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The World Trade System:

Winners and Losers

This briefing is the second in a series of six from Friends of the Earth International (FOEI) covering the Seattle WTO Ministerial Conference and the proposed new round of negotiations (the Seattle Series of briefings). 

CONTENTS

Part I: Winners and losers now

Farmers, food and agriculture

Export-led development

Disputes - beef, cigarettes, oil, shrimp/turtles, and asbestos

International trade and transport

Intellectual property and patents

The banana war

No 'trickle down' - poverty and inequality

Corporate consolidation

Part II: New winners and losers?

Investment, labor and the race to the bottom

Multilateral environmental agreements

Public services and government procurement

Cultural disintegration?

References

PART 1: WINNERS AND LOSERS NOW

FARMERS, FOOD AND AGRICULTURE

The Winners: transnational agribusiness corporations, developed countries, and large farms

The Losers: small farms (South and North), developing countries, local communities, and the environment

Case studies, examples and statistics: the Movimento Sem Terra (MST), Monsanto and soya farming in Brazil; maize farming in Mexico and the Philippines; subsidized European beef dumped in Africa; top 10 agrochemical corporations; pork farmers from Iowa; small holders in Poland; loss of small farms in US and various European countries.

Introduction

The WTO's Agreement on Agriculture (AOA) was one of the results of the last Uruguay Round of negotiations. It's aim is to reduce subsidies and protection for agriculture. However, the agriculture deal was largely stitched up between the EU and the US in bilateral negotiations, before being negotiated in the WTO. The AOA (together with the Agreement on Trade-Related Intellectual Property Rights (TRIPs)) has largely maintained a regulated global trade system for food and agriculture. This has been particularly the case in the North. However, for developing countries, whilst trade regulations have been severely tightened through the TRIPs Agreement, the AOA has to a large extent also liberalized agricultural trade for these same nations (ie increasing access to their markets). The balance of trade liberalization and regulation, together with the structure of the AOA also ensured benefits for Northern transnational agribusiness corporations.

In the North, the AOA perpetuated the post-war transformation of agriculture into an intensive production system supported by hefty subsidies (this is particularly the case in the EU and the US). The Agreement continues to allow the developed world to maintain high levels of support. For example, the EU Common Agricultural Policy (CAP) reform of 1992, which was negotiated with the AOA in mind, continued to skew the distribution of benefits of support towards the largest farms (and more recent reforms have done little to change this situation). Trade liberalization and regulation, export-led production and economies of scale are also intensifying agriculture in both the developed and developing world in favour of large producers and agribusiness at the expense of the small. The WTO's TRIPs Agreement is a significant barrier to securing technology transfer for the development of farming and food security in the South. Technology is clearly aimed at those who can afford it and reap the benefits.

Friends of the Earth does not believe that the complete liberalization of agriculture would necessarily lead to a fairer trade system that encourages food security and sustainable food production. More sustainable agricultural systems require targeted support for rural communities and sustainable agricultural practices. The WTO's current agreements on agriculture and intellectual property prevent this.

The winners and losers in the South

The AOA and trade liberalization favors large landowners and agribusiness aimed at the export market (see also next section under export-led development); and it has undermined subsistence farming and small-scale market production. The AOA has had a particularly marked effect on the least developed countries and those that are net food importers.

The cost of food

The Food and Agriculture Organization (FAO) originally estimated that the food import bill for low-income food deficit countries would be $9.8 billion higher in 2000 than it was in 1988 (an increase of 55%). Of this increase, $3.6 billion would be as a direct result of the last Uruguay Round of trade negotiations.¹ More recent studies have confirmed the deteriorating position of these countries. Between 1993/4 and 1997/98, the cost of cereal imports for net food importing developing countries (NFIDCs) increased by 47%. ² The potential impact on low-income food importers was considered at the end of the Uruguay Round, when member governments agreed that compensation should be given to affected countries; but this promise has never been fulfilled. ³

Opening up markets to large foreign investors

Trade liberalization has also opened up new markets for agribusiness in developing countries (a principal target for these firms since there are few expansion prospects in the US, the EU and Japan). For example, agrochemical companies are now targeting Asia, which has 73% of the world's agricultural production.⁴ Similarly, soya production in Brazil is on the increase and an estimated 40% of the 26 million hectares of soya beans planted in 1998 are Monsanto's genetically modified 'Roundup Ready' soya beans, primarily for export for animal feed in the developed world.⁵ Export-led development has increased the supply of many commodities onto the global market, depressing world prices.

In fact, the rapidly increasing soya production in Brazil has provoked a furious response from Brazilian farmers and peasants. In total, land under soya production in Brazil has increased from 200,000 hectares to 26 million hectares in the last 30 years. Soya production is now in the control of giant mechanized estates, and small producers and land owners have been displaced. Partly as a result, the people responded with the Movimento Sem Terra (MST), the largest direct action land-reform group in Latin America. Since 1984, MST has co-ordinated land occupations and helped those who have 'reclaimed' land to produce food. In 1995 alone, there were 30,500 families engaged in land claims spread over almost 150 sites throughout the country. They have often been on the receiving end of violence. ⁶ Trade has been taken out of the hands of exploitative middlemen; co-operatives from MST now trade and market directly in city squares. ⁷

Box 1: Movimento Sem Terra An unnamed hungry child: “ I am 14 years of age and for six [years] I worked in the sugar cane plantation with my family because we had no land. They paid us very little, moreover we also had to repay a debt. I used to leave home at 4 o'clock in the morning to go to work, always with an empty stomach. Now with others we have occupied uncultivated lands of the big landowners, thanks to the Sem Terra Movement. We cultivate for ourselves, indeed I am going to the rural school, and we eat twice a day and in the morning there is even herva mate, the national tea. But many other laborers had to emigrate to the city, or they continue to die of hunger in a country that is so green, rich and huge, with 100 million hectares not cultivated. Up agricultural reform!” 8

Domestic subsidies, dumping and small scale farming in the South

Similarly, as developing countries open their economies, so they expose themselves to subsidized imports. For example, the US use to provide up to US$5 billion a year in WTO compatible subsidies (known as direct 'deficiency payments') to its maize producers (such payments were eliminated in the last US Farm Bill but new programs were introduced). This allows countries to export at prices that are so low that most staple food producers in developing countries cannot compete with them (ie it is dumped in their markets).

Trade liberalization of maize could jeopardize up to half a million livelihoods in the Philippines and between 700,000 to 800,000 livelihoods in Mexico due to lower prices. Mexico is competing with US imports from the mid west where average yields are five times higher. The Philippines is liberalizing its imports of a range of agricultural commodities under the AOA. For maize, tariffs on imports will be halved over the next six years. According to the UNDP, who stated in 1997, “ depending on world price trends, maize imported from the United States could be available at 30% below current market prices by the end of the decade ”. This would drive down domestic farm prices and undermine local production.^{9, 10}

Export subsidies

During the Uruguay Round governments made a limited commitment to reduce export subsidies, but this appears to have done little to curb the further dumping of cheap subsidized northern agricultural products in the South. This has destabilized local markets and production. For example, to reduce food mountains in the EU in the late 1980s and early 1990s, beef was exported to Africa under export subsidies of £1.60 per kg. In 1991 alone, the EU spent £70 million on export subsidies for poor-quality beef valued at only £18.9 million. Exports undercut the price of beef produced in Burkino Faso, Mali and Niger by some 30-50%. More recently, subsidized beef has been exported to South Africa, depressing prices by 20%.¹¹ Whilst campaigns to stop subsidized exports of beef to Africa were successful, intervention stocks in the EU are projected to rise; and the EU has confirmed that because EU prices are higher than world prices (because of the European system of subsidies), they can only export with subsidies. ^{12, 13}

Technology transfer

Tighter intellectual property rights increase the cost of technology transfer. Biotechnology products are clearly aimed at large-scale (mostly) northern farmers who can afford to buy them and thus reap the benefits. Herbicide resistant crops or seed varieties suitable for mechanized production are designed for large, intensive farms, not small holdings.¹⁴

The winners and losers in the North

The agrochemical industry

The main benefactors of the AOA have been large land owners in the North and the agro-chemical industry that supports them. Whilst direct incentives for over-production have been reduced, on balance the support system continues to favor large farms at the expense of the small, since many payments are for unit area. Large farms tend to be more intensive producers, benefitting from new and higher yielding agro-chemicals, further damaging the environment. In Europe (and in the North generally), agro-chemical companies have, indirectly, been subsidized by the taxpayer: “ The agro-chemical companies have good reason to be grateful to the agricultural policy-makers. That they now share a multimillion pound market is thanks, in part to government intervention. Without public subsidies that market could not have developed to anything like its present scale. ”¹⁵

Table 1: Top 10 agrochemical corporations (1996 and 1998) (Sales US$ millions) 16, 17
Company	1996	1998
Novartis	4068	5010
Monsanto	2555	4032
Du Pont	2472	3156
Zeneca	2630	2798
Dow Chemical	2010	2352
AgrEvo	2422	2330
Bayer	2343	2200
American Cyanamid	1989	2190
Rhone-Poulenc	2243	2066
BASF	1503	1880
Top ten as % of all sales (1996)	79%

Agro-chemical companies continue to reap the double benefits of a regulated agricultural trade system in the North and increased access to markets in the South. Between 1996 and 1998, the top 10 agrochemical corporations dominated 80% of the market (see Table 1) with the top three showing dramatically increased sales and consolidating their position as market leaders.

Subsidies

The Organization for Economic Co-operation and Development's (OECD) figures for the total amounts of agricultural subsidies in OECD countries need to be treated with caution. They have been widely criticized and many fundamentally disagree with the way they have been calculated. However, they reveal that such subsidies within OECD countries remain extremely high, totalling some $362 billion in 1998;¹⁸ that is two and a half times the combined Gross Domestic Product of all least developed countries. In the US and the EU, levels were about equal at $19,000 for each farmer. If water subsidies and food vouchers are included, the support in the US is much higher. ¹⁹ Both Japan and South Korea have high subsidy levels to protect their small producers of rice. Yet, whilst the average subsidy in the developed world is high, it is very unfairly distributed with many small farmers in rich countries facing bankruptcy and poverty.

Small farms disappearing

The largely regulated trade system in the North and economies of scale are intensifying agriculture and the amalgamation of farmers into ever larger units at the expense of the small. In the US, the average size of farm tripled between 1935 and 1987. Around 1920, there were 32 million farmers living on farms; by the 1990s, this figure had fallen to just 4.6 million.²⁰ Small farms are disappearing at a rate of 30,000 a year.²¹

Box 2: Pork farmers in Iowa Lavon Griffeon and her family run a small farm in Iowa, in the US. Lavon is vocal about the problems family farms increasingly face. Many are selling because they are being squeezed on two fronts; urban sprawl and the power of agricultural conglomerates, particularly in pork (a staple of the Iowa economy). Pig farming is now highly intensive. The large food producers have created vast pork factories, driving down prices by about 40% since 1997. More and more small farmers are giving up the struggle. One farmer, Todd Lust has lobbied politicians to enforce competition rules to stop family farmers from going out of business. Lavon has seen many of her small farming neighbors leave. “It's becoming a lord-serf kind of thing”; but as her family have been in farming for six generations, she herself has decided to continue the campaign.22

In the EU, the Common Agricultural Policy (CAP) is supposed to protect farming livelihoods. Yet, the CAP continues to skew the distribution of benefits of support towards the largest farms. It is forecast that in the UK the average cereal grower would require at least 325 hectares to remain profitable on the global market. The average size of UK cereal farm in 1998 was under 50 hectares. There were 450,000 farms in the UK in the 1950s; now there are about half that number.^{23, 24}

Box 3: Small farms in Poland Poland has two million farms averaging just eight hectares (a third are less between one to three hectares). Only the larger farms have a chance of surviving the country's eventual accession to the EU; it is estimated that by 2003, rationalization will have cut the number of farms to 800,000.25, 26 There is already a fear that the freedom of capital and people throughout the EU will bring rich landowners and western companies in search of productive farming land. This is already happening in the Polish village of Prusowice where rich Europeans are buying land. Here Polish small-holders scratch a living from potatoes and sugar beet; Danuta Michalska, is one of these small-holders and a mother of two children; she has discovered that the land around her farm is likely to be sold to a rich landowner from west Europe: “We'll be slaves.We're not afraid of being expelled from our fields. But they're all rich. And they'll get the sugar beet contracts from the refinery. So what happens to us then? ”. Boguslaw Koscik also farms locally and keeps 30 pigs, three cows and farms 12 hectares. “I live from the farming alone. It's hard but I manage. But I suppose the EU means they will be buying land here ”. He optimistically carries on that they could also buy land in the EU; but prices just over the border in Germany are ten times the price of land in Poland.27

There has been a steady loss of farms and thus rural employment across the EU having a very profound effect on local communities which cannot support the level of services - shops, post offices, public transport, schools etc - due to dwindling populations. In the 1960s, there were three million farms in France; today there are fewer than 700,000. It is expected that 200,000 farms as well as 1,500 villages will be lost over the next 20 years. The average size of farm was about 14 hectares in 1955. Today, it is over 40 hectares. The latest census in France reveals that the country “is hollowing out - losing population from the heavily agricultural center to south, north and west.there is a diagonal strip of depopulation from the Belgian/Luxembourg borders to the Pyrenees, covering one-third of the country. As larger farms gobble up smaller ones, hundred of hamlets and villages are dying ”.²⁸ This trend is expected to occur in eastern Europe as countries line up to join the EU (see Box 3).

