Elements for a New Trade System:
Fairness, Sustainability and Development
Myriam Vander Stichele
in Norbert Malanowski (ed.), Social and Environmental Standards in International Agreements: Links, Implementations and Prospects, Schriftenreihe Hans, Böckler Stiftung, Münster, 1997: 22-31
Contribution to the conference on Social Clauses and Environmental Standards in International Trade Agreements: Links, Implementaton and Prospects, organised by the Friedrich Ebert Stiftung and the Hans Böckler Stiftung, Brussels, 30 May 1996.
1. LOOKING AT THE UNDERLYING MECHANISMS
In order to tackle the mechanisms which result in unsustainable trade and investment liberalisation, we have to be clear about the underlying mechanisms of the trade system that have brought us to the current situation of unfair trade that not only brings benefits but also harms food security, employment, social and environmental sustainability.
* A perhaps obvious but important aspect is the fact that the social, environmental, developmental and other societal implications of international trade, trade and investment liberalisation and new international trade rules - as agreed in the Uruguay Round of GATT and implemented in the new World Trade Organisation (WTO)- are hardly known, acknowledged or taken into account, by governments, politicians, trade unions, NGOs, civil society and business.
For instance, the texts of the Social Summit (March 1995) hardly deals with the social aspects of trade and state that the Uruguay Round has to be implemented as it was agreed. Notwithstanding their criticisms, only a few NGOs were present at the Ministerial Conference to sign the Uruguay Round (Marrakesh, April 1994) to provide another view than "no losers, only winners" by the WTO secretariat. EU development ministers had no say about the Uruguay Round and later on WTO matters. Moreover, there is a mentality in the WTO that trade issues are to not to be mixed up with other concerns. The trade rules are accepted to overrule other agreements or determine the framework in which other arrangements are made, e.g. in the UN agencies such as FAO (farmers' rights), with the exception of mutilateral environmental agreements. The WTO's contract and sanction mechanism allows its trade rules to be placed above sustainable development.
This brings me to the first element of a new trade system: the development and support of breaking through the mainly macro-economic analysis and debate of trade issues on which most trade decisions are taken: the 'realities' and 'human face' of trade have to be shown. There should be what I call an 'active information policy', contrary to only relying on positions from lobbies which can afford to push for their position. Decision-makers, governmental and international (trade) organisations should have mechanisms to ask and support analysis by different bodies and groups, especially those likely to be affected, about the different impacts of future trade decisions that will be taken. This should avoid the situation such as at the end of the Uruguay Round whereby nobody could say what the implications for jobs would be, and environmental concerns were taken up so that they would be discussed only after all new rules had been agreed.
Social movements should research, collect, distribute and communicate as many very concrete examples as possible which show the (complex) link between trade, environmental sustainability, employment and workers' standards, food security, marginalisation and other societal aspects as well as the explicit negative effects of the new WTO rules. NGO and trade union campaigns already look at specific sectors (textiles in the 'clean clothes' campaign, toy manufacturing) or group of people (e.g. flower pickers, Sahel cattle farmers, fishermen). These examples are to be used in all political, public and media activities because general demands from NGO statements, often based on concrete experiences, lack persuasion power at political level.
The result should be that not only workers and citizens but also politicians, decision-makers, officials and diplomats dealing with social, economical, employment, environmental and other related matters at different levels also get interested in trade issues. By showing how trade affects people's daily life and by raising the public debate, voters should put pressure on their politicians to take up their responsibility on multilateral trade matters. Most politicians know that their voters will not re-elected them on the basis of their positions or activities on regional or international level (the Philippines might be an exception because of the GATT debate and the US due to the NAFTA debate).
* One interesting example of how NGO work and campaigning has revealed the different aspects of trade is the case of the Lomé Convention banana regime. During the Lomé IV Convention negotiations, the African, Caribbean and the Pacific countries were promised by the European Community in 1989 that their preferential access to the European market would not be undermined by the Single Market obligation that would halt preferential trade quotas with some European countries which would have to open up for cheaper 'dollar' bananas from Latin America as they were already imported in other European countries of the European Community. However, this European promise was done with no consultation with other Directorate Generals on how this would be implemented (lack of coherence of common European policy). When the European Union was able in 1993, after a lot of difficulties, to establish a new EU banana import regime which sets a common duty-free quota for Caribbean bananas, it was being challenged by the 'dollar banana' countries for being discriminatory (against 'Most Favoured Nation' principle of the GATT) because they had to pay duties on their quotas. Due to the undemocratic procedures in the GATT (a country condemned by a dispute panel resolution could block the adoption of the resolution in the Council), the EU and ACP countries could stand firm against the challenges. However, the new WTO rules do not allow such blocking any more and the Latin American countries are again bringing the EU before the WTO dispute settlement system. The US is joining them because its transnational corporations (TNCs) have pushed the US Administration (especially Chiquita) to argue that the EU regime hurts them (in fact, TNCs misinvested as they speculated on total liberalisation of the EU banana market). TNCs are very much behind the actions of the dollar banana countries, for instance TNC representatives were sitting next to country representatives when making their case to the European Commission (lobby) while workers were not consulted (undemocratic decision-making).
