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Democracy and the WTO: Alternatives to Free Trade

by Attac Austria Thursday, Feb. 21, 2008 at 4:49 AM

Trade policies that benefit multinational corporations are undemocratic and promote exploding inequality. "The negotiations are carried out on a supra-national plane where democracy or civil society interests fall by the wayside."


By Attac Austria

[This article is translated from the German on the World Wide Web, http://www.attac.at/index.php?id=5795&type=98.]


On first view, the decision-making structure within the WTO seems an advance over the World Bank and the International Monetary Fund where the distribution of votes depends on the capital contributions (“one dollar-one vote”) and (credit-) donor countries have the majority of votes. The principle “one country, one vote” is in force in the World Trade organization. Every new trade round is resolved theoretically in consensus. Normal power relations operate in practice. The “Quads” – US, Japan, the EU and Canada – set the themes. Official and unofficial meetings (only in the “selected” circle) are held several times a week in the seat of the WTO in Geneva. The agreements are drafted in these meetings. Very complex negotiations require pools of experts. Many developing countries simply cannot afford a permanent representation in Geneva. This disproportion intensifies at ministerial conferences. While the delegations of the EU and the US consist of several hundred persons, the poorest countries often do not have enough negotiators to fill all the parallel negotiating groups that meet round-the-clock in the final phase of the conferences. Whoever is present votes.

If the absent developing countries still refuse their consent, the industrial countries have sufficient levers: cancellation of economic assistance, stopping credit acceptance on a “black list.”

The WTO actually evades the influence or control by national parliaments. The negotiated conclusions can only be ratified afterwards or rejected as a whole by the National Assembly (“single undertaking”) which is hardly imaginable politically. The negotiations are carried out on a supra-national bureaucratic plane where the influence of transnational corporations is disproportional and democratic or civil society interests fall by the wayside.


Several central basic principles are clear in all the partial agreements of the WTO:

Most favored nation treatment: Businesses of all member countries must be treated the same, for example Ghana and the US leading to equal treatment of unequals.

Domestic treatment: Foreign businesses may not be treated worse than domestic businesses. Promoting local or regional markets (local goods) is prohibited to member states of the WTO.

Progressive liberalization: WTO members obligate themselves to ever wider liberalization in all areas up to the total “free” world market.


The WTO rules are unjustly regarded as gender neutral by trade delegates, economic officials and many parliamentarians. The theoretical assumptions underlying the WTO are based on asexual beings that are supposedly equally affected by trade liberalization.

The WTO ignores the fact that the situation of women is very different from that of men. In the countries of the South, women have less access to credit, land and education. Their mobility is greatly restricted by family obligations. Their everyday life is filled with unpaid work. Therefore a trade policy oriented one-sidedly in export can worsen the situation of women.


The General Agreement on Trade in Services (GATS) is one of the central pillars of the World Trade Organization founded in 1995. The service sector already amounts to two-thirds of the economic output in industrial countries. Leading corporations are interested in worldwide liberalization (and privatization) of banking- and insurance businesses, telecommunication, postal service, electricity, gas, water, transportation, tourism, media, education, health care and another 150 services listed in GATS.

GATS implements this and sets the direction. Thus the EU – in representing its population – demands opening the drinking water supply for transnational corporations in 72 countries. Profit striving in these areas – as many international examples show – is to the burden of the comprehensive provision of the population, the quality of services and those employed in these enterprises.

GATS covers four variants of border-crossing services: 1. The service comes across the border (trade); 2. The consumer goes across the border (consumption abroad); 3. The service provider settles abroad (direct investment); 4. The service provider comes across the border (services abroad). On account of the third point, GATS was described as the first international investment protection agreement.

Formally, the central basic principles of GATS are transparency (governments must disclose all laws, norms and standards that could impede trade with services), most favored nation treatment (no foreign provider may be in a worse position than others), market access (Art. XVI) and domestic treatment (Art. XVII). Foreign service providers may not be in a worse position than domestic providers. The repression of the public realm in favor of private suppliers is a hidden basic principle.

Since the beginning of 2000, the so-called GATS 2000 negotiations have been intent on deepening the service liberalization that began in 1995. The negotiations take place under exclusion of the general public. This is more highly charged than the liberalization commitments in the sense of investment protection and cannot be cancelled. In addition the GATS signators obligate themselves to permanent further liberalization in the already opened sectors and in the long “spared” sectors.


The Agreement on Trade Related Intellectual Property Rights (TRIPS) protects brand names, patents and geographical terms. In a word, it transforms knowledge into property. This is the most important reason why developing countries are harmed.

The know-how gulf between North and South has become greater, not smaller, through TRIPS. The TRIPS-devil is in the numerous details.

