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No to the WTO and Free Trade Agreements

September 2013

Launched in 1995, the World Trade Organization (WTO) completed the Bretton Woods trio with the World Bank, and the International Monetary Fund in promoting neoliberalism and corporate globalization. The WTO was particularly special in its power to legally enforce and penalize countries, taking away the policy space of governments, and on several occasions, forcing them to change their national laws in order to implement global free trade rules.

Not long after its launch however, new negotiations to deepen the rules and expand the reach of the WTO had failed thanks to massive protests in Seattle (1999), Cancun (2003), Hong Kong (2005), and the controversies around massive agricultural subsidies in the north. Recent years have seen it stalemated into an impasse but despite the lack of progress in the expansion, the existing 60 agreements that are in place in the WTO are still currently being implemented.

These existing WTO trade rules are currently undermining initiatives to tackle climate change and they can be further aggravated by the attempt of new negotiations in the upcoming 9th Ministerial meeting in Bali, Indonesia.

How the corporate rules of the WTO work
Under the WTO logic, each country should specialize in what they can produce best -what is called their “comparative advantages”- and then trade these products in exchange for products that other countries produce best. This logic however promotes the construction of market-oriented and imbalanced economies that focus on the demands of the market rather than the needs of their people on the ground. These export-oriented economies also bleed Mother Nature in order to exploit the most out of it provoking disruptions in the environment as we are seeing now with climate change, biodiversity loss and the destruction of ecosystems. This is the capitalist logic – nature is just a thing to be exploited for profit.

The real beneficiaries of this imbalanced trade rules of the WTO are the transnational corporations since in reality, they are the ones that have more “comparative advantages” than fledgling national and domestic infant industries. In a world of free trade flows – as the WTO aspires – transnational corporations are free to enter and move between countries, choosing those with cheap labor and relaxed regulations and at the same time able to exit and move out just as easily after it has exhausted and grabbed the natural resources, leaving in several cases, their toxic waste.

At the same time, the losers are many – the farmers who lose their farms as they cannot compete with cheap food imports that flood the local markets, the workers whose jobs are made even more unstable and precarious with the pressure to lower labor standards, the persons who are forced to migrate because of loss of livelihood, the women who are most times those who bear the brunt of economic distress on the family and community, the indigenous people who are displaced from their lands, and Mother Earth.

Global Trade Rules and the Environment
The WTO, of course, claims to be committed to “environmental protection” and “sustainable development.” Citing Article XX from the old GATT[1]regime that was grandfathered into the WTO, any country can be exempted from the WTO rules to bring in policy measures “necessary to protect human, animal or plant life or health” [Article XX–b] or measures “relating to the conservation of exhaustible natural resources…” [Article XX–g]. At first glance this may sound ‘environmentally friendly,’ but it is conditioned by a big caveat in the Article’s preamble [or ‘chapeau’] which, in effect, puts the onus on countries initiating environmental protection measures to prove that their actions will not cause “arbitrary or unjustifiable discrimination” or pose a “disguised restriction on international trade.”

In other words, global trade rules guaranteeing the free flow of capital, goods and services trump environmental protection priorities. As a result, environmental protection measures are often challenged and struck down for being a “disguised restriction on international trade.”  Indeed, under the overarching ‘most favored nation’ and ‘national treatment’ clauses of the WTO regime, those transnational corporations based in member countries effectively have ‘sovereign rights.’ Moreover, even the scope of environmental protection covered by Article XX is too narrowly defined to adequately safeguard measures urgently needed today to combat climate change, let alone the further commodification of nature.

Recent WTO ruling against climate initiatives
In the province of Ontario, Canada, the WTO recently struck down a law and program designed to promote the development of renewable energy as a measure for mitigating climate change while also creating jobs. The program allots the majority of producer power rights to Ontario companies thereby making it possible for the province to make the transition from coal, oil and gas without completely damaging its local economy. Its ‘domestic content requirements’ ensure that new manufacturing jobs will be created in Ontario by requiring that 25 percent of the content of all wind projects and 50 percent of the content of all solar projects are produced by workers and industries in the province. This program also guaranteed preferential 20-year purchase price per kilowatt-hour for electricity from wind and solar generators from companies that had a certain percentage of their costs originating from Ontario.