	Table 2: Farm employment, 1987 to 1995 in selected EU countries ('000s)
		Germany	France	Netherlands	Portugal	Spain	Italy	UK
	1987	1,424	2,034	293	1,666	3,436	5,155	714
	1995	1,325	1,507	276	1,173	2,571*	4,762*	651*
	* 1993 Source: La Situation de l'Agriculture European.

EXPORT-LED DEVELOPMENT

The Winners: TNCs in the forestry, mining, oil, and cash crop sectors; large mobile fishing fleets

The Losers: those displaced from land holdings due to cash crops, mining, logging, oil development and other commodity production; and the environment

Case studies, examples and statistics: resource production and consumption figures for renewable commodities; logging in the Philippines; the Grasberg mine in West Papua; gold mining in the Wassa-Fiase area of Ghana; shrimp farming in Indonesia; oil exploration in Colombia.

Introduction

One of the main principles behind trade liberalization is the pursuit of 'export-led development' - the (re)structuring of an economy towards producing goods for export markets in order to afford more imports and stimulate economic growth. Such programs are also promoted by the Bretton Woods institutions, the World Bank and the International Monetary Fund.

The winners and losers

Such development creates a vicious circle in which world markets are oversupplied (for example, minerals, cash crops and fossil fuels), commodity prices tumble, and poverty-stricken countries are forced to increase exports. Thus rich, importing countries have ready access to cheap supplies of natural resources and have, in fact, incurred an ecological debt to the countries of the South which far outweighs the official financial debt of the South. Between 1980 and 1991, the cumulative loss in terms of trade for all developing counties was $290 billion (ie, declining terms of trade is the revenue from a given volume of exports purchases a smaller volume of imports). Much of this fall is due to the decline in world commodity prices. Between 1980 and 1990, the decline in real commodity prices fell by 45% (also, see sections on trickle down, and food and agriculture).²⁹

It is thus not surprising that in many parts of the world, export-led policies have not delivered economic growth and development. In West and Central Africa, a number of countries - for example Cote d'Ivoire and Gabon which are both significant exporters - liberalized their economies during the 1980s and 1990s, placing the emphasis on export-led growth. However, both countries have suffered declining real per capita GDP during this period; and GDP fails to consider the high cost of other dimensions with respect to development, such as the environment.

Export-led development is generating unsustainable levels of resource use and, in some sectors such as mining, extremely severe environmental impacts. Trade liberalization and export-led development has also been accompanied by a marked trend towards concentration of business within larger producers. Small scale producers or farmers have become marginalized or displaced from their land. In many of these countries, this has had a particularly B impact on women, who are often involved in agriculture and cottage industries (such as textiles) and traditionally responsible for feeding the family. Thus children suffer as well. There should thus be less dependence on policies that promote exports and more emphasis on policies that prioritise subsistence needs.

Impact on resource use

UNEP has confirmed that tropical forests and marine fisheries have been seriously over-exploited and that globalization is also leading to species invasion. The global marine catch almost doubled between 1975 and 1995. Over fishing for export-led development now means that 60% of the world's ocean fisheries are at or near the point at which yields start to decline.³⁰

In the 1960s and 1970s, the Philippines liberalized its economy, adopted export-led policies and became one of the top four timber exporters in the world. In the process, 90% of its forests have been lost. The country is now a timber importer with 18 million impoverished forest dwellers, an external debt of nearly $40 billion in 1995 (up from $17 billion in 1980) and over one third of the population still living below the poverty line.

At a global level, 56 million hectares of forest was lost between 1990 and 1995. Demand for wood continues to increase; the global production of wood products is now 36% higher than in 1970. The recent analysis of the conservation status of 10,000 tree species (out of an estimated world total of 100,000) found that over half were globally threatened as defined by the International Union for the Conservation of Nature and Natural Resources (IUCN).³¹ The increase in global trade of wood products has stimulated the invasion of alien species often with dramatic ecological impacts; the US, for example, has recently restricted imports of packing materials due to the high occurrences of the destructive Asian long horned beetle.³²

The impact of mining

Increasing international trade in minerals is having a dramatic impact in all continents of the world, but most particularly in the South, where countries are particularly anxious to generate foreign-exchange revenues.

Box 4: The Amungwe and Freeport A personal message from tribal chief, Narkime Tuwarek of Waa village regarding Freeport: “I always ask God everyday in my prayers and thoughts, why did He have to create those beautiful rocky and snowy mountains in the Amungme tribal people's area? Or for those beautiful rocky and snowy mountains which have rich mineral resources attracting Freeport... and many outsiders to come here and exploit the resources for their sake leaving us sufferers, and therefore we the Amungme people have to be continuously suppressed, captured and killed?... you'd better destroy us and wipe us out so that you can take all we have, our lands, our mountains and every piece of our resources. It's true I am always angry at God and why He had to place those things here. But gentlemen I'm coming here now because my time has already arrived. I'm old now.And you should be aware yourselves that we have received nothing from Freeport. All we've got today are costs, the problems that we deal with now.”33

For example, mining is a very large export earner for Indonesia. The Grasberg mine in West Papua is the world's largest gold producer and the third largest copper mine. It has been described as representing one of the world's worst known cases of environmental degradation and human right's abuses. It is owned by the US company Freeport-McMoran. Rio Tinto of the UK has a 13% stake in the company and a 40% interest in any expansion of the Grasberg mine. Over 100,000 tonnes of ore tailings are dumped into rivers every day and this will rise to nearly 300,000 tonnes when current expansion is completed. There are plans to extend future expansion into the Lorentz National Park which is one of 10 outstanding protected tropical forest areas in the world threatened by mining. Villagers have been forcibly resettled including 2,000 people in 1998 alone. The Amungme and other tribal peoples have campaigned against the mine for years but their protests have been met with torture and murder (see Box 4).^{34, 35}

The people of Wassa Fiase traditional area in the Wassa West District of the Western Region of Ghana are also among those who have been seriously affected by the current world trading system. The Wassa-Fiase area in Ghana is said to have the largest concentration of mines on the African continent. Mining in this area is conducted to the detriment of the people and the environment, whilst the government is unconcerned about the plight of the people due to the short-term economic gains derived. In order to press home their demands for the mitigation of the environmental and social impacts of the numerous surface mining operations, the chiefs in the area, with the support of the people, embarked on a historic demonstration at Tarkwa in 1996 where they presented a petition to the government through the local authority. Friends of the Earth has spoken to the people of the area two years after the incident; it came to light that none of their demands have been heeded, and they continue to live impoverished lives (see Box 5).

Box 5: Ghana and mining Nana Kwandoh Brempong II is the Acting President of the Wassa Fiase Traditional Council in Ghana: “ The demonstration the chiefs staged was inevitable due to previous unsuccessful attempts at peacefully dialoguing with the companies and government ”. He continued: “there is no land in Wassa-Fiase now which has not been given out for mining prospecting ”. Nana Kwandoh Brempong II was worried because the communities are mostly agrarian and as their lands are taken out for mining purposes, the people are deprived of their livelihoods. He declared that the chiefs and the people will continue to fight for their rights until their demands are heeded to. He stated in plain words that “we are requesting for a moratorium on the opening of new surface mines until effective control measures are put in place ”. Dora Biney, a 37-year old farmer and native of Prestea Himan lives at Bodwireagya-Anikoko. She said one trick the mining companies have been playing is the creation of alternative homes, built of sandcrete blocks and cement. However, the houses and facilities provided by the companies are woefully inadequate. “ The companies maintain that the resettlement scheme is based on affordability but it's not what we want ”. She said that fewer rooms and inadequate facilities are provided. Dora said that “we prefer to live in mud houses with sustained livelihoods as we were happier in our original communities than now ”. Dora Biney cannot even pay for the school fees of her children. She has been compelled to withdraw them from school because the farmlands which provided her with income have been taken away. Neither can she afford medical care nor maintain a decent standard of living. “ This phenomenon if not immediately checked will perpetuate poverty in our rural areas ” she concluded.

The impact of shrimp-farming

The expansion of shrimp-farming in Indonesia provides a further clear example of the impact export-led development can have. The Indonesian government is planning to drastically increase its shrimp production in the next few years by converting 320,000 hectares of new land into shrimp farms, almost doubling the area under production. Half the shrimp from Indonesia are exported. The massive land development required to reach these targets will threaten mangrove forests and affect local shrimp farmers. One of the country's largest shrimp farms covering 170,000 hectares, in South Sumatra, has been the focus of a two year dispute between the company and local farmers (numbering some 2,500). In 1995, they were forced to give up their holdings of small-scale ponds to make way for the massive new development. Some were taken on as smallholders but there are still many outstanding problems, including compensation for their land, unfair contracts and credit agreements, and inadequate housing and equipment.³⁶

The impact of oil development

The Colombian government regards oil as the country's most important commodity and production and exports have increased dramatically in the 1990s. Part of this was due to trade liberalization policies initiated in 1990.³⁷ US company Occidental Petroleum (net sales of $6.6 billion and net income of $363 million in 1998) is currently involved in the exploration for oil in the Colombian rainforests. It is operator for a consortium (with included Royal Dutch Shell and Ecopetrol) which has exploration rights in the Samoré concession. The concession however is home to the U'wa people - numbering some 5,000 - in an area of pristine cloud forest at the headwaters of the Orinoco river basin. The U'wa have already witnessed the impacts of oil development to the east of their territory. Here, the company has paid scant regard for the environment. Of particular concern has been the disposal and volume of waste water which has polluted receiving rivers and lakes. High and dangerous levels of heavy metals and toxic aromatic hydrocarbons have been found in lakes near to the company's facilities.³⁸ The U'wa are determined to defend their traditional territory from a similar fate. Roberto Cobaria, president of the U'wa traditional authority states: “ We cannot sell oil, the blood of our Mother Earth. Mother Earth is Sacred ”.³⁹ Such was the pressure on the consortium - the U'wa have threatened to commit mass suicide - that Shell relinquished its interest to Occidental in 1998; Occidental subsequently relinquished 75% of the original concession but the remaining 25% still lies within the territory of the U'wa.

DISPUTES: BEEF, CIGARETTES, OIL, SHRIMP-TURTLE, ASBESTOS

(see also section on Banana Wars)

The Winners: transnational corporations

The Losers: public health and consumers, the environment, biodiversity, small businesses and labor in Europe

Case studies, examples and statistics: Hormone-treated beef and retaliation by French farmers and café owners; Venezuelan oil; Thai cigarette import ban; shrimp and sea turtles; and the export of asbestos.

Introduction

All WTO dispute rulings have favored free trade at the expense of health and the environment. A case in point at the moment is the US and Canadian challenge to the EU's ban on imports of North American hormone-treated beef. The WTO upheld the challenge, authorizing retaliatory trade sanctions. Similarly, US legislation attempting to reduce air pollution in its worst affected cities has also become a casualty of the world trade system; and the attempt by the US to enact legislation to protect sea turtles from shipping fleets catching shrimp with nets was challenged in the WTO and brings into question whether governments can take unilateral action to protect species in the global commons. Canada has also challenged a French law banning the import and sale of asbestos.

Developing countries - who do not have the financial resources to withstand punitive trade sanctions - cannot defend domestic regulations which protect public health. This has occurred in the case of the ban on foreign cigarette imports into Thailand which was imposed due to health concerns. A complaint by the US was upheld by the WTO forcing Thailand to reverse its decision.

