Part Ten of my diary series on the History of the Supra-National Corporation. This is a draft of a book manuscript that I am working on--I am posting it one piece at a time as it is finished. As always, I welcome any helpful comments or criticisms.
This part covers the Washington Consensus, NAFTA, and the World Trade Organization.
Links to the previous installments in this series are below:
The other installments, for those who didn't see them or don't remember them, are here:
Part One: The Anti-Corporate Revolution of 1776
Part Two: The Robber Barons
Part Three: The Progressive era
Part Four: The Roaring Twenties
Part Five: New Deal and World War 2
Part Six: The Organization Men
Part Seven: The Man
Part Eight: the Reagan Revolution
Part Nine: The Multi-National Wars
By the end of the 1990’s, the Multi-National Wars were over—and the United States lost. The US was no longer the unilateral global economic superpower, and American corporations no longer reigned unchallenged. But they were not replaced in power by some other nation’s corporations—the international economic war was not won by Japan Inc (Japan itself collapsed into financial chaos in the 1990s). The global economic war was, ultimately, won by an entirely new international economic structure, by World Inc.—and the new international economic order permeated every area of the economy.
One of the first results of the Multi-National Wars was a wave of consolidations and mergers. At first, these took the form of American companies combining forces to try to beat back the Japanese and European invaders. But by the 1990’s, the consolidations had themselves become cross-border, as the national corporation gave way to the supra-national.
The initial wave of corporate mergers and hostile takeovers began in the 1980s. In many cases, this was a response to the deregulation of industries carried out by the Reagan and Clinton Administrations, and to frantic attempts by American corporations to survive in the face of new competition from Japanese and European companies. The crucial difference this time, however, was that many of the mergers, buyouts and joint operations involved cross-border deals with foreign corporations. “National” corporations began to disappear, as multi-national corporations took their place. Between 1998 and 2008, foreign direct investment in the US grew 82% to $325 billion. In 1997 alone, there were some 2300 mergers and acquisitions between American and foreign companies, worth almost $300 billion. Between 1998 and 2000, 5 of the 25 largest mergers in the US involved a foreign partner. The largest foreign investors in the US have been the UK, Japan, Germany, Holland and France.
The airlines and aircraft-manufacturing industries were particularly vulnerable to competition after deregulation, and responded with frantic efforts to stay bigger and stronger. This at first took the form of domestic mergers; the six major American airlines formed three partnership to share ticketing purchases and reservations, American then bought TWA, United was courting US Airways, and United and American began talking merger. Soon, the American companies were seeking outside partnerships as well; American Airlines formed a partnership with Swiss Air, Delta Airlines formed an alliance with Air France and Air Lingus, and the biggest partnership of all, the OneWorld venture, involved American Airlines, US Airways, British Airways, Canadian Airways, Iberia, and Qantas. By 1999, just four international partnerships accounted for almost 80% of all passenger traffic.
In the auto industry, a number of partnerships and interlocking ownerships appeared; Ford and Mazda, GM and Isuzu, Renault and Nissan, Ford and Volvo, and Chrysler and Mitsubishi followed by Daimler and Chrysler. Toyota and GM formed a joint company called NUMMI to manufacture Geo cars in California. The automobile parts industry was also consolidated, symbolized by Bridgestone’s (a Japanese company) purchase of the American Firestone company. GM tried to diversify its money by purchasing Hughes Aircraft.
In the oil industry, British Petroleum merged with Shell, and also with Amoco. BP also unified its distribution in Europe with Exxon (which had itself merged with Mobil).
In the banking and finance industry, the number of banks in the US fell 30 percent during the 90’s, while the share of assets held by the ten largest grew from 26 to 45%. During this time, Conseco bought Green Tree Financial, Core States merged with First Union Bank, and Nationsbank merged with Bank of America. In a particularly large deal, Deutschebanke and Bankers Trust combined operations; meanwhile Merrill Lynch bought Yamauchi Securities, and JP Morgan merged with Chase, which then merged with Bank One and then with Chemical Bank, and Citicorp merged with Travelers Group (the largest merger ever up to that time). The American Express Company formed a partnership with the Tata Corporation in India.
In the media industry, a total of nine companies (Disney, AOL-Time Warner, Viacom, News Corporation (Fox), Bertelsmann, GE, Sony, ATT, and Vivendi-Universal) owned nearly every TV station, cable network, book publisher and motion picture studio in the US, and were interlocked by a bewildering network of partnerships and joint ventures.
In other deals, Kobe Steel formed a partnership with Alcoa (Aluminum Company of America), and Toshiba, Siemans and IBM formed a joint partnership to produce electronics parts.
