Far and away the most important globalisation issue is international trade. Worth around US$7 trillion each year, trade dominates the international agendas of most countries. Put simply trade is the everyday activity of buying and selling goods and services - something that we´re all involved in. International trade could be a massive help to poor countries, enabling them to sell what they make and buy what they need. But today the global trade system is only working for the rich.
Five Examples of Unjust Trade Rules
Unjust trade rules #1
Blocking development
Few, if any, nations have escaped poverty under trade rules similar to present WTO rules. In their successful attempts to escape poverty, many South-East Asian countries such as South Korea & Malaysia used innovative trade regulations to help their economies develop. For example they required foreign manufacturers to hire local employees and buy locally-produced components for their factories. Thanks to the WTO `TRIMS´ (Trade-Related Investment Measures) agreement, these regulations are now illegal.
Unjust trade rules #2
Monopolising knowledge
AIDS has been described by the United Nations as “a poor person’s disease”. But it is the rich, helped by the WTO, who are profiting from it.
South Africa is facing the fastest growth of HIV/AIDS infection in the world, but multinational pharmaceutical companies continue to charge sky-high prices for drugs to control the HIV virus. In 1997, the South African government passed legislation allowing it to manufacture the drugs locally. The US government, acting on behalf of its pharmaceuticals industry, immediately embarked on a campaign to stop South Africa making the life-saving drugs it needs.
As part of this campaign the US government threatened to take South Africa to a WTO `dispute settlement panel´, on the basis that their policy was illegal under the WTO TRIPS (Trade-related Intellectual Property Rights) agreement.
The trade rules of the TRIPS agreement give companies a 20-year monopoly on products they have patented, including medicines. Pharmaceutical companies have been able to use the TRIPS trade rules to maintain high prices for their drugs, often making them unaffordable to poor people. Drug prices in Malaysia, which follows TRIPS trade rules, are up to 760% higher than in India which doesn´t. As a result, the diseases of the poor are, even more than they used to be, sources of profit for the rich.
A protester makes his point during a blockade of the WTO ministerial
meeting.
Unjust trade rules #3
Exploiting the poorest
Uganda earns about 70% of its income from exporting coffee. Since joining the World Trade Organisation, the coffee market has been `liberalised´ (i.e. freed from government control) and production has increased. However, according to the World Bank the benefits have not been equally shared. The key beneficiaries were the global coffee corporations, whilst local traders were squeezed out of the market.
Unjust trade rules #4
Hurting Farmers
Rich country governments often make a lot of noise about their commitment to `free trade´ in agriculture. But although current WTO trade rules make poor countries open up their markets, they allowing rich countries to subsidise their agricultural exports. Together rich countries spend some $350 billion annually subsidising their farmers. In the US, this translates into a subsidy of around $20,000 for each farmer! Global trade rules means that these US farmers are competing with small farmers in developing countries, many of whom are living on less than $1 per day. While small farmers are highly efficient, they are not able to compete with the wealth of the US Treasury.
Seattle: police use tear gas on non-violent protesters
Death stalks the streets of Seattle!
Children join the protest.
Unjust trade rules #5
Everything for sale?
People & Planet is concerned that current WTO negotiations to expand the GATS (General Agreement on Trade in Services) threaten to place basic services like water, education and health under the control of big business. In 1999 Bolivia privatised Cochabamba’s water system under instruction from the World Bank. The British-based company that took over increased water prices by up to 200%. Even collecting rainwater in rooftop tanks became illegal without a permit. The crippling price rise sparked mass protests, in which tens of thousands of people took to the streets. In the end the government took back control of the water supply. However if the new GATS rules had been in force this would have been virtually impossible.
Global trade rules are keeping the poor locked in poverty
The world’s poorest countries have seen their share of world trade decline by more than 40% since 1980.
The poorest 20% of the world’s population now receives less than 1% of global wealth - and the gap is widening.
The poorest 10% of the world’s population now participates in less than 0.5% of world’s trade.
International trade is governed by a set of rules agreed by governments and overseen by the World Trade Organisation (WTO). Of course international trade does need rules - but they should be rules that prevent the rich and powerful nations from using their economic power unfairly against poor and vulnerable nations. However the current WTO trade rules are unjust and don´t work for the poor.
