Advance Australia Fair - Building Sustainability, Justice and Peace
Opening plenary - Challenging the neo-liberal danger
Saturday 30th July 2005
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Dr Patricia Ranald,
I want to discuss the limits of the World Trade Organisation (WTO) as a global institution, why protest movements have developed in response to it, some of the victories of those movements, and their proposals for a more democratic, accountable and just trading system. In the workshop this afternoon I will focus on bilateral agreements like the USFTA and the Australia-China FTA.
I speak as an internationalist, one who believes that fair trading relationships can contribute to economic growth and development, and that we need international regulation of trade to restrain the most powerful governments and corporations. I also support the UN Human Rights Charter and more effective implementation of Human rights through UN bodies.
The WTO, together with the International Monetary Fund and the World Bank, promote an economic model known as economic rationalism, neoliberalism or the “Washington Consensus”. This model includes rapid removal of all tariff and other trade barriers, lower taxes for business and high income earners, higher taxes for consumers through goods and services taxes (GST), cuts in government spending, privatization and user charges for services like health and education, less regulation of corporations and deregulation of labour markets to achieve lower minimum wages and working conditions. It is promoted as a “one size fits all” model regardless of the circumstances of particular countries.
In theory, multilateral trade arrangements (many countries) are preferable to bilateral arrangements (2 countries) because the weight of numbers of smaller countries has the potential to moderate power inequalities. But for this theory to work in practice, there must be a multilateral framework that is open and accountable, and guarantees the interests of less powerful nations and regulates corporate influence. The current WTO framework does not meet these goals.
Trade agreements are negotiated in secret, “commercial in confidence” and we don’t discover the results until the deal is done. This has always been the case, but the social impact was less when trade agreements just dealt with tariffs or taxes on imported goods. Since the WTO was founded in 1995 trade agreements have been strengthened in two ways that can have negative impacts on both democracy and our daily lives.
Firstly they expanded in scope, and now include areas like agriculture, trade in services, rules about intellectual property rights and “non tariff barriers” which can mean many kinds of public interest regulation. Trade agreements now reach into health services, education services, water services, cultural policies, quarantine and food regulation.
Secondly, trade agreements have developed much stronger dispute processes through which governments can challenge the law or policy of other governments, on the grounds that they are barriers to trade. The dispute findings are heard by trade tribunals and enforced by strong penalties in the form of trade sanctions. You have to obey the rules or your products are banned or taxed. Trade disputes have challenged laws about access to affordable medicines, GE labeling regimes and restrictions on Internet gambling. All of these disputes were about social policies but the decisions of trade tribunals only consider whether there is a restriction on trade, not whether the law or policy reduces social harm or protects human rights.
The dispute process of trade law has made it far more robust than, for example, international human rights law, which has no general enforcement process other than naming and shaming.
So trade rules have been globalised but democracy still only operates at the national level. Decisions that will profoundly affect social policies are being transferred to international agreements that judge social policies by the rules of the market and are beyond the reach of democratic accountability. These rules reinforce the agendas of economic rationalism or neo liberalism described above, but they are being resisted with some success by local national social movements linked globally through the internet, and increasingly by some developing country governments.
As in many other countries, Australian trade negotiations are secret. There is extensive consultation with business groups. More recently, because of community campaigns, there is some consultation with community groups. Trade agreements are not made public until after the deal is done. They are ratified by Cabinet, not by Parliament. They are reviewed by a parliamentary committee that has limited time and resources. The committee's recommendations are not binding on Cabinet and indeed the Cabinet decision can and has been taken before the committee reports. Parliament only votes on the legislation required to implement the agreement at the end of the process, not on the whole agreement, so for example does not debate what limits it may place on future legislation.
This contrasts with the process for ratification of Human Rights conventions, which are debated in open sessions of UN bodies, and then implemented through the passage of detailed national legislation that is fully debated by parliament.
The WTO has 148 member countries that negotiate reductions in trade barriers through successive negotiating "rounds" named after the cities in which they began. Ministerial Meetings set the agenda every two years, with trade negotiators meeting in between. The current round, called the “Doha Round” began in 2001 includes negotiations in on trade in agriculture, goods and services.
In theory all member governments are equal and decision-making occurs through consensus. But scholars of the WTO processes have analysed how in practice the WTO is lobbied by transnational corporations and dominated by the most powerful trading nations, the US, Canada, Europe and Japan. Their dominance of the WTO informal power structure is recognised in WTO jargon, which calls them ‘the quad’. They initiate much WTO policy and their endorsement is required for any agreement in the WTO. They conduct ‘informal’ meetings with up to 30 other governments, mostly from industrialized countries, previously known as the ‘green room’ process and more recently as informal ‘Mini-Ministerial’ meetings. Over 100 smaller and developing countries are often excluded from the decision making process, and are pressured through aid and other forms of economic influence to join the consensus .
Developing country governments, often supported by civil society, are striving to redress the power imbalance in the WTO. They had some success at Seattle in 1999, when, supported by mass demonstrations that delayed the meeting, they refused to agree to an agenda imposed by the US and EU. There was another win at the Cancun Ministerial Meeting in 2003, when developing countries, again supported by civil society groups, insisted on fairer terms for agricultural trade and rejected proposals for new WTO agreements on Investment, Competition Policy and Government Procurement. The current WTO negotiations are still in crisis, stalled because developing countries will not agree to unreasonable demands from the most powerful players .
