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Paul D’Amato

World Trade Organization: Corporate club

(April 2000)

From International Socialist Review, Issue 11, April–May 2000.
Downloaded with thanks from the ISR Archive Website.
Marked up by Einde O’ Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

THE “BATTLE in Seattle” of November and December 1999 focused deep-seated bitterness and anger toward inequality and corporate greed – an anger that has bubbled, mostly beneath the surface, for the last 20 years. It legitimized protest in a way not seen since the 1960s and, above all, seriously undermined the “free market” consensus that has been pervasive in mainstream press and politics. More than 35,000 protesters – from environmentalists, socialists and anarchists to trade unionists and student activists – crashed the “Party of the Washington Consensus.”

While protesters clashed with riot police outside the failed World Trade Organization (WTO) “Millennium Round” in Seattle, the delegates inside clashed over issues that had been stumbling blocks before the protests even began. According to one Financial Times report, “Developing country delegates pounded their desks, booed and catcalled in protest at the brusque chairmanship of Charlene Barshefsky, the U.S. trade representative. Some threatened to walk out of the talks early.” [1]

One symptom of this malaise within the WTO is the long and bitter fight over who will be the organization’s director general. There are also several trade disputes among the leading economic powers as well as between the leading powers and less developed countries. The European Union (EU) refuses to budge on its resistance to importing hormone-treated beef. The U.S. and Canada are pushing to revise the bio-safety protocol in order to allow imports of genetically modified foods in Europe and elsewhere. Japan, France and Norway oppose proposals by the U.S. to eliminate agricultural subsidies. Japan and the U.S. are at loggerheads over U.S. attempts to portray cheaper Japanese steel and other imports as “dumping.” And India opposes U.S. and European imposition of labor and environmental standards, which are viewed as attempts to weaken India’s trading position.

For many people, these inner workings of the WTO remain a mystery. What is the WTO, who benefits from it and what is its future?

Origins of the WTO

The WTO is a direct descendant of the General Agreement on Tariffs and Trade (GATT). It was formed in 1995 after the “Uruguay Round” of GATT negotiations was completed. Together with the World Bank and the International Monetary Fund (IMF), GATT was created in 1947 by the U.S. and its allies as part of the postwar economic architecture of world trade and investment as decided by the Allies in 1944 in the Bretton Woods Agreement.

Former Labor Secretary and Harvard economist Robert Reich describes how the postwar setup – in the name of free trade – was rigged in the U.S.’s favor:

With the dollar as the currency upon which the system of fixed exchange rates was to be based, American bankers and core corporations could extend their reach at minimal risk. Under a World Bank controlled by Americans, development assistance could be focused precisely where America’s core corporations saw the greatest opportunity. And so long as the recipients of America’s foreign aid used it to buy American exports, core corporations could venture into global trade confident of receptive markets. Through such means, the playing field of global commerce was sufficiently tipped in America’s direction so that by the mid-1950s even the National Association of Manufacturers could be persuaded to support tariff reduction. [2]

The main purpose of GATT has been to reduce tariff barriers, and it has been largely successful. Through the course of several trade rounds over more than 50 years, average tariffs have fallen from about 40 percent in 1948 to about 5 percent today.

Yet this has not meant the elimination of all trade restrictions. Japan and Germany emerged as major competitors in the 1970s, challenging U.S. dominance of world markets and causing the collapse of the Bretton Woods system. This caused rival states to employ other forms of protectionism known as “non-tariff barriers.” These included voluntary export restraint pacts, government procurement procedures, product standards, local content rules and state subsidies to industry and agriculture. According to a 1987 World Bank report, the U.S. outstripped all other industrial states in its efforts to increase non-tariff barriers – at the very moment that the Reagan administration began to tout its free trade, neo-liberal economic agenda.

