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Georgetown International Affairs Journal By Dr. Robert Cox and Daniel A. Seligman Economic globalization is the defining characteristic of our moment in history. Powered by a revolution in communications, electronics, and transportation, global trade and investment have knit the world together as never before -- erasing political, cultural, and environmental boundaries that have evolved over centuries, millennia, or even aeons. Regardless of whether or not one considers globalization "inevitable", the process of global economic integration is clearly driven by extremely powerful technological and economic forces with considerable momentum behind them.In the face of economic globalization, President Clinton invested considerable political capital in negotiating and winning approval for a sweeping new body of international trade law that could secure global advantages for the United States and its companies. The effect of the new generation of trade rules and institutions has been to spur the "creative destruction" of the unbridled global market; while globalization has produced staggering wealth, it has also wreaked havoc on the global environment and on the quality of life for many. In the process of pursuing new trade agreements, the President broke with the traditional view of government in advanced developed countries as a cushion between society and the market. The President acknowledged this tradition by frequently invoking the "human face" of trade to explain the real-world benefits of his pro-globalization policies. But the "human face" of trade is not always smiling. We need to understand why. Rodolfo Montiel: the Human Face of Trade Consider the case of Rodolfo Montiel, a peasant farmer from the mountainous state of Guerrero, Mexico. Montiel and his colleague, Teodoro Cabrera, were illegally detained, beaten and tortured in May 1999, by Mexican soldiers. They were forced to confess to trumped up charges of possession of illegal weapons and planting marijuana. Sierra Club and Amnesty International believe that the arrest and conviction of the two environmentalists stem from their efforts to stop the rampant logging in the southern state of Guerrero, Mexico. In July of this year, a judge found Montiel guilty of illegal weapons possession and drug trafficking, sentencing him to seven years in prison, while Cabrera received ten years.In fact, Montiel's "crime" was to challenge powerful local bosses and transnational logging companies that had teamed up to clear-cut the ancient forests on the rugged mountains surrounding his village. Montiel's troubles started in 1995 when Boise Cascade, the Idaho-based timber giant, set up operations in Guerrero, Mexico, lubricated by the North American Free Trade Agreement (NAFTA). Under NAFTA, Mexico was required to open up traditional communal peasant land-holdings for commercial exploitation. As a result, foreign timber companies came calling, eager to get their hands on the 80 percent of Mexico's forests controlled by such communal farmers. In Mexico, Boise Cascade rented two mills and contracted with two local companies to supply them with logs from the mountains. Reckless and rampant clear-cutting ensued, drying up the river that supplied drinking water and irrigation. Protests eventually led to Boise Cascade’s exit from the area due to “unreliable sources of lumber.” Montiel, one of the founding members of the Organization of Campesino Environmentalists of the Sierra de Petatlán and Coyuca de Catalán, was a recipient of this year's Goldman Environmental Prize for his efforts to organize farmers to oppose the logging. The Challenge of Globalization In the United States, commentators such as Thomas Friedman, author of "The Lexus and the Olive Tree", identify the new, global economy with new, high-speed communications technologies that have fostered a new knowledge-based economy. Super-empowered with an unprecedented wealth of information, global investors -- in Friedman's phrase, the "electronic herd" -- scour the planet for new opportunities, choosing those countries with the most "business-friendly" climate.In cases, such as Guerrero, Mexico, “business-friendly” implies that countries are willing to open their resources to rampant exploitation and environmental destruction, and to tread on individuals such as Rodolfo Montiel who would resist. As wondrous as the new knowledge-based, global economy might seem, the products bought and sold in everyday commerce are still fashioned from resources extracted at enormous ecological cost from the earth. Crude logging and mining operations, not just the light-footed "electronic herd", scour the earth for natural resources, often aided and abetted by the new technologies. For instance, Boise Cascade identified Guerrero's rich timber stores through use of exotic satellite mapping technologies. The result is rising worldwide consumption of natural resources and clashes over industrial mining, oil drilling, and logging as communities around the world suddenly find giant global corporations invading and destroying their lands. From Royal Dutch Shell's oil fields in Nigeria, to Freeport McMoran's mines in Irian Jaya, Indonesia, to the mountains of Guerrero, Mexico, extractive industries and the global economy that they serve are wreaking environmental havoc and creating conditions for the abuse of human rights across the planet in some of the world's most fragile ecosystems. The "human face" of trade is not just the smiling face of the lucky few who land good jobs in high-tech facilities; it is also the anguished faces of Rodolfo Montiel and the countless others confronting global corporations freed from any bonds of community or accountability. Farmers who once sufficiently produced for local communities are now being forced to serve global markets with fluctuating demand. The consequences of globalization for the environment are not good. Global primary forest cover has been reduced by more than half as deforestation spurred by the global timber trade accelerates. Global warming is disrupting weather patterns and melting the polar icecaps, yet we burn more and more fossil fuel every year. Nearly 17 species of plants and animals become extinct ever hour largely due to habitat destruction. Globalization, if we are lucky, will raise average incomes enough to pay for cleaning up some of the mess that we have made. But before we get there, globalization could also destroy enough of the planets basic biological and physical systems that prospects for life itself will be radically compromised.