WTO agreements continue to reflect the interests of the powerful. Two examples:
- The WTO Agreement on Agriculture has reduced tariffs in developing countries but has not addressed the issue of subsidies to farmers in the EU and the US. Developing countries have been flooded with cheap subsidized imports that destroy local food production leading to unemployment and poverty.
- The WTO Trade Related Intellectual Property Rights Agreement (TRIPS) gives pharmaceutical corporations exclusive patents on medicines and hence high prices for 20 years, making them unaffordable for most developing countries. There was a slightly ambiguous clause that acknowledged this problem and allowed exceptions. But in 2001 the US Government lodged a WTO dispute against Brazil to prevent the production of cheap generic drugs to treat the AIDS epidemic. The complaint was withdrawn only after global public outcry. The US then delayed by two years an agreed interpretation of the TRIPs agreement allowing developing countries to manufacture or import affordable generic drugs . The US has since used its stronger bargaining power in bilateral trade agreements with developing countries to try to roll back this interpretation of the TRIPS agreement.
- The third example is the General Agreement on Trade in Services (GATS) It can potentially apply to all services, from banking, transport and telecommunications, to health, education and water. GATS treats services as traded commercial goods, ignoring the social aspects of many services. GATS has been promoted by transnational services corporations that want to expand their markets, especially into services previously provided by government or the non-profit sector.
GATS rules are supposed to exclude public services. However, the definition of public services is ambiguous, including only services that are “not supplied on a commercial basis or in competition with other service providers”. As we know, many public services have been commercialized and are now supplied on a competitive basis.
Although some GATS rules apply to all services, many rules only apply to those services that each government agrees to list in the agreement. Most governments have not listed essential services like health, education and water. But GATS commits governments to increase the range of listed services.
Listing of services in the GATS reduces the ability of governments to regulate services in the public interest. Transnational companies must be given ‘full market access’ meaning no requirements to have joint ventures with local firms, no limits on the number of service providers, and no requirements on staffing numbers for particular services. Qualifications, licensing and technical standards for services cannot be too burdensome for business.
For example, water is a crucial community resource that requires extensive public regulation to ensure equitable access, water conservation and environmental sustainability. But transnational water corporations see water as a traded good and a source of profits. As Forbes business magazine put it, “Water is the oil of the twenty-first century” If water services were included in the GATS, regulation of water services could be challenged as too burdensome to business. These issues are even more important for developing countries .
If a service is listed, governments can complain about the regulation of that service on the grounds that it is a barrier to trade. Recently the WTO disputes panel upheld a complaint against the regulation of public access to Internet gambling services by US state governments. The US government argued that the regulation was necessary to reduce social harm from gambling but the panel found that it was a restriction on trade.
There are moves in the current GATS negotiations to further reduce the right of governments to regulate in relation to licensing requirements, qualifications, and technical standards.
The GATS negotiations also require governments to ‘offer’ to list more services in the GATS. Developing countries have resisted the listing of essential services.
There have been some victories in Australia for community campaigning on GATS. Community pressure forced the Australian government to publish its initial offer for the first time in April 2003. This campaign also influenced the content of the offer, which did not include anything new in the areas of public health, public education, postal services or audiovisual services.
There was another victory in May 2005 when community campaigning pressured the Australian government to clarify that its previous offer on environmental services did not include water services for human use. The GATS negotiations will continue over the next two years and we need to keep the pressure up against the danger that last minute concessions will be made on services in exchange for offers on trade in goods and agriculture.
Trade Justice alternatives to neoliberalism
There are growing campaigns for trade justice in many countries linked through the internet.
The Australian Fair Trade and Investment Network of 90 community organizations supports a more open, democratic and just multilateral system of trade negotiations to restrain the influence of the most powerful national economies and of transnational corporations, and give more voice to developing countries.
Some of the changes we want are:
- Recognition that the WTO is in crisis, and needs urgent re-assessment of its formal and informal structures, and changes to ensure that all governments can participate equally in decision-making processes
- Recognition of the specific situation of developing countries through trade rules that do not erode the right of national governments to regulate to ensure local development
- More effective regulation through the United Nations and the International Labour Organisation of international conventions on human rights, labour rights and the environment, including mandatory standards of behaviour for TNCS
- Clear exclusion of public health, education, cultural, postal, water and other essential services from trade agreements
- No extension of trade rules restricting the ability of governments to regulate in the public interest
- No trade rules that could threaten funding and provision of public services
We also support a more democratic and accountable process for trade negotiations and ratification in Australia.
Such a process should include the following principles, endorsed by the 2003 report by the Senate Foreign Affairs, Defence and Trade Committe
- Independent studies of the social and economic impacts of proposed trade agreements to be published, exposed to public comment and debated publicly and by Parliament before decisions to commence negotiations
- Parliament, not Cabinet, to debate publicly and set goals for particular trade negotiations
- Widespread consultation with community organisations during trade negotiations
- The full text of trade agreements to be debated and ratified by Parliament, not only by Cabinet as at present.
Australian Fair Trade and Investment Network
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