From GATT to WTO

The WTO is an organization of representatives of states (currently 134 members) who assemble in order to negotiate the terms of international trade. Like all international bodies, it is dominated by the most powerful nations, known as the “Quad”: the United States, Japan, the EU and, as a junior partner of the U.S., Canada. As one senior U.S. negotiator remarked during GATT’s Uruguay Round: “The big markets dictate the trading rules. The U.S. can’t do it independently, and the [European Community] can’t do it independently, but when the two lock arms, they can determine the fate of the round.” [3]

During the Uruguay Round of GATT from 1986 to 1994, the formation of the WTO was pushed most strongly by the U.S. The U.S. sought to create new trade rules and to lower trade barriers in order to open world markets further to American goods and services, as well as to reverse a growing trade deficit and expand trade, particularly in agricultural goods. (The U.S. share of the world wheat market, for example, declined from 55 percent in 1980 to 31.5 percent in 1986.) U.S. trade officials and businesses reasoned that the multilateral elimination of subsidies on agricultural and manufactured goods would leave the U.S. in an advantageous position versus its rivals. Europe’s growing agricultural export industry was bolstered by subsidies that were higher than in the U.S., and many less developed countries imposed various measures to protect their less competitive industries from international competition. The U.S. wanted to eliminate subsidies, taxes and regulations that prevented its penetration of those countries, both in terms of sales and investment opportunities. As Carla Hill, chief U.S. negotiator in trade talks from 1986 to 1992, put it: “I would like you to think of me as the U.S. Trade Representative with a crowbar, where we are prying open [foreign. markets, keeping them open so that our private sector can take advantage of them.” [4] Additionally, this agenda dovetailed with the collapse of Eastern European state capitalism and the ideological triumph of the “free market.”

What was prominent in the Uruguay Round of the GATT – and has since been showcased even more explicitly in the WTO – was the drive to eliminate non-tariff barriers. United Technologies executive Harry Gray explains:

Such barriers as quotas, package labeling requirements, local content laws, inspection procedures and discriminatory government procurement policies all inhibit world trade. We need conditions that are conducive to expanded trade. This means a worldwide business environment that’s unfettered by government interference. [5]

It should be noted, however, that this argument is meant primarily for other countries, and that big corporations are not at all adverse to “government interference” in the economy – when it promotes their own interests. No U.S. technology or aerospace company has ever turned down a hefty Pentagon subsidy on the grounds that it would give American companies an unfair advantage against their competitors. Moreover, by pushing the WTO as a forum to open the world’s markets to U.S. multinationals, the U.S. government does actively interfere in world trade. Noam Chomsky explains this well in response to a New York Times editorial that described the WTO as a “new tool of foreign policy.”

The “new tool” allows the United States to intervene profoundly in the internal affairs of others, compelling them to change their laws and practices. Crucially, the WTO will make sure that other countries are “following through on their commitments to allow foreigners to invest” without restriction in central areas of their economy. In the specific case at hand, the likely outcome is clear to all: “The obvious corporate beneficiaries of this new era will be U.S. carriers, who are best positioned to dominate a level playing field.” [6]

How the WTO works

The WTO’s member states are meant to operate by consensus. In practice, however, consensus is first reached by the Quad states, which then impose their will on the remaining members. As Susan George outlines:

Decisions are made by “consensus” of the 134 member governments, but what happens in reality is that the U.S., Canada, the EU and Japan ... meet every day to decide what issues to deal with and how. Then they come back to the general meeting and say, we’ve got consensus, you agree don’t you? It’s a steamroller tactic. [7]

Ultimately, powerful governments and their “home” industries and corporations write WTO rules. The U.S. trade representative relies on 17 “Industry Sector Advisory Committees” to help shape U.S. proposals to the WTO. In this light, it’s clearly no coincidence that the Clinton administration raised a complaint in the WTO against the EU’s policy of preferential trade with Caribbean banana producers after he received a large campaign contribution from the U.S.-based Chiquita Brands International.

While GATT dealt mostly with tariff reduction, the WTO has a far wider scope and broader powers to deal with trade disputes. The WTO appoints a three-member panel that wields the power to make binding rulings on complaints brought by member states. Once the panel rules that a state has violated WTO rules (namely, that it has imposed an “unfair” trade barrier against a member or member states), the losing state must either adjust its policies or submit to trade sanctions by the state or states that raised the complaint. The proceedings of this complaint resolution panel are secret, as are all proceedings of the WTO.