When NGOs looked into the case, called by the Windward Island banana producers, they found that the banana production in the small mountainous Caribbean islands was more expensive because it was on small family owned farms with fair social conditions after slave labour and estates had been abolished. This contributed to the democratic stability and poverty eradication on the islands. In Latin America, the bananas were more "competitive" because productivity was on large plantations boosted by mechanisation, generous application of pesticides and other chemical inputs (with serious implications on health and nature) and low wages whith the use of 'heavy' methods against unionisation. NGOs brought workers from Latin America and the Caribbean together and discussions showed that the workers did not want to compete each other out but rather raise the prices of the dollar bananas up to the Caribbean level. On the Windward Islands no other crop or sector (e.g. tourism) has such a widespread and social benefits than banana production but this cannot taken into account to stop the EU preferential rules to be challenged. In order to find a solution, NGOs - in consultation with banana workers of the Caribbean and Latin America - have launched a campaign for a 3 à 7 percent European import quota for fair trade bananas,i.e. from independent banana growers whose production is socially, environmentally and economically sustainable. This new option is now being discussed between NGOs, EU Commission and banana exporting countries and companies (i.e. wide ranging consultations and discussions). Indeed, why should a banana be less expensive than a locally grown apple in the EU ?
How free is trade ? The realities of trade
The liberalisation has for an important part been pushed by lobbying of big corporations because they will benefit mostly; they want to design, produce, transport and distribute in the cheapest way, using the comparative advantage of different countries for the different processes. Instead of figures on trading by countires, it would be more appropriate to highlight the real actors in internation trade. Now, two thirds of world trade in goods and services is in the hand of 40 000 parent firms of TNCs with 250 000 affiliates; 1/3 of world trade is trade between affiliates of the same firm ('inter-firm') and 1/3 of world trade is trade between TNCs (intra-firm). In some sectors, TNCs hold oligopolistic or monopolistic positions, e.g. in wheat trading 70 % is in hands of 6 TNCs and there is no international control mechansim on abusive market practices (RBPs).
FDI, mainly by TNCs, is to some extend replacing trade (producing in the country in stead of exporting to that country) and becoming very intertwined with trade and international economic integration/'globalisation'. Trade and competitiveness are now linked with many aspects.
TNCs apply more and more a strategy of specialisation to keep the strongest position by strengthening their position around core activities, by putting high information and technological barriers or by making cooperation agreements so that it is more difficult for new comers to enter the market. At the same time, TNCs control a network of sub-contracters which they play out one against the other in order to get the cheapest prices while leaving the risks of production to the sub-contracters.
More complex and expensive technology and communication systems contribute now also highly to competitiveness, making it more difficult for small enterprises or economies to take a place.
This high competition leads to rationalisation and mass production which has an effect on employment with often down-sizing as a result.
The above emphasis on the important role of big companies, their strategies and their capacity to influence the size and nature of cross-border transactions brings me to another element for a new trade system: the big companies have to be kept responsible for the conditions in which they produce and trade, and for the conditions in which the products are made which they buy from their sub-contracters. The high and often unfair competitive pressure they put on producers has to be taken into account in any solution to improve workers' standards through trade.
However, companies have been able to avert any binding regulation which would discipline them: the negotiations for a UN code of conduct has never been finalised (due to US lobbying), at the Earth and Social Summits references to binding obligations where taken out, etc. In Europe, for years companies have claimed that only business creates the wealth in which all other aspirations of the European Union must be founded and that therefore they need freedom from rigid burdensom regulation. Recently, Eurochambers argued that "environmental interventions in world trade should be the exception rather than the rule" and that "better conditions for work and higher living standards cannot be legislated for but need to be achieved through improvements in competitiveness and productivity".