In its first two years, this program created more than 20,000 climate jobs in Ontario and was on track to create a total of 50,000. It was accelerating the production of renewable energy while simultaneously reducing both greenhouse gas emissions and unemployment. While there are particular concerns about the program’s implementation, it is recognized as an innovative step toward tackling climate change.

In 2010/2011, however, Japan and the European Union representing the interest of their transnational corporations filed cases in the WTO against Ontario’s renewable energy incentives program claiming that it was violating the “national treatment” rule of the WTO.  This rule establishes:

“The products of the territory of any contracting party [country member of the WTO] imported into the territory of any other contracting party [country member of the WTO] shall be accorded treatment no less favourable than that accorded to like products of national origin in respect of all laws, regulations and requirements affecting their internal sale, offering for sale, purchase, transportation, distribution or use.” [Art. III. 4 General Agreement on Tariffs and Trade (GATT) of the WTO]

This means that you can give more benefits to foreign transnational corporations but never less than what you have given to a domestic enterprise.

When it comes to climate change, this implies that a State cannot promote the development of a national industry of solar panels, wind energy or renewable energy by using national regulations primarily designed to benefit domestic companies or products. If a State wants to give subsidies or preferences to those national companies or products it must also give the same incentives to foreign transnational corporations. In other words an infant domestic effort at generating renewable energy, will have to compete from the first day with a big foreign transnational corporation of “clean energy”, most of them main actors of the so-called “Green Economy”, that care much more about their markets than the climate of the world and that in reality still promote a market-based and exploitative model of “renewable energy.”

On May 2013, the Dispute Settlement Body of the WTO in its final ruling said that Canada/Ontario was in violation of WTO rules. One month later, the Ontario Minister of Energy announced that they will “comply with the World Trade Organization’s ruling on the domestic content provision.”

The WTO ruling against Ontario is just the tip of the iceberg.  There are other cases, for example, in India, who is still suffering the deaths of almost 1,000 persons, the disappearances of 3,000 and the evacuation of 100,000 due to the extreme floods caused by deforestation and climate change in Uttarakhand, there was a case filed by the United States in February 2013 in the WTO challenging India’s use of subsidies and “buy local” rules in its domestic solar program. The WTO rules that the United States has based its complaints on that India has supposedly violated are the very same ones that forced Ontario to change its renewable energy program.

Furthermore, there are disputes in the WTO between China, the United States and the European Union in relation to wind power equipment and solar panels. These disputes don’t aim to lower the prices of renewable energy but rather the contrary. Their main aim is to preserve the markets and profits of their respective corporations.

Bali: New attempt to expand the WTO and FTAs
At the next ministerial meeting of the WTO, they will not try to conclude the “Doha Development Round.” This has proven to be too difficult as it is a massive agreement encompassing numerous areas and with the “single undertaking” clause of the WTO, where everything or nothing is agreed, this has led to the impasse in the negotiations. However, with a new Director General supported by the influential developing country coalition BRICS (Brazil, Russia, India, China and South Africa), the transnational corporations and big players in the WTO have a new strategy to unlock the stalemate and promote an “early harvest” of some agreements, what they call the “Bali Package”, and push forward agreements that will include environmental goods and services like the White House has recently announced:

“The U.S. will work with trading partners to launch negotiations at the World Trade Organization towards global free trade in environmental goods, including clean energy technologies such as solar, wind, hydro and geothermal… Over the next year, we will work towards securing participation of countries, which account for 90 percent of global trade in environmental goods, representing roughly $481 billion in annual environmental goods trade. We will also work in the Trade in Services Agreement negotiations towards achieving free trade in environmental services.” [2]

In effect, these measures are part of the follow-up to the false ‘green economy’ agenda promoted and adopted at the Rio+20 Earth Summit last June 2012. A prime objective of this Rio+20 plan of action is to promote and accelerate the commodification of both material and non-material parts of nature. Here, for example, the functions of forests are to be extended beyond just the provision of wood products to be used for environmental services ranging from green tourism to carbon capture and storage. In turn, this calls for the establishment of markets for ecosystem services and biodiversity offsets. However, in order to create and advance markets for environmental services and goods, they must be aided and abetted by global trade rules. In other words, the false ‘green economy’ agenda simply cannot operate without the WTO regime and the FTAs.