Expanded role of the WTO

What alarms activists most about the WTO is the way in which it has defined nontariff trade barriers to apply to a wide variety of governmental policies that affect environmental, health and labor conditions around the globe – none of which were part of GATT negotiations. The WTO’s expanded list of non-tariff barriers now includes agricultural subsidies; services such as health care, education and communications; environmental and health regulations; and international patents on goods and “intellectual property.”

Agricultural subsidies: One of the issues pushed most forcefully by the U.S. is the elimination of agricultural subsidies, which has the effect of driving millions of farmers out of business in both the U.S. and Europe. In less developed countries where farming is less competitive, this would wipe out millions of peasants and accelerate the rate at which they are driven off the land and into the joblessness and squalor of urban shantytowns.

Trade Related Aspects of Intellectual Property Agreement (TRIPs): Notwithstanding the endless rhetoric about the WTO promoting free trade, this agreement imposes 20-year monopoly protection on patents developed mainly by the world’s largest agricultural, chemical, pharmaceutical and genetic engineering concerns. Writes Samir Amin:

With Trade Rights in Intellectual Property (TRIP), an offensive has been launched not to reinforce competition, but on the contrary, to strengthen the power of technological monopolies – at the expense, of course, of developing countries for whom the possibility of acquiring the technology they need in order to progress becomes even more uncertain. Will the ‘trade secrets’ that GATT-WTO wants to include under this category bring us back to the mercantilist monopoly practices of 300 years ago? Even the language used to discuss the topic is not neutral. We no longer speak of knowledge as the common property of humanity, but rather of ‘piracy’ when someone tries to acquire it! This policy sometimes verges on the obscene: GATT-WTO, for instance, wants to forbid Third World manufacture of inexpensive pharmaceutical products, which are of vital importance, in order to protect massive profits of monopolies in this sector. [8]

Under the TRIPs agreement, it is no longer possible to manufacture a drug or buy it abroad without permission from – and royalty payments to – the owner of the invention or drug for 20 years. Some exceptions allow a country to manufacture drugs without the inventor’s consent in the event of medical emergencies. But pharmaceutical giants can use the TRIPs agreement as a battering ram to boost their profits at the expense of health and human life. Countries that produce cheaper generic drugs are pressured to stop doing so – thus pricing the majority of poor, working-class and even middle-class people out of desperately needed health care.

In 1998, for example, Thailand began producing a drug to treat cryptococcal meningitis (a fatal disease often associated with AIDS). It cost about one-third of the price of Triflucan – the brand name of the drug sold by Pfizer in the U.S. The U.S. government threatened to impose duties on Thailand’s main exports, forcing Thai authorities to ban sales of the life-saving drug. Similarly, in 1997, the South African government began allowing local firms to produce or to import desperately needed AIDS treatment drugs without paying patent royalties or getting permission from the patent’s owners. In response to complaints by large U.S. pharmaceutical companies, Vice President Al Gore personally intervened to strong-arm South Africa into changing its laws. However, “Gore was unable to hold a single public meeting for the presidential election without being questioned on the subject.” [9] Only public pressure forced the Clinton administration to abandon, for now, its fight on behalf of U.S. pharmaceutical profits.

The TRIPs agreement also protects agribusiness patents over plant varieties and seeds, “shifting ownership and control of seed stocks away from farmers.” [10] This sanctions a common corporate practice in which plants and seeds that have been developed and cross-bred by indigenous communities and farmers (sometimes over centuries) are taken and varied slightly. They are then patented so that the agribusiness is granted exclusive licensing and marketing rights to any products derived from their use.

This “bio-piracy” forces WTO member states to enforce foreign patent rights on seed varieties that may have been developed by farmers in their own country. A famous example is India’s neem tree, which has for centuries been used for medicinal purposes. The U.S. conglomerate W.R. Grace already manufactures neem products and justifies its patent by claiming to have a unique extraction process. The company’s patent is under challenge, but Grace is expected to defend it under the TRIPs agreement.