Between 1987 and 1993, the 50 largest US corporations saw their share of revenue that came from overseas increase from 11.8 percent to 44.8 percent; of the largest 100, the number that received over half of their revenue from abroad increased from 14 to 31.
Not all of the merger wave involved Americans; foreign corporations expanded and sought partners everywhere; in 2000, the German telecommunications company Mannesmann was bought by the British Vodafone Airtech, a $183 billion deal that was one of the largest on record to that time. Mannesmann had itself just bought a share of Olivetti. Renault and Nissan formed a partnership. British Steel merged with the Dutch company Koninklijke Hoogovens. In the financial sector, the German bank Kommerzbank bought a share in the Korea Exchange Bank, the Development Bank of Singapore bought a share of the Thai Danu Bank, and the Dutch ABN-Amro Bank bought a share of the Bank of Asia.
By 2002, about 40% of the total foreign investment in the US was in the manufacturing sector, largely by the British (18% of investments), Japan (13%) and Germany (12%). These investors were attracted by the desire to be close to their largest market, and also to take advantage of America’s lower labor costs—the United States, after two decades of deregulation and outsourcing, was now a non-union low-wage Third World economy, with much lower labor costs than in the UK, Germany or Japan.
By 2000, corporate global domination was complete. Over half of the 100 largest economies in the world were corporations, not nations. The combined revenues of the 200 largest American corporations were larger than all but nine of the world’s nations. In 1998, WalMart—the single largest employer in the United States—had a larger yearly income than 161 nations did. In 1995, the sales from just 200 corporations accounted for over 25% of the entire world’s economic activity. In the US, corporate profits jumped up 75% in the 90s; corporate CEO pay, meanwhile, jumped from 42 times the average worker’s to 531 times.
Increasingly, though, the largest and richest corporations were no longer American. In 1996, the list of the top 100 multinationals included two corporations from “developing countries”—South Korea’s Daewoo and Venezuela Oil. Of the top 500 corporations, 162 were American and 126 were from Japan; China had 3. The most profitable corporation in the world at that time was Royal Dutch Shell Oil. By 2007, the US had fallen noticeably; while the largest corporation in the world was WalMart, Ford had fallen from the top ten for the first time in history, and the top ten now included Toyota, Shell Oil, Daimler, and BP; the Chinese oil company Sinopec was number 17. By 1989, 143 of the corporations that had once been on the Fortune 500 list in 1980 had now become the objects of a buyout or merger. Of the 100 largest corporations in the world in 2000, over one-third of all their assets were located outside their home country. Fifty-eight Japanese corporations accounted in 2002 for 39 percent of total global sales, while fifty-nine American corporations accounted for another 28 percent.
The world was now interconnected by a global web of financial investments.
The 1970’s were a good decade for American farmers. Improved technology and the Green Revolution greatly increased agricultural productivity; American farmers were now able to produce enough food for the US with only 60% of their production, leaving the other 40% as surplus. One outlet for this surplus was Food Stamps, a War on Poverty program which provided food for poor families. Another important outlet was the Soviet Union, which was forced by its own economic problems to buy large amounts of food on the international market. Agricultural prices climbed, and farm income climbed with it. Many farmers began borrowing heavily to expand their production for the export market.
The bubble soon burst, however. On the political front, the Carter Administration imposed a grain embargo on the Soviet Union in retaliation for its 1979 invasion of Afghanistan, and American farmers lost a crucial market. The declining world economy, exacerbated by the 1973 and 1979 oil crunches, further limited the export market. Between 1980 and 1988, farm profits declined by 36%, and hard-pressed farmers were unable to pay off their debts. Foreclosures shot up, and the ruined smaller farms were bought up by large agribusiness corporations. The government’s “price support” subsidies, which were supposed to insulate and protect small farms from the impact of price fluctuations, now began subsidizing huge industrial farms instead as the small family farms all but disappeared. By 1980, some 60% of all farm subsidies were going to just 17% of farm businesses. These, more and more, were controlled by agribusiness corporations like ConAgra, Monsanto, and Archer Daniels Midland (ADM).
Grassroots organizations appeared to “save the family farm”, a benefit concert called “FarmAid” was organized to raise money and publicize the farmer’s plight, and several states tried to pass laws freezing foreclosures or even forbidding corporations from buying farmland. But in the end, the corporations dominated the industry. By 2005, just four agribusiness corporations controlled 83% of the entire beef cattle industry, 66% of the pig industry, and 58% of the broiler chicken industry. Monsanto Corporation, alone, controlled 93% of the soybean crop and 80% of the corn crop. The marketing of grain is similarly concentrated; in 1999, the Cargill Corporation merged with its rival Continental Grain Corporation, thereby controlling the purchase of 94 percent of the soybean crop and 53 percent of the corn crop.
