The World Trade Organization, Trade and Environment Position paper of the Third World Network (1)

Part 1 of article:

1. The Context: The Uruguay Round, the WTO and the South (2)

The Uruguay Round of Multilateral Trade Negotiations have been concluded after seven years with a package of agreements which is set to be signed at the Marrakesh ministerial meeting in April and brought into effect in 1995 under the umbrella of a World Trade Organization. The agreements in the package encompass issues and subjects not directly related to international trade but falling within domestic policy-making and involving choices which ought to be in the autonomous decision-making power of States and their peoples.

But even before the agreements are ratified and brought into force, there are plans and demands to bring new areas and subjects (environment, labour and social standards etc) within the jurisdiction of the WTO, seeking to set global norms and standards, and rules and disciplines on the ground of the trade-distortive effect of lack of such uniform standards. All these moves have to be seen within the context of the outcome of the Round, the WTO that will be established and the overall effects on the South.

The Round was launched at Punta del Este with a carefully negotiated mandate. This established an overall balance. In terms of the mandate, developing countries were promised an expanded market access and thus increased export earnings for their goods exports, in return for their agreement to bring into the GATT trading system the new themes pushed by the United States and other industrialized nations such as services, investment measures and intellectual property rights.

From the beginning, the negotiations had been launched and conducted under the threat or use of the coercive power of unilateral trade sanctions by the United States through its family of Section 301 trade laws.

The threat or recourse to these powers has been used to expand the "economic and political space" in the world for its transnational corporations and for transnationalizing the national systems of production, distribution and trade, and consumption. This transnationalization process has been sought to be achieved by dismantling the power of nation States to manage and intervene in their economy, and in particular diminishing the rights and powers of Third World countries and their local communities. The entire process has been aimed at and seems likely to result in the creation of a new laissez faire world trade and economic order.

Throughout the negotiations, as and when the Punta del Este mandate was coming in the way of the changing objectives of the United States and other Industrialized countries, the GATT and Uruguay Round processes were used to modify and change the mandates (almost till the last hour) and constantly shift the balance away from the South and in favour of the North. The raison d'etre for all this -- and this constantly comes out in official and unofficial pronouncements from the North -- is to restrict or dampen the competitive capacity of the enterprises and productive apparatus of the South in a world economy that is being 'globalized' in the interests of the Northern Transnational Corporations.

While the Uruguay Round negotiating process, as that of the GATT, in theory was based on the democratic principle of equality of participants and consensus decision-making, in practice most of the nations, and even more the developing nations, were sidelined while the final outcome was determined principally by the two majors, the United States and the European Union, through bilateral negotiations outside the multilateral process, and sometimes in conjunction with Japan. All the others acquiesced in or were forced to accept these decisions.

Many claims have been made, before and after the conclusion of the negotiations about gains and benefits to the world economy. A full and proper assessment of the outcome, and the gains and losses, to countries and societies, is yet to be made and none is even possible until at least 10-15 years. The exercise done in December 1993 at the Trade Negotiations Committee, on the basis of a GATT secretariat document, was at best a very partial exercise, bordering on the farcical. By econometric modelling and assumptions about many unknown variables, it sought to project billions of dollars worth of trade and welfare gains. At that time, the market access negotiations were still under way among the majors and, even in mid-February 19~, the picture is not at all clear. In the rule-making areas, the assessment was based on the Dunkel Draft Text of December 1991. The changes in that text that have been incorporated in the final package have all been those in favour of the US (and in agriculture in favour of the EC) -- relaxing the limited disciplines and rules on their trade policy, thus making the outcome even more imbalanced than before.

An Imbalanced, Unsatisfactory Outcome for South

The overall result is thus unsatisfactory for the South and its people, and lacks any balance within and across the sectors. The outcome will result in very clear, and sometimes onerous, rules and disciplines to be undertaken by the countries of the South, placing more obstacles for their development, and ambiguous disciplines full of loopholes vis-a-vis the North. In some ways these new rules seek to negate the few gains of the South in the post-war post-colonial era and perpetuate an unjust international division of labour dating back to the colonial era.