These ideas have been promoted during years not only by business but also by right wing thinkthanks, with huge financial support from business, which have spread their ideas and people in universities, governments etc. This has lead to free trade regulations to become a goal rather than a means (Commissioner Leon Brittan is proposing another round of trade and investment liberalisation negotiations before the year 2000) and to the current thinking that there are no alternatives (TINA). This is why it is so difficult to bring people and the environment back to center of concern and why the WTO is able to take a strong bias in favour of free trade in all the problems it touches on (e.g. environment, intellectual property rights, services).
2. FAIRNESS IS NOT A PRINCIPLE APPLIED IN THE WTO
* The WTO decision-making has a serious democratic deficit among the negotiators/members and between the decision-makers and their wider constituency in their home countries. There has been and continues to be lack of accountability, equity and transparency in the WTO so that the biggest trading powers in reality decide, giving the smaller countries hardly any possibility to have their concerns to be taken into account. For instance, the US and the EU, the two major trading powers have negotiated the agricultural deal more or less alone in the Uruguay Round; they brought their final agreement officially before the other parties one week before the deadline of finalising the overall negotiations ! In this way, developing countries were unable to incorporate food security and comprehensive anti-dumping measures while they were obliged to open up their markets because for foreign food imports. Any measures concerning workers' conditions should therefore also include the plight of agricultural workers which have been marginalised because of unfair dumping.
During and after the Uruguay Round, parliamentarians in most countries were hardly involved in the WTO decision-making and most sectors of society are hardly informed while big business was successfully lobbying for its interests based on the analyses it has the capacity to make. The WTO also failed to make appropriate arrangements with non-governmental organisations (NGOs, trade unions, business) which would allow due consultations and transparency. However, the WTO will be "the" forum for future trade negotiations.
This untransparent and undemocratic decision-making among the negotiators/representatives in the Uruguay Round which has been continuing under the WTO, and the lack of transparency and accountability of the representatives and decision-makers towards their population is a serious problem accompanying any new rules and clauses that will be brought under the auspices of the WTO. Many countries and citizens do not trust that the WTO can give them an equitable solution to their problem.
An important element of the new trade system is to guarantee that the democratic principles of transparency, equity and accountability between the members and between the different sectors of society are being guaranteed. NGOs and social movements have been making concerted proposal and demands with little being implemented. Without better democratic structures, any decision coming out of the WTO will continue to be as in the Uruguay Round: seriously biased towards the interests of the countries of the North and big business. This lack of democracy at international level, while the North presses the South for democracy at national level which is than not respected at international level, is a serious obstacle for alternatives and integrated solutions coming form local and democratic initiatives as there is no room is left for them in undemocratic international decision-making.
An international rule based system for trade is needed but there is a problem is when the rules are fair for all parties.
* To that extent it is also important to highlight that the WTO dispute settlement system lacks fairness in different ways and that this has serious implications when new rules and clauses are going to be implemented under the WTO:
- The sanction system does not foresee that smaller countries might not be able to effectively apply the sanctions because e.g. it has no effect on the bigger country it is allowed to retaliate against or the other party in breach of WTO rules puts political (aid) pressure.
- There is no tradition of collective sanctions by all the parties against the country breaking the rules which is recalcitrant. This lack of collective sanction system is an important issue in the discussions of a WTO based social clause.
- The constitution of the dispute panel is not free from political meddling and is very limited in its expertise.
- Only governments can go before the WTO dispute settlement system, even if the actors are companies. This means that companies and individuals who have a complaint need to be able to have enough political leverage to convince their government to take up the issue. This promotes government-business interest linking and disadvantages the weaker companies, individuals or groups. Non-governmental organisations, including trade unions, cannot directly present their arguments before the panel and even parliamentarians are not allowed to know how the case is proceding and what arguments are being used.
- There are no rules or arrangements in the WTO which allow for settling a conflict between the preamble - promising full employment, wellfare for all and seeking to protect and preserve the environment - and the implementation of the Uruguay Round rules, or between the WTO rules and other international or UN agreements (the only real discussion is about the WTO rules and Multilateral Environmental Arrangements).
Ideally, these short comings should be tackled and the trade dispute settlement system been brought under the International Court of Justice. This would more respect the principle of separation of powers.
* In order to provide more fairness in the multilateral trade system, the principle of subsidiarity needs to be incorporated. It will avoid that big countries and companies use the international fora unduly to push their interests against of democratically decided regulations (e.g. food safety standards). Quite some social and environmental standards might have to be adapted to local or national situations to be effective.
3. A COMPREHENSIVE VIEW ON SUSTAINABILITY AND DEVELOPMENT
Unfortunately, the important link between environment and development, as expressed in the term 'sustainable development' has been very much lost in the trade debates. For instance, at the WTO there is no structural link between the Committee on Trade and Development and the Committee on Trade and Environment (the latter reports to the UN Commission on Sustainable Development).