The WTO dispute settlement procedure is up for review as part of the built-in agenda. As far as TNCs are concerned, this review should reinforce the primacy of free trade over health and environmental issues.

The winners

Companies (and their shareholders and the executives who work for them) stand to benefit from the rulings of WTO dispute panels. For example, US cigarette manufacturers; Philip Morris, British American Tobacco, RJR Nabisco and Rothmans; the manufacturers of bovine hormones, for example, Monsanto (see section on intellectual property and patents, p15ff), Eli Lilly, American Cyanamid and Upjohn.⁴⁰ Oil refiners producing petrol from dirty oil such as the state owned Petroleos de Venezuela, S.A. (PdVSA). And potentially Canadian asbestos mine owners.

In the beef-hormones dispute, Micky Kantor, the then US Trade Representative initiated the action in the WTO in response to B lobbying from Monsanto (Micky Kantor is now a board member of the company), the US National Cattlemen's Association, the US Dairy Export Council and other interest groups. “ On the EU side, industry groups such as FEDESA, the primary lobby organization for the European animal 'health' products industry, and the European Federation of Pharmaceutical Industry Associations (EFPIA), both members of EuropaBio (the primary biotech lobby group in the EU), pressured the Commission to lift the ban, which was affecting European companies as well.”⁴¹

The losers

People's health, environment and consumer choice are at stake. Small companies hit by the US's punitive trade sanctions are also being affected.

Beef

The EU's 11-year old ban on imports of beef produced using a range of growth-promoting hormones has been successfully challenged in the WTO by the United States and Canada, on the basis that the EU does not have the scientific evidence required to support the ban.

One of the reasons that the EU imposed the import ban on beef hormones is fear that they may cause health problems; specifically the EU has cited health issues relating to breast and colon cancer. The ban has, however, proved controversial because of differing opinions concerning the safety of the various hormones. But an equally important reason for the ban is that consumers in the EU, according to officials, have expressed a B preference to eat hormone free-meat even in the absence of any scientific proof (these concerns come hard on the heels of many health scares in food production in Europe, including bovine spongiform encephalopathy or BSE, more commonly know as mad cow disease). There is also an additional argument for a ban on animal health/husbandry grounds (ie, pushing animals to grow faster than they would naturally). These additional concerns are not valid under current WTO rules.

Box 6: Reactions in France to trade sanctions Reactions to French sanctions demonstrates how highly charged world trade wars are becoming. Café owners across France are retaliating against the US trade sanctions. Anne-Marie Sandrine, owner of Le Bowling du Rouerquite café in Rudez near Toulouse has jumped to the defence of her local Roquefort cheese manufacturers. Like other café owners in France, she has been so incensed by the sanctions that she has increased the price of a bottle of Coca-Cola to $15. But even more spectacular price increases have been found in Dijon, where bottles have been priced as high as $75. French farmers have also responded furiously, particularly in response to the sanctions applied to Roquefort cheese production in the south of the country. Demonstrations have involved damage to a half-constructed McDonalds restaurant and the imprisonment of several protesters. The leader of the French farmers, José Bové, was released after a number of weeks to a chorus of sympathetic comments from French Ministers, including the Prime Minister Lionel Jospin, who is reported to have commented that “ Mr Bové's cause is just ”. The agricultural minister, Jean Glavany, who has invited Mr. Bové to attend the Seattle meeting, reportedly said: “ Today, for the first time, we are in step with public opinion. There's a national consensus about bad food. People realize we need a different international logic than the economic, social and environmental dumping of modern agriculture. We have to change the WTO so that it respects people's cultural choices, does not destroy the world's peasantry and guarantees fair trade for all. ”42

Small companies have been hit throughout the European Union because of US-imposed sanctions following the WTO ruling. Amongst those affected are Denmark and Germany (pork and other meat exports), France (mustard, cheese, truffles and other gourmet products) and Italy (canned tomatoes, truffles and fruit juice). 70% of truffles in Italy are exported to the US so the $3.4 million sanctions could jeopardize some of the hundreds employed in the sector.

Oil

The US has Bly opposed the import of Venezuela petroleum because of fears that high levels of olefins would contribute to the formation of toxic nitrogen oxides (NOx). Olefins increase NOx emissions and have B ozone-forming potential.⁴³ In 1994 the US environmental protection agency (EPA) issued regulations under the Clean Air Act requiring a 15 percent increase in the cleanliness of gasoline sold in cities with air pollution problems. Due to difficulties in getting reliable data on some gasoline refineries, the regulations divided producers into two categories. Producers for which there was adequate data had to make the 15 percent improvement from their gasoline's actual quality in 1990. Newly established US refiners and foreign refiners (for whom it was difficult for EPA to verify data) had to make the 15 percent improvement from a baseline of the average US gasoline quality in 1990.

Foreign producers lobbied unsuccessfully against this rule in the US. So, when it was adopted, Venezuela, supported by Brazil, challenged the rule in the WTO. They argued that it violated the national treatment requirement of the GATT by treating foreign producers less favorably than most US producers. The Dispute Panel and the Appellate Body both agreed with Venezuela, ruling that the regulation was incompatible with the GATT. As a result the US changed the regulation to give foreign refiners an option of using either the US 1990 average or an individual baseline. While establishing this new rule, the US EPA acknowledged that it “ creates a potential for adverse environmental impact. ” This is because foreign producers will only choose the individual baseline if it allows them to ship dirtier gasoline into the US than they would have been allowed under the average baseline. The principle of national treatment may have been upheld, but real people's health is negatively impacted as a result.

Cigarettes

Each year three million people die world-wide from tobacco (with over 300,000 of those people coming from the US). In the late 1980s, the US lodged a complaint at the WTO against unfair trade practices in Thailand for imposing a ban on cigarette imports (supposedly for health reasons). At the time that the US filed the complaint, the number of smokers in Thailand was rising dramatically; between 1988 and 1991, the number smoking between the ages of 15 to 19 increased by 24%⁴⁴. What ever the merits or otherwise of Thailand's actions - ie, domestic cigarette production was not affected - the country was forced to reverse its decision after the WTO ruled in favor of the US because it could not afford to withstand trade sanctions. The US General Accounting Office has subsequently confirmed that any USTR initiatives aimed at opening tobacco markets overseas were inconsistent with public health goals. They conflict with the US government's support of global health programs (such as the World Health Organization's program to prevent smoking).

Shrimp and turtles

Seven species of sea turtles are currently recognized. All seven species are included in the Convention on the International Trade in Endangered Species (CITES) Appendix I and all appear in the International Union for the Conservation of Nature and Natural Resources (IUCN) Red Data List of threatened species. According to research published by the US Government and by the IUCN, the main threat to the survival of sea turtles is the incidental mortality in nets used by shrimp trawlers in the open sea. The US thus enacted legislation to require domestic shrimping fleets to use turtle excluder devices (TEDs), inexpensive but effective devices that allow turtles, but not shrimp, to escape from nets. The law also required other shrimp-producing countries to show a regulatory program and incidental mortality rate comparable to that of the US as a condition of market access for imports of shrimp into the US.

Malaysia, Thailand, Pakistan and India lodged a complaint with the WTO. Initially, the WTO Dispute Settlement Panel ruled that the US measure was arbitrary and unjustifiable and was not within the scope of Article XX (ie measures to protect animal life and natural resources). The Appellate Body overturned this ruling but found that the way that the measure had been implemented was discriminatory (ie, some countries had received longer phase-in periods). The US government changed some of the procedures. In the absence of any international agreement, given the mixed decisions by the WTO, this case highlights whether governments can take action to protect species in the global commons and the problems for the WTO to arbitrate on the appropriateness of democratically enacted conservation measures.

Asbestos

Canada has challenged a French law banning the manufacture, import and sale of asbestos, arguing that the French ban cannot be justified on health grounds and is harmful to Canada's economic interests (Canada is the world's leading asbestos exporter). The EU says that there is no safe exposure level to chryosotile asbestos, which it plans to ban across the EU in January 2005. But Canada's asbestos industry claims that the product can be used safely if recommended control and management practices are followed. The WTO's decision is expected in Spring 2000.⁴⁵

Seven of Canada's main markets are in the developing world - for example, India, Thailand and Korea. Here demand is actually growing. There are grave fears that these countries could experience, in the future, the same fate that developed countries are facing today. Asbestos causes cancer of the lung and abdomen and can take up to 20 years to manifest. 500,000 people in Europe will die from asbestos by 2035.⁴⁶

INTERNATIONAL TRADE AND TRANSPORT

The Winners: business air lines, road haulage, shipping and air freight companies, TNCs (ie, those manufacturing air craft or engaged in global trade)

The Losers: the environment, natural habitats, business, local communities living near motorways or airports, the taxpayer and the public (health and increased accidents)

Case studies, examples and statistics: predicted increases in road haulage (for example in the EU, and between the US and Mexico); predicted growth in air freight and airports (often backed by subsidies); residents living below flight paths into Heathrow; Boeing, the company's Chief Executive Phil Condit and China; accident and health impacts of increased road traffic; transport related pollution statistics.

Introduction

Trade liberalization and the increasing mobility of capital is increasing the movement of goods and people, particularly by road and air.

The winners

As international trade increases, the transport of goods obviously increases in parallel. For example, freight transport in the EU is expected to increase by some 70% by 2010. Much of this increase will be in road haulage, with its 'market share' increasing from 70% to 80% (at the expense of rail which will take just 10% by 2010, down from 32% in 1970).⁴⁷ It has also been estimated that truck transportation in North America is likely to be seven times higher in 2005 than it was in 1995 as a result of the North American Free Trade Agreement (NAFTA). ⁴⁸ This will benefit overland cargo hauliers - such as J. B. Hunt Transport, the largest haulier in the US.⁴⁹

Air traffic is also forecast to grow exponentially. Air cargo nets $40 billion annually and is forecast to grow by 6.4% per year (which means it could triple in about 20 years). Freight within and between Asia is expected to account for more of this air freight than any other region.⁵⁰ Air freighters carried 35% of air cargo in 1996 and this is expected to increase to 44% by 2016 (the balance is carried on passenger planes). The world's air freighter fleet will thus nearly double by 2016 with an additional 1,000 planes coming into operation. ⁵¹ The number of air passengers - both leisure and business - will also grow (almost doubling in the next 20 years). Because of these increases, Boeing is arguably one of the companies that stands to benefit the most from further trade liberalization and the increased movement of goods (particularly perishables such as food and flowers). The company has experienced mixed fortunes over the past 10 years with the boom-bust cycle of aircraft production and employment. Nevertheless, in 1998 it made a profit of $1.4 billion.⁵² Clearly Phil Condit, Chairman and Chief Executive Officer of the company, who was paid just under $1 million in 1998, sees the WTO as an unrivaled opportunity to boost business. In 1998, Boeing was the US's largest exporter at $56 billion.⁵³ (See also p25ff on Investment).