Environmental protection laws: The WTO has challenged as barriers to trade a number of environmental laws in various countries. For example, under a challenge launched by Venezuela and Brazil, a WTO panel instructed the U.S. in 1996 to amend its gasoline cleanliness regulations to allow for lower standards of air cleanliness. The Clinton administration agreed, and amended the U.S. Clean Air Act in order to lower standards. Similarly, just last year, the EU and the U.S. complained to the WTO’s Technical Barriers to Trade (TBT) panel a}out a Japanese law that requires cars to be manufactured with engines that comply with Japanese pollution emission standard.

Some WTO opponents use these examples to show that the WTO violates national sovereignty – even that of the U.S. But this is not the case. The WTO’s most powerful players sometimes choose to comply with a WTO panel ruling, not because the WTO forces them to, but because they actually support the change themselves. Journalists Russell Mokhiber and Robert Weissman quote a revealing WTO document that states, “Quite often, governments use the WTO as a welcome external constraint on their policies: ‘we can’t do this because it would violate the WTO agreement.’” [11] The new WTO-compatible air-safety regulations adopted by the Clinton administration, for example, are the very same regulations proposed earlier by U.S. industry but rejected by the Environmental Protection Agency.

Food Safety: Most famously, the U.S. and Canada have pressured the EU to end its ban on hormone-treated beef. The U.S. also wants to alter international food safety regulations, which allow a country to ban the import of foods on the “precautionary principle” that they have not yet been proven safe. Under the rhetorical guise of pushing for “science-based” rules, the U.S. wants countries to accept imports of genetically modified foods unless they are scientifically proven to be dangerous. A coalition of governments led by the U.S. and Canada blocked adoption of the Biosafety Protocol last year in Colombia, and finally signed on in Montreal this year only after succeeding to water down some of its provisions.

Labor Laws: The WTO operates on the principle that any attempt to prevent the importation of products on the basis of the manner in which they were produced or procured constitutes an unfair trade barrier. In the race to the bottom, the WTO and its backers consider it open season on labor standards, environmental protection, and health and safety laws. They are all “barriers to trade.” The WTO therefore considers any attempt to ban a product because it was produced by child labor a “trade barrier.” In one of its most outrageous rulings, the WTO dispute panel forced El Salvador’s government to reduce its minimum wage from 60 to 36 cents an hour because it considered the higher wage to be a barrier to trade. [12]

Trouble in trade paradise

While the WTO can be used as a tool to pry open markets, this process can come to a standstill when its main players fall out. This has certainly been the case recently, when WTO members have been unable even to agree on a date for convening their next meeting. And while the U.S. uses the WTO to promote its own agenda, Europe and Japan also have their own agendas, which sometimes clash with Washington. And as stated above, the collapse of the Seattle talks had as much to do with major disagreements between the WTO’s main contenders as it did with the protests.

When it comes to trade, the world’s ruling classes are, as Marx said, a “band of hostile brothers.” They are willing to use the WTO to horse trade as long as they can gain something from it. When the “hostile brothers” who run the WTO can agree on their main goals, they band together to impose trade conditions most favorable to themselves and less favorable to weaker, less developed states. For the most economically powerful states, the motto of “free trade” has been used to batter down all barriers to the expansion of their markets.

But when the “hostile brothers” disagree, the WTO cannot actually force them to comply. For example, the U.S. pressured the EU to halt a WTO dispute panel aimed at challenging the Helms-Burton Act, signed into law by Clinton in 1996. Helms-Burton enables U.S. nationals whose property was confiscated by the Cuban government after the 1959 revolution to sue foreign investors who profit from the use of those properties. The Clinton administration claimed that since Helms-Burton involved national security, the U.S. could ignore a WTO panel ruling demanding that the Act be modified. Noam Chomsky notes:

Washington declared that the WTO “has no competence to proceed” on an issue of American national security ... A WTO ruling against the United States in absentia would be of no significance or concern, a Clinton Administration spokesman added, because “we do not believe anything the WTO says or does can force the U.S. to change its laws.” [13]

Likewise, the EU has effectively refused to comply with the pro-U.S. WTO ruling that calls on it to end its special trade arrangements with banana producers in former Caribbean commonwealth states. Moreover, the U.S. has maintained that it has the legal right to impose unilateral sanctions under its own trade laws outside the bounds of the WTO system whenever it sees fit.

