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Beyond the WTO
Alternatives to Economic Globalization

A Preliminary Report
by a Task Force of the International Forum on Globalization

Release Date: November 26, 1999
(Full Report will be issued June 2000)

Task Force members: Debi Barker, Maude Barlow, Walden Bello, Agnes Bertrand, Brent Blackwelder, John Cavanagh, Tony Clarke, Edward Goldsmith, Randy Hayes, Colin Hines, Martin Khor, Andy Kimbrell, David Korten, Sara Larrain, Jerry Mander, Victor Menotti, Anuradha Mittal, Helena Norberg-Hodge, Mark Ritchie, Vandana Shiva, Steve Shrybman, Lori Wallach.


CONTENTS:

  1. Principles of an Alternative Agenda
    1. Democracy/Popular Sovereignty
    2. Favoring the Local
    3. Ecological Sustainability
    4. Economic Human Rights
    5. Food Security and Food Safety
    6. Certain Goods and Services Should Not Be Traded and Should Not Be Subject to Trade Agreements
    7. Equity
    8. Cultural, Biological, Economic and Social Diversity
  2. Views on Global Institutions: Internationalism, Not Globalization
  3. The Future of the IMF, the World Bank, and the WTO
    1. Principles
    2. Finance and the IMF
    3. Production and the World Bank
    4. Trade/Investment and the WTO

Special thanks on this preliminary report to John Cavanagh and Sarah Anderson of the Institute for Policy Studies.
Comments on this preliminary report can be emailed to John Cavanagh: jcavanagh@igc.org


Introduction

For over half a decade, the International Forum on Globalization (IFG) has convened some of the world's leading critics of corporate-led economic globalization. IFG teach-ins, newsletters, pamphlets, and declarations have spelled out, in great detail, the dangers of the recent shift in global rules in favor of global corporations and against people and the environment everywhere.

Since the IFG's creation in 1994, the most frequent question asked by those who enter the globalization debate is: "If you are opposed to the World Trade Organization (WTO) and the current set of global rules, then what are you for?" In June 1999, twenty-two IFG Board members and associates from North and South gathered in Washington, D.C. and spent three days answering this question. This pamphlet is the first result of the IFG "alternatives" task force deliberations. It offers principles to undergird an alternative set of rules and institutions that would foster more dignified work, healthy communities, and a cleaner environment. It then spells out what kind of institutions at different levels of governance could be built upon these principles.

This pamphlet is a work in progress. Based on reactions to it, discussions at the WTO Ministerial in Seattle, and further meetings of the IFG "alternatives" task force, a longer, more detailed version will be issued in 2000. We welcome reactions and inputs.

I. Principles of an Alternative Agenda

The current organizing principles of the regulatory institutions of the global economy are narrow and serve the few at the expense of the many and the environment. Economic growth has been the central goal of the International Monetary Fund (IMF), the World Bank, and the General Agreement on Tariffs and Trade (GATT), as well as its successor, the WTO. The expansion of international trade and investment has been viewed as an end in itself. The governing formula of the past half century has been: free trade and investment will bring prosperity, which will bring democracy. This formula has guided the declarations of U.S. presidents from Truman to Clinton as well as the policy pronouncements of most leaders the world over, particularly since the early 1980s. The persistent mantra of corporate and government leaders alike has been that the necessity of remaining competitive in a global economy requires governments to cut regulations and to encourage the most favorable climate for foreign investment, often at the cost of worker rights and environmental integrity. In the words of Council of Canadians chair Maude Barlow: "Stateless corporations have given rise to corporate states".

The "free market" paradigm is anything but free. Trade and investment are governed by increasingly complex rules that favor corporations over everyone else. And, the "free market's" beneficiaries are increasingly few. Even "consumers," touted by free traders as the greatest beneficiaries, often find that goods produced in countries with exploited workers and lax environmental enforcement are not cheaper because large firms that dominate a market can keep prices high. The big losers have been workers whose wages and benefits are bargained down by mobile firms. And, in ways that the IFG spells out in other publications, corporate-led globalization has undermined the environment, equity, financial stability, healthy communities, food safety and security, and cultural diversity. Indeed, it is threatening the bedrock of democracy.

These adverse impacts are pulling millions of people into diverse streams of a global river of citizen backlash to globalization. These movements have pressed to stop certain aspects of globalization and to slow down others. They are pressing for new rules and new institutions to govern global economic activity. And, inevitably, they are branded by free trade proponents as "protectionists," a moniker that is deployed as a crude insult.

