (FAIR) that, despite Alliance claims to the contrary, their companies are not Alliance members. A Capital Cities/ABC spokesperson told Multinational Monitor, "As far as I could determine, we are not a member [of the Alliance], though various groups we belong to are supporting it."

Other media conglomerates and executives have also supported some of the Alliance�s founding members, such as the Emergency Committee for American Trade. According to lobby records filed with the Clerk of the House of Representatives, the Committee accepted $548,000 in contributions in the first half of 1994. Most of this money came in $11,000 contributions listed in the names of corporate executives, including a couple of media moguls. One is Joseph L. Dionne, chairman and chief executive officer of McGraw-Hill, Inc ., which owns Business Week, a host of trade publications and television stations in California, Colorado and Indiana. Another is Gerald M. Levin, president and chief operating officer of Time Warner Inc. , which owns Time, Life, Fortune, Money, People, Health and many other publications. A spokesperson for Time Warner says the corporation foots the bill for the dues listed in Levin�s name.

Even National Public Radio (NPR) made questionable judgments about trade coverage by harboring the pro-GATT lobby in its midst. Former congressional representatives and regular NPR political commentators Tom Downey and Vin Weber became honorary co-chairs of the Alliance for GATT Now in June. "It is not coincidence that the business coalition campaigning for GATT happened to choose Mr. Downey as their Democratic lobbyist and Mr. Weber as their Republican lobbyist," consumer advocate Ralph Nader complained in a June 27 letter to NPR President Delano Lewis. "Part of what the pro-GATT alliance was buying was the on-air Wednesday political pundit duo heard throughout Washington weekly."

But Lewis, the former head of Chesapeake and Potomac Telephone Co., a descendent of bona- fide Alliance member AT& T , saw no conflict of interest in retaining the commentators. "It is our understanding that neither Mr. Downey nor Mr. Weber are paid for their co-chairmanship of GATT Now and that they were asked by the Clinton administration to work with a consortium of businesses seeking GATT legislative approval," Lewis responded in a reply letter. "I can assure you that in any future discussions relating to GATT, we will certainly point out their affiliation with the Alliance for GATT Now."

Producers masquerade as consumers

Another founding member of the Alliance worthy of mention is Consumers for World Trade (CWT), a corporate front group funded not by consumers, but by multinational producers.

In the first half of this year, CWT accepted $64,500 in contributions, according to Congressional lobby records. The sources of this patronage include Toyota Motor Sales, USA, Inc. , Nissan North America, Inc. , Honda North America , Exxon Corporation , Rockwell International , Boeing Company , Caterpillar, Inc. , 3M , Procter & Gamble , The Limited and Cargill, Inc . With the exception of the Japanese-controlled firms and Rockwell, these corporations also contribute $11,000 a year to the Emergency Committee for American Trade.

The highlight of CWT�s annual fundraising drive, which this year marked the nadir of the pro- GATT lobby�s consumer charade, is its award dinner. On June 21, Mickey Kantor presented CWT�s 1994 consumer award to GATT Director-General Peter Sutherland. Like previous winners, such as Ronald Reagan and Mexico�s lame duck president Carlos Salinas de Gortari, Sutherland distinguished himself among consumer advocates by forwarding the belief that government regulation of commerce is the greatest threat consumers face. "Governments should interfere in the conduct of trade as little as possible," Sutherland said in March.

To draw attention to deregulation�s questionable benefits for consumers, protesters outside Washington�s Four Seasons Hotel, where the banquet was held, handed out special menus. Beneath each dish on the menu was a note indicating what additives and pesticides currently prohibited by U.S. law could be legalized if Congress cedes authority to the proposed World Trade Organization.

The date of CWT�s award ceremony coincided with the annual meeting of the Business Roundtable. Before the award dinner, about 20 Roundtable chief executive officers spent the day meeting with lawmakers on Capitol Hill and urging the rapid passage of the Uruguay Round implementing legislation.

Trade all-stars strike out

The pro-GATT business lobby�s message assumed its most bizarre form on July 21, when the Alliance sent members of Congress a pack of GATT all-star baseball cards. Leading the line-up of these trade all- stars is that seamless line of the three presidents who have lorded over the eight-year period in which the Uruguay Round has been negotiated. Each is photographed in a highly presidential, first-pitch pose above imaginative captions that read:

o President Reagan threw the opening pitch for the Uruguay Round trade talks in 1986, helping to ensure today�s GATT agreement - a home run for America;

o President Bush oversaw four crucial years of GATT negotiations, and helped make GATT a home run for America;

o President Clinton hit a home run for America by concluding the GATT agreement.

While the Alliance�s public relations gurus could not have foreseen the baseball strike that began three weeks after their publicity pitch, some of their GATT all-star selections suggest lapsed judgment.

One GATT all-star pick is Agriculture Secretary Mike Espy, who recently agreed to resign his post. Espy became the subject of a federal investigation seeking to establish whether there is any connection between the Department�s regulation of the poultry industry and gifts Espy and one of his girlfriends allegedly accepted from poultry tycoon Donald Tyson. Federal law prohibits U.S. Department of Agriculture employees from accepting gifts from the industries it is charged with regulating.

Another all-star card of questionable taste features a beaming Vice President Al Gore, whose stated GATT accomplishment is flying to Morocco in April to sign the GATT accord. An unstated but arguably more crucial Gore contribution has been his willingness to selflessly push GATT, even though many of the very environmental policies he proposed in his book, Earth in the Balance, would be open to challenge as illegal barriers to trade under the World Trade Organization.

Finally, Carla Hills, U.S. Trade Representative under George Bush, makes an embarrassing all- star choice. Now a partner at Richard Nixon�s old law firm of Mudge, Rose, Guthrie, Alexander and Ferdon, Hills personifies the revolving door connecting the U.S. Trade Representative�s office to multinational corporations and their stables of lawyers and lobbyists.

In a legal opinion prepared for R.J. Reynolds Tobacco Company and Philip Morris International , Inc. on May 3, 1994, Hills outlined a GATT-attack strategy targeting a Canadian Parliament proposal to impose black and white, generic packaging for all cigarettes sold in Canada [See Tobacco Puffery," Multinational Monitor, June 1994 ]. The intent of that proposal was to reduce smoking among children by erasing the slick images and logos on cigarette packages. Hills concluded that the measure would be GATT-illegal unless Canada could persuade a GATT dispute resolution panel that there was no alternative, less-trademark-restrictive way to reduce smoking among children.