• Innovation is prevented through extended patent protection.
• Patenting living organisms is the commercial foundation for genetic engineering.
• Plant patents make possible bio-piracy by western pharmaceutical companies – the appropriation of the genetic resources of the South (for example, active plant substances).
• TRIPS “protects” the property rights of pharmaceutical firms so massively that poor countries cannot afford the medicines against plagues like AIDS or malaria – since they cannot produce them more cheaply themselves or only in absolute emergency.

TRIPS came about under the pressure of western pharmaceutical corporations as the globalization of US patent law. Before TRIPS, many cultures did not know “intellectual property.” For example, medical knowledge was seen as common heritage, not as private property.


The Agreement on Agriculture (AoA) regulates trade with agricultural goods. The North now sells its products on the world market thanks to massive subsidies far below the production costs. Farmers in Asia, Africa and Latin America become economically ruined and starve or must abandon their land. Therefore many poor countries urge the dismantling of all export subsidies and protection of their very sensitive agricultural commodities by tariffs. Unlike the “protectionism”-initiative for the poorest countries, the big agricultural exporters like Argentina and Brazil demand market access to the rich countries. This would concentrate the best soil in the hands of a few who produce mainly for export and not for their starving population.

The solution to the complex agricultural problematic within the WTO is hopeless. Thus the passionately discussed abolition of export subsidies would be sensible. This abolition would immediately increase the pressure for dismantling all agricultural tariffs and thus total free trade accelerating the spiral of export orientation, land concentration, rural exodus and impoverishment. The alternative lies in strengthening small farmers, ecologically and culturally adjusted structures worldwide with the past goals of food sovereignty, avoiding hunger, diversity and sustainability.


The so-called four Singapore themes could lead to an immense expansion of the authority of the WTO in the areas of investments, competition policies, public employment and trade facilitation. The investment theme is a very hot iron. What is involved here is “protecting” corporations from any kind of state encroachment, defining environmental laws as “expropriation” and creating direct corporate legal action against states – not before national courts but before the tribunals of the WTO that can invalidate national laws. The extremely one-sided agreement draft made it collapse at the conference of Singapore (1996). A second draft in the OECD, the notorious MAI, broke down after massive protests. The Singapore themes were instrumental in the breakdown of the 5th ministerial conference in Cancun in 2003.


By Attac Austria

[This article is translated from the German on the World Wide Web, http://www.attac.at/index.php?id=5797&type=98.]

The basic theoretical framework of the WTO was worked out two hundred years ago by the British economist David Ricardo. According to Ricardo, all countries should specialize in producing those goods for which they had the best prerequisites (“comparative cost advantage”). All the participants would then profit from free trade. However in the practice of the world market, this strategy leads to dependencies and greater imbalances. The North specializes in high-tech products and services and the South in exports with low value creation and raw materials with falling prices.

Despite such construction flaws, liberalization proponents seem convinced industrial countries owe their present wealth to free trade. A glance at the factual historical situation reveals the opposite. The industrial countries did not actually pursue their political strategies that they decree without alternative today to developing countries like the much-praised free trade. Up to the middle of the 19th century, Great Britain followed an explicitly protectionist policy with high protective tariffs and export subsidies with preferential tariffs on imported raw materials needing processing. With its search for new sales markets, the British Empire first became the glowing advocate of free trade.

The growth of US industry occurred well-protected by two oceans and import tariffs up to 50 percent on finished products. After the Second World War, the US first began championing free trade and rose to an economic superpower. The German economist Friedrich List correctly compared such promotion of trade liberalization with a man who removes the ladder from others without which he could never have climbed over a high wall.

Proponents of free exchange of goods have always promised that opening more and more areas for the world market would guarantee economic success and combat poverty. The actual effects of the neoliberal prescriptions reveal another picture. In the 1984-2000 period, the growth of the world economy slowed from 3 to 2.3 percent. On average the growth rate of the developing countries was cut in half. In parts of Africa and in former communist countries, per-capita income shriveled dramatically. The decline was only cushioned by the strong growth of the Chinese and Indian economies – without applying neoliberal recommendations in both cases.


John Maynard Keynes had already predicted that free trade zones between unequal parties could only last if the profits were redistributed from the stronger to the weaker. This is only the case now in the European Union. Very unequal trading partners are joined in the WTO and there is generally no redistribution. Since Cancun, the South has tried new ways. We will see whether the alliance of the poor will last and whether a debtor- and raw material cartel will arise or become a crystallization core of a new – fair – world economic order. One obstacle on this way is certainly the opposition between the export interests of threshold countries and stronger defensive interests of the very poor countries.

Many actors including Attac urge the multilateral approach to the regulation of trade with the help of an organization like the WTO that aims exclusively at free trade without ignoring all other goals of human development. With the UN, there is already an alternative forum, UNCTAD, the Conference of the United Nations for Trade and Development which as its name suggests does not pursue trade as an end-in-itself but embeds trade in a corset of preeminent goals: fighting poverty, social security, equal rights for women and men, cultural diversity, protection of the atmosphere and human rights. Such an approach would not force all countries in a free trade corset but would give them possibilities for different development strategies.

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