Even under some of the most optimistic scenarios of benefits, there is little doubt that the major share of the benefits, now or in the medium to long-term, whether in the form of market access and trading opportunities or in general welfare, will accrue to the industrialized countries and at the cost of the developing world and its poor. Africa as a whole appears to be a major loser. The Marrakesh Ministerial meeting must set a WTO mechanism to undertake a proper and continuous assessment of the outcome at each country level and see how far, and whether at all, the promises at Punta del Este to the countries of the South have been fulfilled. The Ministers must also mandate corrective actions and put in place in the WTO mechanisms and special measures for compensating these losers.

The major claim about the Uruguay Round agreements and the World Trade Organization to be established by it, and which are sought to be projected as an important gain to the Third World, is that of a rule-based system where the powerful will undertake and obey the international law and change their domestic laws and measures that are in conflict, giving up unilateralism and use of threats of trade sanctions to secure neo-mercantilist trade gains.

But hardly have the negotiations been concluded and even before its signature and ratification by the participants, the United States and its administration have asserted their determination and sovereign right to continue to resort to such steps, thus putting into question the US good faith in negotiations, acceptance of the international treaty and its future implementation as well as the credibility of the system.

The United States has also made no secret of its intention to use the 'trade-related' negotiating process to achieve its objective of preservation and maintenance of the status quo and US power, military and economic, against the challenges from the Third World. This objective is sought to be achieved through new negotiating agendas to expand the trading system's mandate, forge new norms and trade instruments, to hit the production systems of the Third World doubly: facing unfair competition within their countries and new obstacles in their export markets. The expansion of the mandate of the trade organization into ever new areas is sought to be achieved by prefixing 'trade-related', and setting new norms and disciplines on the Third World on environment, labour and other social standards and legitimize US unilateralism and exercise of power outside its territories -- just as the WTO has legitimized, even though in a 'civilized way', the cross-retaliation trade sanctions of the powerful against the weak.

Trade, Environment & Market only means to Sustainable Development

The attempts to link trade and environment through the instrumentality of the gatt and the WTO has to be seen against this background.

Trade and Environment are not ends in themselves, nor is the market and the free trade theology being preached to the developing world (but not practised in the US and other industrialized countries) nor the economic liberalism doctrines embraced by some Third World governments. They are only means, whose efficacy and usefulness have to be constantly tested and weighed, and where needed modified, to achieve the objective of sustainable development.

Sustainable development is not merely a question of generational equity between the present and the future, but between the past and the present; and, within the present, equity between the privileged and under-privileged. It means the ecologically sound development of the undeveloped or under-developed South and the equally important adjustment and transformation of the maldeveloped and overdeveloped North which with one-fifth of the world's population consumes four-fifths of the world's resources, exerting ecological pressures against the South and its poor in the present and for the future. The maldeveloped-overdeveloped North's toxic intensity of emissions/pollution as a proportion of GDP may be coming down, but is constantly increasing absolutely.

Sustainable development also requires democratic governance, not only within societies and countries, but equally so internationally. It requires an end to control and attempts at management of the world by a few nations for their own benefit. It demands an unreserved good faith acceptance on their part of international agreements and implementing them in letter and spirit.

This is also the basic meaning of the path of international cooperation pledged at the highest levels by the nations of the world at the Earth Summit in Rio de Janeiro in June 1992. The Rio Declaration and the Agenda-21 programmes for a better, greener planet of the future adopted at the Earth Summit, is postulated on international cooperation and partnership, not on coercion or unilateralism and exercise of power.

Everyone, governments and non-government organizations, national and international, promoting or working under the banner of environment protection and sustainable development must hence unequivocally abandon and repudiate resort to or advocacy of unilateralism or extra-territorial exercise of power by the powerful countries and condemn any such actions or threat.

The interlinked issues of trade, money and finance and environment to promote sustainable development are not mere technical issues of money, finance or trade rules, but those falling in the domain of the political economy of the world and must be addressed in institutions like the UN and UNCTAD.

The non-governmental community of the North and the South came together, in a democratic participatory process during the preparatory process for the Rio Summit and the Summit itself to force their governments to address these overwhelming ecological concerns of their peoples, and focus on the issue of poverty that is stalking and expanding in the developing South and has now started to afflict the North too.