Sidebar

Tied to the Whipping Post

That stake is American Personal Communications (APC), 70 percent of which is owned by the Washington Post Co. A provision slipped into the GATT implementing legislation would sell APC and two other companies licenses to compete against cellular phone companies in three of the nation�s largest metropolitan markets by providing a new generation of wireless telephone service.

Critics argued that tucked into the non-amendable, fast-track GATT implementing legislation is as much as $1.6 billion in gravy for APC, which received the Baltimore-Washington market, Omnipoint Communications Corp ., which was granted the New York City license, and Cox Enterprises Inc. , which received the Los Angeles concession. Together, the companies would pay the federal government between $400 million and $1 billion for these licenses, which have an estimated total market value of as much as $2 billion.

The wireless phone deal was cut between representatives of the beneficiary companies and leaders of the House of Representatives and the White House, who were frantically searching for money to offset the $11.5 billion in foregone tariff revenue that GATT will cost the U.S. Treasury in its first five years. Post Publisher and Chief Executive Officer Donald Graham represented his company�s interests in the bargaining and Alliance for GATT Now co-chair and NPR commentator Tom Downey lobbied on behalf of APC. House Energy and Commerce Chairman John Dingell, D-Michigan, inserted the deal into the GATT implementing legislation.

Once copies of the implementing legislation, including the deal, hit the streets, jealous competitors of the three chosen companies denounced this handiwork as a sweetheart deal that ripped off the American taxpayer. On October 4, Pacific Telesis took out full-page ads in Washington papers - including the Post - slamming the Post for neglecting to mention "its own special interest" in this "billion-dollar loophole" in "two editorials urging quick passage of the trade pact." Pacific Telesis said it would gladly pay full market price for the licenses.

In several mea culpa pieces belatedly printed in its pages, the Post admitted to serious lapses of omission on its editorial pages. But even in these pieces, the Post writers were quite generous to their own paper. "It was bad judgments and bad communication - and not intentional secrecy" that led the Post editorial board on September 29 to run yet another editorial that urged Congress to lose no time in passing GATT without disclosing the company�s conflict of interest, Ombudsman Joann Byrd wrote on October 9.

Byrd graciously accepted Editorial Page Editor Meg Greenfield�s vague explanation that the usual communication system had broken down. But Byrd noted in the same piece that the Post�s business page reported that the APC deal was in the GATT implementing legislation just two days before the September 29 editorial ran. Instead of saying that "the usual communication system broke down," Byrd might have said that there is something particularly disturbing about her paper�s editorial board churning out pro-GATT pieces when they don�t even bother to read GATT articles located in another section of their own paper.

The Post subsidiary vigorously defended its position in the controversy. It pointed out that all competitors were on equal footing in 1992 when the Federal Communications Commission (FCC) decided to offer companies that could demonstrate that they have pioneered communications technology a preference over all other license applicants. The APC technology, the company claims, will greatly expand the kind of data that can be transmitted over wireless phones, while costing about half the price of cellular phones. Anne Phillips, APC vice president of external affairs, says the company spent about $30 million developing the technology that the FCC later recognized for preferential treatment.

In 1993, Congress woke up to the considerable value of these broadband licenses and ordered the FCC to auction them off. After the FCC was required to sell licenses to non-pioneer companies at their market value, the pioneers� competitors, led by the Baby Bells, complained that preserving free licenses for pioneers would give them an excessively unfair advantage. On August 9 the FCC decided to charge the pioneers about 90 percent of the market value of the licenses, which it had once promised to award them for free.

Outraged by what it characterizes as a breach of contract, the APC sued. The settlement struck by the pioneers, Dingell and the White House requires the companies to pay $400 million or 85 percent of the average price paid in coming auctions, whichever is more. But PacTel Vice President Ronald Stowe charged that the pioneers could end up with a 30 percent discount because their price will be based on an average that excludes the values of the markets granted to the pioneers, which are among the nation�s largest.

In an October 4 letter to congressional colleagues, Dingell described this settlement as "a good deal for the taxpayers." Dingell said the FCC lacked explicit legal authority to demand payment for a license, and the deal was a prudent way to avoid an expensive court battle. In its own promotional materials, the APC trumpeted the fact that: "Without revenue generated by the �Pioneer Preference,� passing GATT would be impossible." But given that the licenses are worth as much as $2 billion, pioneer competitors and other critics countered that the pioneers struck a good deal at the expense of taxpayers.

PacTel�s scathing ads found a particularly receptive audience among conservative pundits and politicians. GATT opponents such as Patrick Buchanan and Ross Perot hit the talk shows, portraying the Post deal as the tip of an iceberg and suggesting that the untouchable GATT implementing legislation was an irresistible pork skewer for Clinton and Dingell and friends. Rep. Dana Rohrabacher, R-California, told reporters he was ashamed that he voted for fast-track authority in 1992, now that the Clinton administration was trying to ram the lengthy, complicated GATT legislation through the House in a fraction of the fast-track-allotted 45 days. Once Senator Ernest Hollings, D-South Carolina, engineered a delay of the GATT vote in the Senate, House Minority Leader Newt Gingrich, R-Georgia, took advantage of the opportunity that the Post provided him to rally his troops to postpone the House GATT vote beyond the November elections.

- A.W.

Sidebar

Kantor�s Heritage

BEFORE THE ADVENT OF the New Democrat agenda (which is increasingly difficult to distinguish from the traditional big business agenda), one could expect a lively assault on the top economic policies of a Democratic president from the conservative think tanks in Washington. No more. In fact, the Heritage Foundation�s pronouncements on GATT are interchangeable with those of the Clinton administration and its appointed corporate advisory groups.

Heritage Senior Fellow Joe Cobb, former chief economist for the Senate Republican Policy Committee and Minority Staff Director for the Joint Economic Committee of Congress, is credited with writing a GATT position paper, "A Guide to the New GATT Agreement." Cobb�s paper is so strongly pro-GATT that one might conclude it was written by the same multinational corporations that helped draft the GATT agreement. Much of it was.

A comparison of Cobb�s May 5, 1994, paper to a Jan. 15, 1994, report by the Advisory Committee for Trade Policy and Negotiations (an official, federal government-formed committee made up of multinational corporate representatives), reveals that Cobb borrowed entire paragraphs and pages of the earlier report. In so doing, Cobb, who did not return Multinational Monitor calls, often failed to use quotation marks or footnotes to identify material that he lifted, often word for word, from the Advisory Committee�s "Report to the President and Congress and the United States Trade Representative Concerning the Uruguay Round of Negotiations on The General Agreement on Tariffs and Trade."