Other agrarian industries became similarly concentrated; 80% of all the beef cattle in the US are slaughtered and processed by 4 companies (ConAgra, Cargill, IBP and farmland Beef; 50% of the entire chicken crop is slaughtered and packaged by six companies (Tyson Foods, Goldkist, Perdue, Pilgrim’s Pride, Continental Grain and ConAgra Poultry. And three-fourths of the nations grain crops (corn, wheat and soybean) are marketed by Cargill, Archer Daniels Midland, Continental Grain and Bunge.
By 2000, however, the global agricultural sector was undergoing changes. In the 1990s, there was an international land grab, as agribusiness, supported by governments in Asia and the Middle East, began buying up cheap land in South America, Australia, central Asia and Africa. For the governments, this was seen as a way to increase the food supply for their own people (at the expense of the land-owning nation); for the corporations, it was an opportunity for easy money.
China has played a particularly large role. Although China has 40% of the world’s farmers, it only has 9% of the world’s arable land—and Chinese farmers are further hampered by the relative lack of government investment in agriculture compared to the manufacturing sector that fuels the Chinese economy. In 2008, the Chinese Ministry of Agriculture began considering deliberate plans to outsource China’s staple food production. In the past ten years, about 30 Chinese-backed companies have been buying up large tracts of land elsewhere, including Africa and Central Asia. Local farm-workers are hired to grow rice, maize, or soybeans on Chinese-owned land, and although some of the resulting foodstuffs are sold within the host nation, a large proportion of it is exported back to China.
The Middle-Eastern countries are carrying out similar plans. They import virtually all of their food from Europe, and have seen the costs of imported food rise steadily. As desert nations, they have few agrarian resources of their own, but they have lots of oil money, and so are in the position to buy their own cheaper food production elsewhere. A number of Arab nations have formed the Gulf Cooperation Council, which offers money and oil in exchange for access to farmland in places like Sudan, Pakistan, southeast Asia, and the former central Asian Soviet republics.
Japan and Korea are also attempting to solve their food difficulties by outsourcing production. Korea is able to grow much of its own rice, but imports 90% of all its other foodstuffs. In 2008, the South Korean government began facilitating the purchase of farmland in Mongolia, Russia, Sudan, and Argentina for production of food to be exported back to Korea. Japan, meanwhile, strictly maintains its centuries-old tradition of family-owned small rice farms, and forbids large corporations from entering the industry. But as the native agrarian sector becomes more and more unable to meet Japan’s domestic needs, the Japanese government is aiding some of its large corporations, including Mitsubishi, Asahi, Mitsui, Sumimoto, Itochu and Marubeni, to purchase facilities abroad to produce for the Japanese market. In the past few years, Marubeni bought a number of grain-storage warehouses in the US, so it can purchase grain directly from US farmers and cut out the large agribusiness middle-men. The Japanese are particularly focusing on China, where they have purchased millions of acres of farmland. Asahi has obtained a portion of the Chinese dairy industry, and Itochu has a joint venture with the Chinese government to produce agricultural machinery and land acquisitions. Mitsui owns 40% of Multigrain SA, and used it to buy 100,000 hectares of farmland in Brazil for soybean production.
In the wake of the 2007 financial collapse, many investors are turning to the international land market. Goldman-Sachs has invested heavily in the Chinese livestock industry, while the American financial giant BlackRock has set up a $200 million hedge fund specifically to invest in foreign agricultural resources. The fertile areas of the former Soviet Union have been particularly attractive. In the past few years, the Russian financial company Renaissance Capital, the Swedish companies Black Earth Farming and Alpcot-Agro, the American finance company Morgan Stanley, and the British company Landkom have all invested heavily in Ukrainian farmland. About ten percent of Ukraine’s entire arable land is now owned or contracted for by just 25 companies, nearly all of them foreign.
In Vietnam, some 40 percent of the entire rice crop and 90 percent of the dairy industry is now carried out under contract with foreign companies; in Brazil, three-fourths of poultry production is done under foreign contract.
In all of these cases, the host nation’s land and labor are used primarily to produce food and other agricultural products for the export market, usually to the contractor’s home nation. In some cases, the control is direct; the Chinese company DaChan, the second-largest producer of chickens in the world, has an exclusive contract to supply McDonalds, while Hortifruiti, the largest producer of fruits and vegetables in Central America, was recently bought by WalMart, which has been adding grocery sections to its “superstores”.