Repudiating Rio

The issue of trade and environment and sustainable development were sought to be addressed in the run-up to and at the Earth Summit, the UN Conference on Environment and Development, held in Rio de Janeiro in June 1992.

In Chapter 2 of Agenda 21, the three instrumentalities specifically identified and linked for trade and environment to support and achieve sustainable development were open markets, finance and technology.

In the 18 months since Rio, and as became clear at the recent meetings of the working groups of the Commission on Sustainable Development, the industrialized nations have already repudiated their commitments to provide 'new and additional resources' and availability of technology to enable the South to achieve sustainable development. The TRIPs accord in the Uruguay Round has in fact tightened and restricted the availability of environmentally sound technology and its further innovation by creating global monopoly for the TNCs in this area.

11. The WTO and the Trade and Environment Work Programme

It is in this overall context that we look at the proposals, ideas and plans of the United States, the European Union and the other major industrialized nations and some non-governmental voices from the North for a GATT/WTO work programme on trade and environment and the talk of a 'green round'.

The decision on 15 December 1993, while concluding the Uruguay Round negotiations, for developing a work programme on trade and environment is to be welcomed. But any such programme must build on and not dilute from the solemn commitments undertaken at the level of Heads of State or Governments at the Earth Summit at Rio de Janeiro.

The primary focus of any work programme should be the promotion of Sustainable Development, and for adoption of international policies, measures and instruments to reduce the pressures and burdens on the planet's ecological capacity caused by the overconsumption of the North and create ecological space and ensure availability of resources for the sustainable development of the South and alleviating poverty of its masses.

This is the yardstick by which any programme and its content should be judged.

111. The Role of the WTO in Trade and Environment

The nature of the Work Programme should be tailored to the issue of the proper role (and limitations) of GATT or the WTO in issues of trade and environment promoting sustainable development.

The GATT and the WTO, because of their narrow trade focus, lack the jurisdiction, competence and capacity to be a coordinating agency to handle these interlinked issues. Nor can this function be delegated to or allowed to be appropriated by the WTO in conjunction, or acting in tandem, with the Fund and the Bank.

Moreover, as the closing phase of the Uruguay Round showed, the GATT's decision-making is dominated by only two or three major countries or entities, and a majority of parties have to accept the decisions or deals arrived at by these few. Given the reality of this decision-making process in GATT (and, in all likelihood the same will prevail in the WTO), and the current state of the international political and economic power relations, any rules developed in this asymmetric forum would most likely serve to legitimize the use of trade weapons which the North and the powerful can use against the South and the weak. But the South will be unable to use them against the North.

There is thus the danger, if not likelihood, that through particular and narrow definitions of the trade-environment link, the powerful nations will try to shift the economic burden of ecological adjustment to the weaker parties in order to preserve and expand their own unsustainable consumption patterns.

Also, there is a danger of extending the practice (which was so prevalent in the launching and actual Uruguay Round negotiating process) of bringing in new concepts, activities and areas under the management and control of GATT or the WTO simply by attaching the prefix 'trade-related' to the issue. This would bring issues under national jurisdiction into the area of 'international' control. For instance, the issue of intellectual property rights was brought under GATT/WTO by calling it 'trade-related', not to liberalize the 'trade' in IPRs but to create global monopolies for the benefit of TNCs at the cost of public interest and public policy of States and their peoples.

The bringing of any issue thus under 'international' jurisdiction, and the very choice of the GATT/WTO as the international agency, pulls the location of rights and powers away from the local and national levels to an international agency that skews the treatment of the matter in favour of the powerful parties. As a result, the process by which local communities lose control of their natural resources is accelerated.

The inclusion of new areas such as the environment, labour standards and human rights in the WTO through calling them 'trade related' would potentially be used by the powerful trading entities not, as purported, to advance the noble cause of protecting the environment or peoples' rights, but to make use of these issues to reduce the competitiveness of the South's products and services and thus enlarge the North's market space.

Trade instruments, and more so coercive ones, when used wrongly and in particular by the powerful over the weak, harm rather than promote the cause of environment protection, labour rights, or social standards and norms. Multilateral discussion and treatment of these issues should be better taken up by United Nations agencies such as the ILO (for labour) and the CSD, UNEP, UNCTAD and the Conference of Parties of the environment treaties (for environment). Otherwise there is the risk that by attaching the pre-fix 'trade-related', issues within the competence of more appropriate fora are pulled away from these fora and into the ambit of GATT/WTO.