U.S. Trade Representative Mickey Kantor was so impressed with Cobb�s scholarship that he quoted it approvingly in an April 28 letter to members of Congress. Kantor apparently was privy to the sneak preview of the May 5 Heritage paper, which Cobb sent Republicans - and perhaps a few highly placed New Democrats - on April 13.

-A.W.

Interview

An interview with James Goldsmith

Sir James Goldsmith�s claim to fame in the 1980s was as a corporate raider; he cemented his reputation as an extraordinarily shrewd businessperson when he sold his stocks in the days before the 1987 stock market crash. He is now a Member of the European Parliament, President of the Parliamentary group L�Europe des Nations and a member of the Parliamentary Committee concerned with global trade, the Committee on External Economic Relations. He is also the Chief Executive Officer of the Goldsmith Foundation, Europe�s largest privately-funded charity specializing in supporting environmental causes.

This interview was reprinted with permission from the French bestseller, Le Piege (The Trap), by James Goldsmith.

Multinational Monitor: Why are you opposed to so-called global free trade and GATT ?

James Goldsmith: Global free trade has become a sacred principle of modern economic theory, a sort of moral dogma. That is why it is so difficult to persuade our politicians and economists to reassess its effects on a world economy which has changed radically. I believe that GATT and the theories on which it is based are flawed and that, if they are implemented, they will impoverish and destabilize the industrialized world whilst at the same time cruelly ravaging the Third World.

MM: What is the economic theory on which GATT is based?

Goldsmith: A leading theoretician of free trade was David Ricardo, the early-19th century British economist. He developed two interrelated concepts: specialization and comparative advantage. According to Ricardo, each nation should specialize in those activities in which it can have a comparative advantage relative to other countries. Thus, a nation should narrow its focus of activity, abandoning certain industries and developing those in which it has a comparative advantage. The results would be that international trade would grow as nations export their surpluses and import those products that they no longer manufacture, efficiency and productivity would increase and prosperity would be enhanced. But these ideas are not valid in today�s world.

MM: Why not?

Goldsmith: During the past few years, four billion people have suddenly entered the world economy. They include the populations of nations such as China , India , Vietnam , Bangladesh , and the countries that were part of the former Soviet empire, among others. These populations are growing fast. Barring catastrophes, they are forecast to reach over 6.5 billion in 35 years. They have very high levels of unemployment and those who do find jobs offer their labor for a tiny fraction of the pay earned by workers in the developed world. For example, 47 Vietnamese or 47 Filipinos can be employed for the cost of one Frenchman. Until recently, these four billion people were separated from our economy by their political systems, usually communist or socialist, and because of a lack of technology and of capital. Today all of that has changed. Their political systems have been transformed, technology can be transferred instantaneously anywhere in the world [via] microchip, and capital is free to be invested worldwide, wherever the anticipated yields are highest.

The principle of global free trade is that anything can be manufactured anywhere in the world to be sold anywhere else. That means that these new entrants into the world economy are in direct competition with the work forces of the developed countries. They have become part of the same global labor market. Our economies, therefore, will be subjected to a completely new type of competition. For example, take two enterprises, one in the developed world and one in Vietnam. Both make the identical product destined to be sold in the same market, say France or the USA; both can use identical technology; both have access to the same pool of international capital. The only difference between the two is that the Vietnamese enterprise can employ 47 people for the cost of only one Frenchman. You do not have to be a genius to understand who will be the winner in such a contest. In France, as in most developed nations, an average manufacturing company pays its employees, including social costs, an amount equal to about 30 percent of volume. If such a company decides to maintain in France only its head office and sales force, and to transfer its production to a low-cost area, then it will save about 20 percent of volume. Thus, a company with a volume of $500 million will increase its pre-tax profits by $100 million per year. If, on the other hand, it decides to maintain its production in France, the enterprise will be unable to compete with low-cost imports and will perish. It must surely be a mistake to adopt an economic policy which makes you rich if you eliminate your national work force and transfer your production abroad, and which bankrupts you if you continue to employ your own people.

MM: Won�t high tech jobs replace those that move offshore?

Goldsmith: High tech industries can, indeed, survive and prosper under these circumstances. That is because they are highly automated and therefore employ only a few people. So labor is a minor item in the overall cost of the products that they make. But obviously the fact that they employ very few people means that they are incapable of employing very many. As soon as they need to employ many, they will be forced to move offshore. For example, IBM is moving its disk drive business from America and Western Europe to low labor cost countries. Boeing has also announced that it will transfer to China production of parts of certain of its planes to China.

In France, proponents of global free trade constantly say that the exporting of such high tech products as very fast trains, airplanes and satellites will create jobs on a large scale. Alas, this is not true. The recent $2.1 billion contract selling very fast French trains to South Korea has resulted in the maintenance for four years of only 800 jobs in France : 535 for the main supplier and 265 for the subcontractors. Much of the work is carried out in Korea by Asian companies using Asian labor. What is more, following the transfer of technology to South Korea, in a few years time Asia will be able to buy very fast trains directly from South Korea and bypass France. As for planes and satellites, the numbers employed in this industry in France have fallen consistently. Over the 5 years from 1987 to 1992, they have fallen from 123,000 employees to 111,000 and are forecast to fall to 102,000 in the short term.

MM: Won�t the growth of the service sector compensate for the jobs lost in manufacturing?

Goldsmith: I am afraid that even service industries will be subjected to substantial transfers of employment to low-cost areas. Today through satellites you can remain in constant contact with offices in distant lands. That means that companies employing large back offices can close them and shift employment to low-cost areas. SWISSAIR has recently transferred a significant part of its accounts department to India, for example.

MM: But certain services such as health and education, cannot be transferred overseas, can they?

Goldsmith: A nation�s economy is split into two broad segments, one which produces wealth and the other which dispenses it. That in no way means that the latter is inferior. It includes such vital activities as health and education. But one cannot reduce that part of our economy which produces wealth and expect to be able to maintain the other part which dispenses it. You must earn what you spend.

MM: Proponents of GATT claim it will spur growth, citing, for example, the joint study published by the OECD and the World Bank which states that the application of the GATT proposals would increase world income by $213 billion a year. How can we turn down such growth?

Goldsmith: If you study the facts, you will find that the increase is forecast to come about in 10 years time. Two hundred and thirteen billion dollars is a large sum of money, but to assess its significance you must compare it to the world�s GNP as it is forecast to be in 10 years time. Two hundred and thirteen billion dollars is no more than 0.7 percent of the world�s anticipated GNP. What is more, the General Secretary of the OECD described the report as being "highly theoretical."

