THE WTO REPORT: A stark warning to Vietnam of things to come The WTO purports to be an organization committed to expanding trade

and commerce worldwide. Not only does it establish trade rules and regulations all member nations must abide by to accomplish this goal, but it also has a private court for settling disputes between member nations, known as a Dispute Settlement Body. According to a WTO publication, the rulings of the WTO court are simply a judgment or interpretation of whether a government has broken one of the WTO agreements agreements that the infringing government itself had accepted. If a government has broken a commitment it has to conform.1 With that stated and in order to understand the full implications of membership, it is important to take a closer look at this world body established to facilitate international trade. Wallach and Woodall analyze the structure of the WTO and carefully scrutinize the results of WTO court cases in their 2004 publication, Whose Trade Organization. In Chapter 9, poignantly titled, The WTOs Operating Procedures and Enforcement System: World Government by Slow-Motion Coup Dtat, they illuminate an important fact related to the Dispute Settlement Body. The court is not only empowered to declare illegal the domestic policies and laws of sovereign states that are deemed trade barriers, but also the court rulings are strictly enforced through trade sanctions and hefty fines to ensure compliance.2 As stated above, a government has to conform. In effect, this world body has the power to dictate the domestic policy in every member nation. Consider this for a moment. With power to force allegedly autonomous nations to repeal or water-down domestic regulations, complete with drastic measures to ensure
1

World Trade Organization (2003), 10 Common Misunderstandings about the WTO. Downloaded from www.wto.org on 15 October, 2006. 2 Wallach, L. and Woodall, P., (2004) Whose Trade Organization, New York: The New Press

conformity, the WTO is more powerful than the United Nations Security Council. A single court ruling has the potential to utterly destroy the entire economy of a sovereign nation. For this reason the WTO trade system must be closely examined to understand the implications this has on Vietnam, the newest member of the organization. To begin it is necessary to understand the origins of the WTO and the establishment of WTO rules. Initially there was the General Agreement on Tariffs and Trade (GATT), a 1947 international agreement to regulate trade governing tariffs and quotas for trade between nations. The World Trade Organization emerged out of the 1995 Uruguay Round GATT negotiations with incredible fanfare and promotion. The difference between GATT and the WTO soon became quite apparent, Instead of setting terms for international trade exchange between different nations these rules are aimed at eliminating the diversity of national policies, priorities, and cultures to create the uniform world market sought by large multinational corporations in which government would be shrunk and human rights and needs would be left to markets and corporations (p.13)3. Wallach and Woodall go on to state the international reaction to this new trade system: As awareness grew in the U.S. and around the world about what the Uruguay Rounds trade talks were really about, environmental, labor, consumer and other public interest groups started raising the alarm. In many nations, especially in the developing world, the establishment of this powerful commerce agency was incredibly controversial and caused massive protests. In several countries, opposition was so strong that the WTO was approved only after extraordinarily antidemocratic maneuvers including the failure to translate the text so elected officials in many nations literally had no idea what they were approving, and short-notice late-night parliamentary votes in several nations. But in the U.S., most people including many people in Congress had no idea what was really at stake (p.5).4