A word on protectionism. The alternatives that we present in this document and that we advocate in our work are varied and cannot be reduced to a single term. We reject the traditional notion of "protectionism" in that we believe that trade of many goods and services as well as foreign investment can be positive under the right terms and rules. At the same time, we often use the verb "to protect" to refer to the many gains in local, state, national, and global legislation that "protect" local communities, the environment, viable food systems, the health and safety of workers, and the diversity of cultures. We also point out that most current global economic rules and institutions "protect" global corporations at the expense of others.

Healthy societies are rooted in certain core principles. We outline eight core principles which, we argue, economic policies, rules, and institutions should seek to further:

A. Democracy/Popular Sovereignty

Democracy flourishes when people organize to protect their communities and rights and hold their elected officials accountable. For the past two decades, governments have transferred much of their sovereignty to the hands of global corporations. We advocate a shift from governments serving corporations to governments serving people and communities, a process which is easier at the local level but vital at all levels of government.

B. Favoring the Local

Economic globalization entails first, and foremost, de-localization and disempowerment of communities and local economies. A high percentage of people on the earth still survive through local, community-based activities: small scale farming, local markets, local production for local consumption. This has enabled them to remain directly in control of their economic and food security, while also maintaining the viability of local communities and culture. Even in developed countries, most jobs have traditionally been connected to local economic production. Economic globalization is rapidly dismantling this, strongly favoring economies based on export, with global corporations in control. This brings destruction of local livelihoods, local jobs, and community self-reliance.

It is therefore necessary to reverse directions and create new rules and structures that consciously favor the local, and follow the principle of subsidiarity, i.e., whatever activities can be undertaken locally should be. Whatever power can reside at the local level should reside there. Only when additional activity is required that cannot be satisfied locally, should power and activity move to the next higher level: region, nation, and finally globalized trade and communications. Such rules as "site here to sell here" and grounding of capital locally should be codified. Economic structures should be designed to move economic and political power downward toward the local, rather than in a global direction. (In Europe, calls by IFG members and others for globalization to be replaced by more emphasis on protecting and rebuilding local economies has had its first political success. United Kingdom Green Members of the European Parliament were elected in 1999 on a manifesto that called for the "Protect the Local, Globally" route to localization.)

C. Ecological Sustainability

Economic globalization is intrinsically harmful to the environment, as it is based on ever-increasing consumption, exploitation of resources, and waste-disposal problems. One of its most important elements, export-oriented production, is especially damaging as it directly increases global transport activity, fossil fuel use, refrigeration and packaging, while requiring very costly and ecologically damaging new infrastructures: ports, airports, dams, canals, etc. It also accelerates conversion to industrial-style agriculture with corresponding increases in pesticides, water and air pollution, and biotechnology. Such elements, combined with many other wasteful aspects of global trade, are also powerful contributors to the problems of global climate change, ozone depletion, loss of habitat, and unprecedented levels of pollution. Viable alternatives must be rooted in the principle of ecological sustainability.

D. Economic Human Rights

In 1948, governments of the world came together to adopt the United Nations Universal Declaration of Human Rights, which established certain core rights, such as "a standard of living adequate for ...health and well-being..., including food, clothing, housing and medical care, and necessary social services, and the right to security in the event of unemployment." Much of the past half century has been a struggle by people to press their governments to advance these rights. These rights remain as central to human development today as they did 51 years ago. The goal of trade and investment should be to enhance the quality of life and the respect of core labor, social, and other rights.

E. Food Security and Food Safety

Communities and nations are stable and secure when people have enough food, particularly when nations can provide their own food. People also want safe food, a commodity that is increasingly scarce as global agribusiness firms spread chemical- and biotech-intensive agriculture around the world.

Some of the strongest citizen movements around the world are now fighting the juggernaut of globalized industrial agriculture. Monopoly control of food and seeds among a small number of corporations now threatens millions of farmers and tens of millions of peoples' food security and safety. Global rules of trade now strongly favor the industrial agriculture model, rapidly destroying small scale farmers who mainly produce staple foods for local consumption. Globalized industrial agriculture is driving small farmers off their lands and replacing them with pesticide and machine intensive, monocultures producing luxury items for export, at great environmental and social cost. And, biotechnology brings a host of new ecological and health risks.

Any new rules of trade must recognize that food production for local communities should be at the top of a hierarchy of values in agriculture. Local self-reliance in food production, and the assurance of healthful, safe foods should be considered basic human rights. Shorter distances and reduced reliance on expensive inputs which must be shipped over long distances are key objectives of a new food system paradigm.

F. Certain Goods and Services Should Not Be Traded and Should Not Be Subject to Trade Agreements

The current trend of corporations placing all goods in the market is unhealthy. The global community has agreed that trade in endangered species and in toxic wastes is wrong and global conventions have been signed to end this trade. Many countries have created national parks and, in effect, told corporations that the trees in the parks are not to be traded. These examples are indicative of a growing debate over which goods and services should not be subject to trade and other market arrangements.