MM: How do you respond to GATT proponents� claims that free trade will enable consumers to benefit from being able to buy cheaper imported products manufactured with low-cost labor?

Goldsmith: Consumers are not just people who buy products, they are also the same people who earn a living by working, and who pay taxes. As consumers they may be able to buy certain products cheaper, although when Nike moved its manufacturing from the United States to Asia, shoe prices did not drop. Profit margins rose. But the real cost of apparently cheaper goods will be that people will lose their jobs, get paid less for their work and have to face higher taxes to cover the social cost of increased unemployment. Consumers are also citizens, many of whom live in towns. As unemployment rises and poverty increases, the towns will grow even more unstable. So the benefits of cheap imported products will be heavily outweighed by the consequent social and economic costs.

MM: Why will GATT reduce earnings?

Goldsmith: According to figures published by the U.S. Department of Labor, since 1973, in inflation-adjusted dollars, real hourly and weekly earnings in the United States have already dropped by an average of 16.4 percent, and that was before the most recent GATT negotiations known as the Uruguay Round. If populations of 4 billion people enter the workforce and are willing to offer their labor at a fraction of the price paid to workers in the developed world, it is obvious that such a massive increase in supply will reduce the value of labor. Also, it will take away practically all negotiating power from organized labor. When trade unions ask for concessions, the answer will be: "If you put too much pressure on us, we will move offshore where we can get much cheaper labor, which does not seek protection, long holidays, and all the other items that you want to negotiate."

You must understand that global free trade will brutally shatter the way in which value-added is shared between capital and labor. Value-added is the increase of value obtained when you convert raw materials into a manufactured product. In a mature society such as our own, we have been able to develop a general agreement as to how it should be shared between labor and capital. That agreement has been reached through generations of political debate, elections, strikes, lockouts and other conflicts. Overnight that agreement will be destroyed by the arrival of huge populations willing to deeply undercut the salaries earned by our workforces. The social division that this will engender will be deeper than anything envisaged by Marx in the nineteenth century.

MM: Who will be the winners and losers under a system of global free trade?

Goldsmith: The losers will, of course, be those who become unemployed as a result of production being moved offshore. They would also be those who lose their jobs because their companies do not move offshore and are not able to compete with cheap imported products. Finally, they will be all those affected by the reduction in their earning capacity following the shift in the sharing of value- added.

The winners will be those who can benefit from an almost inexhaustible supply of very cheap labor. They will be the companies who move their production offshore to low-cost areas; the companies who will benefit from paying lower salaries at home; and those who have capital to invest offshore, and who will receive larger dividends as a result of the very low-cost labor. But they would be like the winners of a poker game on the Titanic. The wounds inflicted on their societies would be too deep to be acceptable without brutal consequences.

It should also be remembered that one of the characteristics of developing countries is that a small handful of people control the overwhelming majority of their nation�s resources. It is these people who own the major part of their nation�s industrial, commercial and financial enterprises and who assemble the cheap labor which is used to manufacture products for the developed world. Thus, it is the poor in the rich countries who will subsidize the rich in the poor countries. This will have a deep impact on the social cohesion of nations.

MM: Do the developed nations not have a moral responsibility to open their markets to the Third World?

Goldsmith: Let me start my response by quoting an extract of a report by Herman Daly and Robert Goodland, published by the World Bank.

"If by wise policy or blind luck, a country has managed to control its population growth, provide social insurance, high wages, reasonable working hours and other benefits to its working class (i.e. most of its citizens), should it allow these benefits to be competed down to the world average by unregulated trade? This levelling of wages will be overwhelmingly downward due to the vast number and rapid growth rate of under-employed populations in the Third World."

But the application of GATT will also cause a great tragedy in the Third World. Modern economists believe that the definition of efficient agriculture is one that produces the maximum amount of food for the minimum cost, using the least number of people. That is bad economics even in purely mathematical terms. When you intensify the methods of agriculture and substantially reduce the number of people employed on the land, those who become redundant are forced into towns. Everywhere you travel in the world you see those terrible slums made up of people who have been uprooted from the land. Even in one-dimensional economic terms, you should add to the direct cost of producing food by intensive methods, the cost of building infrastructure and paying welfare to those who have as a consequence been uprooted. But, of course, the hurt is deeper. Families are broken, the countryside is deserted and social stability in the towns is destroyed. The slums in Brazil , known as favelas, did not exist before the Green Revolution was applied to agriculture in Brazil and chased people off the land. It is estimated that there are still 3.1 billion people in the world who live from the land. If GATT manages to impose worldwide the sort of productivity achieved by the intensive agriculture of nations such as Canada and Australia , then it is easy to calculate that about two billion of these people will become redundant. They will be uprooted and will move to urban slums. But a large part of the GATT refugees will be forced into mass migration.

There is much concern about the tragic events in Rwanda where 2 million refugees have been chased into neighboring countries, and about the boat people who left Haiti . But GATT, if it "succeeds," will create mass movements of refugees on a scale of about l,000 times greater. We will have profoundly and tragically destabilized the world�s population.

MM: But why do Third World nations themselves support global free trade?

Goldsmith: You must distinguish between the populations on the one hand and their ruling elites on the other. As I explained earlier, it is these elites which are in favor of global free trade. It is they who will be enriched. Visit India and you will find that there have been demonstrations of up to one million people opposing the destruction of their rural communities, their culture and their traditions. In the Philippines , several hundred thousand farmers protested against GATT because it would destroy their agriculture.

MM: Some would say that Europe�s, and more particularly France�s, employment problem is not GATT, but just the result of the old-fashioned diseases that one finds in uncompetitive, inflexible and spoiled societies. The welfare state is out of control; social costs borne by employers discourage the creation of new jobs; high government expenditure and taxation stifle the economy; state intervention is paralyzing corporatism.

Goldsmith: All that is partially true. And those diseases must be treated forcefully. But even if the treatment is successful, it would not solve the problems that I have described. Imagine that the French were able to reduce at a stroke social charges and taxation so as to diminish the cost of labor by a full 33 percent. All that would mean is that instead of being able to employ 47 Vietnamese or 47 Filipinos for the price of one Frenchman, you could only employ 31. In any case, you must remember that France, over the past 20 years, has produced spectacular economic growth. During that period her GNP has grown by 80 percent. And yet during the same period, unemployment has grown from 420,000 people to 5.l million (the official figure is 3.3 million, but the government�s own figures show that various categories consisting of 1.8 million people have been omitted and should be added). 5.1 million unemployed in France is equivalent to about 25 million in the USA. This growth in unemployment has taken place while France has progressively opened her market to international free trade. How can we accept a system which increases unemployment from 420,000 to 5.l million during a period in which the economy has grown by 8.0 percent?