3 4

Ibid Ibid

The WTO claims to be a rules-based organization; rules that must be agreed upon and adopted by any nation accepted into the organization.5 It also claims the member nations formed and agreed to the rules of the WTO.6 However that could not be further from the truth. The research of Wallach and Woodall uncovers a grim reality; the rules of the WTO were written surreptitiously, and under the influence of the worlds largest multinational corporations, with five hundred U.S. corporations officially designated as formal U.S. government advisors while public interest organizations were deceitfully excluded from the entire process covering several years of secrecy (p.4)7. Simply stated, WTO regulations were written by the very same multinational corporations that benefit from tilting the scales in their favor. Of particular consequence is that industry did not establish the WTO regulations with consultation from public-interest organizations or experts in fields affected by these rules such as labor, public health, human rights, environmental policy and so on. An analysis of the WTO rules and court rulings repeatedly prove these rules are destructive to both humanity and the environment. And unlike democratic processes where various opinions and concerns can be voiced, the only advisors to the Western governments in the secretive rules making process came from the industrial sectors while public-interest groups and humanitarian non-government organizations were barred altogether. On another domestic issue related to trade and contrary to the wishes of multinational corporations, sovereign governments have historically added tariffs to imported products. Disregarding the underlying principles of these governmental policies, multinational
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World Trade Organization (2003), 10 Benefits of the WTO Trading System. Downloaded from www.wto.org on 15 October, 2006 6 World Trade Organization (2003), 10 Common Misunderstandings about the WTO. Downloaded from www.wto.org on 15 October, 2006 7 Wallach, L. and Woodall, P., (2004) Whose Trade Organization, New York: The New Press

corporations negatively refer to tariffs as protectionist measures. Yet tariffs are wellsubstantiated taxes on imported products that shield domestic producers and small enterprise from foreign competition. Not only is it good for a government to protect domestic and local economic sectors, such protection encourages growth in selfsustaining small enterprise, enhances local variety and overall national diversity available on the market, and inhibits unfair competition from foreign corporations dominating the national market which would significantly contribute to a negative cash flow in trade. Under the corporate established WTO rules, these historically standard policies are now deemed illegal in a push to promote a free trade agenda. Subsequently there have been cases in which multinational corporations entered a market selling their products at minimal gains or a financial loss to eliminate or weaken local competition. Considered an initial market investment, these losses were easily covered by gains in other more lucrative international markets. Even without deploying such sweeping measures the marketing strategies devised and perfected in West prove to be very effective and easily overwhelm local competition as has been proven in numerous countries in Asia and Latin America.

Inside the WTO Court: an Expos Whenever a multinational corporation perceives a domestic policy or regulation of a WTO member nation as a trade barrier they threaten a court challenge in the WTO Dispute Settlement Body. How this happens is one member nation will file a complaint against another on behalf of a domestic corporation or an industrial lobbying group. Naturally the cost for a developing nation to field a wide array of government lawyers

versed in international laws and tied up in court is quite expensive, often costing hundreds of thousands of US dollars desperately needed in a myriad of other civil services. Unfortunately such skilled lawyers working for the government on behest of public interest are scarcely found in developing nations and too costly to have tied up in courts battling a well financed highly skilled collection of corporate lawyers. Thus, when confronted with the mere threat of a WTO court case, multinational corporations wield unprecedented power over otherwise sovereign governments that are pressured to conform voluntarily to the skewed pro-corporate WTO rules despite justified public outcries. Under the WTO system the only other option is to face the expense of being tied up in a court case. Even then the odds are against the defendant. A review of court cases reveals a suspicious statistical anomaly any qualified researcher would question with an abnormally high number (82.5%) of pro-plaintiff rulings forcing governments to either dilute offending laws or to repeal them altogether. Not surprisingly, a vast majority of cases are brought to the court by governments of developed nations that can afford such expenditures that prove a deterrent to developing nations (p.244).8 For cases brought to the WTO court where the verdict dictates a nation must conform to the WTO rules, the domestic law must be changed within a set period of time. Again, to avoid heavy fines and trade sanctions the ruling must be adhered to in spite of any well-founded domestic opposition. Here it must be acknowledged that within the WTO system there is a built-in opportunity for a court ruling to be overturned which the WTO claims to be a democratic function.9 Yet, unlike working democracies where an agreed

8 9

Ibid World Trade Organization (2003), 10 Common Misunderstandings about the WTO. Downloaded from www.wto.org on 15 October, 2006.