Though the most powerful states benefit the most from the WTO, other members do not participate to “help” their own general population win better services or higher wages. On the contrary, they seek to open the world markets to goods produced by their capitalists, who rely on cheaper labor to make their commodities more competitive. Economist Jeff Faux quotes a retired State Department official who bluntly sums up the class character of the WTO’s participants, whether they are from relatively rich or poor countries: “What you don’t understand is that when we negotiate economic agreements with these poorer countries, we are negotiating with people from the same class. That is, people whose interests are like ours – on the side of capital.” [14]

No major turn in world trade policy can take place against the will of the U.S., EU and Japan. The U.S. might agree to some WTO sanctions in order to impose some sanctions of its own on another country. It may use a WTO ruling, for example, that demands the reduction or elimination of some environmental standard in the U.S. But it does so not because it has no choice, but so it can use the WTO ruling as a convenient cover.

The difference between the “Quad” countries and the poorer ones in the WTO is that the latter have far less trade leverage. Where large, diversified economies like the U.S. can afford to take a trade hit; economies that are dependent on the export of one crop or raw material cannot. The result is that, as shown above, trade deals are first and foremost agreed upon by the richest countries, and then the poorer countries are expected to agree – or else.

The WTO’s future

As a weapon wielded to eliminate health, environmental and labor regulations, the WTO must be opposed at every step of the way. The WTO is distant, secretive and unaccountable. It favors multinational companies and the “wealthiest few in developed and developing countries.” [15] The calls by various trade unions and non-governmental organizations (NGOs) for reform of the WTO is therefore welcome. The WTO has opened up a new debate – not just about this or that specific economic problem, but about how capitalism internationally runs roughshod over workers and the environment in the unquenchable pursuit of profit.

But the WTO, a club of the world’s richest aimed at expanding their wealth, cannot be expected to fundamentally alter its practices. As Lori Wallach pointed out in a Nation symposium on world trade:

When the WTO was established, many environmentalists pushed for an environmental working group in the WTO. They got one, and after five years, many of its most energetic proponents are now saying that this working group has turned into a trade-dominated entity where environmental laws are studied not to safeguard them but rather to figure out how to get rid of them. We don’t want to put the environment in the hands of an organization whose charge and worldview is commercial. That would be like putting the Endangered Species Act in the middle of the bankruptcy code. [16]

Kim Moody of Labor Notes made a similar observation about labor-movement support for WTO reforms:

The Clinton administration’s proposal for a WTO working group on labor standards is not new. It was first proposed to the U.S. trade delegation to the 1986 meeting of the GATT. In other words, it was first proposed by the Reagan administration – fresh from crushing the air traffic controllers. Need we say more?

The AFL-CIO proposes more rigorous labor standards, but it is hard to see how an organization single-mindedly bent on corporate power, deregulation, and cost-cutting could be expected to enforce them in favor of working people and their organizations. [17]

The Clinton administration, predating Seattle, has also proposed that the WTO take on issues of labor and environmental standards. But an administration that violates basic labor standards at home can hardly be expected to take them seriously abroad. A July 1999 report of the International Confederation of Free Trade Unions (ICTFU) to the WTO makes this very clear:

While in theory U.S. law provides for workers to have freedom of association, the right to join trade unions and participate in collective bargaining is in practice denied to large segments of the American workforce in both the public and the private sectors.

A 1997 survey, based on federal government data, revealed that some 290,000 children were working illegally ... Between 400 and 600 children working in agriculture suffer work-related injuries which are reported each year. In addition, between 1992 and 1996, 59 children lost their lives while working in agriculture. [18]

The report also cited the fact that 27,000 federal and state prisoners in the U.S. are engaged in labor and receive pay between 23 cents and $1.15 per hour. This number is 50,000. Moreover, the U.S. has dragged its feet when it comes to signing the Conventions of the International Labor Organization; indeed, the U.S. has refused to sign all but one of seven “core labor standards.” It has signed one of two conventions on child labor, but has failed to sign the two conventions on union rights, two on discrimination and an additional one on child labor.