A reason why GATT was used as the agency of choice by Northern interests to take charge of more and more issues (and away from UN technical agencies with a more democratic and open decision-making systems) is that the dispute settlement mechanism and the threat of trade sanctions present in GATT enables these interests to force the South to comply. With the broadening of the jurisdiction of the WTO to include intellectual property rights, investments and services, and its integrated dispute settlement system (which enables cross-sectoral retaliation), the WTO will have even more 'bite' than the GATT, and would enable the North to bring the South in line.

There is thus the potential danger of the use of the WTO to impose environmental measures on the South through the threat of trade sanctions. The North meanwhile may not fulfill its UNCED related obligations but instead may shift the adjustment problem to the South through the use of the WTO as the lead agency handling 'trade and environment.'

It is thus inadvisable to give more powers to the WTO to be an agency that links trade measures (such as trade restrictions, penalties and sanctions) to environmental protection and standards.

The WTO should also not be the forum to comprehensively study or address the overall issue of the relationship between trade, environment and sustainable development. It does not have the competence, knowledge or appropriate approach for this task.

Different countries have different natural resource endowments, levels of pollution, waste and absorptive capacities, systems of production, labour and capital intensities, and levels of development. Thus, the idea of a uniform approach to solving environmental problems through an international trade agency is misplaced. Such an agency would become an instrument for inequitable burden sharing as the balance of rights and obligations would not have been properly worked out.

In relation to environment and sustainable development, within each country some choices and balances are involved. Where an environment question involves no spill-over beyond national boundaries, the measures to protect and deal with these issues has to be left to national and domestic decision-making and jurisdiction, but encouraging governments of countries to do so by making available the necessary technology and providing additional funds. Only where there are transboundary effects should these be dealt with through regional and/or global multilateral environmental agreements and treaties, with use of trade instruments as an exception.

Any trade restriction arising out of a multilateral environment treaty should be based on a treaty negotiated in a universal fora and its adherents represent fully various regions and levels of development. Otherwise it will be a coercive instrument capable of abuse.

In any such treaty, any obligations placed on the developing, particularly poorer countries, for sustainable resource management must have provisions for the transfer of necessary technology and the financial resources as an integrated contractual obligation.

Attempts to preserve and secure access to the natural resources and/or environment services of the South by negative trade instruments of threatening to shut off existing market access (whether contractual under GATT or autonomous such as GSP), rather than through positive exchanges including technology transfers and new financial resources, is a reprehensible exercise of power by the powerful over the weak. It should be rejected.

Any work programme and any international policies and actions to deal with the problems of trade, environment and sustainable development have thus to be studied and discussed in an integrated way relating to trade, finance and technology and creating equitable and interlinked rights and obligations.

A more suitable forum for integrating these various facets would be the United Nations, such as in the Commission on Sustainable Development and UNCTAD. At the end of such a process, GATT/WTO can be given the jurisdiction to handle those matters where it has been determined that trade rules and/or measures are required. The process should not, in other words, be turned on its head by first assuming or deciding that trade rules and measures are needed to promote environment and sustainable development, and thus appoint GATT/WTO to coordinate matters relating to trade and environment.

Any institutional mechanisms, and decisions as to where these rights and obligations could be addressed, monitored and administered should come after multilateral discussions and agreements on the issue and not before. There should be no a priori assumption that GATT WTO is the proper and main forum.

The experience of the South with the UNCED process, and with the way subjects were brought onto the trade and GATT agenda by prefixing 'trade-related' before them to place onerous burdens on the South, is a clear warning to the governments of the South against accepting any concepts, institutions or negotiating processes without adequate prior analysis and study of these issues outside the GATT and the Bretton Woods institutions.

The Third World Network appeals to the developing country Contracting Parties and Ministers assembling at Marrakesh to refuse to countenance such moves, and not yield to these demands as one more price to be paid by the South to get the United States to accept the agreements. The Third World Network calls upon the civic society of the South to refuse the WTO if it comes packaged with these further side-agreements.

Click here for Part 2 of article