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Secret trade treaty documents reveal the shark hidden in the free trade swimming pool.

By Gregory Palast The Observer (London), Sunday 15 April 2000.


(Note to American readers: Replace the words "Trade Minister Dick Caborn" with the words, "US Trade Representative" - whose assurances about the WTO are virtually interchangeable with European ministers' happy-talk....)


Britain's Trade Minister Dick Caborn does nothing all day, and that keeps him very, very busy. Caborn is busy reassuring his nation that nothing in the proposed General Agreement on Trade in Services (GATS) threatens Britain's environmental regulations. Nothing in GATS permits American corporate powers to overturn safety, health regulations. Nothing in GATS, which is part of the World Trade Organization regime, threatens public control of the UK National Health Service. The official statement of what GATS doesn't do goes on for pages and pages.


So I've been perplexed by Caborn and his European Union sidekick, trade commissioner Pascal Lamy, rushing to Geneva and Washington and god knows where to argue over the wording of rules which do Nothing, change Nothing and mean Nothing.


But then, this week, Something came through my fax machine. And this confidential document, dated March 19, from the World Trade Organization Secretariate is Something indeed: a plan to create an international agency with veto power over parliamentary and regulatory decisions.


When Churchill said that, "democracy is the worst form of government except all the others," he simply lacked the vision to see that in March 2001, the WTO would design a system to replace democracy with something much better Article VI.4 of GATS. And this unassuming 6-page memo, now modestly hidden away in secrecy, may one day be seen as the post-democratic Magna Carta.


It begins with considering that difficult matter of how to punish nations which violate, "...a balance between two potentially conflicting priorites: promoting trade expansion versus protecting the regulatory rights of governments."


Think about that. For a few centuries centuries Britain, and now almost all nations, have relied on elected parliaments, congresses, prime ministers and presidents to set the rules. It is these ungainly deliberative bodies which "balance" the interests of citizens and businesses


Now kiss that obsolete system goodbye. Once Britain and the EU sign on to the GATS treaty, Article VI.4, called The Necessity Test, will kick in. Then, per the Secretariate's secret program outlined in the March 19 memo, national parliaments and regulatory agencies will be demoted, in effect, to advisory bodies. Final authority will rest with the GATS Disputes Panel to determine if a law or regulation is, "more burdensome than necessary," in the memo's language. And GATS, not parliament, will you what is Śnecessary.'


As a practical matter, this means nations will have to shape laws protecting the air you breathe, the trains you ride and the food you chew by picking, not the best nor safest means for the nation, but the CHEAPEST methods for foreign investors and merchants.


Let's get down to concrete examples. The Necessity Test has already had a trial run in North America via inclusion in NAFTA, the region's free trade agreement. Recently, the state of California banned a gasoline additive MBTE which haws contaminated water supplies. A Canadian seller of the "M" chemical in MBTE filed a complaint saying the rule fails The Necessity Test.


The Canadians assert, quite logically, that California could simply require all petrol stations to dig up storage tanks and reseal them, and hire a swarm of inspectors to make sure it's done perfectly. The Canadian proposal might cost Californians a bundle and would be impossible to police. That's just too bad. The Canadian proposal is the LEAST TRADE-RESTRICTIVE method for protecting the water supply. ŚLeast trade-restrictive' is NAFTA's Necessity Test. If California doesn't knuckle under and drop its ban on MBTE, the US Treasury may now have to fork over $976 million (Ł635 million) to the Canadian chemicals seller.


The GATS' version of the The Necessity Test is NAFTA on steroids. Under GATS, as described in the purloined memo, national laws and regulations will be struck down if they are Śmore burdensome than necessary' to business. Notice the subtle change from 'least trade-restrictive'. Suddenly the GATS treaty is not about trade at all, but a sly means to wipe away restrictions on business and industry, foreign AND LOCAL.


What burdensome restrictions are in the corporate cross-hairs? The US trade representative has already floated proposals on retail distribution. Want to preserve Britain's green belts? Well, forget it - not if some bunch of trees are in the way of a Wal-Mart's superstore. Even under the current, weaker GATS, Japan was forced to tear up its own planning rules to let in the retail monster boxes.


The British trade minister assures us that nothing threatens the right to enforce laws in the nation's public interest. But not according to the 19 March memo. It reports that, in the course of the secretive multilateral negotiations, trade ministers have agreed that if a nation is hauled before the GATS tribunal, a defense of "safeguarding the public interest ... was rejected."