The Clinton Administration’s Response The world's leading industrial nations responded to the birth of the "electronic herd" not by taming it, but by spurring it to run wild. A similar response followed the dawn of the industrial revolution early in the 19th century. In the face of new industrial technologies such as the spinning jenny, the steam engine and improvements in agriculture technology, Britain enclosed common lands and drove its peasants from the land to work in the mines, smelters, and factories.In response to the savagery of the unbridled market and to the demands of populist social movements, by the late nineteenth century, industrial country governments began constructing a dense safety net. Now, one hundred years later, the world's leading industrial governments, lead by the United States, are debating the degree to which they will undo, retool, or roll back these social safety nets. They are doing so to compete more effectively for the attention of multinational corporations and global investors Much of political debate in the United States and other industrial countries over the last decade concerns the nature and extent of this deregulation. The negotiation of a new generation of global trade agreements is the most dramatic expression of the pressure to deregulate. "Trade agreement" is probably a misnomer for these legal instruments. In fact, they deal with much more than tariffs and quotas, the traditional stuff of trade policy. The North American Free Trade Agreement (NAFTA) and the Uruguay Round agreements that established the World Trade Organization (WTO) enforce a thick code of rules that set sharp limits on the ability of governments to legislate and to regulate in the public interest. The objective of the new trade agreements is to remove national laws, regulations, and administrative procedures that complicate international trade or investment. To that end, democratic principles have been suspended. Disputes between nations are heard by tribunals of trade experts who meet behind closed doors. These tribunals lack the due process and conflict of interest guarantees that are customary in US courts. Citizens have no standing to participate; instead challenged laws are defended by trade agencies with a vested interested in eliminating “trade barriers”, not defending public health or the environment. Countries are legally bound to comply with adverse rulings. If they do not, sanctions are authorized. Unfortunately, the guiding principles of the new global trade regime conflict with fundamental principles that support laws protecting health and the environment. The effect has been to weaken health and environmental safeguards that have come under review of the new trade rules. Consider the following examples. After an adverse ruling by the WTO in 1998, the U.S. State Department weakened regulations to protect endangered sea turtles from drowning in shrimp nets. Before the ruling, U.S. regulations required all shrimp-exporting nations that traded with the United States to equip their shrimp trawlers with "turtle excluder devices" (TEDS). These simple devices could save 97 percent of the 150,000 sea turtles that drown in shrimp nets each year. But under international trade rules, nations are limited from regulating imports based on how they are harvested, made, or produced. After the WTO ruling, the State Department, therefore, modified the regulations to apply only to those individual foreign trawlers selling shrimp to the U.S. market. The new regulations will push the sea turtle closer to extinction because they are unenforceable. Unless all trawlERs are equipped with TEDs, turtle-deadly shrimp can easily pass as turtle-safe. Canada was forced to roll back its ban on MMT, a gasoline additive and neurotoxin used to reduce engine knock. MMT’s U.S. manufacturer used a NAFTA dispute process to charge that Canada’s ban had hurt its profits, violating NAFTA provisions barring the partial “expropriation” of investor property. Under the precedent established in this case, governments could be forced to pay injured investors any time they seek to protect the environment or to pursue any other public purpose. If these investor rights were expanded worldwide, as US industry lobbyists hope to do, they could be used to block further progress at protecting the environment. The United States has levied sanctions authorized by the WTO against the European Union for failing to lift its ban on imports of beef treated with artificial growth hormones. A WTO panel ruled that Europe's ban lacked a scientific basis. Under WTO rules, countries must prove conclusively that a product is risky before limiting its import. Unfortunately, in most cases science cannot establish conclusive proof of a product's risks. In these cases, governments may invoke the precautionary principle -- regulating to protect the public in the absence of conclusive information. Europe's precautionary approach to hormone-treated beef is based on scientific evidence. Even though the evidence might not be conclusive, many would find it persuasive. Some scientists believe that the excess hormones in the human diet are responsible for developmental changes in children, such as the early onset of menstruation in girls that may be contributing to rising rates of breast cancer. Developing country governments have often sided with the US Trade Representative (USTR) in rejecting calls for environmental reform of international trade rules. Now key developing countries may be learning that they too have a stake in trade rule reform. For instance, Chile, a paragon of free trade thinking, is now alarmed to find the European Union is threatening a WTO challenge against measures it has adopted to protect dwindling stocks of swordfish in its ocean fisheries. And Mexico, a "model" free trade champion, may reconsider its opposition