And it is not just food production that has been spurring this international land grab—about one-fourth of the total increase in global agricultural production over the past 20 years is in biofuels. A large portion of the recently-acquired agrarian land is intended for soybeans, corn and sugar cane—not for human consumption, but for the production of biodiesels and biomass fuels.
As a result, an entirely new generation of large agribusiness corporations are appearing which, while not yet able to topple the older giants like Nestle or Monsanto, are growing at rapid paces. These include the Brazilian company JBS and the Chinese company Shineway.
The increasing domination of world agricultural production by supra-national corporations not only means the destruction of subsistence farming, the increased dependence of non-industrialized nations upon a monoculture export market, and the increased flow of food to profitable wealthy markets and decreased food for unprofitable poor nations—it symbolizes the rising power of a supra-national corporate financial and economic structure, outside of and above any national government. And a founding member of that supra-national financial system, dating all the way back to the Breton Woods conference, was the International Monetary Fund.
The International Monetary Fund was formed during World War II as part of the Breton Woods agreement. Its original purpose was to finance the reconstruction of Europe and Japan, but after the war the IMF became a means of providing loans to developing nations that were too high-risk to obtain credit from private financial institutions. And, since the IMF was dominated by American economic power, it also became a tool of American diplomatic and economic interests.
Throughout the 50s and 60s the IMF and its World Bank partner dispensed loans to Africa, Asia and South America. Most of them went to Third World nations that were either friendly to the US in the cold War, or that the US wanted to entice into becoming friendly. Many of these recipient nations were unelected dictatorships who were engaged in repressing and slaughtering their own people.
In the early 1970’s, interest rates were low, and developing nations were eager to borrow from IMF to finance their projects. By 1980, longterm debt among Third World nations climbed from $21 billion to $110 billion. As the global economy slowed in the late 70’s and interest rates soared, however, the developing nations were caught in a vise, as declining revenues and increasing debts made it difficult for them to meet their interest payments. The result was more borrowing; the IMF in essence became a loan shark, constantly draining national economies with never-ending interest payments; it’s goal no longer that of financing development in poor nations, but simply that of preventing poor nations from defaulting on their payments.
As the developing nations tottered on the edge of defaulting on their loans, the IMF introduced what they called “structural adjustment plans”—in exchange for new loans (used mostly to pay off the old ones), the recipients would be required to impose a whole series of economic and political changes that became known as “austerity measures”. In essence, the recipient nations were required to adopt the neo-liberal Washington Consensus model of government. In a “one-size-fits-all” approach, the IMF simply forced everyone onto its economic Procrustean bed—all recipients were required to privatize any state-owned industries (including utilities), devalue their currency against the dollar, cut government spending (sometimes drastically), and deregulate their economy.
The effects were often disastrous. “Austerity programs” forced governments to slash spending on social programs such as health care or education; at the same time, privatization and deregulation often produced increased unemployment. To pay the interest on their IMF debt, nations are often compelled to place most of their economic resources into export markets which can earn them foreign exchange; since most of these developing nations were agriculture-based, that often meant diverting resources to fruit, coffee or other cash crops at the expense of local food production. In Africa, which had been a net exporter of food in the 1960s, IMF austerity programs turned the continent into a food importer.
The resulting deteriorated social conditions and increased poverty often led to popular resentment and sometimes to rebellions and revolts, which the dictators could only control with increased repression. And American and other corporations often moved in to buy up parts of the distressed economy, taking resources out of native hands, converting the native into a powerless bystander in his own country, and increasing resentment and rebellion even further.
In South America, where the US was already widely resented as an imperial power who continually propped up military dictatorships and stifled movements towards democracy and social justice, hostility towards the IMF was particularly deep. Brazil, which owed the IMF some $100 billion, and Peru, which owed some $10 billion, began making the ultimate threat—they might simply default on their loans, an action which might trigger a complete collapse of the entire global financial system.
In the 1990’s, Latin America underwent a remarkable transition. Military regimes were swept away, and democratic governments appeared. And most of the continent broke free of the IMF. During this time, the debt crisis had become so large and the threat of default had become so great that the IMF was forced to negotiate many of its loans, and even forgave some of its debts. Several Latin American countries paid off their loans and ended their debt—and finally began to utilize their economic resources for improving the lives of their people. Populist governments in Peru, Venezuela and Bolivia openly defied both the IMF and the United States, and oil-rich Venezuela joined with six other South American countries to form their own regional development back that would serve as an alternative source of funding and loans, independent of the IMF.