It thus comes as no surprise that Phil Condit is co-chair of the Seattle Host Organization, along with Bill Gates of Microsoft. Through the offices of the two companies (both based in Seattle), some of the world's largest companies - including Bank of America, Ford Motor, General Motors, Hewlitt Packard, Proctor and Gamble and Weyerhauser - are paying hundreds of thousands of dollars in the hope of privileged access to key ministerial and other negotiators at the Seattle Ministerial Conference. The companies' sponsorship could enable them to “ become part of a process to develop substantive business input to the WTO though a series of business programs ”. In addition, they expect to be able to attend receptions and dinners for heads of states, ministers and delegates, with preferential seating.⁵⁴

The fact that China is also currently negotiating to join the WTO is also a highly significant factor for Boeing. In August 1999, China placed an order for 13 Boeing 747 freighters, worth some $2.5 billion.⁵⁵ Although Boeing's competitor, Airbus, has also won orders from China, this was the largest freighter order ever received by Boeing. China is the market to capture at present and this will have been a significant break through for Boeing. Unsurprisingly, Phil Condit - either through the company or as the chair of the US Business Roundtable's International Trade and Investment Task Force - has lobbied hard for China's accession to the WTO. The company has repeatedly argued that unless Washington acts, China will do business with Airbus.⁵⁶

Air transport and subsidies

In the European Union, subsidies to airlines (ie, direct subsidies, no excise duty on kerosene, or no VAT on kerosene and air planes) runs to at least 41 billion Euros each year (currently about $45 billion).⁵⁷ In the US, similar air transport subsidies have primarily benefitted TNCs engaged in trade. Airports are being funded through the federal government; a new airport in Arkansas will be big enough to handle fully laden Boeing 747 freighters (about 60% being funded through the tax payer). One of the beneficiaries will be the Arkansas state's giant poultry companies, Tyson Foods, Hudson Foods (the two companies recently merged) and Peterson Industries.⁵⁸

The losers

Increasing road freight traffic will inevitably lead to more congestion and accidents. For example, the Confederation of British Industry pessimistically estimates that the economic cost of congestion in the UK is about $33 billion annually. Cost/benefit analysis suggests that the health impacts from traffic pollution in the UK cost a further $18 billion a year.⁵⁹ In the European Union (EU), 45,000 people die and 1.6 million are injured every year in road accidents. This costs the EU almost $50 billion a year for the cost of health and emergency services and lost economic output.⁶⁰ In 1999, with the new North American Free Trade Agreement in place (which according to the US Government would expand cross-border traffic between the US and Mexico sevenfold with a subsequent increase in noise and air pollution), about 5,000 trucks cross the Texas-Mexico border every day of which a quarter carry hazardous explosives or chemicals.⁶¹

Transport is also a major contributor to air pollution and climate change. Every year, nearly 3 million people die from air pollution globally. Pollution from air travel is already growing faster than in any other transport sector. This will be compounded by the exponential growth in air traffic expected over the next 20 years. The total pollution from an air plane on a 500 kilometer flight is 70 times that of a train (per passenger kilometer) and nearly twice that of a car.⁶² By 2050, aircraft emissions could be responsible for a staggering 15% of all global warming.⁶³ A DC10 (belongs to the family of Boeing planes) at take off lasting two minutes is equivalent to the NOx pollution of 21,500 cars driving one mile at 30 miles an hour.⁶⁴

Box 7: Increased air freight and local communities The volume of freight and number of passengers through London Heathrow continues to climb. Between 1996 and 1997, cargo tonnage increased by 11% to 1.2 million tonnes (passenger numbers increased by about 7% between 1997 and 1998). With British Airways new cargo freight terminal, these figures are set to rise. Rita Pearce has lived in the immediate vicinity of the airport for 55 years. In that time she has witnessed its enormous growth and the associated environmental issues - particularly noise, pollution and congestion - which have worsened over the last 10 years. “ The quality of our lives has deteriorated greatly. There are more aircraft movement, night flights, early morning arrivals and aircraft using reverse thrust on landing in order to vacate the runway quicker ”. The growth in cargo has also compounded these problems; “ Heathrow has recently opened a massive new cargo terminal for British Airways which is a magnet for heavy goods vehicles on the already congested roads. Not just on motorways, but these beasts come trundling through the villages ”. Such is the demand for warehousing around the airport that other employment is vanishing. “ Its being replaced with large tin boxes employing a handful of people. My fear is this area will end up with only unskilled jobs ”.

Increasing transport infrastructure also frequently necessitates the removal of dwellings and important habitats. Thus, for example, the building of the new 1,100 hectare airport in Arkansas (see above) will force 50 families off their land.⁶⁵ The proposed Trans European Network threatens the social integrity of 1,000 small villages throughout Europe.⁶⁶ In the UK, many hundreds of the country's most important wildlife sites are threatened annually from road construction (either directly or through indirect effects such as increased air pollution from growing traffic).

INTELLECTUAL PROPERTY AND PATENTS

The Winners: transnational companies

The Losers: local farmers everywhere and indigenous peoples in developing countries

Case studies, examples and statistics: the Intellectual Property Committee; International Plant Medicine Corporation and ayahuasca; Monsanto's links with the US administration; Monsanto and terminator technology; W R Grace and the neem tree; Monsanto in India, local farmers; and the Karnataka State Farmers Association (KRSS).

Introduction

Traditionally, trade liberalization has been associated with deregulation. However, the opposite is the case with intellectual property rights (IPRs) protection. The WTO's Trade Related Intellectual Property Rights (TRIPs) Agreement lays down a set of rules stipulating how governments must regulate to protect various aspects of intellectual property including patents, copyrights, designs and trade marks. It affects a diverse array of sectors including pharmaceuticals, computer programming and transgenic crops. TRIPs standards are derived from industrialized countries' legislation, which is quite different from much developing country legislation. In this way, the trade system protects the intellectual property of knowledge-rich Northern based companies rather than diffusing knowledge and transferring technology. This has already generated a great deal of conflict, even though many countries have yet to implement fully their TRIPs commitments.

The TRIPs Agreement is up for review as part of the WTO's 'built-in' agenda. While many developing countries will be arguing for a scaling back of the TRIPs agreement, it is likely that the USA will seek to remove developing countries' existing option to introduce their own sui generis IPR systems and use the TRIPs renegotiation to demand full patenting of all plant and animal life forms (at the moment only plant varieties and microbiological processes are covered). However, it has recently been reported that the US might fight to keep TRIPs off the agenda, due to concerns that the review might lead to a backsliding of current commitments and meet some of the demands of developing countries. In addition, some governments intend to push for further discussion on the related issue of the links between biotechnology and trade in the WTO.

The winners

The TRIPs agreement regulates trade in a way which significantly benefits northern TNCs. Since these companies were involved in initiating TRIPs negotiations this comes as no surprise. The first initiative on intellectual property was taken in the 1980s during the GATT negotiations in the Uruguay Round by a newly formed corporate lobby group. The Intellectual Property Committee (IPC) brought together thirteen major US corporations - including Monsanto, DuPont, General Motors, Pfizer, IBM and Bristol Myers Squibb - and was instrumental in getting intellectual property onto the GATT agenda.⁶⁷ The US government then asked the private sector to provide specific proposals for the agreement. The IPC, together with the Union of Industrial and Employers Confederations of Europe (UNICE) and the Keidanren in Japan, were able to draft the standards for intellectual property and a dispute mechanism to support it.⁶⁸ The Chairman and CEO of Pfizer at the time - Edmund Pratt - helped lead the company initiative on intellectual property.⁶⁹

Today, industrialized countries hold over 97% of all patents. It is estimated that 710,000 patents were granted in 1995 and that an estimated 3.7 million are now in force.⁷⁰ It is also estimated that 90% of technology and product patents are held by TNCs.⁷¹ The use of patents has increased dramatically in recent years as biotechnology and genetic engineering companies have sought protection for 'inventions' such as Monsanto's Round-up Ready Soya bean and the 'terminator gene'. Although Monsanto has now pledged not to commercialize its 'terminator' technology, companies - such as Novartis and DuPont - continue to research and patent biologically-engineered sterile seed. In addition, “ Zeneca has developed technology that would render its crops from its seeds stunted or impaired if not regularly exposed to certain patented chemicals sold by the company..US-based Monsanto also has applied for a patent on a technology that would make a seed not germinate unless exposed to a certain chemical .”⁷²

Box 8: Ayahuasca, Loren Miller and traditional knowledge In 1986, Loren Miller - the Managing Director of International Plant Medicine Corporation in the US - was awarded a patent on a supposedly new and unique variety of Banisteriopsis caapi , more commonly known in the Amazon as 'ayahuasca' or 'yagé'. Ayahuasca is a liana and has been used by many indigenous peoples for centuries in traditional and ritual healings and for its psychotherapeutic benefits. COICA, a coalition of Amazonian NGOs is challenging the patent. According to Antonia Jacanamijoy; “ To us, this is a clear example of biopiracy.it is objectionable that someone can patent a plant we have known and used for centuries ”. This case illustrates the way in which the TRIPs agreement permits the use of patents that completely ignore traditional knowledge, passing ownership to transnational corporations.73

In the US, biotechnology is seen as a way of maintaining the US's position as the world's leader in agriculture, and agrochemical and biotechnology companies wield considerable influence. In the US, formal consultative committees exist to create links between the administration and different sectors of business and society. The President's Advisory Committee for Trade Policy and Negotiations (ACTPN) gives recommendations on US Trade Policy. Robert Shapiro, chairman of Monsanto, is a member of this important body, directly nominated by the President of the United States. The US Trade Representative for much of the Uruguay Round, Mickey Kantor, is now a board member of Monsanto. He played an important role in bringing the Round to conclusion and is going to serve as Trade Meeting Counsel at the forthcoming Ministerial meeting in Seattle in November on behalf of the Wheat Industry.

The losers

TRIPs and the use of patents expropriates knowledge from local farmers and indigenous peoples in developing countries who, in many cases, have been cultivators, researchers and protectors of plants for thousands of years. As such, companies have alienated a large number of people and farmers. For example, under WTO enforced patent law, Monsanto has the right to take farmers to court if they collect and use seeds from its patented plant varieties. In the USA, Monsanto has opened more than 475 such 'seed piracy' cases. Monsanto's 'terminator gene' technology, which makes plants sterile, would have helped the company to enforce its patent rights. However, even if Monsanto keeps its voluntary pledge not to commercialize this technology, the promotion of patented varieties, backed by legal action, could pose a significant threat to food security in the developing world. Approximately 1.4 billion people around the world depend on farm-saved seed for their food security.

Monsanto also holds extremely broad patents on a wide variety of food items such as the brassica family. It also holds patents on neem products. Similarly, US company W.R Grace has patented certain pesticide properties of the neem tree. This tree has been used for centuries by people in India for a variety of uses - including for pest control - yet they may have to start paying royalties to W.R Grace for this use under WTO law. At the same time, the indigenous knowledge that resulted in the 'innovation' will not be acknowledged financially - the 'benefits' will exclusively go to W.R. Grace and those consumers that can afford its products. Monsanto's actions in India and the response they have generated epitomize the current battle over knowledge between large transnationals and small farmers. Monsanto has been operating in India since 1949 and has been attempting to push its GM crops onto the country's farmers. The company has already claimed patent rights over 30 'new' crop varieties including corn, rice, tomato and potato varieties which have been genetically altered to be resistant to Monsanto's herbicides. But Monsanto's main focus, in a sub-continent where cotton is widely grown, has been the promotion of GM 'bollgard' cotton (modified to be resistant to the boll weevil). However, Monsanto offered the cotton to farmers without informing them in was a GM variety and had not been passed by the Government for testing. The tests were illegal and the deception infuriated the farmers (see Box 9).⁷⁴

India has been the subject of a complaint from the US regarding their non compliance with the TRIPs Agreement.⁷⁵ In 1998 the WTO's dispute panel ruled that India had failed “...to establish a legal basis that adequately preserves novelty and priority in respect of applications for product patents for pharmaceutical and agricultural chemical inventions...” and also failed “...to establish a system for the grant of exclusive marketing rights” . India was bound by the TRIPs Agreement to implement this ruling or face possible trade sanctions, even though there remains B opposition within the Indian farming community to the TRIPs Agreement more broadly. In 1999, India's parliament approved a patent system that brought the country into compliance with the ruling.⁷⁶

Box 9: Monsanto, GM cotton and Indian farmers In 1998 an Indian farmer, Basanna Hunsole, found out that he was - unknowingly - growing GM cotton crops on his land that were supplied by Monsanto. Furthermore, the yields were poor and the crop became heavily infested by boll weevils. In November 1998, the Karnataka State Farmers Association (KRSS) arrived at Basanna's field. In protest at Monsanto's actions, they tore up the GM cotton plants and burnt them, with the assistance of neighbors and other local grass root farmers. They then started a formal campaign to drive the company out of the country.77

BANANA WARS

The Winners: transnational companies and their Chief Executive Officers, politicians

The Losers: small businesses and labor in Europe, small-scale producers in the Caribbean, banana plantation workers in Latin America, the environment

Case studies, examples and statistics: banana production costs; Chiquita; the Windward Island banana growers; wages, health and environmental impacts on Latin American banana growers; Guatemalan banana farmers; impacts on small businesses in the UK hit by sanctions.

Introduction

The WTO dispute rulings favor free trade at the expense of development and social issues. For example, the EU's preferential import regime for Caribbean banana farmers - aimed at supporting small scale growers where costs are high because of steep terrain, poor soils and climatic hazards - has been deemed incompatible with WTO rules. A complaint was lodged by the US on behalf of its banana-producing transnationals, who wanted greater access to the world's largest market - the EU. The WTO ruled that the EU was discriminating unfairly in favor of a group of countries and authorized the US to impose sanctions of $191 million on a range of EU exports to the US. The EU is now revising its banana import scheme and may well settle for a tariff-only scheme as desired by the US and TNCs such as Chiquita, risking the livelihoods of 200,000 banana farmers in the Caribbean. The most likely alternatives for these farmers are unemployment or growing marijuana. The sanctions are also having severe economic impacts on small companies in Europe that have no involvement in the banana trade.