to NAFTA reforms after a recent dispute tribunal ordered it to compensate a US corporation that sought to operate a toxic waste incinerator that violated Mexican state environmental law. New trade agreements now under negotiation may further erode government authority to protect public health and the environment. For instance, the Clinton administration has been negotiating a Free Trade Area of the Americas (FTAA) that would essentially expand NAFTA-like rules to the entire Western Hemisphere. Although a draft text has not been released publicly, there are indications that FTAA could include the NAFTA provisions that allow private investors to sue governments over actions that have the effect of reducing property values. Such provisions would, for instance, allow Citgo Gasoline, owned by a Venezuela state-owned oil company, to sue the United States if it adopts new regulations to prevent leakage from gasoline storage tanks. US industry views adoption of investor-state dispute resolution in the FTAA as a stepping stone to adoption of the same principles at the global level. The New Populism On November 30, 1999, trade ministers gathered in Seattle for the Third Ministerial of the WTO were confronted by more than sixty thousand demonstrators. Most of the demonstrators rallied and marched in permitted activities organized by labor unions and environmentalists. But at least twenty thousand locked arms and sat down in the streets surrounding the Seattle Trade and Convention Center, blocking ministers from entering the building and preventing the Summit from beginning.The so-called Seattle Coalition, the trade unionists, human rights activists, environmentalists, family farmers, and youth, who rallied in Seattle have profoundly shaken the politics of international trade in the United States and around the world. A Business Week poll found the public approving of the demonstrators by 52 to 39 percent, a respectable showing considering the disproportionate coverage given to a handful of "anarchists" who smashed several storefront windows. The "Seattle coalition" has more staying power than is widely recognized. While it is true that trade unionists and environmentalists have sometimes clashed in the past, differences are put aside in the globalization debate. Both movements, after all, are defenders of "place" -- whether working class communities or endangered species habitat -- in the face of the corrosive "no where" that is globalization. Both movements are also built on the power of organized citizens acting through the institutions of democratic society. As such, each movement recognizes a mortal threat in a globalization process that aims to reduce citizens to mere consumers, and governments to mere servants of global investors. The Seattle Coalition is also enduring because it has been strategically constructed through a series of bitter legislative battles. The coalition first came together in the unsuccessful fight against NAFTA in 1994. It learned how to win in the fights against "fast track" trade negotiating authority in 1997 and 1998. With the energy of a youth movement added to its core of trade unions and environmental groups, the Seattle Coalition is a force to reckon with in coming years. The President's victory in normalizing trade relations with China doesn't change this fact. Trade votes that focus on individual countries or regions cloud the larger debate about the terms of globalization with tangential issues about the nature of relations with particular countries. As such, the China vote says little about the outcome of future legislative fights over broad trade policies, such as trade negotiating authority or the FTAA. If trade policy is to move forward in the future, it will, therefore, have to temper the political interests of the “electronic herd” with the populist impulse of the Seattle Coalition. The Future of Globalization Policy President Clinton talked a good deal about "putting a human face" on trade, implying a desire to ensure a social safety net alongside his pro-free trade policies. In practice, the administration's trade policy, weighted down by a hardened trade policy establishment, differed little from the policy of the Republican leadership.The President talked urgently about the need to make the WTO more open and democratic. Yet his position had little credibility because US trade policy is itself so secretive. For instance, after being lobbied by the American Electroncis Association (AEA), the administration intervened in Europe to block proposed new standards to reduce tosic waste from electronics equipment. The USTR says that it was merely exercising US rights under the WTO. But it never consulted with environmentalists before deciding to oppose environmental safety rules that could prevent tons of lead and other hazardous materials from entering Europe's environment ever year. No doubt, the AEA sought to kill the standards to ensure that they would never be emulated in the US market; the USTR was all too willing to serve private corporate interests at the expense of the public interest. The President promised to make trade rules environmentally sensitive, but his administration advocated international investor rules that would allow corporations to sue governments for property "takings." When similar ideas were proposed by Newt Gingrich as legislation in congress as part of his "Contract with America," the President rightly threatened a veto. When the same policies were embedded in trade agreements such as NAFTA, the President signed them into law. When US environmental laws were successfully challenged as international trade barriers, the administration consistently chose to weaken the laws rather than pay penalties to keep them in place. For instance, new regulations adopted after the WTO ruling against US sea turtle protections have