MM: Why is it not possible to repeat our successes in enriching countries like Taiwan, Hong Kong, South Korea and Singapore?

Goldsmith: The combined population of these countries is about 75 million people. So the scale of the problem is quite different. The United States might be able to achieve a similar success with Mexico and, progressively, Western Europe could accommodate Eastern Europe. But attempting to integrate four billion people at once is blind utopianism. In any case, each of the countries that you mention has been the beneficiary of the Cold War. During that period, one or other of the superpowers sought to bring every part of the world into its camp. If one failed to fill the void, the other succeeded. That is why very favorable economic treatment was granted by the West to South Korea after the Korean war, and to Taiwan , Singapore and Hong Kong while China was considered a major communist threat.

MM: So what do you recommend?

Goldsmith: We must start by rejecting the concept of global free trade and replacing it by regional free trade. That does not mean closing off the regions from trading with the rest of the world. It means that each region is free to decide whether to enter into bilateral agreements with other regions when it is to their mutual economic benefit. We must not just open our markets to any and every product whether or not it benefits our economy, destroys our employment, and destabilizes our society.

MM: Does that not mean that we will cut ourselves off from innovation in other parts of the world?

Goldsmith: No. Freedom of movement of capital should be maintained. If a Japanese or a European company wishes to sell its products in North America, it should invest in America. It should bring its capital, its technology, its products, build factories in America, employ American people, and become a corporate citizen of America. The same is true for American and Japanese firms wishing to sell their products in Europe. Think about the difference between the GATT proposals and those I have just described. GATT makes it almost imperative for enterprises in the developed world to close down their production, eliminate their employees and move their factories to low-cost labor areas. What I am suggesting is the reverse: that to gain access to our markets, foreign corporations would build factories, employ our people and contribute to our economy. It is the difference between life and death.

MM: But won�t that reduce competition?

Goldsmith: Competition is an economic tool which is necessary to promote efficiency, to apply downward pressure on prices, and to stimulate innovation, diversity and choice. Vigorous competition needs a free market that is large and in which cartels and other limitations on competitive forces are forbidden. The idea that Europe or NAFTA , the two largest free trade areas ever created in history, are not able to be thoroughly competitive is, of course, nonsense. They are vast and open and free and competitive and welcoming to innovations from anywhere in the world. Every significant corporation worldwide would have to come and compete, because no corporation could afford to bypass them. The markets are much too big and prosperous. But such competition would be constructive, not destructive.

MM: What other recommendations do you have?

Goldsmith: I totally reject the concept of specialization. We need the contrary, a diversified economy. Only such an economy will allow our populations to participate productively in our society.

Specialization inevitably leads to chronic unemployment and to lower wages. Growth in GNP has not solved the problem. Usually it creates part-time, lower-paid jobs. That has been the trend in the developed world during the past decades. In addition to the large corporations, we need a society based on a multitude of small- and medium-size businesses and craftsmen covering a wide range of activities, and we need a decentralized economy. We must encourage local activity rather than urban centralization. Everything must be done to return life and vigor to the small towns and villages throughout our nations. It is extraordinary to read economists commenting on the state of the nation. They believe that the profitability of large corporations and the level of the stock markets are the reliable guide in assessing the health of the society and the economy. A healthy economy does not exclude from active life a substantial proportion of its citizens.

In the great days of the U.S.A., Henry Ford stated that he wanted to pay high wages to his employees so that they could become his customers and buy his cars. Today we are proud of the fact that we pay low wages. We have forgotten that the economy is a tool to serve the needs of society and not the reverse. The ultimate purpose of the economy is to create prosperity with stability.

Labor

The Tragedy of Child Labor

An Interview with Kailash Satyarthi

Kailash Satyarthi is head of the South Asian Coalition on Child Servitude (SACCS), a coalition of 50 organizations working on child rights issues in India , Pakistan , Nepal , Bangladesh and Sri Lanka . In India, Satyarthy�s Bonded Labour Liberation Front has freed more than 26,000 children from forced servitude.

The General Agreement on Tariffs and Trade (GATT ) Uruguay Round would have a tremendous impact on child labor issues, since laws designed to prevent the import of goods produced with child labor would be GATT-illegal. Under the new GATT, it would be illegal to distinguish among products based on the working conditions under which they were produced, with the sole exception of laws discriminating against imports made with prison labor.

Multinational Monitor: What is the structure and origins of SACCS?

Kailash Satyarthi: We began in 1980 liberating bonded laborers in India. At that time, there was no awareness of the problem. A law had been enacted banning child labor, but received no more than a four or five line article in the newspaper. The bonded laborer system is really the modern form of slavery, in which one cannot choose his or her location or type of employment. It is often caused by debt, or when a person, or his father, or grandfather, borrows a small amount of money from a landlord or master and then becomes bonded forever. This affects adults as well - men and women - and it is often related to caste; you will never see a Brahmin bonded laborer.

Once, we even encountered a member of the state assembly in Solund, Uttar Pradesh, who was a bonded laborer. We went to his house to meet with him and asked someone working on the roof if we could speak with the member of parliament. The laborer did not reply; he said to speak with his master first. We wondered how one bonded laborer could employ another bonded laborer. When we met with the master and asked to meet with the member of assembly, the master said, "You already met with him. He was the person cleaning the roof."

Back then, our first tactic was to conduct raids on factories, sometimes freeing entire families from bonded laborers. This exposed the situation in the media. We soon realized that the most vulnerable of these laborers were child laborers, with nowhere to escape to, completely unaware of their rights. We also discovered that the situation of bonded laborers was not restricted to India, but also existed in Pakistan, Nepal, Bangladesh and Sri Lanka. So in 1987 and 1988, we launched campaigns throughout South Asia. SACCS now incorporates the efforts of over 50 organizations in South Asia.

MM: In which sectors of the marketplace does child labor exist?

Satyarthi: Children work in export industries, where profit margins are highest: in agriculture, construction materials, stone quarries, and in cottage industries such as carpet weaving and the glass industry. While they have been commonly found in smaller enterprises, child laborers have also been used in a bottling plant of Coca-Cola and in the tea fields of Unilever .

