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Globalization, WTO, and the End of Democracy

by Michael Parenti

Posted at globalresearch.ca 29 August 2001

Among the recent undertakings of global business elites and their faithful governmental servants are the North American Free Trade Agreement (NAFTA) and the 1993 Uruguayan Round of the General Agreement on Tariffs and Trade (GATT). As presented to the public, NAFTA and GATT were going to abolish irksome regulatory laws, integrate national economies into a global trade system, and create more jobs and greater prosperity.

The goal of the transnational corporation is to become truly transnational, poised above the sovereign power of any particular nation, while being serviced by the sovereign powers of all nations. Cyril Siewert, chief financial officer of Colgate Palmolive Company, could have been speaking for all transnationals when he remarked, "The United States doesn't have an automatic call on our [corporation's] resources. There is no mindset that puts this country first."1

With NAFTA and GATT, this becomes quite evident. The giant transnationals have been elevated above the sovereign powers of nation states. The GATT agreements created a World Trade Organization (WTO), an international association of over 120 signatory nations. The WTO has the authority to prevent, overrule, or dilute any laws of any nation deemed to burden the investment and market prerogatives of transnational corporations. It sets up three-member panels composed of "trade specialists" who act as judges over economic issues, placing themselves above the national sovereignty and popular control of any nation, thereby insuring the supremacy of international finance capital, a process called "globalization," and treated as an inevitable natural development beneficial to all. It is in fact a global coup d'état by the giant business interests of the world.

Elected by no one and drawn from the corporate world, these panelists meet in secret and can have investment stakes in the very issues they adjudicate, being limited by no conflict-of-interest provisions. Their function is to allow the transnational companies to do whatever they like without any restraints or regulations placed on them by any country. Not one of GATT's 500 pages of rules and restrictions are directed against private business; all are against governments. Signatory governments must lower tariffs, end farm subsidies, treat foreign companies the same as domestic ones, honor all corporate patent claims, and obey the rulings of a permanent elite bureaucracy, the WTO. Should a country refuse to change its laws when a WTO panel so dictates, the WTO can impose fines or international trade sanctions, depriving the resistant country of needed markets and materials.2

Acting as the supreme global adjudicator, the WTO has ruled against laws deemed "barriers to free trade." It has forced Japan to accept greater pesticide residues in imported food. It has kept Guatemala from outlawing deceptive advertising on baby food. It has eliminated the ban in various countries on asbestos, and on fuel-economy and emission standards for motor vehicles. And it has ruled against marine-life protection laws and the ban on endangered-species products. The European Union's prohibition on the importation of hormone-ridden U.S. beef had overwhelming popular support throughout Europe, but a three-member WTO panel decided the ban was an illegal restraint on trade. The decision on beef put in jeopardy a host of other food import regulations based on health concerns. The WTO overturned a portion of the U.S. Clean Air Act banning certain additives in gasoline because it interfered with imports from foreign refineries. And the WTO overturned that portion of the U.S. Endangered Species Act forbidding the import of shrimp caught with nets that failed to protect sea turtles.3

"Free" trade is not fair trade; it benefits strong nations at the expense of weaker ones, and rich interests at the expense of the rest of us, circumventing what little democratic sovereignty we have been able to achieve.4 "Globalization" means turning the clock back on many 20th century reforms: no freedom to boycott products, no prohibitions against child labor, no guaranteed living wage or benefits, no public services that might conceivably compete with private profit-making, no health and safety protections that might cost the corporations any money.

GATT allows multinationals to impose monopoly property rights on indigenous and communal agriculture. In this way agribusiness can better penetrate locally self-sufficient communities and monopolize their resources. Ralph Nader gives the example of the neem tree, whose extracts contain naturally pesticidal and medicinal properties. Cultivated for centuries in India, the tree has attracted the attention of various pharmaceutical companies, who filed monopoly patents, causing mass protests by Indian farmers. As dictated by the WTO, the pharmaceuticals now have exclusive control over the marketing of neem tree products, a ruling that is being reluctantly enforced in India. Tens of thousands of erstwhile independent farmers must now work for the powerful pharmaceuticals on terms set by them.