This puts Clinton’s labor initiatives in perspective. His initiatives do not represent any genuine concern for labor rights and standards, but are rather an attempt to garner support from AFL-CIO leaders for Clinton’s (and, if elected in 2000, Gore’s) trade policies. U.S. policy in the WTO is fueled not by any concern to improve labor standards, but by the desire to reduce the trade deficit and expand overseas markets. Its biggest weakness is that the U.S. trade deficit has mushroomed to more than $250 billion as U.S. purchasing power has sucked in the world’s exports in the wake of the Asian economic crisis. Washington hopes to offset this deficit by prying open markets in which the U.S. is most competitive – agricultural products, financial services, computer software, intellectual property and entertainment exports from Hollywood. Clinton has been interested throughout the 1990s in pushing America’s high-tech advantage over the rest of the world. Though their motives in doing so are questionable, Third World leaders’ attacks on Clinton for using the issue of labor conditions as a way of making their economies less competitive rings truer than any of Clinton’s homilies against child labor.

An analysis by two Canadian authors sympathetic to the WTO and its policies was written not long before the Battle in Seattle, and offers this accurate observation:

The Quad countries, particularly the United States and the European Union and to a lesser extent Japan, will as usual be in the driving seat for the Millennium Round. Canada will be going along for the ride, but may be able to do some back seat driving. Other countries, especially the developing countries, will be even further away from the steering wheel, and less likely to influence the direction of the vehicle. [19]

What the authors fail to add is that the vast majority of the world’s population – billions of workers, small farmers, the poor and the destitute – aren’t even in the car, which is either speeding past them or running them over. No matter how much the WTO trumpets the benefits of “free trade,” Seattle has lifted the veil and exposed the WTO’s real purpose: to pile up wealth on one side, misery and poverty on the other. It may be a long time before the Quad countries can come to enough agreement even to meet. But in the meantime, the issues brought to the surface by the Seattle demonstrations – from environmental destruction to attacks on workers’ rights – aren’t going away. In the U.S. and around the world, workers need to take the spirit of Seattle and translate it into the language of fightback on many different home fronts. More than ever, the battle in Seattle has shown the need for cross-border, international solidarity among the world’s workers and poor who share a common enemy. The anger that was given a focus in Seattle needs to be transformed into the rebirth of day-to-day struggles that not only challenge the priorities of capitalism, but also overturns them. Only then can we nullify the WTO and all of the other institutions that serve global capitalism.

* * *


1. Collapse: A Goal Beyond Reach, World Trade Organization Special Report, November 1999 <>.

2. Quoted in Alan Maass, The Politics of Trade, unpublished manuscript, p. 5.

3. Robert K. Schaeffer, Understanding Globalization: The Social Consequences of Political, Economic and Environmental Change (Lanham, Md.: Rowman & Littlefield Publishers, 1997), p. 191.

4. Schaeffer, p. 183.

5. Schaeffer, p. 188.

6. Noam Chomsky, Profit Over People: Neoliberalism and Global Order (New York: Seven Stories, 1998), p. 69.

7. Susan George, Trading Places, Socialist Review 233, September 1999: p. 19.

8. Samin Amin, Capitalism in the Age of Globalization (New York: Monthly Review, 1997), p. 29.

9. Martine Bulard, Apartheid of Pharmacology, Le Monde Diplomatique, January 2000 <>.

10. Lori Wallach and Michelle Sforza, The WTO: Five Years of Reasons to Resist Corporate Globalization (New York: Seven Stories Press, 1999), p. 49.

11. Quoted in The Bosses Tool, International Socialist Review No. 10, Winter 2000: p. 4.

12. Kim Moody, What to Know About the WTO, Labor Notes, February 2000: p. 8.

13. Chomsky, p. 76.

14. Jeff Faux, Slouching Toward Seattle, The American Prospect, Vol. II, No. 2, December 6, 1999.

15. Wallach and Sforza, pp. 14–15.

16. Whose Trade?, The Nation, December 6, 1999.

17. Kim, p. 14.

18. Internationally Recognized Core Labor Standards in the United States: Report for the WTO General Council Review of the Trade Policies of the United States, Geneva, 12 and 14 July 1999 <>.

19. Patrick Grady and Kathleen Macmillan, Seattle and Beyond (Ottawa: Global Economics Ltd., 1999), p. 150.

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