The winners

World trade in bananas is dominated by three US transnational corporation (TNCs); the largest producer and distributor is Chiquita, followed closely by Dole Food and Del Monte. Between them they produce and control up to 70% of world exports.⁷⁸ These TNCs are closely associated with plantation production in South and Central America where costs are significantly lower than in the Caribbean and have much to gain from the WTO decision. For every $1 of bananas from Costa Rican plantations, 57 cents of the profit goes to the owning, importing or exporting company.⁷⁹

Between 1988 and 1997, the Chiquita president, Carl Lindner, relatives and officials in his companies gave a total of over $3 million in donations to both the Republic and Democratic parties.⁸⁰ It is widely suspected that the $500,000 donation to the democratic party in 1996 was instrumental in persuading the US administration to lodge a complaint against the EU just a few days later. Lindner's personal wealth is put at $830 million.⁸¹ Politicians would appear to have been swayed by Lindner's 'generosity' and have supported his company in the current dispute. It is reported that the Republican candidate at the last presidential election Robert Dole borrowed Lindner's private jet and was instrumental in arranging meetings between Chiquita and Micky Kantor, the US Trade Representative at the time. Lindner's support for both parties has won him other friends in high places; for example, John Gephardt (House Democratic Leader) and Trent Lott (Majority Leader in the Senate).⁸²

The losers

Renwick Rose, the Co-ordinator of the Windward Island Farmers' Association reflects on the impact of the WTO's ruling on the EU's preferential import regime for Caribbean bananas. 60% of the Windward Islands' export earnings come from bananas. Of those in the Windward's, 70% of St Vincent's population makes a living, directly or indirectly from bananas; on St Lucia it is about 33%.⁸³

Table 3: Estimated production cost per box 84
Ecuador	$2.95
Costa Rica	$3.25
St Vincent	$8.40
Dominica	$9.37

Whilst Renwick is not entirely surprised by the ruling itself (previous WTO decisions have ruled against social and development considerations), the impact for Windward Island farmers will be devastating; Renwick believes that it will set in train a process of economic ruin, resulting in mass unemployment, undermining the social fabric of their society and possibly lead to political instability and social unrest.⁸⁵

Box 10: Banana growers, Windward Islands Message from Emile Thomas, a Dominican banana farmer: 86 “ My farm is typical of the Windward Islands. It covers 7 acres of mountainous terrain and provides me with an income which does not even meet my family's needs. Bananas are the only year round crop that can produce again within months of damage or destruction by storms, floods or hurricanes, which are constant Caribbean hazards. We know we can only sell our bananas in the European Union (EU) because of the special arrangements which the EU provide us with as traditional suppliers to the UK. The World Trade Organization (WTO) have ruled against these arrangements and we could lose our market as a result of this. Employment in Dominica is hard to find and if I stopped growing bananas I simply do not know how else I could earn a living for myself and my family. I urge the Commonwealth to support the cause of the Caribbean banana industry on which so many livelihoods depend”. Similarly, St. Vincent banana farmer Alroy Smart is frustrated and angry; his decent, legal, livelihood may well be snatched away because of the ruling by the WTO: “ The situation is really bad now. I feel like abandoning the fields. The question is: what to do? If I plant marijuana, I'll go to jail. There is no other alternative in this country. Unemployment is very high. Bananas were the only thing that we could depend on. ”87 Banana grower, Thomas St Hill will also be affected: “ If the banana industry goes down, St Lucia goes down with it.” 88

Furthermore, it's not as if Central American banana farmers have much to gain from this decision. Labor, health and environmental standards on these plantations are appallingly low. Workers receive just three cents from every dollar earned exporting bananas.⁸⁹ Furthermore, workers are often subjected to agro-chemicals in the fields, where they get sprayed along with the crop, and during packing (see Box 11).

Box 11: Banana workers in the banana plantations in Central America Feliciano and his family have worked on the banana plantations in Guatemala for 60 years. He is an active trade union member. Feliciano, and fellow workers Octaviano, Guillermo and Ubaldo, recount life working on the plantations. The work has left some of them destitute; there is often nothing good to eat; electricity and water has been cut off and drinking water from the wells is polluted. Workers are paid as little as 63 cents an hour or $28 a week. Some have been affected by chemicals in packing plants, making them sick and giving them sores. Workers in the field are subjected to aerial fumigation of the crops without protective clothing. The foul-smelling chemicals make them feel nauseous, causing nose bleeds and sore eyes and they have difficulty breathing (the chemical is reported to be the organophosphate insecticide, chloropyrifos, which attacks the nervous system).90

In Costa Rica, pesticide poisoning on banana plantations is three times higher than in the rest of the country. Chemicals that the workers are currently using include at least four that are classified as extremely hazardous by the World Health Organization, including paraquat. Because the plantations use high levels of agrochemicals, rivers have also been polluted killing fish and coral reefs; and 30% of current plantations have been established at the expense of forest.⁹¹ On parts of the Caribbean coast, there appears to be little life of any kind, except for bananas in a featureless landscape. As a result of the WTO's ruling, negative impacts on workers and the environment in Latin America will also be compounded, since production and export from South and Central American plantations can be expected to increase.

Trade sanctions and small businesses

It is not just small scale farmers that have been affected by the WTO decision on bananas. Sanctions have been imposed on a number of EU goods; for example, bath products, handbags, felt paper and paper board, folding cartons, bed linen, and batteries (see Box 12). One sector in the UK hit by sanctions is batteries. Estimates suggest that 400 jobs in the UK could rely on battery exports to the US.⁹²

Box 12: Trade sanctions and small businesses At the end of 1998, Iain Russell was reviewing the prospects for his family run business - Arran Aromatics - on the Island of Arran in Scotland. The outlook was favorable; expansion plans would increase employment and take turnover from 4.25 million in 1998 to eventually 15 million (amounting to half the total turnover for the Island). Imagine his surprise and anger when he found out in early 1999 that his products - bath products - would be hit by sanctions imposed by the US as result of the WTO ruling on the 'banana wars'. As much as 40% of the company's turnover in 1998 was exported to the US. Iain was equally incensed because he found by word-of-mouth that the company would be the unwitting victims of this dispute; no one from the EU or the UK Government had bothered to inform the company that they were potential targets. As Iain explained to FOE, despite the fact that he supports the principle of EU support to small banana producers in the Caribbean, the impact on his company from this trade dispute is completely outside his control. Not only has it caused economic hardships to his employees - for example, there was no pay increase for 1999 and the directors have had to take pay cuts - but it has created great anxiety and uncertainty. As the largest employer on the Island of Arran, the fortunes of the local community are closely tied in with prospects of the company. The expansion plans and the prospect of 10 new jobs have had to be curtailed. Planned turnover was 6 million for 1999 but the company will be lucky to reach 3 million because of the dispute. US customers are now turning to other suppliers. The number of people employed by the company has actually fallen from 75 at the beginning of the year to 65. The job losses have been achieved through natural wastage although the company would not have been able to maintain the previous level due to loss of turnover. The position of the company has also put in serious jeopardy the continued support to the local school and to other charities.93

NO 'TRICKLE DOWN' - POVERTY AND INEQUALITY

The Winners: the already wealthy - rich countries, rich communities, rich people and rich companies

The Losers: developing countries, poor and marginalized communities around the world

Case studies, examples and statistics: predicted winners and losers of the Uruguay Round; declining terms of trade for developing countries; changing consumption patterns and inequity; income inequalities; developing country marginalization in the WTO process.

Introduction

The WTO is the institutional embodiment of trade liberalization, which is now being pursued as a goal in itself rather than as a means to an end. The ideology behind trade liberalization is that it is the driver responsible for increasing global economic prosperity. On the basis of the 'trickle down' theory, wealth should then be passed onto the rest of society, raising living standards, promoting human development and providing the finance and standard of living deemed necessary for people to seek environmental protection measures.

In reality, however, the negative impacts of trade liberalization are now being felt by a significant proportion of the world's population. Trade liberalization is associated with increasing inequality both between and within countries. The workings of the WTO favor the powerful and influential at the expense of the powerless and those without influence. The theory outlined above also assumes that poor people are not concerned with preserving their environment. This is an erroneous assumption.

The winners and losers

Trade liberalization directly benefits those already trading and enjoying economies of scale. There appears to be no evidence to support the 'trickle down' theory. As economist Michael Jacobs concludes: “ The theory that wealth would automatically 'trickle down' from the rich to poor has been proved simply wrong: rather, it now appears that wealth can circulate and expand within geographical and economic class boundaries to the exclusion of those outside. ”⁹⁴ The experience of previous rounds of trade negotiations confirms that the benefits have accrued to the rich and powerful. World trade expansion as a result of the Uruguay Round is expected to increase global income by between US$212 and $510 billion by 2005. However, a number of studies have shown that this new wealth is shared very unequally. In terms of countries, most of the benefit will accrue to the US and the EU, with China (not yet a member of the WTO) and a few upper-income Southeast Asian countries being the main beneficiaries in the South. In contrast, it has also been estimated that the world's least developed countries (LDCs) stand to lose up to US$3 billion in the period up to 2000, whilst sub-Saharan Africa is set to lose US$2.6 billion.^{95, 96}

These figures continue an alarming trend in declining terms of trade for developing countries. Between, 1970 and the mid 1990s, least developed countries have suffered a cumulative decline of 50% in their terms of trade (see figure 1). Between 1980 and 1991, the cumulative loss in terms of trade for all developing counties was $290 billion (ie, declining terms of trade is the revenue from a given volume of exports purchases a smaller volume of imports). Much of this fall is due to the decline in world commodity prices. Government support for 'non-intervention' in trade, means that little or nothing has been done to rectify this situation (indeed, the emphasis on export-led development has increased supply of many commodities onto the world market thus depressing prices).⁹⁷ Global consumption has increased on average 3% annually since 1997, but this figure hides significant imbalances. Consumption in Africa is now 20% lower than it was in 1980. Basic needs - such as adequate nutrition, literacy and information - are not being achieved. For example in Sub-Saharan Africa, between 1970 and 1995, per capita consumption of paper actually decreased from 2.2 to 1.6 kilograms per annum, whilst calorie intake in 1995 was still below the daily minimum calories requirement of 2,300. In contrast, between the same dates, the consumption of paper in industrialized countries increased by 70% and calorie intake by 5%.⁹⁸

Income inequalities between countries have been rising steadily for over 200 years; the ratio between the richest and poorest country in 1820 was 3 to 1. By 1992, this ratio had climbed to 72 to 1.⁹⁹ In 1960, the 20% of the world's population living in the richest countries were thirty times richer than the poorest 20%. By 1997, they were 74 times richer.¹⁰⁰ In the 1990s, the richest 20% of the world's population has 95% of all commercial lending, 94% of all research and development, 86% of world gross national product, 82% of world trade, 81% of all domestic investment; 81% of all domestic savings and 68% of all Foreign Direct Investment (FDI). In contrast, the poorest 20% has only 1% of world GDP and 1% of FDI. ^{101, 102} 1.3 billion people are still obliged to manage on less than one dollar a day. ¹⁰³
Figure 1: Declining Terms of Trade
- Average annual rate of change (%)
Source: UNDP, Human Development Report , 1997.

Box 13: GATT, WTO and developing countries

The strength of feeling amongst developing countries over GATT and the WTO is very B. At the 50th anniversary of the multilateral trading system, only two came from Africa. '' That African leaders [did] not bother to attend is a big indication of how dissatisfied [they are] with the events of the past 50 years, '' noted an African diplomat. According to Nathan Shamuyarira, Zimbabwe's then Industry and Commerce minister. '' For many decades the GATT [the WTO's predecessor] has had a legacy of treating developing countries like second class members of a rich men's exclusive club. '' ¹⁰⁴

Developing countries have been marginalized in the WTO decision making process. At the Singapore Ministerial Conference in 1996, the majority of time was devoted to the priority agenda items of the EU and US. Developing countries were not involved in much of the 'behind-the-scenes' negotiating that took place. The negotiations were dominated by some 30 delegations to the exclusion of the others who were often not aware of what was going on. ¹⁰⁵ Negotiations were structured so that different issues were discussed in different places at the same time. This practice favors the powerful traders like the EU and USA, that have large delegations comprising expert trade lawyers, and acts against those members with small delegations and fewer lawyers. Many developing countries do not have the capacity to negotiate in global fora such as the WTO. At present, thirty WTO members cannot even afford a base in Geneva, the home of the WTO. Bangladesh has one official to cover all WTO matters whilst the US has over 200 in Geneva.