In recent years there has been tremendous growth in child servitude in the export-oriented industries of India, Pakistan, Nepal and Sri Lanka. In the case of the carpet industry in India, for example, 10 years ago, 75,000 to 100,000 children were employed in the industry. At that time, the industry brought in $100 million. Today the industry has tripled, to $300 million, with a corresponding increase in children employed in the industry of more than 300,000. So there is a very clear correlation between the growth of the industry and the number of child laborers. The situation in Pakistan is similar, with a half million children in the carpet industry. In Nepal, there are 200,000 child laborers. So altogether, there are 1 million children who produce more than two-thirds of the world�s supply of carpets. Of course, in countries such as Turkey , China , Morocco , Afghanistan and Iran , children also work in very bad conditions in the carpet industry. These children cannot form unions, cannot strike and cannot go to court. This brings down standards for adults in the industry as well.

MM: What are the conditions under which children work?

Satyarthi: Children most often work in hazardous industries, exposed to fumes and other hazards. In the glass industry, children are exposed to high temperatures, and in the carpet industry, compelled to breath wool particles for the entire day. The children are also compelled to work 12 to 18 hours a day, seven days a week at times. Many suffer from tuberculosis and other health problems associated with the continuous inhalation of wool particles. The children work confined in small cottages, where they also eat and sleep.

If the children cry for their mothers, they are beaten - not only in India, but in Nepal, Pakistan and many other countries. Sometimes they are hung upside down from trees and poked with cigarettes. The Nepalese carpet industry is also one of the launching points for prostitution throughout South Asia. Sexual harassment in Pakistan is common.

In May 1994, I received information about a 12-year-old boy who tried to run away from the industry. He had been lured away from his native village of Bihar and taken to a carpet factory 400 kilometers away. He always cried for his mother and wanted to go back. On April 24, he was caught trying to escape. His master had beaten the boy so badly that the boy collapsed. The boy was then hacked into three pieces and each piece buried in different places.

MM: How is the practice of child labor justified?

Satyarthi: Many countries find excuses for child labor in poverty, unemployment among adults, illiteracy and other so-called "harsh socio-economic realities." The carpet importers� lobby in the United States, as well as the big exporting houses in Asia, have argued that since the children are poor, it is better they work in the carpet industry than resort to prostitution or starvation.

But children who are working to bring income for their families and also receive some schooling are different than those who are compelled to sell their present and future to servitude. In the case of the carpet industry, as well as the leather, gem cutting and processing and many other industries, children are nameless, faceless, voiceless non-entities. They have no education or health care. They are deprived of their basic childhood in the present and are also denied their future.

MM: How successful have your efforts to combat child labor in South Asia been?

Satyarthi: In the past 14 years, we have been able to eliminate several thousand child labor positions through raids on factories. We have often been attacked. Two of my colleagues have been killed, one of them beaten to death. But despite efforts such as ours, the number of child workers has tripled.

For 10 years, when we focused on placing pressure on the industry within India, we wrote thousands of letters to various carpet exporters, manufacturers and governments. But the carpet industry in India enjoys a sort of "blue-eyed boy" status, because it brings in foreign exchange. The manufacturers can bribe their way around and influence local governments. Not a single carpet maker has been convicted under a 1986 law that declared the carpet industry one of the most hazardous industries. Laws banning child labor in India, enacted in 1976, and in Pakistan, enacted in 1993, have yet to result in a single child being released.

Ninety-seven to 98 percent of carpets are exported to Western consumers, and demand is rising rapidly. Thus, we decided to focus on the consumer market, particularly in Germany, which was the single largest purchaser of Indian carpets. We then expanded to other European markets and the United States.

The only success we have seen has been through consumer pressure. It was only after our consumer campaign that the industry even admitted the problem of child labor existed. Until that time, the industry and government claimed children working in the industry were working in family looms, learning a craft. There are now over 50 exporters who have pledged not to use child labor. They have even formed their own association for carpet manufacturers who do not use child laborers. This has also created pressure for reform in other industries where child labor is a problem, involving industries where we are not active.

When consumers were made aware of how their carpets were produced, they demanded child labor-free carpets. We devised a labeling (rug mark) scheme which would guarantee that consumers could easily find carpets made free of child labor. We did not support a ban on carpets, or a ban on products produced in India or Pakistan. Rather, we decided to move in a more positive direction, trying to find ways and means to shift labor in the industry from children to adults. The carpet belt in India is confined to four or five areas. In these areas, 300,000 children are working, while 400,000 adults are jobless. Every year, 100,000 adults from these areas are compelled to leave the area in search of work, often to the slums of major cities. Thus, adults are made jobless to give children jobs.

At first, the Indian government wanted to implement the rug mark scheme. But we demanded an independent and professional body to monitor and inspect the factories, along with a scientific and independent labeling scheme.

MM: In the United States, Senator Tom Harkin, D-Iowa, would ban the import of made with child labor. What has been the impact of this bill for your struggle?

Satyarthi: The Harkin Bill, the Child Labor Deterrence Act has served as a shot in the arm for our movement, although we oppose some of the more protectionist clauses in the bill. The original text of the bill gave monitoring responsibilities to U.S. importers and the U.S. government, and there was no provision for follow-up action to assist children now working in the carpet industry. We suggested an independent monitoring system within the country of export and additional money for educating children released from the industry. These suggestions have been incorporated in the latest version of the bill.

MM: Will consumer pressure be enough to end child labor?

Satyarthi: While consumer pressure can create a new market for child labor-free carpets, the impact of these initiatives are limited without certain legal measures. Ethically-produced coffee, for example, only maintains a five or six percent share of the market. It is more expensive than other coffee and can only compete to a limited degree. Therefore, in the context of carpets, we have advocated a ban on the import of carpets made with child labor in addition to promoting the rug mark. But this should not be done in a protectionist manner. The children must have somewhere to go when they are released from the industry. Funds from any multilateral sanctions on the industry must be made available for follow up - for free and compulsory primary education. The World Bank , IMF , European Union and other international bodies are giving huge amounts of money for "education for all." But this can never be implemented if the children remain working for 12 or 16 hours a day. These funds should be diverted to children who are freed from the carpet or any other industry.

Guest Column

Time for a New Protectionism

by Colin Hines and Tim Lang

THERE IS A GROWING DEFENSIVENESS among free-market zealots who have long had the ear of politicians. They are concerned that people are acting irrationally and irresponsibly by voting or demonstrating against the social and economic havoc caused by their policies. A couple of days after the General Agreement on Tariffs and Trade (GATT ) Uruguay Round was initiated on December 15, 1993, the Russian people voted out many of the "reformers" whose implementation of market-oriented austerity policies devastated the living standards of the majority, caused unemployment to burgeon and hastened the rise of the Mafia that now rivals the power of the government. Similarly, the January 1, 1994 Chiapas rebellion, coinciding with day one of the North American Free Trade Agreement (NAFTA ), captured world attention and acted as a focal point for those throughout Latin America wary of the downside of the free market.