Although trade rules are made by countries, it is companies that do the trading. And the companies of the richest countries have been able to make most of the gains from international trade, often at the expense of developing countries.
Global trade rules put big business first
“The WTO services agreement is first and foremost an instrument for the benefit of business.”-European Commission WTO website
About two-thirds of world trade is accounted for by 500 large corporations.
Three companies account for 83% of world trade in cocoa, six companies control 85% of world
The unjust trade rules created by WTO agreements are often the result of close relationships between negotiators from the most powerful countries in the WTO and business lobby groups. These relationships ensure that government trade negotiators focus primarily on the gains that trade rules will bring the corporations, and not on whether the rules are in the wider public interest.
For example in agriculture, companies were involved in designing the WTO trade rules from the very beginning of the negotiating process. Some commentators claim that one US firm which controls half of global trade in grains, actually wrote the first draft of the US government´s negotiating position on agriculture before the last round of trade talks.
Corporations were also involved in the negotiation of the WTO TRIPS agreement (see next page for details). This agreement was put on the negotiating agenda by a committee of 13 major corporations which lobbied governments to include their proposals. In the trade talks that followed, 96 out of the 111 members of the US government delegation negotiating the agreement were from corporations. Speaking about business involvement, one Monsanto employee said that “Industry has identified a major problem in international trade. It crafted a solution, reduced it to a concrete proposal and sold it to our own and other governments”
Global trade rules are not protecting the earth
- If UK consumption levels were matched globally, we would need eight planets to provide the resources needed.
International trade has contributed to the excessive use of natural resources, as it allows richer countries to consume other nations´ resources. For example a huge area - 56 million hectares - of forest was lost globally between 1990 and 1995. And at the rate we are using resources such as petrochemicals and metals, the resulting climate change, health impacts of pollution and habitat damage are already exceeding sustainable levels - and growing as consumption rates increase.
Global trade rules are not democratic
On paper, world trade rules are agreed by ‘consensus’, meaning that all the 139 WTO members must agree every new rule. In theory this should be ultra-democratic. In practice, however, the important decisions are taken by the European Union, the USA, Japan & Canada. It is their ‘consensus’ that counts; less powerful nations can take-it-or-leave-it!
To make matters worse many developing countries have found themselves overwhelmed by the expense and bureaucracy of endless WTO negotiations. Over half of the poorest countries in the WTO have no representation in Geneva where the WTO HQ is located. These countries have a total population of 81 million people who have effectively no voice at the WTO. Those developing countries that are represented in Geneva often have only one person responsible for all the WTO negotiation, where there can be more than 40 meetings a week. The US has 250 negotiators in Geneva; Bangladesh has one.
Global trade rules are not `free trade´
‘Britain has been a whole-hearted supporter of free trade…. We remain an unashamed champion of free trade today.’ Tony Blair, World Trade Organisation speech, 1998
Supporters of the WTO, such as the Prime Minister, promote existing trade rules as ‘free trade’, that is trade that is not restricted by government taxes (called tariffs), limits (called quotas) or bans on particular goods. They claim that free trade benefits both the world economy and poor countries. For example the Department of Trade & Industry says that ‘free trade’ “is a key contributor to economic prosperity … growth, the creation of new jobs throughout the world, poverty elimination and technological advance.”
Over the last 50 years, trade has indeed become more free as many governments have opened up their economies to foreign trade and investment. At the end of World War II the average tariff (import or export tax) imposed on goods crossing national borders was 40%; now the average is around 4%. However, free trade is not necessarily fair trade. At the end of the last round of trade talks in 1994, it was predicted that Africa would lose $300 - $600 million per year from the agreement. Astonishingly, despite making confident claims for the benefits of current trade rules, trade officials admit that no-one has any clear answer to the simple question: ‘have poor countries benefited from the last round of trade negotiations or not?’ The research has simply not been done.