upon majority of the general assembly or parliament can overturn court decisions, the only way for a court decision to be overruled is if all member nations of the WTO unanimously vote against the court judgment. That is not a majority; it is a consensus. A unanimous decision in any truly democratic parliament is extremely rare, and much less likely to occur in an international body such as the WTO where views can be staggeringly varied. But in the case of the WTO, it is simply illogical. One must consider that the member nation challenging another nations domestic policy on behalf of corporate interests can be expected to vote against overturning the court decision out of self-interest, thus making a unanimous decision a self-evident impossibility. Far from the functions of a democratic system it proclaims to be, the WTO proves to be undemocratic in both the rule making process and in overruling court decisions. For this reason a closer examination of the courts and its judges are necessary. Again Wallach and Woodall uncover the truth about the secretive WTO courts: In sharp contrast to domestic courts and even other international agreements, at the WTO there is a startling lack of transparency, public disclosure or accountability. This leads to overwhelming industry influence, especially by the largest multinational corporations based in the most powerful countries. Even the dispute resolution tribunals meet in secret. The panels rely on documents never made public and on anonymous experts to make decisions and issue reports that cannot be assessed by the public until the hearings are over and a binding judgment is issued. WTO panelists are selected for their trade credentials, not their knowledge of an issue in dispute, such as public health, environmental protection, or development policy. Most disturbing is the fact that many of these decision makers have a philosophical or commercial stake in the WTOs preeminence they are not unbiased judges. Basic due process guarantees, such as strict conflict-of-interest rules for judges, the right for meaningful appeals, and openness to the press and public are all missing at the WTO (p.15).10

Considering the weight carried in WTO court decisions in cases related to domestic policies regarding public health, environmental protection, industrial safety
10

Wallach, L. and Woodall, P., (2004) Whose Trade Organization, New York: The New Press

standards, and so on, more than a base knowledge in the relative field is necessary to understand an array of possible implications. Yet these judges are selected based only on their trade qualifications and appointed regardless of their conflict-of-interest in upholding the tilted scales of the WTO. For this reason it comes as little surprise the controversial Dispute Settlement Body remains secretive, barring all public interest groups, international media and public scrutiny. The detrimental implications of court rulings stemming from this international trade regulating world body will prove costly in the very near future if the current trends continue unabated.

A Case in Point On November 21, 2006, The Strait Times of Singapore printed a report from Brussels, Belgium titled EU takes India to WTO over duties on alcohol. Unfortunately Indias position isnt represented in the article; instead they simply print accusations against the infringing government. However the press release is indicative of WTO court cases in many ways: The European Union had taken India to the World Trade Organization (WTO) over duties and distribution methods which were blocking access by EU countries to its wines and spirits market, a spokesman said yesterday. The consultation process marks the first step towards possible litigation against India in the WTO dispute settlement process. European producers have complained that they face Customs duties on wines and spirits, which range from 177 per cent to as high as 540 per cent, depending on the import price We will always respect genuine sensitivities in Indias development, but this is out and out protectionism which even the Indian government has not been able to justify in the past, said a commission spokesman for trade, Mr. Peter Power.

The EUs executive body began probing Indian duties on European wines and spirits last year after receiving complaints from EU producers, for whom India represents a potentially huge market. (p.9)11

As mentioned above, this case is representative of litigation brought to the WTO Dispute Settlement Body. First the European wine and spirits industry perceived the tariffs in place were inhibiting their profit potential, thereby declared them to be protectionist trade barriers regardless of the unreported rationale for enacting these tariffs. Secondly, the industry had the EU take up the case on their behalf, reiterating the fact that multinational corporations wield unprecedented powers in what otherwise is a domestic policy set by a sovereign government. Thirdly, it is a developed nation, or in this case, the EU bringing legal action against a developing nation. It is quite likely that India will lose if this case goes to court considering the odds of a pro-plaintiff ruling are 82.5% in a court which repeatedly upholds WTO rules that are aimed at eliminating the diversity of national policies, priorities, and cultures to create the uniform world market sought by large multinational corporations.12

Unacceptable Costs Historically corporations have not been the self-regulating, socially responsible organizations they would like the public to believe. Since the dawn of the Industrial Revolution, every industry regulating measure enacted in Western nations resulted from public outcries and refusal to blindly accept continued abuses and flagrant exploitation by companies bent on attaining lofty profits regardless of their unethical methods. For this