CORPORATE CONSOLIDATION

The Winners: transnational corporations, their shareholders and chief executive officers

The Losers: consumers, labor (lost jobs and job insecurity) and small businesses

Case studies, examples and statistics: Concentration of trade in various agricultural and industrial sectors; various statistics relating to trade and transnational corporations; mergers and job losses; Wal-Mart and impacts on small store owners; loss of small businesses in Italy.

Introduction

In today's highly competitive global market, companies need to capture ever greater market shares yet find themselves competing with companies operating to different standards and with different costs. This ever increasing pressure to keep costs down has sparked a trend for corporate restructuring, rationalization and consolidation, primarily through mergers and acquisitions. The process of globalization is thus creating unemployment and increasing job insecurity, concentrating trade in the hands of the larger players and knocking out smaller, less competitive companies. This is happening simultaneously in many different sectors with important implications for employment, consumer choice, value for money and prices. Trade liberalization is in fact facilitating a process of 'unfair competition' pitting local producers against transnational corporations in areas where economies of scale and the capacity to pay for advertisers, marketers, lawyers, lobbyists and other services determine success. In other words, current trade liberalization is facilitating the extension of monopolistic economic environments.

The winners

Trade liberalization (with often an emphasis on export-led development) has been accompanied by a marked trend towards concentration of business within larger producers and traders. For example, in the food and non-food commodity sectors, it is now the case that: ^{106, 107, 108, 109}

• five corporations now market 60-90% of all wheat, maize and rice (ie staples); Cargill, Feruzzi, Louis Dreyfus, Bunge/Born and Cook (Cargill, Dreyfus, Bunge/Born and Cook together with Andre/Garnac control 70% of world grain trade);
• three corporations control 80% of the banana trade; Chiquita, Dole Food and Del Monte;
• three corporations control 83% of the cocoa trade;
• three corporations control 85% of the tea trade; and
• five corporations are responsible for 70% of tobacco production; Philip Morris, BAT, Nabisco, Rothmans and Japan Tobacco.

In industrial sectors: ^{110, 111, 112}

• the top ten companies control 35% of the $297 billion global pharmaceutical market, of which the largest by turnover are Glaxo Wellcome, Novartis and Merck;
• the top ten companies control 86% of the $262 billion global telecommunications market, of which the largest by turnover are AT&T, Nippon Telegraph and Telephone, British Telecommunications and GTE Corp;
• the top ten companies control 70% of the $334 billion global computer market, of which the largest by turnover are IBM and Hewlett-Packard;
• the top ten companies control 79% of the $32 billion global agrochemical market, of which the largest by turnover are DuPont, Novartis, Monsanto and Aventis (with the merger between AgrEvo and Rhone-Poulenc);
• just 6 companies control 91% of the world's recorded music business, the largest of which are Polygram, Time Warner, Sony and EMI.

Table 4: Total value of mergers and acquisitions (US$ billion)113
	1988	1998
Computers	21.4	246.7
Biotechnology	9.3	172.4
Telecommunications	6.8	265.8

The extent of corporate power can be summed up in the following statistics:

• 50 of the world's largest economies are TNCs.
• About two-thirds of world trade is now accounted for by just 500 companies, and 40% of world trade occurs within these companies.
• The total income of the 10 largest TNCs is greater than that of the world's poorest 100 countries, and many TNCs have greater sales than the GDP of some developed countries. For example, General Motors is more powerful in pure economic terms than Thailand or Norway.

The losers

Level playing fields

One of the most oft-quoted phrases in the free trade lexicon is that it provides a 'level playing field' for international trade. This is highly misleading. Level playing fields are only relevant in competition between equals. Yet small scale producers are expected to compete in the global economy along with the likes of IBM, Monsanto and AT&T even though there are massive differences in wealth and power. Assymetries in information also means that consumers do not necessarily choose the best (or even cheapest) products. In other words, even the argument that the consumer gains from the 'level playing field' is flawed.

Consumers

As Consumer International concludes: “ Whilst the Uruguay Round contained some liberalization measures which could benefit consumers, the package overall may be having a negative impact because of its impact on consumer rights.it has increased the global concentration and the market power of large multinational corporations. This has tended to reduce competition, and therefore choice and value for money for consumers, rather than increasing it, undermining the basis for consumer support for trade liberalization ”.¹¹⁴

Workers

Contrary to the claimed benefits of trade liberalization, the consolidation of businesses can have a direct negative impact on employment. The oil industry is one example. After the merger between BP and Amoco, 7,000 redundancies were announced. Moreover, in 1998 BP-Amoco axed a further 3,000 jobs because, despite the fact that it still made a massive $4.5 billion profit, this was a drop from $6.5 billion the previous year. In 1999, BP-Amoco acquired American oil company Arco resulting in a further 2,000 job losses. The merger between Exxon and Mobil in 1998 was projected to shed 9,000 jobs whilst Shell, Texaco, Conoco and Chevron have all recently announced job cuts due to corporate restructuring.¹¹⁵

Small businesses

A 'level playing field' does not apply in retailing. The business has undergone a massive transformation with the arrival, globally, of larger and larger superstores who enjoy economies of scale. The emergence of supermarkets known as ipermarcati in Italy has put 370,000 small, family run concerns out of business since 1991; in less than 10 years, half of Italy's corner groceries and a third of the country's other small stores have disappeared.¹¹⁶ This picture is mirrored across the developed world.

The impact of Wal-Mart in the US and Europe

Robson Walton (and family) is the second richest person on earth with a fortune of $34 billion in 1999 (up from $25 billion in 1998). Wal-Mart is expanding globally and Europe, Latin America and Asia could experience the same impact felt by the company's operations in the US. Studies have shown that with the opening of a new Wal-Mart, stores within a 20-mile radius lose, on average, 19% of sales.¹¹⁷ Another study found that between 1983 and 1993, of the 7,326 closures of grocery, hardware and clothing stores, they were concentrated in areas where Wal-Mart or a similar operation had moved in.¹¹⁸ Only nine per cent of Wal-Mart's sales are overseas; within five years, plans are to increase this to one-third.¹¹⁹ Wal-Mart is expanding into the UK through the acquisition of Asda; current expansion plans include stores in Wales with serious implications for local businesses.

Box 14: Wal-Mart and small stores

Mickey Molteldo owns a hardware store near Clinton, New Jersey. He has worked in the store for eight years - his father ran it before him. “ But I don't expect to be here for much longer..I can't run a business if I discount to less than I pay for the stuff can I. If I don't, there's no reason not to buy the same thing at Wal-Mart ”. Other towns have been more successful - such as the failed attempt by Wal-Mart to establish a store near Greenfield, west of Boston. The campaign lives on, run by Al Norman under the name 'Sprawl Busters': “ They won't come in unless they think they can suck more out of the community than they put in. Small-town quality of life is not for sale at my Wal-Mart ”.¹²⁰ The Unions in the US have accused Wal-Mart of paying poor wages and keeping staff on part-time work to avoid health insurance responsibilities.¹²¹

The take over of Asda by Wal-Mart has already sparked a new wave of mergers in Europe. Carrefour and Promodes of France plan a £30 billion merger creating the world's second largest retailer after Wal-Mart. ¹²² The power of Wal-Mart and Carrefour is already being felt in new markets such as Latin America. Small and medium-sized Brazilian suppliers and wholesalers are losing bargaining power with the expansion of international supermarket groups in Brazil. Carrefour of France, Sonae and Jeronimo Martins of Portugal, and Wal-Mart of the US are expected to make combined sales of R$13.9 billion in 1999 (25 per cent of the sector's 1998 overall turnover of R$55 billion). These large international groups could force small and medium-sized suppliers into bankruptcy. Carrefour is due to complete the acquisition of the Rio de Janeiro-based supermarket chain Rainha during 1999 and is already eyeing other companies, such as Mundial, which has 13 outlets in the city.¹²³

PART 2: NEW WINNERS AND LOSERS?

(The possible impact of some proposed 'new issues')

INVESTMENT, LABOR AND THE RACE TO THE BOTTOM

The Winners: transnational corporations

The Losers: labor (jobs and job security), consumers, the environment

Case studies, examples and statistics: Nestlé; Boeing; investment in China and Slovakia; Ericsson; Hoover; US fashion house sweat shops in Saipan; a Saipan worker; 'maquiladora' companies in Mexico; maquiladora workers; the impact of foreign investment in Uruguay; work related diseases and injuries.

Introduction

Firms and investors are increasingly moving or looking to new countries to take advantage of lower wages and weaker labor, health and safety and environmental regulations. As borders open and capital becomes ever more mobile, foreign investment also becomes easier. Unfortunately, this also allows companies to play countries off against each other, forcing down costs and standards everywhere. This is known as the global 'race to the bottom'. Standards are kept low in order to be more 'competitive' and 'flexible labor forces' are currently popular with governments. A marked trend towards contractual working arrangements is increasing job insecurity. This 'race to the bottom' is being fuelled by governments providing tax breaks, subsidies, sweeteners, infrastructure developments and weaker environmental regulations to incoming investors.

The global 'race to the bottom' is likely to accelerate if there is any further deregulation of investment through the WTO. Investment may be dealt with under the built-in agenda, where it appears as the Agreement on Trade-Related Investment Measures (TRIMs), or as a separate 'new issue'. The TRIMs agreement already bars countries from imposing several kinds of performance requirements (conditions) on foreign investors. Governments cannot require corporations to export a minimum percentage of finished products or to use a minimum percentage of domestically-produced components.

The winners and losers

TNCs are taking advantage of lower wages and weaker environmental and labor standards. The companies, their executive officers and shareholders are benefiting from cheap, sometimes subsidized production overseas (see example of Boeing below). The losers are the workforce, the unemployed, consumers and countries which have forced down labor and environmental regulations. The largest TNCs are all members of bodies such as the International Chamber of Commerce and the Transatlantic Business Dialogue, both of which have lobbied hard for investment to be included in a new round of talks.

Companies are also moving or expanding operations in developing countries where work force health and safety regulations are lower; this is directly leading to an increase in hazards in the workplace. According to the International Labor Organization, over one million work-related deaths occur every year together with hundreds of millions of accidents. Work-related diseases - such as cancer and cardiovascular, respiratory and nervous-system disorders - are expected to double over the next 20 years. The problems for developing countries are compounded because globalization is creating industries which are often informal and dangerous. The contrast could not be more marked. In Nordic countries there is almost universal occupational safety and health protection whilst only 10% or less of the workforce in developing counties is likely to enjoy such benefits.¹²⁴

Nestlé

The main beneficiaries of trade and investment policies are companies that have evolved into global transnational corporations (TNCs). One of the largest TNCs - in terms of turnover ($49 billion in 1997) and the proportion of their assets outside their home territory (91%) - is Nestlé. The company has almost 500 factories operating in 75 countries and has been at the forefront of recent attempts to liberalize investment, often through the auspices of the International Chamber of Commerce and the European Round Table (ERT). The Chairman of Nestlé, Helmut Maucher, is currently chair of the ERT and a Member of the Presidency of the ICC.

