Reader Dan Follows up on WTO GATS

Reader Dan follows up on JohnA’s piece about the WTO GATS trade agreement….

Reader Dan adds to the WTO GATS trade agreements posts:

This site defines who is writing the US Trade Reps:

The World Trade Organization has set a July deadline for negotiating a text within the WTO’s Working Party on Domestic Regulation (WPDR). States are concerned because the negotiations could affect services that states traditionally provide or regulate such as public utilities, health facilities and licensing of professionals. The negotiations are authorized under GATS, the General Agreement on Trade in Services.

Letters to the U.S. Trade Representative (USTR) have come from three multi-state working groups (on services, energy policy and prescription drugs), oversight committees in Maine and California, the governors of Maine and Oregon, and a joint letter from attorneys general in 25 states. Two of the working groups submitted detailed case studies of how the WTO proposals could affect domestic regulation: one on coastal regulation of liquified natural gas (LNG) facilities and one on nursing qualifications.

We learn more here:

Two other sets of documents suggest that LOTIS and other corporate lobbyists appeared to have been astonishingly successful in getting Western governments to adopt their plans to radically expand the reach of the GATS treaty. A confidential memo dated March 19th obtained from inside the WTO’s Secretariat, written four weeks after the LOTIS meeting on the matter, indicates that European negotiators had accepted industry-favored amendments to GATS Article VI.4, known as the “necessity test.”

The necessity test requires nations to prove that their regulations — from pollution control to child labor laws — are not hidden impediments to trade. Industry wants the WTO to employ a necessity test similar to the one in the North America Free Trade Agreement which has worked to reverse local environmental rules. For example, Mexico has been forced to pay $17 million to an American corporation, Metalclad, for delaying the operation of the company’s toxic waste dump and processing plant. Local Mexican officials had attempted to block the plant’s operation on the grounds that it was built without a construction permit, and would not have received one, as the plant handling toxins was placed above the area’s drinking water supply.

According to the secret March 19 memo from the Working Party on Domestic Regulation, issued to WTO members by the organization’s Secretariat, European negotiators reached a private consensus to change the worldwide GATS agreement to include a much stronger form of the necessity test than found even in NAFTA. The Agreement between the US, Canada and Mexico only requires that a nation’s regulations be “least trade restrictive.”

Under the GATS, as proposed in the memo, national laws and regulations would be struck down if they are “more burdensome than necessary” to business. The difference between the NAFTA language and the proposal for GATS is subtle, but the effect would be enormous. The language in the WTO memo effectively removes trade from the equation. Rather, a nation would have to adopt rules which are, in the memo’s words, the most “efficient” — that is to say those which carry the lowest cost to business.

Freeing up some barriers to trade can work to benefit all, and bi-lateral agreements do include ‘necessity tests’ to help smooth trade barriers away, many more than NAFTA. WTO GATS Article V was a comparative advantage document between nations for economic integration, Article VII addressed de jure non-discrimintory issues, and VI.4 is to address domestic regulation through ‘necessity tests’ that the nation must prove are ‘efficient’ or not ‘more burdensome than necessary’. The burden of proof is on the member, not the WTO. Interesting approach as a grand experiment, but apparently, as always with so much money involved, is being gamed as well.

Free is in the eye of the beholder.

What is going to happen in globalization is well on the way, and promises many benefits, but is it sufficient to say the Hand will provide?

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This post was by Reader Dan