But by this time, the IMF was no longer the primary method through which the US interacted with the global economy.
One of the primary reasons for the appearance of the modern nation-state in the 15th and 16th centuries was the merchant class’s need for a uniform set of trade regulations. In the earlier feudal period, each individual fiefdom was more or less independent, and each feudal lord had the authority to decree whatever taxes, duties, tolls or trade restrictions that he pleased. As the merchant class grew more powerful and trade routes became longer and more widespread, they ran headlong into this bewildering patchwork of laws and regulations, and, recognizing that it would be far more advantageous for them if they faced a uniform set of laws and regulations everywhere, the merchants threw their support behind the idea of ”nationalism”, in which a single government would have control of each national territory and impose upon it a single uniform set of rules.
At the end of the Multi-National Wars in the early 1990’s, the global corporations ran into a similar problem. As their operations expanded into dozens of countries, they butted up against a bewildering array of separate national trade laws, tariffs, taxes and regulations. And the solution they proposed for this problem was the same as the old mercantilists—a uniformity of rules.
The economic blood-letting unleashed by the Multi-National Wars had also deeply shaken the corporations on all sides. The casualty rates among corporations were high, as once-mighty corporate behemoths disappeared in mergers or buyouts or bankruptcy, and the multinationals searched frantically for a way to avoid such costly economic wars in the future, by setting up a single uniform set of rules by which everyone would abide, and an authority to enforce them. This could not be done by national governments; even the largest and most powerful national governments simply were not strong enough to compel obedience from the supra-national corporations (who were now richer, larger and more powerful than any single national government).
Thus, the supra-national corporations proposed a policy of “globalism”, in which trade in every country everywhere on earth was to be regulated by a single uniform set of worldwide laws and policies. Naturally, these laws and policies would be exclusively geared towards the benefit of the corporations.
In a short time, the program was drawn up, primarily by the large American corporations. Drawing its ideas largely from the economic philosophy of “neo-liberalism” (referring not to political liberals, but to the classical free-market ideology of the early economists), the new staunchly pro-corporate globalist doctrine centered around the elimination of tariffs, duties and other “barriers to free trade”, the privatization of state-owned sectors and the elimination of subsidies, fiscal conservatism in government (particularly in regards to balanced budgets), low interest rates, lower taxes, and deregulation. Because the program was largely drawn up by American corporations working in concert with the American-based IMF, it became known as the “Washington Consensus”.
The first halting steps in this direction were taken as bilateral or regional trade agreements between national governments, in which these nations agreed to unify their trade regulations and drop any “trade barriers” that limited the flow of capital and goods between them. The US entered a number of such “free trade agreements”, but the most significant, in terms of economics and of political controversy, was the North American Free Trade Agreement (NAFTA) between the US, Canada and Mexico.
In the early 1990’s, President George HW Bush began negotiations towards a multilateral trade agreement between the three North American nations. The intention was to formalize a set of rules whereby investments and products could move freely across the two borders, particularly to and from the Mexican maquiladora sector. When President Bill Clinton was elected in 1992, he too embraced the Washington Consensus, became an ardent deregulator and fiscal conservative, and continued the “free trade” negotiations, culminating in the NAFTA treaty taking effect in January 1994. President Clinton considered NAFTA to be one of the crowning achievements of his Administration, and devoted himself to the goals of the neo-liberal American Consensus, including deregulation, balancing the government’s budget, privatizing government functions (Clinton was particularly proud of “ending welfare as we know it”), and eliminating protectionist tariffs and other trade barriers.