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EU takes India to WTO over duties on alcohol, released by the Agence France-Presse, published in The Strait Times, November 21, 2006. 12 Wallach, L. and Woodall, P., (2004) Whose Trade Organization, New York: The New Press

very reason laws to end child labor; establish industrial safety requirements; allow for workers to form unions; create a national minimum wage; limit the number of work hours per week; establish standards to cap industrial pollution; place public health standards above the narrow interests of pharmaceutical companies and so on, were all put in place due to the excessive and repeated abuses of industry. The idea that some altruistic, selfregulating genuinely socially responsible corporation would initiate a single government regulation is ludicrous. Quite the contrary was true; industry fought against any measures public interest groups, unions and workers called for to oblige Western governments to act on the publics behalf. History also shows the blatant abuses by industry weighed heavily in the rationale for Carl Marx to reject the cruelties inherent in the Capitalist system. Finally, after decades, even centuries of often bloody conflict, the persistence of labor movements and public interest groups forced Western government to establish regulatory systems to simultaneously monitor industry and protect the citizenry. With government systems regulating industry to protect the public from the excessive greed of a few, industrial development could move forward while ensuring future generations a clean environment, safe working conditions and fare wages; or at least that was the paradigm prior to the unveiling of the WTO in 1995. Industry regulated by government guaranteed that minimum measures were established and in some cases they came with incentives for exceeding those minimums. In many cases graduated increases over a period of time were incorporated to ensure environmentally friendly methods or safety measures were simultaneously developed along with more profitable technologies. The essential difference between a government

establishing industrial regulations and allowing for industry to self-regulate is simple; a stated purpose of a government is to serve and protect the population while a corporation is a profit-driven entity beholden to no one other than stockholders who demand a high return on their investment. Nowhere is the disparity between the two more clear than in the WTO rules. Wallach and Woodall write since its conception in 1995 to 2004, the WTO has ruled that every environmental, health, or safety policy it has reviewed but one is an illegal trade barrier that must be eliminated or changed. With few exceptions, nations whose laws were declared a trade barrier by the WTO or that were merely threatened with prospective WTO action have eliminated or watered down their policies to meet WTO requirements. In addition to undermining existing public interest safeguards, this trend has a chilling effect on countries inclinations to pass new environmental, human rights, or safety laws (p.10).13 Their publication presents a multitude of cases in which a nations domestic policies, set on behalf of public interest, have been challenged in WTO courts and found to be WTO-illegal. This is particularly alarming considering the recent publication of international reports. On the eve of Vietnams ascension to the WTO, October of 2006 saw the release of two pertinent reports on environmental change. First was the World Wide Fund for Nature, (formerly the World Wildlife Fund) which produced its annual Living Planet Report 2006. Eloquently stated in economic terms, the WWF emphasizes the disastrous impact the corporate definition of development has on the environment: Since the late 1980s, we have been in overshoot the Ecological Footprint has exceeded the Earths biocapacity as of 2003 by about 25 per cent. Effectively, the Earths regenerative capacity can no longer keep up with demand people are
13

Ibid.

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turning resources into waste faster than nature can turn waste back into resources. Humanity is no longer living off natures interest, but drawing down its capital. This growing pressure on ecosystems is causing habitat destruction or degradation and permanent loss of productivity, threatening both biodiversity and human wellbeing. For how long will this be possible? A moderate business-as-usual scenario, based on United Nations projections showing slow, steady growth of economies and populations, suggests that by mid-century, humanitys demand on nature will be twice the biospheres productive capacity (Italics added). At this level of ecological deficit, exhaustion of ecological assets and large-scale ecosystem collapse become increasingly likely. (p.2-3)14

