What is the WTO and Why Do People Hate it So Much?

Excerpted from "A Citizen's Guide to the World Trade Organization," published by Public Citizen.

What do the U.S. Cattlemen's Association, Chiquita Banana and the Venezuelan oil industry have in common? These big business interests were able to defeat hard-won national laws ensuring food safety, strengthening local economies and protecting the environment by convincing governments to challenge the laws at the World Trade Organization (WTO).

Established in 1995, the WTO is a powerful new global commerce agency, which transformed the General Agreement on Tarriffs and Trade (GATT) into an enforceable global commercial code. The WTO is one of the main mechanisms of corporate globalization. While its proponents say it is based on "free trade," in fact, the WTO's 700-plus pages of rules set out a comprehensive system of corporate-managed trade. Indeed, the WTO has little to do with the 18th Century free trade philosophy developed by David Ricardo or Adam Smith, who assumed neither labor nor capital crossed national borders.

Under the WTO's system of corporate-managed trade, economic efficiency, reflected in short-run corporate profits, dominates other values. Decisions affecting the economy are to be confined to the private sector, while social and environmental costs are borne by the public.

Sometimes called the "neoliberal" model, this system sidelines environmental rules, health safeguards and labor standards to provide transnational corporations (TNCs) with a cheap supply of labor and natural resources. The WTO also guarantees corporate access to foreign markets without requiring that TNCs respect countries' domestic priorities.
The myth that every nation can grow by exporting more than they import is central to the neoliberal ideology. Its proponents seem to forget that in order for one country to export an automobile, some other country has to import it.

Now the world's transnational companies want more - a new "Millennium Round" of further WTO negotiations which would accelerate the economic race to the bottom by expanding the WTO's powers.

But this concept's failure goes beyond this inherent sham: the lose-lose nature of export-led growth was exposed in the aftermath of the East Asian financial crisis of 1998. When the IMF compelled Asian countries to try to export their way out of their crises, the U.S. became the importer of last resort. U.S. steelworkers lost jobs to a flood of steel imports, while workers in Asia remained mired in a terrible depression.

The neoliberal ideological underpinning of corporate-managed trade is presented as TINA - "There Is No Alternative" - an inevitable outcome rather than the culmination of a long-term effort to write and put into place rules designed to benefit corporations and investors, rather than communities, workers and the environment.

How the WTO Tramples Democracy

The WTO is the international organization charged with enforcing a set of trade rules including the General Agreement on Tariffs and Trade (GATT), Trade Related Intellectual Property Measures (TRIPS), General Agreement on Trade in Services (GATS), among others. WTO was established in 1995 in the "Uruguay Round"of GATT negotiations.

Prior to the Uruguay Round, GATT rules focused primarily on tariffs and quotas. Consensus of GATT members was required to enforce the rules. The Uruguay Round expanded GATT rules to cover what is known in trade jargon as "non-tariff barriers to trade." These are food safety laws, product standards, rules on use of tax dollars, investment policy and other domestic laws that impact trade. The WTO's rules limit what non-tariff policies countries can implement or maintain.

Currently there are 134 member countries in the WTO and 33 nations with observer status. Officially, decisions in the WTO are made by voting or consensus. However, developed countries, especially the so-called QUAD countries (U.S., Canada, Japan and the European Union), repeatedly have made key decisions in closed meetings, excluding other WTO nations.

The WTO's lack of democratic process or accountable decision-making is epitomized by the WTO Dispute Settlement Process. The WTO allows countries to challenge each others' laws and regulations as violations of WTO rules. Cases are decided by a panel of three trade bureaucrats. There are no conflict of interest rules and the panelists often have little appreciation of domestic law or of government responsibility to protect workers, the environment or human rights. Thus, it is not surprising that every single environmental or public health law challenged at WTO has been ruled illegal.

WTO tribunals operate in secret. Documents, hearings and briefs are confidential. Only national governments are allowed to participate, even if a state law is being challenged. There are no outside appeals.

Once a final WTO ruling is issued, losing countries have a set time to implement one of only three choices: change their law to conform to the WTO requirements, pay permanent compensation to the winning country, or face non-negotiated trade sanctions. The U.S. official position is that ultimately, laws must be changed to be consistent with WTO policy.

When the WTO was created, concerned citizens and public interest organizations warned that the combination of the WTO's pro-industry rules and powerful enforcement would pose a threat to laws designed to protect consumers, workers, and the environment. Almost five years later, there is a clear record: the cases settled under WTO rules show the WTO's bias against the public interest.