But perhaps the most fundamental long-term threat to the ability of multinational corporations to maximize their profits came a couple of days before the signing of the GATT Uruguay Round. The Clinton administration, with support from the French, demanded that labor standards and workers� rights be put on the agenda of the GATT Uruguay Round discussions at the April 12-15 ministerial meeting in Marrakesh, Morocco. This demand for a social clause in the GATT was reinforced by U.S. Labor Secretary Robert Reich�s calls for a modest global system of minimum labor standards, including a ban on goods produced by prison or slave labor or very young children.

The near-hysterical responses from the free-market advocates reached their nadir with Martin Wolf, assistant editor of the Financial Times, justifying the use of prison labor in exports as "better than for inmates to rot in useless idleness."

The debate over workers� rights and GATT promises to continue indefinitely. Indeed, it could be the catalyst for facing up at last to the unpalatable truth that the United States and Europe can�t possibly compete with cheap labor imports, especially from Asia. It should also hasten the realization that the only way to tackle unemployment is the introduction of a new form of protectionism.

The status quo�s fantasies

Today�s accepted wisdom is that the way to create new jobs is to keep inflation under control, lower interest rates and increase labor productivity while holding back wages and promising to invest in new skills and training to compete with low wage economies. Much hope is pinned on the new GATT deal, signed by 116 countries in Marrakesh on April 15 and scheduled to take effect in 1995. The Organization for Economic Cooperation and Development (OECD), made up of the world�s industrialized countries, guesses that the GATT Uruguay Round will create $270 billion in worldwide economic growth. While this speculative claim might seem impressive, it amounts to a mere $40 dollars a head on average globally and will only reach this level in 10 years. The real question, however, is whether this projected financial growth will result in more jobs in the United States and elsewhere.

Globalization�s realities

The fact is: the new GATT will add to pressure on Northern high-wage economies. When tariff barriers come crashing down, as they shortly will, how can the West�s workers compete with low-wage economies? In 1993, West Germany�s manufacturing labor costs were $24.90 per hour; Japan�s $16.90; the U.S. costs were $16.40; France�s $16.30; and the United Kingdom�s $12.40. Compare those with South Korea�s manufacturing labor costs of $4.90 per hour; Hungary�s of $1.80; and China�s at 50 cents! You need an awful lot of super-efficient equipment for U.S. workers to out-compete low labor costs like that. But that equipment is also available to plants hiring cheaper workers, who are often highly-educated, skilled and motivated. This is why companies like the Italian sportswear and shoe maker Fila have, in the words of one commentator, "found one way of coping with a fundamental problem of European manufacturing. It is trying not to have any." In the Philippines, college-educated data punchers paid $150 a month receive free medical care and a few grams of rice if they don�t miss a day of work. Their total labor costs have been estimated to be one-sixth of their European equivalents. It is now cheaper for Manhattan law offices to fax draft letters to an anonymous woman employed by a data firm in Barbados than to hand it to a secretary in the next office.

Who will buy?

Already, the OECD estimates that 35 million people will be unemployed in its member countries this year. There are warning signs that this situation could lead to a dangerous fall in consumer buying power. As Jeff Faux of the Economic Policy Institute has argued, "One does not have to be an expert in economics to see that the world economy cannot continue with all nations expanding exports and constricting the ability of their workers to buy imports." Eighty years earlier, Henry Ford put it more succinctly: "If you cut wages, you just cut the number of your customers."

But will this realism about purchasing power stem the political stampede to transfer power to multinational corporations? At present, whenever the question of unemployment is raised, the usual answer is that workforces must become ever more competitive. Calls are made for more deregulation and fewer taxes on industry, for workers to avoid pricing themselves out of the ever more cut-throat international marketplace, and for more inducements for private investment to replace that of the state - in other words, for more of the same damaging policies of the last decade that have led to rising unemployment.

A new approach: constraining business

A radical new approach is long overdue. Its starting point must be the replacement of the need to be internationally competitive with the goal of building up local economies world-wide. To realistically tackle global unemployment, it will be vital to increase import and export controls on a regional bloc level. This will allow localities and countries to produce as much of their food, goods and services as they can by themselves. Anything that can�t be provided nationally should be obtained regionally, with long- distance trade as the very last resort.

Big business will also have to be constrained. According to the World Bank, the top 350 transnational companies already control an estimated 40 percent of world trade. Their activities need to be brought back under government control. Market access would be dependent on compliance with a "site here to sell here" policy. The present domination of economies by big companies is reducing the positive aspects of competition. Their power is awesome and many should be broken up, thus guaranteeing the local competition needed to maintain the impetus for improved products, more efficient resource use and the provision of choice.

It will also be essential to keep capital local. With barriers to trade being dismantled and international capital flow virtually unfettered, national treasuries will have less and less control over their economic destiny. Money flies around the globe when there should be controls on banks and pensions, insurance and investment funds to ensure the investment of the majority of funds in the locality where they are generated and/or needed.

The General Agreement on Tariffs and Trade should be revised to become a General Agreement for Sustainable Trade with an emphasis on trade and aid for self-reliance. Aid, technological transfer and the residual international trade should be geared to building up sustainable local economies.

Such a transformation will of course be expensive. Resource taxes would be the key to helping to pay for this radical economic transition. They would be environmentally advantageous and for the first time politically feasible, since competition from regions without such taxes could be held at bay by reintroduced tariffs and controls. In addition, the emphasis on local production would mean that adverse environmental effects would be experienced locally, thus in turn increasing the impetus and potential for control and improved standards.

The first signs of a political counterattack

Such a progressive vision for the future may sound hopelessly utopian. However, the first tentative steps towards it may have just occurred in Europe. In the European Parliament elections in June, a right-wing, specifically anti-GATT party won 12 seats. Its most famous candidate is the billionaire, Sir James Goldsmith, who gained international fame for his foresight in selling his stocks just before the 1987 stock market crash, transferring his assets to gold bullion. The essence of his platform is that Europe has no hope of successfully competing against highly-qualified, cheap labor, particularly from China, in a time of unfettered capital flows. Europe must protect itself against such imports.

Goldsmith�s views could lead to a similar result as those demanded by many progressive voices in the Third World, who don�t want further distortion of their economies away from meeting basic needs and towards producing the cheapest exports.