The ERT and the ICC, whose members include most of the largest TNCs in Europe, were the corporate heavyweights behind the MAI. They are now pushing hard for investment to be included in the WTO. Their influence is considerable: “ The ICC's campaign towards the Seattle Ministerial Conference was kicked off on May 20th, when a top level ICC delegation (including its President Adnan Kassar, vice-Presidents Richard McCormick from US WEST and Nestlé's Helmut Maucher, Secretary General Maria Livanos Cattaui and the chairman of ICC Germany Ludger Staby), met with German Chancellor Schroeder to bring him the ICC's demands for the G-8 Summit two weeks later. ” Nestlé's influence does not stop there. Arthur Dunkel, former head of GATT, is also a registered WTO dispute panellist and a board member of Nestlé.¹²⁵

Investment negotiations at the WTO will mean different things for different companies. What does a more liberalized investment agenda mean for a company like Nestlé? According to Nestlé itself it is “ about setting out an international structure that stimulates the ongoing process of opening, deregulation and modernization of the developing countries' frameworks for doing business. ” The company confirms that access to markets is important and would like to see the issue negotiated at the WTO. Nestlé 'works best and most efficiently' in countries which share their view of marketing. According to the company: “ there are still restrictions on marketing in certain sectors.At times, these restrictions are quite incoherent, as for instance in infant foods ”.¹²⁶ This position - and specifically the company's aggressive marketing of baby milk products - has been condemned by NGOs world-wide for undermining breast feeding; the WHO estimates that reversing the decline in breast feeding could save the lives of 1.5 million infants every year.¹²⁷

Boeing

The incentive to move production - particularly high-tech jobs - overseas is having a dramatic impact on job insecurity in the US. Boeing, for example, has undergone a number of restructurings recently, with massive job losses as a result. Production has been moved abroad to countries such as Japan and China. Support for overseas investment is often backed by low cost financing from the US Export-Import Bank. Boeing and McDonnel Douglas - which has been merged with Boeing - have been amongst the largest beneficiaries of finance from the Bank in the 1990s.¹²⁸ Some of the technology being shipped abroad will have also been subsidized in the US because of the company's defence work.

Box 15: Job insecurity

Lois Holton used to work at the Boeing Everett Plant in Seattle. He says that the work force is frightened beyond belief due to the movement of jobs. He believes he would still be working for the company if production had been kept in the US.¹²⁹

The migration of Boeing's high-tech jobs and production makes a mockery of the theory of comparative advantage and free trade: “ The aircraft industry offered a better window on the global reality than other sectors precisely because its migration was not complicated by the standard issues of comparative wage levels or which company held the high ground in the technological contest. Boeing was already, without dispute, the best. It was the world's most efficient low-cost producer, even with the $20-an-hour wages for machinists. Boeing products and especially its design capabilities were without peer. If the economists' logic of comparative advantage ruled the world, then Boeing could be making all the world's jet airliners. ”¹³⁰ The fact that Boeing is not making all its air craft in Seattle is because the company is using its power and influence to gain market access; but to obtain access, it has had to transfer production and jobs overseas. Boeing's only main competitor - Airbus Industries - is only able to compete with its US rival because it pays no taxes and has received an estimated $20 billion in government subsidies since 1970.¹³¹

Investment, profits and standards

A survey of 10,000 large to medium sized German firms revealed that one in three intended to transfer part of their operations to Eastern Europe or Asia because of lower wages and weaker environmental standards. For example, in the mid 1990s, labor costs in Germany were $25 per hour compared to Korea ($5), Hungary ($2) and China (50 cents).¹³² Subsequently, Bayer announced plans to move bulk capacity to China due to lower costs and for environmental reasons.¹³³ As the Chief Executive of the company confirmed: “ The main disadvantage we have to face are higher labor costs and expensive social security systems, coupled with widespread regulation of environmental affairs by the state .”¹³⁴ At least 120 of the world's 500 largest TNCS now have operations in Shanghai; market access is also an important consideration to these companies in what is one of the most profitable and fasted growing consumer markets in the world. In 1996, China attracted a staggering 40% of all Foreign Direct Investment inflows to developing countries. Similarly, Volkswagen is being enticed to set up operations in Slovakia with its inexpensive workforce. The Slovak Government has put together a range of tax-related incentives such as tax free holidays, zero customs duty and no Value-Added Tax.¹³⁵

Norwegian companies are also being attracted abroad. Norway is a large producer of aluminium, taking advantage of cheap energy. However, the country also has strict environmental laws. 10 years ago companies - such as Norsk Hydro - began to move aluminium production to areas where there are less strict environmental regulations and attractive incentives - such as Slovakia, where electricity production is subsidized.¹³⁶

In 1998, the Swedish telecoms-equipment firm, Ericsson, threatened to move its headquarters from Stockholm to London because of cheaper labor and lower taxes. With higher energy costs and little chance of labor reform in Sweden, other large companies were also thinking of leaving the country.¹³⁷ Ericsson subsequently announced a major reorganization which included a new office in London.¹³⁸ Poor working conditions in the UK did not, however, stop Hoover threatening to move its operations from the UK to France unless the workforce accepted flexible working time, limited period contracts, overtime cuts, constraints on the right to strike, a year-long freeze on wages, and the introduction of video cameras on the shop floor. It subsequently appears that the company had little intention of moving but the ruse worked and the workers accepted the conditions.¹³⁹

US fashion houses - such as Gap, Ralph Lauren and Tommy Hilfiger - are using sweat shops in the US dependent territory of Saipan in the Pacific. Shirts on sale for £40 have a factory-gate price of £3. Working conditions are appalling but are accepted by many of the mainly 13,000 Chinese women who have been lured by the prospect of eventually working in the US. They have to sign strict contracts (which include a ban on pregnancy) and work up to 15 hours a day in hot, cramped, and unsafe conditions. Living conditions are poor, infested with vermin and have inadequate water supplies (see Box 16).¹⁴⁰

Box 16: Workers in Saipan

Wang Li works in Saipan. She has recently aborted a child because of fears that she would be sent back to China. She works 15 hours a day, six or seven days a week for £130 a month after deductions for essentials such as food. She shares her accommodation with three other workers and an assorted collection of rats and cockroaches.¹⁴¹

Maquiladora in Mexico

In Mexico, there are more than 2,000 manufacturing 'maquiladora' companies (mostly US owned) just over the border from the US (although such companies are increasingly common over all parts of Mexico). Blue chip US companies - such as General Motors, General Electric, Du Pont (owned by the 16th richest person in the world), Ford, Honeywell and Wal-Mart (owned by the second richest person in the world) - have established maquila facilities or contract work out for re-export back to the US.^{142, 143} A survey of companies moving from the USA to Mexico after the North American Free Trade Agreement (NAFTA) had been signed showed that over 25% moved because of lower environmental standards in Mexico. The majority moved because of cheaper labor (see Box 17). ^{144, 145}

Box 17: Workers in maquiladora

Zenaida Ochoa is one of half a million from Central America who work in the maquiladora sector (which consists of about 2,000 assembly plants mostly belonging to US firms). Zenaida comes from a farming family and is one of six children. She came to Tijuana near the border with the US to escape a life of poverty and found work in a clothing factory. At $60 a week for nine hours a day, this was a small fortune even though it was about one-tenth the US rate. However, Zenaida found Tijuana a depressing place. Smog hangs over the town, there is much dust in the air from the busy roads and the poor working conditions and the long walk to and from work began to affect her health. The surroundings in the shanty town are appalling; she has to pick her way through raw sewage to walk to work. A fellow worker that tried to organize a trade union for better pay and conditions was fired.¹⁴⁶

One person who did get fired was Alma Molina, another of Mexico's maquiladora workers. “ A group of us wanted to improve our working conditions, safety and wages at Clarostat [a US company]. We worked with dangerous chemicals, including phenol and epoxy resin, but no masks were provided. The chemicals irritated our skin. Six of us began to organize a union . I was fired. Four other workers were fired one week later. The personnel manager told me I was fired because I was trying to organize a union.” ¹⁴⁷

Box 18: Investment in Uruguay and labor

Alexander Acosta is a member of the Union of Workers and Employees. He says that: “Gas de France's priority is to make as much money as possible with the smallest possible investment in wages and employment conditions. Investment capital from France has brought job cuts. We had 430 employees - now we only have 240. Gaseba made these changes purely to cut costs, not because of investments in new technology. To be without work these days is to be left without a future as far as workers and their families are concerned. This situation is so hard that some companions committed suicide, because they had no opportunity for alternative employment.”

Whilst the company is creating jobs in France “ they apply policies common to transnational companies operating in the Third World. They attack the unions and the workers. The privatization of the Uruguayan gas company demonstrated what can happen when public companies are privatized using international capital. ” says Acosta. He continues: “ Gaseba's president, Pierre Perez, has suggested that all workers should become self-employed. This would be the final nail in the coffin as far as employment security and standards are concerned. Piece work would bring in around 500 dollars a month, of which 200 would go in tax and social security costs. We would also lose many employment rights including annual paid vacations, maternity payments, health insurance, Christmas bonuses, and accident insurance. The leaders of our union are elected by the members through a secret ballot. Nevertheless, Gas de France wants to dismiss the leaders of the union.”

“ It is quite incredible that we have to go to these lengths to speak out, yet it seems to be the only way of making government authorities listen ” says Luis Puig, another member of the company's union and member of the Executive Board for the National Workers' Union Confederation of Uruguay. The leaders of the union are now organising a hunger strike.

It is the inadequate or non-existent safety controls that pose most threat to the workers in the maquiladora sector. Production machinery is often not shielded resulting in cuts and burns. Employees are often exposed to toxic chemicals; one study found that 41% of workers regularly handled chemicals resulting in frequent health problems such as headaches, stomach ailments and dizziness; another study reported that 43% of those interviewed stated that they were exposed to dust-born chemicals whilst 45% reported exposure to gas or vapour. Perhaps the most common occupational health issue is the repetitive and stressful nature of the work (at very low wages); many workers have reported physical pain to elbows, forearms and shoulders due to machine vibration or the repetition of physical work (see Box 17).¹⁴⁸

Investment in Uruguay

In Uruguay, the country's national gas company was privatized in 1995, becoming Gaseba, a subsidiary of Gas de France. However, the arrival of Gas de France (a public utility company in France) saw hostile treatment of the unions and increased job insecurity.

For ten days, in August 1999, members of the Independent Union of Workers and Employees of Gaseba chained themselves to the doors of the French Embassy in Montevideo, demanding an interview with the French ambassador concerning France's industrial strategy and the impact of this political 'colonialism' on labor laws in Uruguay. After ten cold and wintery days chained to the railings, the French Ambassador still refused to see the workers (see Box 18).

MULTILATERAL ENVIRONMENTAL AGREEMENTS

The Winners: transnational corporations, developed countries

The Losers: people and their environment

Case studies, examples and statistics: The Biosafety Protocol; the Basel Convention; the Kyoto Protocol; Exxon Mobil; and the Global Climate Coalition.

Introduction

Many environmental problems - such as species loss, the depletion of the ozone layer and global warming - are now addressed by intergovernmental environment treaties known as multilateral environmental agreements or MEAs. There are some 24 international environment agreements that concern trade or have trade provisions. However, the WTO bans discriminatory trade provisions which might conflict, for example, with the Most-Favored Nation principle of the World Trade Agreement (WTA). This principle requires WTO members to give equal treatment to all other members. This means, for example, that provisions in the Montreal Protocol banning transactions with countries who trade in substances (and products containing these substances) that are regulated by the Montreal Protocol fall foul of the WTO.

Whilst no multilateral environmental agreements have ever been challenged in the WTO, it is the case the WTO rules have already had a marked effect on some international agreements and negotiations designed to protect the environment and promote development (such as the failure of the Biosafety Protocol). The European Union is proposing that the WTO discuss multilateral environmental agreements. However, there is no guarantee that negotiations would improve the status of the 'environment'. On the contrary, any WTO negotiations on environmental issues could be used to reinforce the effective primacy of global trade rules and over-ride MEAs such as the Kyoto Protocol on climate change and the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their Disposal. The fact that there is legal uncertainty concerning the relative status of the GATT 1947, the World Trade Agreement signed in 1994 and the various MEAs is a particular concern.

The winners and losers

Civil society and the environment in general benefit from many different MEAs. Species and the environment are protected, health issues and consumer concerns are addressed and the movement of dangerous substances is prohibited. However, MEAs could well be undermined through the WTO. If this happens it would be a great loss for civil society. Nevertheless there would still be some who benefit: those actively lobbying against the negotiation of such agreements - countries and companies with vested interests in subjugating MEAs to global trade rules.