And we need to remember that the rules of the WTO are the basis for all other free trade agreements, whether bilateral or regional, (TPP, TTIP, EPAs, CAFTA, NAFTA, EU-Association Agreements and others[3]). These WTO-plus agreements are also in their own right, undermining and working counter to initiatives to care for the environment and address climate change. There are dozens of cases all over the world of foreign corporations demanding huge compensations from States, using the FTAs clause allowing lawsuits from investor to State, because of national environmental regulations. Occidental v. Ecuador, Pacific Rim Mining Corp v. El Salvador, Vattenfall v. Germany, Renco vs. Peru are just some examples of how free trade and investment rules are designed and used to undermine initiatives to heal nature. In many situations a simple threat of a lawsuit from an investor, eases national environmental regulations. International trade law has legal mechanisms to sanction and implement their rulings while environmental provisions are mainly declarations that have no compliance mechanisms and are easily trumped by trade agreements.

People and Nature first!
To address the climate emergency we need to not only stop the expansion of the WTO and FTAs but we need to go beyond that and call for an end to the WTO itself and the free trade regime. There is no more time for half-measures. If we are to save nature and humanity, we need to change the system and changing the system means dismantling the free trade regime.

WTO rulings like in the Ontario case cannot be allowed to proliferate.  Governments should not have to follow rulings that undermine initiatives to address climate change. Human rights, labor rights, indigenous rights and the rights of Mother Earth have to be above trade rules if we want to preserve life as we know it.
In the WTO and the FTAs, there are clauses that guarantee the patents of transnational corporations over inventions that can save millions of lives and that can help reduce greenhouse gas emissions. We are living a global emergency situation, greater than any that we have lived, and intellectual property rights for profit should not have precedence over nature and humanity.

Trade is needed but a different kind of trade, one that is not based on the exploitation of people and nature and whose rules benefit the communities and not the corporations. The kind of trade we need is complementary and equitable trade not corporate free trade.

We need to guarantee that all countries and especially those that are least responsible and most affected by climate change have the right and the capacity to:

  • Support their national and domestic renewable energy sector trough “buy local” regulations, subsidies and all kinds of measures that allow them to get rid of fossil fuels as soon as possible.
  • Have free access to all patents concerning renewable energy and inventions that can help limit the impacts of climate change.
  • Promote food sovereignty and agroecology to not only cool the planet but to feed the people without agrotoxics and GMOs.
  • Stimulate local production and consumption of durable goods to meet the fundamental needs of the people and avoid the transport of goods that can be produced locally.
  • Guarantee the human right to water, reverse the privatization of public water services and preserve the watersheds.
  • Push for clean and accessible public transport infrastructure to take cars off the roads to reduce greenhouse gas emissions.
  • Establish regulations and sanctions against industries that destroy and pollute the environment without the threat of international disputes.
  • Encourage the nationalization and control of the society over the energy sector to dismantle the dirty component and accelerate the expansion and promote community based renewable forms of clean energy.
  • Promote economies that are diverse and resilient to climate change.

To really address the climate crisis, a world without the WTO and the FTAs, one that is not dominated by transnational corporations and the global free trade regimes, is necessary! We have to change the system, and we have to do this now.

[1] General Agreement on Tariffs and Trade (GATT)


[3] TPP – Trans Pacific Partnership, TTIP – Transatlantic, Trade and Investment Partnership, EPA – Economic Partnership Agreements, CAFTA – Central America Free Trade Agreement, NAFTA – North American Free Trade Agreement.

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