The NAFTA structure was inherently undemocratic—not surprising, since it was written in secret by unelected corporate representatives and trade professionals whose only interest was their own. Under NAFTA, hundreds of pages of policies were spelled out which all three member nations had to accept, covering areas as diverse as agricultural inspection, safety regulations, fiscal policies, and environmental and labor policies. Under NAFTA, any partner who feels it is being subject to a “restraint of free trade” by any law, federal, state or local, can file a complaint, which is heard in secret by a panel of unelected trade representatives—their decision cannot be appealed and is not subject to review by any national court. In a finding of trade violation, the offending nation can be slapped with punishing trade sanctions, and the offended partner also has the option of seeking monetary damages from the violating government—not in that nation’s courts, but in secret NAFTA tribunals. Under NAFTA policies, violations can be far-reaching—an environmental regulation or labor law, for instance, which costs a corporation money, can be (and often has been) ruled an “unfair restraint of free trade”. When the state of California outlawed the use of the gasoline additive MTBE, a suspected carcinogen that contaminates groundwater and makes it undrinkable, the Canadian manufacturer Methenex filed charges under NAFTA, claiming its economic free trade rights had been violated. Conversely, when Canada outlawed the additive MMT, which degrades catalytic converters and is suspected of poisoning the human nervous system, the American manufacturer US Ethyl filed charges under NAFTA, prompting Canada to quickly reverse its ban and pay US Ethyl $13 million in compensation for lost profits. In Mexico, environmental regulations caused a delay in the construction of a toxic waste dump owned by the American company Metalclad, near the city of Guadalcazar (the Mexican authorities were trying to prevent the dump from being placed in an environmentally-sensitive area, and had already denied a similar permit to a Mexican company, which then sold the land to Metalclad). The American company filed a complaint under NAFTA and was paid $16 million in compensation. And when the Canadian government signed an international treaty prohibiting the cross-border transport of toxic waste and mandating domestic disposal of waste, the American company SD Meyers, which had been trucking toxic polychlorinated biphenyl (PCB) waste from Canadian sites to its disposal plant in the US, filed claim under NAFTA, forcing the Canadian government to pay $5 million in compensation for the lost profits.
These “regulatory takings” provisions in NAFTA wre originally added as a protection against a corporation having its assets seized and nationalized by a national government—as Mexico did to the oil companies in 1938. The right of compensation for “regulatory takings” had already been explicitly rejected in American law by the US Supreme Court, which has repeatedly ruled that private owners have no legal right to be compensated for economic losses sustained because of US government regulatory actions. Under NAFTA provisions, however, corporations are entitled to such compensation, which they obtain outside of the jurisdiction of American courts—in effect undermining the entire US legal system, and giving corporations more legal property rights in the US than citizens of the US have for themselves. In one infamous case, a Canadian-owned funeral company in Mississippi was sued in a civil court and lost a jury judgment of $750 million—then filed for compensation under NAFTA on the grounds that the US civil law had unfairly cost the company profits. The company won its NAFTA hearing—the only reason it did not ultimately receive the money was because before he ruling was issued it had reincorporated itself as an American company, thus losing NAFTA’s protection as a Canadian investor.
NAFTA has also been utilized to gut product safety regulations. Prior to 1994, US law required Canada and Mexico to have meat inspection procedures that were at least as good as those in the US before their product could cross the border. This law was invalidated as an “unfair restraint on free trade”. And NAFTA has been used to undo governmental actions that have the purpose of social justice: in 1917, after the Mexican Revolution, the country’s Constitution specified that the land was to be redistributed from the wealthy elite to the landless peasants, and foreign ownership of Mexican land was specifically outlawed. That provision, however, conflicted with NAFTA—and Mexico was forced to amend her Constitution to remove it.
NAFTA produced a significant amount of opposition within the US. Nearly all of it came from the point of view of American nationalism, whether it was the remnants of the labor movement fighting to “protect American jobs”, or the right-wing fighting to “protect American sovereignty”. Political factions that normally hated each other, ranging from Pat Buchanan to the AFL-CIO, now united in their opposition to NAFTA to “defend American interests” from “the foreigners”. The old “Buy American” campaign that the labor unions had launched years before, in a failed attempt to prevent US corporations from outsourcing their jobs, now appeared again; Presidential candidate Ross Perot famously declared that NAFTA would lead to “a giant sucking sound” as jobs left the US for Mexico (and in fact between 1994 and 2002, the US lost a net of 879,000 jobs); environmental groups rallied weekly in Washington to protest the imminent gutting of pollution standards, wildlife protections and habitat preservation; “America First” groups denounced NAFTA as a surrender of American sovereignty to a nascent world government. None of the protests mattered. American corporations were enthusiastically behind NAFTA, hoping it could turn the maquiladora into a convenient low-wage haven where they could avoid tariffs and regulations; both political parties (particularly Bill Clinton’s “New Democrats”) also backed it (though there was some weak opposition from some Democratic factions).
By 1994, the fight was over. NAFTA was the law of the land, the neo-liberal Washington consensus was the ruling ideology of both parties, and corporate globalism became government policy.
The next step was to expand the regional NAFTA-type agreements to encompass everyone, everywhere.
World Trade Organization
In 1947, as part of the Bretton Woods process, the world powers signed the General Agreement on Tariffs and Trade GATT), an innocuous document that standardized the duties and quotas on a number of manufactured products. At he close of the Multi-national Wars, however, GATT became the instrument through which the corporations established their global rule.