severely compromised the laws, pushing an endangered species closer to the brink of extinction. No doubt, the administration adopted a policy of compliance with trade rules at the expense of the environment to increase the international legitimacy of the rules and to reinforce its own claims for compliance by foreign governments. On key issues, time and again, the White House's rhetoric did not match its policies. The President never pursued a consistent trade policy reflecting the values of the social safety that he espoused. Conditional Opposition Sierra Club policy does not seek to reverse globalization nor do we oppose trade that is consistent with strong, environmental, labor, and human rights protection. Our intent is to tame globalization by subjecting it to democratic and envronmental values. If trade policies on the table do not meet these standards, we believe that Congress and the administration should oppose them. Doing so is the only way to create an incentive for trade policymakers to offer more balanced alternatives the next time around.In fact, we believe that America can afford to be patient. There would be no fundamental economic loss if no more trade agreements were adopted in the near to medium term. After all, total world trade has been growing steadily at roughly twice the rate of global GNP for fifty years, with no sign of leveling off. Blocking new trade agreements would have little effect on this trend. The global environment, by contrast, is not doing so well. We can afford to do without trade agreements that bring us more goods we do not need at the expense of the earth's life support systems on which all of humanity is utterly dependent. With that in mind, we propose the following program to the next Administration to make trade clean, green, and fair. These changes should be adopted before any expansion of trade rules. 1. Trade rule reform First, international trade rules should be reformed to ensure that trade does not expand at the expense of environmental protection.To become more responsible consumers in the global market, countries should be able to regulate imports based on how they are made. The way in which things are made or produced is the heart of environmental protection. A shrimp caught with nets that kill sea turtles should be treated differently than shrimp caught with nets that let turtles escape alive. To ensure that regulations of production methods are not abused to restrict trade needlessly, trade reules could require that regulations apply equally to foreign and domestic producers. Trade rules could also require that such regulations be imposed only after giving foreign governments an opportunity to comment on domestic regulations, and after an attempt to negotiate an international agreement. If these efforts fail after a reasonable effort, nations should be free to take action on their own. Trade rules, such as those of the WTO and NAFTA, should be changed to allow countries to regulate based on the precautionary principle. Countries should be allowed to regulate products based on a judgment about the preponderance of scientific evidence, even in the absence of foolproof science. To ensure that countries do not abuse the precautionary principle for protectionist purposes, a panel of independent scientific experts could authorize a precautionary approach in cases where there is a basis to think that risks are potentially high, or where the scientific uncertainty is too great. Eliminate the right of foreign investors to sue countries for compensation over loss of profits due to government regulations. To help governments establish a climate friendly to foreign investment, the WTO or another international body could publish non-binding guidelines on how to attract foreign investment. To enforce the guidelines, investors could simply resort to market principles -- and leave or avoid countries that ignore the guidelines. Beyond that, the right of investors to sue states for compensation represents an unnecessary and dangerous incursion on national sovereignty. 2. Democratize trade policymaking Second, trade policymaking and dispute settlement should be reformed to be transparent, to give all interested citizens the standing to participate, and to ensure the accountability of policymakers for their actions. Here's how: All trade agreements should be subject to a thorough environmental review. That review should involve the public in an early scoping of potential issues. It should cover all major trade agreements, regardless of the political or administrative inconvenience. And it should hold negotiators accountable to include the results of the review in final trade agreements. Regrettably, review guidelines developed by the Clinton administration fall far short of what is required. These guidelines should be replaced with a legally mandated review process modeled on the National Environmental Policy Act. US trade advisory committees should be opened to the public. Presently, more than 500 industry lobbyists are given closed-door access to trade policy makers through more than two dozen sectoral advisory committees. Through these committees, industry lobbyists influence US negotiating positions and shape government policy without any participation whatsoever of the affected public. The trade advisory system should be abolished or opened to all. The public should be thoroughly consulted before any action is taken to intervene in environmental laws of other countries. For instance, under current procedures, the USTR seeks public comment on new complaints in the WTO only after a decision to make the complaint has already been made. Given the risk that such proceedings can set anti-environmental precedents, the USTR should make decisions on whether or not to intervene against foreign environmental or health laws only after first consulting with the public through a federal register notice. Congress must find new mechanisms to hold the executive accountable for trade policies that serve the public interest. For instance, Congress could require that new trade agreements be certified by all effected committees of jurisdiction as having met key negotiating objectives before being considered on a "fast track" approval process. Certification would ensure that negotiators are held accountable to fulfill congressional mandates on such key issues as environmental or labor standards in trade agreements. Implementation of these ideas would help remove the chilling effect that trade rules now have on environmental protection. But by themselves they would do little to mitigate the destructive tendencies of economic globalization. For that, bold new initiatives are required. 