More importantly, despite the ‘free trade’ rhetoric, in reality rich countries only tend to support free trade when they are likely to gain. So while the WTO demands that poor countries remove every possible ‘trade barrier’, Northern countries keep high import taxes on agriculture and textiles (clothing etc.), areas in which poor countries are most competitive. Overall, Northern countries retain trade barriers that cost developing countries US$700 billion a year in lost income. This is some fourteen times the amount that poor countries receive in aid. Recently the most powerful trading nations failed to agree to `free trade´ access (i.e. no tariffs and quotas) for all exports from the world´s 48 poorest countries
The evolution of the the TRIPS (Agreement on Trade Related Intellectual Property rights) rules also graphically illustrates this hypocrisy and how trade rules are being fixed in the interests of big business. The WTO TRIPS agreement has strengthened corporations´ rights to control knowledge in ways that are actually contrary to the free trade principles that the WTO rules are supposed to uphold. As such, the TRIPS trade rules have little to do with free trade and plenty to do with corporate profiteering!
People-Power strikes back! The Battle of Seattle
The rules that govern the current global trading system are deeply unfair. But that hasn’t stopped rich countries, spurred on by their multinational corporations, from trying to expand those rules substantially. In November 1999, Ministers from WTO countries met together in Seattle to launch a ‘new round’ of trade negotiations, to be impressively named the ‘Millennium Round.’ This new round was to be ‘comprehensive’, in other words to extend WTO power into many new areas, such as foreign investment. This would have had far-reaching effects for the world’s most vulnerable people and for the planet. But, despite having the force of the world’s most powerful countries and companies behind it, this attempt did not succeed.
The talks in Seattle collapsed, amidst crippling internal disagreement and headline-grabbing external protest. Inside the meeting, developing country governments had had enough of being excluded from the real decision-making process. Outside, pictures of thousands of peaceful protesters being tear-gassed by Robocop-style police were beamed all over the world. Suddenly the WTO was big news. The people on the streets of Seattle were a diverse movement of environmentalists, Southern activists, trade unionists, students, consumers… in fact their diversity reflected the numerous negative impacts of WTO rules, suffered by people across the globe.
This movement took the world, and its leaders, by surprise. The collapse of the talks was heralded as an unprecedented victory for people power. But although Seattle was a real setback for the global rule-makers, they are continuing to push determinedly for WTO expansion.
A dangerous leap into the dark
Western governments, particularly the European Union, are desperate to launch the Millennium Round as soon as possible. The only lessons they seem to have learned from Seattle is that they need to ‘sell’ the round a bit more effectively to their electorates. In the weary words of Mike Moore, Director-General of the WTO, ‘We need to reassure people that globalisation is generally a force for good.’ They claim to be moving ever closer to launching a round - critics of the WTO must stay on their toes.
In the meantime, new WTO negotiations have already started on two existing agreements: the Agreement on Agriculture and the General Agreement on Trade in Services (GATS). The GATS negotiations are particularly worrying as the proposed agreement is far-reaching and could result in the privatisation and commercialisation of a whole range of public services, including health and education. The WTO is desperate to rebuild its legitimacy and it is using the GATS to do it.
After Seattle, the UK Secretary of State for Trade and Industry very sensibly recognised that ‘the WTO will not be able to continue in its present form. There has to be fundamental and radical change in order for it to meet the needs and aspirations of all of its members.’ Such changes have not occurred, yet the world’s most powerful people are pushing ahead with WTO expansion anyway, regardless of how this will affect poor people in both North and South, and the global environment. It is deeply irresponsible for governments to behave in this way, and they must not be allowed to do so. There should be no further expansion of WTO rules unless governments can show that such a path would be broadly beneficial to people and the planet. To this end, governments should not proceed until a comprehensive independent assessment of the social and environmental impacts of the last round of trade negotiations has been completed. To do otherwise would be reckless.
Seattle was just the start. The movement that came together to stop the Millennium Round in Seattle continues to grow. This is a historic opportunity for people all over the world to come together and bring about real change on a global level. The People & Planet Trade Justice campaign aims to be part of that change.
Sources: The facts and figures in this document were mainly drawn from research reports by Oxfam, Christian Aid, CAFOD, Friends of the Earth and the Corporate European Observatory.