The Biosafety Protocol

In February 1998, representatives from 174 countries gathered in Colombia to finalize a Biosafety Protocol that would regulate the transfer and handling of genetically modified organisms (GMOs). But as a result of the efforts of what was known as the 'Miami' group of countries (the United States, Canada, Argentina, Uruguay, Australia and Chile) the talks collapsed. This was in spite of the fact that the United States is not a signatory to the umbrella Convention on Biological Diversity and was only attending the talks as an observer. The head of the US delegation to Colombia confirmed that one of his main objectives was “ to avoid undue interference with world trade because this is as much a trade agreement as an environmental agreement. ”¹⁴⁹ In the lead up to Colombia, the US based Biotechnology Industry Organization (BIO) (representing most of the world's major biotechnology companies) lobbied hard against a B and effective international agreement.¹⁵⁰

The Miami Group of countries export genetically-modified crops and their aim was to make sure that trade was not disrupted by any Protocol. The Miami Group wanted the Protocol to apply only to GMOs that are deliberately released into the environment, such as seeds for planting. Thus they argue that all commodities (over 90% of world trade in GMOs) should be excluded (since they are to be eaten and not released into the environment) and Bly opposed plans to label GM crops. The Miami Group also clashed with the European Union over whether WTO rules should take precedence over the rules of a Protocol. Since the European Union and G77 group of developing countries refused to accept the Miami Group's proposals the talks became deadlocked. Negotiators met again in Vienna, from 15-19 September, to try to restart the talks. Although the governments re-confirmed their political will to conclude a Protocol no major break though was reported.¹⁵¹

Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal (1989)

For many years, the movement of large quantities of hazardous wastes around the world went largely unregulated. This led to fears that the developing world was being used as a dumping ground for the industrialized world's toxic waste. This prompted countries like Nigeria to declare hazardous waste dumping on its shores a capital offence. Such gestures were simply token gestures in reality however. Failure to control international movements of waste has even led to situations - both frightening and farcical - where ships of dubious origin and ownership, with a multinational crew, spent months cruising round the world looking for somewhere to off-load hazardous wastes.

The 1994, governments agreed to the Basel Convention in order to control the international movement of hazardous wastes from OECD counties to non-OECD countries. The Basel Convention is intended to prevent dumping in developing counties and to encourage waste minimization in countries of production (generally in the developed world). In order to do this it includes a raft of 'discriminatory' provisions. Trade is controlled largely through notice and consent procedures, although each signatory country has the right to prohibit the import of hazardous wastes from other signatory countries. Exports should only be allowed after permission has been granted by the importing country government. Trade with non-signatory countries is not permitted. An amendment to the Convention now also restricts trade within the OECD. A few OECD governments - such as the US, Australia, New Zealand, the Netherlands and Canada - continue to undermine this Convention. The US is the only OECD country that still refuses to become a party to the Convention.¹⁵²

The Kyoto Protocol

In 1992, 165 nations agreed the United Nations Framework Convention on Climate Change (UNFCCC). At the third meeting of the UNFCCC in 1997, 175 nations agreed to the Kyoto Protocol setting out legally binding reductions to greenhouse gases of 5.2% for the years 2008 to 2012 (using 1990 as a base year) for 39 developed countries.¹⁵³ The Protocol has received a very mixed reception in the US and to date has not been ratified by the Senate, despite being supported by the International Climate Change Partnership, which includes companies like General Motors and BP Amoco. Some organizations and individuals believe that the Protocol will have a negative impact on trade, jobs and consumers with effects in the chemicals, petroleum refining, paper, iron and steel, aluminium and cement sectors. Prominent amongst the opponents is the Global Climate Coalition (GCC) which consists of trade associations and companies. So far, the GCC appears to have prevented US ratification of this important international agreement.

Exxon (together with its newly merged partner, Mobil) is leading the fight by industry to block the Protocol completely. With combined profits of $8.5 billion and turnover of $179 billion in 1997, Exxon Mobil is the world's third largest company. It possesses 21 billion barrels (equivalent) of oil and gas which it is keen to exploit, refine and trade around the world. Exxon and Mobil have been the most aggressive opponents of the Protocol, keen to protect the oil production and refining industry (one of the main sources of carbon dioxide). They contributed to a $13 million advertising campaign in the run up to Kyoto; are questioning the science behind climate change; and were behind plans to run a $6 million PR campaign to discredit the science. They have failed to follow the example of other oil companies to expand into renewable energy. Exxon and Mobil are ranged against a number of TNCs who support the Protocol - such as British Petroleum - who not only left the GCC, but recognized the need to act to address climate change and invest in renewable energy.¹⁵⁴

PUBLIC SERVICES AND GOVERNMENT PROCUREMENT

The Winners: transnational service sector companies

The Losers: those needing health care, health care professionals

Case studies, examples and statistics: Health services; the US Coalition of Service Industries.

Introduction

The General Agreement on Trade in Services (GATS) - administered by the WTO - is intended to secure the progressive removal of measures which discriminate against foreign service suppliers through successive rounds of negotiations. As far as the next round of negotiations (known as GATS 2000) is concerned, it is not yet clear which sectors governments will decide to include. However, there has been a suggestion from the United States that all service sectors should be considered¹⁵⁵ - and health seems to be particularly high on their list of priorities. Health could also fall under the proposed 'new issue' of Government Procurement. The US service sector argues that government health contracts are awarded under closed procedures which should be open to competition from both domestic and foreign companies.

Leon Brittan, the European Commission's last trade Commissioner, also appeared to be promoting liberalization of a wide range of service sectors, including 'in politically difficult ... sectors' (which would certainly include the health sector). If a broad-brush approach is adopted it could have extensive (although so far unknown) environmental and developmental implications, with areas such as health, education, the film industry and broadcasting (see the next section on culture), tourism, and energy and water services up for liberalization. However, European Commission officials have stated that they do not support liberalization in areas such as public health and education services.

The winners and losers

The GATS Agreement passed relatively unnoticed by civil society when the Uruguay Round was completed. It was hurriedly ratified by member governments without MPs knowing how far-reaching the Agreement would be; the list of sectors it would cover (according to the WTO in covers 160 separate sectors) was never made available to, or sought by Members of Parliament throughout Europe. It is clearer now. According to the Ecologist, the privatization and globalization of the health sector - opening it to competition and take-over by transnational companies - is inevitable. “ In France, the AXA Group has already bid for the management of health insurance in at least one region. ”¹⁵⁶

This new agenda is being pushed from the US. Health provision certainly seems to be a key area of interest for the US's Coalition of Service Industries (CSI). Members of CSI's Services 2000 Working Group include some of the world's largest service companies - American Express, Andersen Worldwide, AT&T, Bank of America, Chase Manhattan, Citigroup, Ford Financial Services, IBM and PriceWaterhouse Coopers. The Working Group states that the general objectives of negotiations at the WTO should be “ to encourage more privatization, to promote pro-competitive regulatory reform, and to obtain liberalization [in health care services]. ”¹⁵⁷

Specific negotiating objectives at the WTO should include:

• Obtaining market access and national treatment commitments allowing provision of all health care services across borders;
• Allowing majority foreign ownership of health care facilities; and
• Seeking inclusion of health care in WTO government procurement disciplines.

Patients and the public thus become customers and the losers. The laws of the market suggest that the high-cost of treatment will favor those that can pay, whilst the rest will have to do with a cheaper form of healthcare on tight budgets and potentially longer waiting lists.

CULTURAL DISINTEGRATION?

The Winners: global entertainment transnationals

The Losers: consumers and culture

Case studies, examples and statistics: Canadian magazines; the US entertainment sector; Time Warner.

Introduction

Trade liberalization is having a profound effect on cultural diversity. Culture is becoming homogenized in a world increasingly dominated by American lifestyles and values. Witness, for example, the rapid global spread of the US entertainment industry (the US's largest exporter) and US fast food. The demise of the proposed Multilateral Agreement on Investment - intended to liberalize and encourage foreign investment - was due, in part, to a polarization of views on culture. The US, the UK, Germany and Japan regarded culture as simply another tradable commodity. France and Canada on the other hand saw - and still do see - “ cultural goods as having intrinsic value to be protected for artistic diversity and national identity ”.¹⁵⁸ It was thus not surprising that farmers in France targeted McDonalds for its 'bad food' when retaliating against the US sanctions on French exports of gourmet food, such as Dijon mustard and Roquefort cheese (see disputes section). With the collapse of the MAI, so the issue looks set to resurface in the proposed Millennium Round.

The winners and losers

The beneficiaries of WTO negotiations are likely to be the global entertainment transnationals. Successful negotiations could force countries to relinquish domestic controls over cultural diversity. For example, it might become difficult or even impossible for governments to protect local film makers against the growing number of English language films.

The US trade Representative, Charlene Barshefsky has already indicated to the US entertainment business (including telecommunications, movie studios, television networks, music, broadcasting, publishing ) that she will protect their interests at the forthcoming WTO negotiations. Culture has already arisen within the remit of the WTO a number of times. Canada has twice attempted to protect its magazine industry but was forced to back down after the WTO ruled that magazines were simply products subject to trade rules - and the US threatened massive retaliation.

There appears to be two important reasons behind the US's aggressive stance. The first is that the US is still angry at the role Canada played in the demise of the MAI. At the time of the magazine disputes, Barshefsky said that the WTO decision would serve as a useful weapon against any further attempts by Canada to protect other culture such as films, books and broadcasting.¹⁵⁹ The second is the power that some of the entertainment-industrial complexes wield in US political circles. Entertainment is the largest single export sector in the US - in 1997 alone, US films grossed $30 billion world wide.¹⁶⁰ Two companies dominate - Walt Disney and Time Warner - and both have recently vied to be the largest media and entertainment company in the world (Time Warner - for now - has won that battle with its recent merger with Turner Broadcasting System). However, both companies “have powerful friends on Capitol Hill and in the White House and intend to get their way” to oppose cultural protectionism.¹⁶¹ Time Warner instigated one of the complaints against Canada's protection of its magazine industry, arguing that it was not an effort to protect cultural identity but was imposed for economic and commercial reasons.¹⁶²

Ted Turner, Vice-President of Time Warner is well known by the US President. Board Director, Gerald Greenwald is also a member of the Advisory Committee on Trade Policy and Negotiations (ACTPN), appointed by the President. The committee has about 45 members from representative elements of the US economy with international trade interests. Its mandate is to provide overall policy guidance on trade issues. Also on the Board of time Warner is Carla Hills, former US Trade Representative.

The process of cultural disintegration is already underway in the WTO. Negotiations are scheduled to begin on 1st January 2000 for the deregulation of broadcasting, potentially removing domestic controls (ie curbs on foreign television programs) and forcing countries to open public broadcasting to TNCs. Culture will also be on the agenda via new negotiations on the telecommunications sector which includes the Internet.

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Notes and References

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2. FAO, 1998. Assessment of the impact of the Uruguay Round on agricultural markets, CCP 99/12. Food and Agriculture Organization, Rome. Cited in Agriculture Trade Rules: Are They Stacked Against the Poor? UK Food Group Position Paper on the WTO and Food Security. UK Food Group, London, 1999.

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3.UK Food Group, 1999. Op cit

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150. Yoke Ling, C., undated. Concerted Moves to Undermine a B Biosafety Agreement.
http://www.twnside.org.sg/ souths/twn/title/chee-cn.htm

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151. ICTSD, 1999b. Countries Meet to Restart Biosafety Talks, International Centre for Trade and Sustainable Development, 20 September 1999.

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152. Greenpeace, 1998. Basel Ban: Final Round to Put an End to Global Waste Dumping . Press release, 23rd February 1998.
http://www.greenpeace.org/pressreleases/toxics/1998feb23.html (1998)

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153. TED, 1999. TED Case Studies. The Kyoto Protocol: International Agreement, Domestic Implications. Trade and the Environment Data Base.
http://www.american.edu/projects/mandala/TED/kyoto.htm

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154. Friends of the Earth, 1999b. The Exxon Files: Probably the Worst Oil Company in the World. Friends of the Earth, London and Friends of the Earth International, Amsterdam.

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155. Inside US Trade, 1999. Barshevsky reveals US push to broaden WTO Services Talks, Inside US Trade , 4 June 1999.

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156. Bertrand, A., and L., Kalafatides, 1999. The WTO and public health. The Ecologist , Vol 29, No 6, October.

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157. CSI, 1999. Solicitation of Public Comment Regarding U.S. Preparations for the World Trade Organization's Ministerial Meeting, Fourth Quarter 1999. Services 2000 USTR Federal Register Submission. Coalition of Service Industries.

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158. UNDP, 1999. Op cit. Page 34.

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159. Barlow, M., 1999. Notes on culture for IFG report card on the WTO. E-mail communication. July.

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160. UNDP, 1999. Op cit. Page 34.

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161. Barlow, 1999. Op cit.

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162. Rinaman, K., 1996. TED Case Studies: Canadian Magazine Industry and Cultural Protectionism. Trade and the Environment Data Base.
http://www.american.edu/projects/mandala/TED/sportsil.htm

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