In place of a public interest standard, the Secretariat proposes a deliciously Machiavellian Śefficiency principle.' "It may well be politically more acceptable to countries to accept international obligations which give primacy to economic efficiency." This is an unsubtle invitation to load the GATS with requirements which rulers know their democratic parliaments could not accept. This would be supremely dangerous if, one day, the USA elected a President who wanted to shred air pollution rules or, say, Britain elected a prime minister with a mad desire to sell off his nation's air traffic control system. How convenient for embattled chief executives: what elected Congresses and Parliaments dare not do, GATS would require. The government can brush off the green- haired anti-GATS protester, but can't ignore the objections of the gray-hairs of the British Medical Association. The BMA is jittery about GATS' control over the National Health Service. In its journal LANCET, the BMA nervously questions European Commissioner Lamy's assurances that, "interpretation of the rules [must not be] settled by disputes procedures," that is, the GATS panel. One pundit calls the BMA's position Śhysterical.'


But after reading the 19 March internal memo, hysteria may be the right perscription. The memo makes no concession to sovereign interpretation of the rules. Under the post-democratic GATS regime, the Disputes Panel, the Grand Inquistors of the Free Market, will decide whether a nation's law or a regulation serves a what the memo calls a Ślegitimate objective.' While parliaments are lumbered with dated constitutional requirements to debate a law's legitimacy in public, with reviewing the evidence in public, in hearings open to citizen comment, GATS panels are far more efficient. GATS tribunals are closed. Unions, consumer, environmental and human rights groups are barred from participating or even knowing what is said before the panel.


Is the March 19 memo just a bit of wool gathering by the WTO Secretariat? Hardly. The WTO was working from the proposals suggested in yet ANOTHER confidential document also sent to me by my good friend, Unnamable Source. The secret memo, "Domestic Regulation: Necessity and Transparency," dated 24 February, was drafted by the European Community's own "working party" in which the UK ministry claims a lead role.


In letter to members of Parliament, UK Trade Minister Caborn swears that, through the European working party, he will insure that GATS recognizes the "sovereign right of government to regulate services" to meet "national policy objectives." Yet the 24 February memo, representing the UK's official (though hidden) proposals rejects a nation's right to remove its rules from GATS jurisdiction once a service industry is joined to the treaty. Indeed, the EC document contains contemptuous attacks on nations claiming "legitimate objectives" as potential "disguised barriers" to trade liberalization. Moreoer, that nasty little codicils against national control, that regulation must not be Śmore trade restrictive than necessary,' is suggested in the EC document, ready for harvesting by the WTO Secretariat's free market fanatics.


Not knowing I had these documents in hand, the trade minister's office told me this week that GATS permitted nations a "right of to regulate to meet national policy objectives." I was not permitted to question the Trade Minister himself (and in the post-GATS future, I understand, no mortal may be permitted to gaze directly upon him). But let us suppose, for a moment, that minister Caborn believes what his press office says on his behalf, that there is nothing to fear from GATS, especially because any nation can opt in or out of clauses as it chooses.


Don't count on it. According to Professor Bob Stumberg of Georgetown University, the WTO is now suggesting that the Necessity Test, the shark in the swimming pool, will be applied "horizontally," that is, to all services. No opt outs.


The trade minister's letters to Parliament admits that his pleasant interpretation of GATS has not been Śtested in WTO jurisprudence.' In other words, HE DOESN'T ACTUALLY KNOW if a GATS panel will rule as in his fantasies. This is, after all, the minister who, with his EU counterparts, just lost a $194 million judgment to the USA over the sale of bananas. (Now, I can understand how minister Caborn goofed that one. Europe argued that bananas are a PRODUCT, but the USA successfully proved that bananas are a SERVICE try not to think about that and therefore fall under GATS.)


And that illustrates the key issue. No one in Britain should bother with what a British trader minister thinks. The only thing that counts is what George W Bush thinks. Or, at least, what the people who think FOR George think. Presumably, minister Caborn won't sue the UK for violating the treaty. But the USA might. It has. Forget Caborn's assurance -- what consumers in Britain, Europe and the USA need is assurance from President Bush that he won't use GATS to help out Wal-Mart or Citibank or Chevron Oil. Don't bet on it.


The odd thing is, despite getting serviced in the bananas case, minister Caborn and the Blair government have not demanded explicit language barring commerce-first decisions by a GATS panel. Instead, the secret 14 February EC paper encourages the WTO's Secretariat to use the punitive form of The Necessity Test sought by the USA. So there you have it. Rather than attack the rules by which America whipped Europe, Caborn and the EC are keen on handing George Bush a bigger whip.




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