3. Creating new international standards Recently several advisors to Vice President Al Gore's presidential campaign endorsed the concept of a Global Environmental Organization (GEO) to provide a forum for the negotiating of new multilateral pacts on environmental issues. The advisers intended the GEO to remove environmental issues from the WTO, safeguarding the trade agenda from "green protectionism" -- the use of environmental standards as trade barriers.The GEO idea is flawed, however, in several respects. First, environmentalists are involved in the trade debate because the rules of trade agreementS themselves cause environmental problems by subjecting legitimate environmental standards to attack as "trade barriers." Since trade agreements cause these problems, they must be remedied in the trade agreements themselves, not in a parallel institution. Second, the market access afforded by trade agreements could, in some cases, be used as a “carrot” to induce countries to move toward higher environmental standards. If environmental issues are separated from trade agreements and housed in a separate institution, we would discard a powerful incentive to develop strong environmental standards. Third, development of a strong GEO would require the investment of enormous time and political capital. If governments cannot develop and implement strong agreements to protect global biodiversity or to stop global warming, one doubts that these same governments have the will to develop a new global institution that is truly effective. 4. International Right to Know To start developing the fabric of international standards on which a strong GEO might later be based, we propose that the United States pursue an alternative, “bottom up” strategy. In particular, the next President should seek legislation requiring that the foreign operations of US companies publicly disclose information on the environmental impacts of new operations and on toxic releases of existing facilities. (In addition, companies could be required to disclose information on labor practices and conditions and security arrangements that might lead to abuse of human rights.) The information disclosed abroad should be the same as parent companies are required to disclose domestically. Foreign citizens should have access to US courts to enforce these standards. This disclosure policy, dubbed “International Right to Know” (IRTK), would have several benefits.First, IRTK would secure environmental results far faster than a GEO. Experience shows that facilities in the United States that were required to disclose toxic releases quickly reduced their emissions. No doubt the same would happen abroad. Second, IRTK would blunt charges of "eco-imperialism" that inevitably crop up in any discussion of international environmental standards. It would do so because IRTK would not impose costly substantive environmental standards on foreign governments. Instead, it would simply require environmental disclosure by US firms and their foreign subsidiaries. With this information in hand, foreign governments and communities would be in a much better position to fight for the substantive environmental standards that are right for them. Third, IRTK might also lead to strong international standards faster that traditional multilateral negotiations. American companies required to disclose their toxic releases will argue that IRTK would place them at a competitive disadvantage relative to foreign competitors. But once the standards were in place, the disadvantage would not last long. In short order, US companies would mobilize their foreign subsidiaries to lobby for adopting similar laws in the host countries of their competitors, ensuring a level playing field for all. CONCLUSION We believe that the responsible trade agenda that we advocate here would win wide public support if advocated by a new President. The American public is pro-trade. But polls consistently show that large majorities prefer trade that reflects strong environmental and labor standards.An environmentally responsible trade agenda is ultimately in America's interest. We can ill afford trade that fosters growth at the expense of the planet's life support systems. Environmentally responsible trade is ultimately in the interest of American industry. Many of our companies are the most environmentally sophisticated in the world. A global economy based on high standards would only put American industry at a competitive advantage. Finally, the responsible trade agenda we advocate here would put the elusive "human face" on trade. In particular, disclosure of potential environmental impacts by US companies investing abroad might have prevented the conflict in the mountains of Guerrero that lead to Rodolfo Montiel's arrest, torture and unjust conviction.
America is a great nation at the height of its political and economic power. Surely, it
can show the leadership to ensure a just global trading regime that serves the people and
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