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Necessity test is mother of GATS intervention

The World Trade Organisation has plans
to replace that outmoded political idea: democracy

by Gregory Palast
Sunday April 15, 2001

Trade Minister Dick Caborn says `nothing' all day, and this keeps him very, very busy. Caborn is busy reassuring the nation that nothing in the proposed General Agreement on Trade in Services (Gats) threatens Britain's environmental regulations. Nothing in Gats permits American corporate powers to overturn UK health and safety regulations. Nothing in Gats, which is part of the World Trade Organisation regime, threatens public control of the National Health Service. The official statement of what Gats doesn't do goes on for pages and pages.

So I've been perplexed by Caborn and his EU sidekick, Pascal Lamy, rushing to Geneva and Washington and God knows where else to argue over the wording of rules that do nothing, change nothing and mean nothing.

But then last week `something' came through on my fax machine. And this confidential document from the WTO Secretariat, dated 19 March, is something indeed: a plan to create an international agency with veto power over parliamentary and regulatory decisions.

When Winston Churchill said that `democracy is the worst form of government except all those other forms that have been tried from time to time' he simply lacked the vision to see that in March 2001, the WTO would design a system to replace democracy with something much better: Article VI.4 of Gats. And this unassuming six-page memo, now modestly hidden away in secrecy, may one day be seen as the post-democratic Magna Carta.

It begins by considering the difficult matter of how to punish nations that violate `a balance between two potentially conflicting priorities: promoting trade expansion versus protecting the regulatory rights of governments'.

Think about that. For centuries Britain, and now almost all nations, has relied on elected parliaments, congresses, prime ministers and presidents to set the rules. It is these ungainly deliberative bodies that `balance' the interests of citizens and businesses

Now kiss that obsolete system goodbye. Once Britain and the EU sign the Gats treaty, Article VI.4 of that treaty, the Necessity Test, will kick in. Then, as per the Secretariat's secret programme outlined in the 19 March memo, national parliaments and regulatory agencies will be demoted, in effect, to advisory bodies.

Final authority will rest with the Gats Disputes Panel to determine whether a law or regulation is, in the memo's language, `more burdensome than necessary'. And Gats, not Parliament, will decide what is `necessary'.

As a practical matter, this means nations will have to shape laws protecting the air you breathe, the trains you travel in and the food you chew by picking not the best or safest means for the nation, but the cheapest methods for foreign investors and merchants.

Let's get down to concrete examples. The Necessity Test has already had a trial run in North America via inclusion in Nafta, the region's free trade agreement. Recently, the state of California banned a petrol additive, MBTE, which has contaminated water supplies. A Canadian seller of the `M' chemical in MBTE filed a complaint saying the rule failed the Necessity Test.

The Canadians assert that California could simply require all petrol stations to dig up their storage tanks and reseal them -- and hire a swarm of inspectors to make sure it's done perfectly. The Canadian proposal might cost Californians a bundle and would be impossible to police. That's just too bad. The Canadian proposal is the least trade-restrictive method for protecting the water supply. `Least trade-restrictive' is Nafta's Necessity Test.

If California does not knuckle under, the US Treasury may have to fork out $976 million in compensation to the Canadians.

The Gats' version of the the Necessity Test is Nafta on steroids. Under Gats, as proposed in the memo, national laws and regulations will be struck down if they are `more burdensome than necessary' to business. Notice the subtle change. Suddenly the Gats treaty is not about trade at all, but a sly means to wipe away restrictions on business and industry, foreign and local.

So what `burdensome' restrictions are sitting in the corporate cross-hairs? The US trade representative has already floated proposals on retail distribution. Want to preserve Britain's green belts? If some trees stand in the way of a Wal-Mart superstore, forget it. Even under the current, weaker, Gats, Japan was forced to tear up its own planning rules to let in the retail monster boxes.

The Government assures us that nothing threatens its right to enforce laws in the nation's public interest. Not according to the 19 March memo. The WTO reports that, in the course of the secretive multilateral negotiations, trade ministers agreed that a Gats tribunal would not accept a defence of `safeguarding the public interest'.

In place of a public interest standard, the Secretariat proposes a deliciously Machiavellian `efficiency principle': `It may well be politically more acceptable to countries to accept international obligations which give primacy to economic efficiency.' This is an unsubtle invitation to load the Gats with requirements that rulers know their democratic parliaments could not otherwise accept. This would be supremely dangerous if, one day, the US elected a president who wanted to shred air pollution rules or, say, Britain elected a prime minister who had a mad desire to sell off the rest of his nation's air traffic control system.

How convenient for embattled chief executives. What elected congresses and parliaments dare not do, Gats would require. Under the post-democratic Gats regime, the Disputes Panel, those Grand Inquisitors of the free market, will decide whether a nation's law or a regulation serves what the memo calls a `legitimate objective'.

While parliaments are lumbered with dated constitutional requirements to debate a law's legitimacy in public, with public evidence, and hearings open to citizen comment, Gats panels are far more efficient. Hearings are closed. Unions, as well as consumer, environmental and human rights groups, are barred from participating -- or even knowing what is said before the panel.

Is the 19 March memo just a bit of wool-gathering by the WTO Secretariat? Hardly. The WTO was working from the proposals suggested in yet another confidential document also sent to me by my good friend, Unnamable Source. The secret memo, `Domestic Regulation: Necessity and Transparency', dated 24 February, was drafted by the European Commission's own `working party', in which the UK ministry claims a leading role.

In a letter to MPs, Trade Minister Caborn swears that, through the EC working party, he will ensure that Gats recognises the `sovereign right of government to regulate services' to meet `national policy objectives'. Yet the 24 February memo, representing the UK's official (though hidden) proposals, rejects a nation's right to remove its rules from Gats jurisdiction once a service industry is joined to the treaty.

Indeed, the EC document contains contemptuous attacks on nations claiming `legitimate objectives' as potential `disguised barriers' to trade liberalisation. Moreover, there is a codicil that regulation must not be `more trade restrictive than necessary', ready for harvesting by the WTO Secretariat's free market fanatics.

Not knowing I had these documents in hand, Caborn's office this week maintained that Gats permitted nations a `right to regulate to meet national policy objectives'.

I was not permitted to question the Trade Minister himself. However, the Caborn letter to MPs admits that his pleasant interpretation of Gats has not been `tested in WTO jurisprudence'. This is, after all, the Minister who, with his EU counterparts, just lost a $194 million judgment to the US over the sale of bananas.

Now, I can understand how Caborn goofed that one. Europe argued that bananas were a product, but the US successfully proved that bananas were a service -- try not to think about that -- and therefore fall under Gats.

And that illustrates the key issue. No one in Britain should bother with what Caborn thinks. The only thing that counts is what George W Bush thinks. Or, at least, what the people who think for Bush think.

Presumably, Caborn won't sue the UK for violating the treaty. But the US may. In a way it already has. Forget Caborn's assurance -- we need assurance from President Bush that he won't use Gats to help out Wal-Mart -- or Citibank or Chevron Oil.

The odd thing is, despite getting serviced in the bananas case, Caborn and the Blair government have not demanded explicit language barring commerce-first decisions by a Gats panel. Instead, the secret 14 February EC paper encourages the WTO's Secretariat to use the punitive form of the Necessity Test sought by the US.

So there you have it. Rather than attack the rules by which America whipped Europe, Caborn and the EC are effectively handing George Bush a bigger whip.

Guardian Unlimited Guardian Newspapers Limited 2001

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