In a similar vein, the WTO ruled that the U.S. corporation RiceTec has the patent rights to all the many varieties of basmati rice, grown for centuries by India's farmers. It also ruled that a Japanese corporation had exclusive rights in the world to grow and produce curry powder. As these instances demonstrate, "free trade" amounts to monopoly corporate control. Such developments caused Malaysian prime minister Mahathir Mohamad to observe:

We now have a situation where theft of genetic resources by western biotech TNCs [transnational corporations] enables them to make huge profits by producing patented genetic mutations of these same materials. What depths have we sunk to in the global marketplace when nature's gifts to the poor may not be protected but their modifications by the rich become exclusive property?

If the current behavior of the rich countries is anything to go by, globalization simply means the breaking down of the borders of countries so that those with the capital and the goods will be free to dominate the markets.5

Under free-trade agreements like General Agreements on Trade and Services (GATS), all public services are now at risk. A public service can be charged with causing "lost market opportunities" for business, or creating an unfair subsidy. To offer one instance: the single-payer automobile insurance program proposed by the province of Ontario, Canada, was declared "unfair competition." Ontario could have its public auto insurance only if it paid U.S. insurance companies what they estimated would be their present and future losses in Ontario auto insurance sales, a prohibitive cost for the province. Thus the citizens of Ontario were not allowed to exercise their democratic sovereign power to institute an alternative not-for-profit auto insurance system. In a case that is now pending, United Postal Service is charging the Canadian Post Office for "lost market opportunities." Meanwhile, the Canadian postal workers union is challenging the case in court, arguing that the agreement violates the Canadian Constitution.

Education is a trillion dollar industry, and private corporations want a big piece of it. If the issue is ever brought before the WTO or whatever trade council under the pending GATS agreement, public education and protests against corporate run schools could be seen as a barrier to free market investments and lost market earnings for corporations involved in privatizing schools. It is probably only the fear of a heated public outcry that keeps the forces of privatization from moving more precipitously into the "education market."

International "free trade" agreements like GATT and NAFTA have hastened the corporate acquisition of local markets, squeezing out smaller businesses and worker collectives. Under NAFTA better-paying U.S. jobs were lost as firms closed shop and contracted out to the cheaper Mexican labor market. At the same time thousands of Mexican small companies were forced out of business. Mexico was flooded with cheap, high-tech, mass produced corn and dairy products from giant U.S. agribusiness firms (themselves heavily subsidized by the U.S. government), driving small Mexican farmers and distributors into bankruptcy, displacing large numbers of poor peasants. The newly arrived U.S. companies in Mexico have offered extremely low-paying jobs, and highly unsafe and unhealthy work conditions.6

Under NAFTA, the U.S.-based Ethyl Corporation sued the Canadian government for $250 million in "lost business opportunities" and "interference with trade" because Canada banned MMT, an Ethyl-produced gasoline additive considered carcinogenic by Canadian officials. Fearing they would lose the case, Canadian officials caved in, agreeing to lift the ban on MMT, pay Ethyl $10 million compensation, and issue a public statement calling MMT "safe." California also banned the unhealthy additive; this time a Canadian based Ethyl company sued California under NAFTA for placing an unfair burden on free trade.7

We North Americans are told that to remain competitive in the new era of globilzation, we will have to increase our output while reducing our labor and production costs, in other words, work harder for less. We will have to spend less on social services and introduce more wage concessions, more restructuring, deregulation, and privatization. Only then might we cope with the impersonal forces of globalization that are sweeping us along. In fact, there is nothing impersonal about these forces. "Free trade" agreements, including new ones that have not yet been submitted to the U.S. Congress have been consciously planned by big business and its government minions over a period of years in pursuit of a deregulated world economy that undermines all democratic checks upon business practices, and leaves all the world's population in the merciless embrace of a global free market. The people of any one province, state, or nation are now finding it increasingly difficult to get their governments to impose protective regulations or develop new forms of public sector production out of fear of being overruled by the WTO or some other international trade panel.8