Clearly, the pillagers of the earth are not the villagers and farmers of the developing world. The high consuming/polluting societies of the West propelled by the highly profitable marketing strategies of corporate advertising encourage this unsustainable lifestyle and pawn it off to the rest of the world as being developed; something which they can only hope to attain but will forever remain elusive in a system established to maintain the status quo. In the not-so-distant future developing nations will suffer the initial affects of a continuous worldwide drain of natural resources for the financial benefit of multinational corporations based in the lucrative markets of developed nations and matched only by their unrelenting pollution. According to the United Kingdoms Stern Review Report on the Economics of Climate Change, also released in October of 2006, the developing countries are set to fare the worst in the years to come: The impacts of climate change are not evenly distributed - the poorest countries and people will suffer earliest and most. And if and when the damages appear it

Published October 2006 by WWFWorld Wide Fund for Nature (formerly World Wildlife Fund), Gland, Switzerland. Downloaded 16 November, 2006 from the World Wide Fund for Nature website www.wwf.org

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will be too late to reverse the process. Thus we are forced to look a long way ahead. Climate change is a grave threat to the developing world and a major obstacle to continued poverty reduction across its many dimensions. First, developing regions are at a geographic disadvantage: they are already warmer, on average, than developed regions, and they also suffer from high rainfall variability. As a result, further warming will bring poor countries high costs and few benefits. Second, developing countries - in particular the poorest - are heavily dependent on agriculture, the most climate-sensitive of all economic sectors, and suffer from inadequate health provision and low-quality public services. Third, their low incomes and vulnerabilities make adaptation to climate change particularly difficult. Because of these vulnerabilities, climate change is likely to reduce further already low incomes and increase illness and death rates in developing countries. Falling farm incomes will increase poverty and reduce the ability of households to invest in a better future, forcing them to use up meagre savings just to survive. At a national level, climate change will cut revenues and raise spending needs, worsening public finances.15

Contrary to the repeated calls for industrial policies that will preserve a clean, unpolluted and pristine world for future generations, the WTO places profit above all else. Under the WTO rules and contradictory to logical and ethical behavior, environmental policies are capped with maximum measures. As pointed out above, the WTO rules were established by the very same industry that does the polluting. These measurements cannot be exceeded under threat of WTO trade sanctions and penalties. Any additional measures to protect the earths vulnerable environment will inevitably reduce corporate profits, thus such attempts will be viewed as a trade barrier and quickly bring about a corporate threat to challenge sovereign policies in the secretive, undemocratic, corporate-biased WTO courts. Interestingly many of these regulations fell

15

Stern Review Report on the Economics of Climate Change, (2006), HM Treasury, London. Downloaded from the UK Treasury Department website on 16 November, 2006, http://www.hmtreasury.gov.uk/independent_reviews/stern_review_economics_climate_change/stern_review_report.cfm

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below the existing standards in the US or Europe at the time of the Uruguay Round in 1995, which brought about the WTO; and far below the standards set in the 1997 Kyoto Protocol an international attempt to reduce harmful CO2 emissions. Ironically there are no minimum standards established in these rules. Thus if a government sets environmental protection levels far below the already dangerously unacceptable standards set by the WTO, those regulations will go unchallenged as profits can only increase with less regulation. Evidence shows repeatedly and without fail that the WTO is much more than an organization committed to expanding trade and commerce worldwide. Close evaluation of the globally destructive WTO trade system with rules established by profit driven corporations and backed up by the powerful governments of the West exposes a genuinely callous disregard for humanity and our environment. Unless drastic measures are taken to reevaluate world trends while enhancing Vietnams domestic environmental and public interest policies in spite of WTO court threats by multinational corporations, the warnings of the WWF and the UKs Stern Report will ring true with the disastrous effects of an unprecedented ecosystem collapse enhanced by severe climate change in the not-so-distant future. Thus in joining the World Trade Organization, Vietnam finds itself on the frontlines of an impending international catastrophe and the time to take action is now.

Mitch Teberg, MA Sustainable Development Hanoi, Vietnam 2006

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