Apologists for the "kinder, gentler" hand claim things would be better for the South if the industrialized countries would only open up their markets more to cheap imports. This fails to take into account how conditions are worsening for Third World workers, even in the Asian Tigers� economies. They are seeing their hopes for effective union bargaining for better wages and conditions dashed as firms leave Taiwan and South Korea for cheaper labor in China and elsewhere.

In the North, the same process results in workers losing their jobs and facing insecurity while they try to find work in the new McJob low-wage service economy. Of course, cheap imports and relocation aren�t the only causes of growing unemployment. Trends in automation will continue to make things worse as well. But it is the incessant and virtually unchallenged drumbeat of international competitiveness, plus the threat of relocation to counteract workers or governments that demand higher wages, taxes or stricter legislation, a trend that is forcing all countries to submit to structural adjustment and a race to the bottom.

Europe poised for the New Protectionism?

Given the success of Goldsmith in the European Parliament election, Europe could well be the first region to start the political debate about how to protect its economies from imports produced with cheap labor and at an unacceptable expense to the environment. Such a retaking of control of the local, national and regional economy would require long-term policies that address the power of multinational companies and international capital.

Europe is a politically powerful and sufficiently organized bloc to break the power of the multinational corporations and international speculators. Such a debate will of course not go unnoticed in the United States and the rest of the world, and similar demands to take back control of the economy would grow as it becomes clear that this is the only way to tackle unemployment. The IMF , World Bank and other aid agencies� policies of contorting all economies to emphasize cheaper exports will suddenly become largely irrelevant in such a "new protectionist" world.

Lastly, to ensure that the poor of the world benefit by these changes, it is vital that the practicalities of retaking control of economies in the North, East and South becomes a priority in the discussions of the global network of citizens groups.

The world political and economic system is more destabilized than at any time since the 1930s. This provides progressive forces with an opportunity to prevent the extreme right from capturing the debate and to halt today�s worrying trend of the spread of "free market fascism," filling the vacuum left by the upheavals caused by the present market-dominated system. The alternative to such a radical solution for the industrialized countries� unemployed was chillingly described by a Taiwanese shoe manufacturer, who has moved his plant to China to cut his labor bills by 90 percent. His company alone already supplies one in 40 of all U.S. shoes; when asked on British television how big a threat he was to U.S. manufacturers, he replied, "A fatal threat as far as we know."

In the face of all this, the call for a rapid ratification of GATT, with its reduction of protective barriers and President Clinton�s call for the United States to "compete, not retreat" are the economic equivalent of the military thinking behind the Charge of the Light Brigade.

Names in the News

Boeing �s Dirty Deals

The bribes - $400,000 split equally between two Bahamian cabinet ministers - were paid in 1991 by Toronto-based DeHaviland Inc ., a maker of Dash 8 commuter planes. DeHaviland, owned by Boeing from 1986 to 1992, sold three new Dash 8s and two used Dash 8s to the government-owned airlines, Bahamasair, in 1991. DeHaviland is now owned by Montreal- based Bombardier Inc ., with a minority stake held by the Ontario government.

The other aircraft maker bidding for the contract, the German company Fokker , was also asked to pay bribes to the same cabinet ministers to obtain the contract, says a Fokker source familiar with the company�s bid.

According to the CBC, when the Dash 8s were delivered, the bribe money flowed from DeHaviland�s head office in Toronto through three consultants to relatives of the two ministers of transport in the Bahamas government of Sir Lynden Pindling. "The sole function of the consultants was as conduits for the bribe money," says former Bahamasair comptroller John Utter, who blew the whistle on corruption at Bahamasair. The money trail was revealed in testimony in a recently-completed Commission of Inquiry in Nassau. Investigators from the Royal Canadian Mounted Police and Scotland Yard helped uncover the payoff scheme.

DeHaviland said in a letter to the CBC that it had cooperated fully with the Bahamian inquiry. However, inquiry investigators told the CBC that the company kept them from questioning the salesperson who had made the bribe arrangement with the Bahamian politicians and that the company had refused to testify at the inquiry in Nassau.

A Boeing spokesperson in Seattle would not comment on the inquiry testimony, referring questions back to DeHaviland.

The Commission of Inquiry finished its public hearings in Nassau in late-August and its report is expected by the end of the year.

Fix Is In for the Fixers

The study, "Criminal Penalties Under the Sherman Act: A Study in Law and Economics," published in the October 1994 issue of the journal Research in Law and Economics, looked at fines in 250 price-fixing cases. Fines were compared to optimal penalties, calculated by a complex formula that looks at a number of factors, including the harm caused by price-fixing to society and the probability of successful government prosecution.

The study found the average fine from these cases amounted to 0.04 percent of the optimal penalty.

"Despite the recent increase in aggregate criminal penalties, they probably remain a relatively small expected burden to offenders when compared with the external costs of the offenses committed," the report concluded. "To date, the level of criminal penalties has not, by itself, provided adequate deterrence against antitrust offenses."

One of the study�s authors, Joseph Gallo, chair of the Department of Economics at the University of Cincinnati says, "We can conclude that there is very little deterrence resulting from these criminal prosecutions." According to the authors, optimal deterrence is achieved when the expected costs of the antitrust offense to the potential offender, taking into account the degree of risk of being successfully prosecuted, equals the external costs of the offense to society.

Hazards of Kodak

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Publications

GATT, NAFTA and the Globalization

of Corporate Power

San Francisco:

Earth Island Press, 1993

Affects our Lives, Work and Environment

Edited by John Cavanagh,

John Gershman, Karen Baker

and Gretchen Helmke

San Francisco: Institute for Food

and Development Policy, 1992

of Agriculture

By Devinder Sharma

Delhi: Konark Publishers PVT Ltd., 1994

By Patti Goldman and Richard Wiles

Washington, DC: Public Citizen and

The Environmental Working Group

Economics and Policy

Edited by Durwood Zaelke, Paul Orbuch and Robert F. Housman

Washington, DC: Center for

International Environmental Law, 1993

California"

By Robert Stumberg with Denis Gooding, Mary Rundle and Gian-Michele a Marca

Washington, DC:

Center for Policy Alternatives, 1994

in India�s Export Industries

By Pharis J. Harvey and Lauren Riggin

Washington, DC: International Labor Rights Education & Research Fund, 1994

By Jagdish Bhagwati

Princeton, NJ:

Princeton University Press, 1990

By Joan Goldstein

New York: Plenum Press, 1990

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