Previous attempts had been made to establish worldwide standard trade regulations. In 1947, the Bretton Woods conference had proposed creating an International Trade Organization, but no one supported the idea. In the early 1970’s, GATT representatives met in Tokyo and tried to produce an agreed-upon international set of trade policies, but this was not accepted by most of the members.
The eighth gathering of GATT representatives took place in Uruguay in September 1986. As the corporate wars between the US, Japan and Europe raged around them, the Uruguay Round decided that a uniform set of international trade rules was now required if peace was to be established. As a result, the GATT framework was, over the space of eight years, expanded to cover virtually all industrial products—and was then expanded even further, to cover “non-trade barriers” such as safety, environmental and labor regulations. In a series of separate agreements, GATT was also expanded to include the agricultural, service and financial industries, as well as intellectual properties and copyrights—nearly the entire global economy. In all, some 60 treaties, annexes and “understandings” were adopted. And to enforce all of these agreements, the Uruguay Round established the World Trade Organization (WTO), an executive body with exclusive power to enforce GATT and punish violators. At its inception the WTO had 123 members; as of 2010 it had 153, covering over 97% of all international trade. Membership is open not only to sovereign nations, but also to independent economic entities (the European Community has its own WTO representatives, as does Hong Kong). China became a member in 2001; to placate China’s political dispute about the sovereignty of Taiwan, Taipei was admitted in 2002 as the “Separate Customs Area of Taiwan”. About 30 nations and entities have “observer” status at WTO but are not yet members; the most important of these are Russia and Iran. Other observers include the Vatican and a number of UN organizations. WTO headquarters is located in Geneva.
The decision-making body within the WTO is the Ministerial Conference, which consists of trade representatives from various countries (none of these representatives are elected by popular vote—they consist of corporate lawyers or trade officials that are appointed by their respective governments). Underneath the Ministerial Conference is the General Council, which forms various Committees to handle different areas of the economy. Representation within WTO is theoretically on a one-nation one-vote basis, but no actual votes seem to have ever been taken—most decisions are reportedly taken by small groups of economically-powerful nations (called “Green Room negotiations”) and then presented to the rest as a fait accompli and adopted by consensus. Small nations realize that they cannot even hope to engage in a trade war with the richer nations, and so have no choice but to agree with whatever they are presented; in some reports, small nations who opposed some WTO rule were threatened with loss of IMF or World Bank funding if they continued to object.
Not surprisingly, the largest economic powers dominate all the discussions—they set the agenda and make the important decisions. Also not surprisingly, the bulk of WTO’s staff and bureaucracy is made up of corporate lawyers, with at least 500 multinational corporations having input at WTO. These are often the people who actually draft all the proposed rules and policies.
The WTO framework is based on several fundamental ideas, all of which are codified into GATT policies and all of which must be accepted by every WTO member. A basic principle of the WTO is that nations cannot discriminate, in their trade practices, against foreign-owned companies. The idea is encompassed in two sections of WTO rules, the “most favored nation” section, which means that any trade favor granted to one WTO member must be equally available to all; and the “national treatment” section, which means that no distinction in treatment can be made between domestic and imported products or services. The “no discrimination” policy also applies to particular products—under WTO trade rules, products cannot be differentiated by their source or their method of production. A nation cannot, for instance, allow the import of sustainably-produced rainforest products while at the same time restricting the import of clear-cut forest products.
The effect of this goes far beyond merely prohibiting tariffs or import duties—it has an enormous effect in the areas of procurement practices and technical standards, environmental regulations, safety standards, endangered species protections, and other important areas.
In essence, WTO has one overarching goal—the freedom of multinational corporations to freely make profits anywhere they like without any pesky restrictions getting in the way. In 2001, the WTO began the Dohan Round of talks in Qatar to expand its reach even further. As we will see later, the talks didn’t turn out as expected.
The End of National Sovereignty
Like the NAFTA apparatus, the WTO is completely undemocratic, deliberately so. By written WTO policy, all of its deliberations and decisions are made in secret; all of the WTO representatives are corporate lawyers or government trade bureaucrats—none of them are elected, and there is no representation in policy-making of any not-for-profit Non-Governmental Organizations (NGOs).
Any WTO may file a complaint against any law or policy (whether national, state or local) implemented by any other member. When a charge is filed, it goes to a panel made up of three members which meets in secret. There are no policies or regulations concerning conflict of interest or bias on the part of panel members. If the three-member panel concludes that a violation of WTO rules has occurred, the offending government has a set period of time to bring itself into compliance. Unlike in NAFTA, the complainant does not have the ability to sue for monetary damages, but the WTO has the ability to authorize punitive trade sanctions against violators if they do not comply with its rulings.
