Global Integration; Global Rule

The impact of GATT on governance

One of the articles in Toward A Sustainable World Order (IC#36)
Originally published in Fall 1993 on page 33
Copyright (c)1993, 1996 by Context Institute

While the North American Free Trade Agreement (NAFTA) has been receiving a lot of attention in the media lately, little attention has been focused on an even more sweeping trade agreement, now in the works. Provisions of the Uruguay round of talks on GATT (the General Agreement on Tariffs and Trade) would further open the world to unrestrained transnational commerce. Like NAFTA, GATT could set back efforts to gain more democratic control over resources, technology, and living and working conditions. IC contributing editor David Korten is a fellow of the People-Centered Development Forum, 14 E. 17th Street, Suite 5, New York, NY 10003.

International trade and investment are means, not ends. Both can advance the world’s social and environmental well-being when managed within a political framework that aligns market forces with the public interest, and preserves the right of publics to determine what constitutes their interests.

Unfortunately, little sunlight permeates the discussions on GATT. Its affairs are conducted in secret meetings and are seldom exposed to public debate. The public hears only assur-ances that a successful agreement will bring new well-paying jobs for workers and lower prices for consumers.

It is not mentioned that the Uruguay Round proposals include sweeping provisions of uncertain outcome, including provision for trade sanctions imposed in an attempt to force the repeal by signatory countries of conflicting national and local laws.

Under current GATT rules, enacting sanctions requires an unanimous endorsement by GATT members. Under the draft proposal now being considered, the so-called Dunkel draft, decisions by GATT dispute panels – three unchecked and unaccountable officials meeting in secret – would be binding and enforceable unless overturned by a unanimous vote of all GATT member countries.

The mandate of the GATT is to deregulate trade. The proposal now under negotiation seeks to expand the definition of regulatory trade barriers to prevent a national or local government from:

  • Excluding foreign products that fail to meet local environmental health and product-safety standards if these exceed recognized international standards;

  • Restricting the export of natural resources, for example, through laws requiring local value-added processing;

  • Giving preferential treatment to local producers;

  • Limiting foreign participation in any area of manufacturing, mining or services (such as banking, insurance, and shipping); and

  • Failing to prevent infringement of the intellectual property rights of foreign companies.

Many of these GATT provisions are being advanced as necessary to assure the efficient functioning of competitive markets.

The GATT proposals do advance competition – among workers whose jobs can be exported to low-wage, labor-surplus economies; among raw materials producers; and among localities seeking to attract investment by offering cheap labor, lax environmental, health and safety regulation, tax exemptions, and other subsidies.

The provisions do nothing to limit the ability of transnational corporations to use their monopolistic powers to drive competitors out of the market by unfair means, to eliminate competitors through mergers and acquisitions, or to form non-competitive strategic alliances with "competitors" to share technology, production facilities, and markets.

The proposed GATT provisions will accelerate the shift of power from labor and democratically elected governments to huge corporations, increasingly freeing the latter from both the restraints of law and the competitive discipline of the market.

Capital and technology are the critical control points in a free and open global economy. Removal of restrictions on investments by international banks and other financial services companies will allow a few transnational corporations to further extend their control over capital markets worldwide.

The intellectual property rights agreements will secure monopolistic control by a small number of corporations over much of the world’s store of technology and genetic materials, including seeds and medicines.

The ability of national and local legislative bodies to set and enforce social, health, and environmental standards will be seriously compromised.

The agenda of an open, one-world economy promoted by the IMF, World Bank, and GATT has an intuitive appeal as a path to universal peace and prosperity. Unfortunately, the more evident outcome is accelerating social and ecological disintegration driven by cultural homogenization and the unrestrained concentration and centralization of unaccountable economic power far removed from ties to place and community.

Closing the gap between rich and poor, moving toward a sustainable relationship between human society and Earth’s ecology, and giving real meaning to democratic governance depend on exactly the opposite – the decentralization and distribution of economic power and the nurturing of cultural diversity.

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