NAFTA and GATT are in violation of the U.S. Constitution, the preamble of which makes clear that sovereign power rests with the people: "We the People of the United States . . . do ordain and establish this Constitution for the United States of America." Article I, Section 1 of the Constitution reads, "All legislative Powers herein granted shall be vested in a Congress of the United States." Article I, Section 7 gives the president (not some trade council) the power to veto a law, subject to being overridden by a two-thirds vote in Congress. And Article III gives adjudication and review powers to a Supreme Court and other federal courts as ordained by Congress. The Tenth Amendment to the Constitution states: "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people." There is nothing in the entire Constitution that allows an international trade panel to preside as final arbiter exercising supreme review powers undermining the constitutionally mandated decisions of the legislative, executive, and judicial branches.

True, Article VII says that the Constitution, federal laws, and treaties "shall be the supreme Law of the land," but certainly this was not intended to include treaties that overrode the laws themselves and the sovereign power of the people and their representatives. In any case, to exclude the Senate from deliberations, NAFTA and GATT were called "agreements" not treaties, a semantical ploy that enabled President Clinton to bypass the two-third treaty ratification vote in the Senate and avoid any treaty amendment process. The World Trade Organization was approved by a lame-duck session of Congress held after the 1994 elections. No one running in that election uttered a word to voters about putting the U.S. government under a perpetual obligation to insure that national laws do not conflict with WTO rulings.

What is being undermined is not only a lot of good laws dealing with environment, public services, labor standards, and consumer protection, but also the very right to legislate such laws. Our democratic sovereignty is being surrendered to a secretive plutocratic trade organization that presumes to exercise a power greater than that of the people and their courts and legislatures. What we have is an international coup d'état by finance capital over the nations of the world.

Designed to leave the world's economic destiny to the tender mercy of bankers and multinational corporations, globalization is a logical extension of imperialism, a victory of empire over republic, international finance capital over democracy. In recent times however, given popular protests, several multilateral trade agreements have been stalled or voted down. In 1999, militant protests against free trade took place in forty-one nations from Britain and France to Thailand and India.9 In 2000-2001, there were the demonstrations in Seattle, Washington, Sydney (Australia), Prague, Genoa, and various other locales. More and more, people throughout the world are resisting the loss of democratic accountability that masquerades under the banner of "globalization" and "free trade." And national leaders are thinking twice before signing on to new trade agreements. Meanwhile, existing free trade agreements do not need to be "revised" but repealed.


Michael Parenti's recent books include History as Mystery and To Kill a Nation: The Attack on Yugoslavia. This article is excerpted from his newly published Democracy for the Few, 7th edition.

  1. Quoted in New York Times, May 21, 1989.
  2. See Lori Wallach and Michelle Sforza, The WTO (New York: Seven Stories Press, 2000); and John R. MacArthur, The Selling of Free Trade: Nafta, Washington, and the Subversion of American Democracy (New York: Hill and Wang, 2000).
  3. New York Times, April 30, 1996 and May 9, 1997;Washington Post, October 13, 1998.
  4. From a report by the United Nations Development Program, New York Times, July 13, 1999.
  5. Quoted in People's Weekly World, December 7, 1996.
  6. John Ross, "Tortilla Wars," Progressive, June 1999
  7. John R. MacArthur, The Selling of "Free Trade": NAFTA, Washington, and the Subversion of American Democracy (New York: Hill & Wang, 2000; and Sarah Anderson and John Cavanagh, "Nafta's Unhappy Anniversary," New York Times, February 7, 1995.
  8. For a concise but thorough treatment, see Steven Shrybman, A Citizen's Guide to the World Trade Organization (Ottawa/Toronto: Canadian Center for Policy Alternatives and James Lorimer & Co., 1999).
  9. San Francisco Chronicle, June 19, 1999.

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