* Many problems such as those of employment or labour and environmental standards should not to be done from a trade perspective alone with strong bias to preserving 'free' trade as is currently often the case, especially in the WTO. Different aspects, including trade, of an issue have to be looked into and the solution is often to be found from different aspects together which could include trade restriction. An interesting example is how Bangladesh is trying to reduce its child labour together with support from UNICEF, the ILO, and Northern donors so that education for the children and avoiding decreased income for the family is being taken into account.
This multi-faceted approach should be an important element of a new trade system although it is not new: it was promoted by the UN and has been totally undermined by the WTO which is out of the UN, has only a consultation and trade sanction system and which has a mentality which does not want trade to be linked with other issues. However, the founders of the UN wanted to manage international trade as an important element in international politics to avoid another world war. In their view, the second world war was caused in the 1930's by countries in economic depression transferring their economic problems to other countries. They tried to solve their employment and balance of payment problems trough successive devaluations which enabled them to export their goods more cheaply, and increasing protectionism against (cheaper) imports. Another cause of the depression was the collapse of primary commodity prices. At that time, no international authority was able to monitor these trade movements, let alone coordinate and intervene in the trade policies. In order to deal with international macro-economic coordination, the Bretton Woods institutions (BWI) were created and designed to be complemented by the International Trade Organisation (ITO) which was set out in the Havana Charter. Indeed, employment, balance of payment problems, exchange rate stability, monetary policies, finance, development policies and trade policies are all related. The UN system of international macro-economic coordination has been incomplete from the beginning in the area of trade. The International Trade Organisation (ITO) was never created, mainly because the US refused to ratify it. The ITO was to be the 'third pillar' of the Bretton Woods system. The function of dealing with financial problems affecting the expansion of trade (short term shortage of foreign exchange reserves due to balance of payments problems, and exchange rate instability), which can lead to devaluations, had been given to the International Monetary Fund (IMF). The World Bank was to provide loans to develop economies in problem and with unemployment.
Based on pre-war experiences, the ITO had an integrated approach to international trade and incorporated most aspects related to commercial policy such as national employment, labour standards, development, commodities (price stabilisation), competition policy (against monopolies and abusive business practices which restrict free trade), and even the flow of productive capital and transfer of know-how on equitable terms.
As the ITO could not be set up, only one part of it was created in 1948. The General Agreement on Tariffs and Trade (GATT) had to deal with commercial policy, the reduction of tariffs and trade barriers, and the abolition of trade preferences among a limited number of countries. Without any democratic debate, the WTO was created as a successor to the GATT but outside the UN system (which is against international law) and thus without any international control mechanisms and with ad hoc arrangements for collaboration with UN agencies!
Not only is there a problem at international level, even in the EU and in national governments is there a serious problem in introducing the principle of policy coherence between e.g. trade, agriculture and development policies.
If governments fail to look at social and environmental sustainability from a comprehensive perspective, social movements are here and there trying to do so; their initiatives should receive support and their voices should be heard. For instance, different kind of coalitions have been and should continue to build up, to find win-win solutions:
- among farmers from all countries to avoid solutions whereby farmers of one country are pitted against those of another country;
- between farmers and consumers from North and South, based on the arguments that cheap prices are not a long term solution for both North and South and that consumers are also citizens with other concerns;
- at national and regional level (see experience in Europe and North America) among small or ecological farmers, consumer, environmental, development groups and trade unions.
These are difficult coalitions to come to common positions but common ground can be found, discussions can find the linkages and compromises which politicians have not worked out yet and the knowledge of the others' concerns can avoid that each of them pressures politicians in different directions.
* A step further is the experience of fair trade by which the selling organisations pay a guaranteed equitable price to the producers. Together with fair trade marks and (eco-)labels, they aim at raising the awareness that the production (and sometimes disposal) methods should also be of concern to the consumer.
Contrary to the WTO where the process of production cannot be a reason for discrimination, a new trade system should make the link between the social development, environemntal sustainability and consumption accepted after due consultations based on democratic principles and subsidiarity. Personally, looking at stricter legislation on advertisements should also be an aspect for achieving this aim.
* A fundamental problem remains the fact that the global economic system is based on economic growth and that it is not sure that environmental, consumption and social concerns will allow the continuation of the current growth system.
I hope I have been able to raise some elements and principles which should be useful for the rest of the debate on social clauses and environmental standards. My main concerns are that whatever arrangements are agreed, they should tackle the cause of the problem and benefit those who need it most; for that you need fair structures that promote sustainability.
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