From 1994 to 2010, a total of 414 complaints have been filed with the WTO. Of these 90 have been settled by mutual agreement between the complainant and respondent; 74 were resolved when the WTO’s rulings were complied with by the offender, 16 were resolved when the offender offered its own solution that was accepted by the WTO as compliance. Only four cases have actually resulted in WTO authorization of actual punitive trade sanctions—three of those were against the United States and one was against the European Community.
The US has been the most active participant, both as accuser and as defendant. The US has had 110 complaints filed against it, and has filed 96 complaints of its own. The European Community has filed 82 complaints and had 70 filed against it; Japan has filed 14 and had 15 filed against it; China has filed just 7 complaints but has had 20 filed against it. Of the complaints filed by the US, most of them were against the European Community (19 complaints), China (10 complaints), Japan, Mexico and South Korea (6 complaints each). Of the complaints filed against the US, most of them came from the European Community (31), Canada (15), Brazil (10), Mexico (9), Japan (8), and India (7). Nations who file complaints have won about 85% of the time.
Theoretically, the decisions of the three-member panel can be appealed to the WTO’s Ministerial Conference. In reality, however, no such appeal is possible, since the panel’s decision can only be overturned by a unanimous vote of the Conference—which of course includes the representative who just won the disputed ruling.
Although the citizens of democratic nations have no say in the making, interpretation or enforcement of any WTO rule or policy, the WTO has the authority to order any member nation to modify or withdraw any national law or policy that conflicts with WTO decisions. In addition, any national regulations in areas such as environment, workplace safety, product safety, labor laws, etc, must be “least trade restrictive”—in other words, if WTO decides unilaterally that the same aim could be done with a more business-friendly policy, then the regulation is ruled to be “more burdensome than necessary” and is an illegal violation of free trade. In WTO hearings, the argument that a given policy is necessary “for the public good” is specifically disallowed.
In essence, the WTO has literal veto power over the democratically-decided public laws of any member nation. And indeed in many cases, the WTO has actively forced nations, including the United States, to modify or withdraw laws that they had passed through the democratic process.
In its very first case, filed by Venezuela against the United States, WTO invalidated provisions in the Clean Air Act, when it ruled that US regulations concerning clean air standards violated Venezula’s free-trade rights to sell its higher-pollutant gasoline in the US. The United States was forced to adopt new lower clean air standards.
In another case, when the United States passed a law outlawing online gambling, it was slapped with WTO charges by Antigua, which hosted many of the online gambling companies. The WTO ruled in their favor, concluding that “US laws deny access and discriminate against foreign suppliers of gambling and betting services inconsistently with US WTO obligations”. The US repealed the law.
Under the provisions of the Marine Mammal Act, the US passed a ban on the import of tuna that was not caught in dolphin-safe nets; in a similar move under the Endangered Species Act, a ban was also placed on the import of shrimp that was caught in nets that did not have a Turtle-Excluding-Device to protect endangered sea turtles. Both laws produced WTO complaints, and in both cases the WTO ruled them “unfair restraints on free trade”.
One of the few cases where the WTO has been openly defied centered around a European restriction on the import of beef that was produced using artificial growth hormones. The US filed a complaint, and the WTO dutifully ruled that the restrictions were “unfair” and ordered them stricken. The European Community, instead, flatly refused to repeal them—and as a result has been slapped with permanent punitive sanctions of over $116 million per year on its highly profitable luxury cheese trade.
Of course, most WTO complaints center around corporate interests, not national interests. In one illustrative case, the US filed a complaint against a European policy that encouraged small-scale banana farming in some of its former Caribbean colonies. The US, of course, had virtually no banana trade of its own and therefore no national interest to defend—but American corporations like Chiquita dominate the very profitable banana production in Central America. It was Chiquita’s interests that the US was protecting, not American interests.
By 2001, then, the supra-national shadow government of the corporations was complete. The WTO had veto power over any national government, and prevented any nation—even the largest and most powerful—from asserting its own national interests against the interests of the multinational corporations. The corporations were now international; they served no national interest, answered to no national government, and heeded no national border. The United States and its corporations, which had ruled unchallenged for half a century, were no longer at the top of the pyramid—they had been replaced by a multifaceted international economic structure. By World Inc.
But now the multinationals faced a new fight, from a political group in the US with the avowed aim of breaking the international structure and of returning “American interests” to its unchallenged position of national global supremacy.