The debate needs to be spread further with the goal of both preserving the "global commons" (including water, seeds, the genetic structures of life, as well as culture) and protecting people against pernicious goods (e.g., drugs, toxics, arms). In Canada, for example, activists have made a strong case that the bulk export of water will deplete critical water resources. They also want portions of Canadian culture off limits to global corporations. In India, activists argue that certain realms of "collective property" such as seeds should not be subject to patenting by global corporations. Globally, there is a growing consensus that no life form should be patented. Likewise, we would assert that certain goods should not be traded if the process under which they are produced violates basic labor or environmental rights and standards.

G. Equity

Texas populist Jim Hightower often quotes his father: "Son, everyone does better when everyone does better." Greater equity reinforces both democracy and healthy communities. Economic globalization, under the current rules, has widened the gap between rich and poor countries and between rich and poor within most countries. The social dislocation and tension which result have become one of the greatest threats to peace the world over.

H. Cultural, Biological, Economic and Social Diversity

A few decades ago, it was still possible to leave home and go somewhere else where the architecture was different, the landscape was different, the language, lifestyle, dress, and values were different. Today, farmers and filmmakers in France and India, and millions of people elsewhere, are protesting to maintain that diversity. Tens of thousands of communities around the world had perfected local resource management systems that worked, but that are being undermined by corporate-led globalization. Cultural, biological, social, and economic diversity are central to a dignified, interesting, and healthy life.

II. Views on Global Institutions: Internationalism, Not Globalization

The principle of subsidiarity, that decision-making should start with strong local institutions and then work up toward regional, national, and global institutions, still requires effective global institutions.

The world needs effective global institutions that will:

A. Prevent the spread of disease, conflict, and harm to the environment across borders.

For example:

The UN World Health Organization has been central to the global battle against the spread of HIV and AIDS, as well as dozens of other deadly diseases; it has helped countries protect themselves against the marketing incursions of tobacco, alcohol, and infant formula corporations.

In Rwanda, the Balkans, East Timor, and other societies torn with conflict, a stronger and more ready United Nations diplomatic infrastructure and peacekeeping force could have prevented countless atrocities.

B. Set norms on internationally agreed upon rights and standards which are largely implemented at the national level:

The UN International Labor Organization, through a dialogue among governments, representatives of organized labor, and corporations, has hammered out over one hundred conventions that define internationally recognized worker rights. A great deal more work is needed on how to strengthen national labor law and enforcement of existing laws through national, regional, and global mechanisms.

The United Nations Development Programme has created an alternative measure of human welfare called the Human Development Index, which offers a much more comprehensive measure of a society's accomplishments than Gross National Product (GNP). While weak on environmental criteria, the index offers peoples' movements and governments a new measure against which to measure advancement.

Author David Korten has begun to enumerate a strengthening of the United Nations Economic and Social Council (ECOSOC) that could provide a strong international anti-trust regime; require global corporations to adhere to the highest standards regarding human, labor, and environmental rights; and provide guidance on other global economic reforms.

In addition to these UN initiatives, over 200 international environmental treaties begin to lay out environmental rights and standards which nations aspire to achieve, and begin to sketch out enforcement mechanisms.

However, the trends of the past two decades have progressively weakened the United Nations system while infusing new powers into the IMF, the World Bank, and the WTO. The U.S. government, after being the shepard of the United Nations' creation in 1945, has largely undermined its efforts to carry out these functions since the advent of the Reagan administration in 1981. In the name of the free market and efficiency, the Reagan administration systematically undermined UN agencies and threatened to cut off funds to stifle activity that was viewed as interfering in the market. This is not to suggest that the United Nations has been free of corruption and that resources have not been wasted. As with most institutions of governance, much greater accountability to those it serves will enhance its effectiveness.

Since the early 1980s, the refusal of the U.S. Congress (until earlier this month) to pay the full dues owed to the United Nations has created a permanent crisis atmosphere in what should be the most important and stable international body. While Exxon and General Motors, not to mention the World Bank and IMF, are flush with resources, the United Nations is starved from fulfilling its mandate. What a tragic perversion of global priorities

III. The Future of the IMF, the World Bank, and the WTO

If strengthening some United Nations agencies would enhance human security and environmental health, what should be done with the three agencies that have become the enablers of corporate-led globalization: the IMF, the World Bank, and the WTO? The answers to this question becomes clear in each instance if one asks: what are the needs in each of the realms in which these institutions function: global finance, production, and trade/investment?

A. Principles

Certain principles govern our approach to global economic and environmental institutions, principles which grow out of the eight core principles laid out at the outset of this document:

1. Subsidiarity and democracy: Global institutions should seek only to do what cannot be done at lower levels of government. All global institutions should be open, transparent, and democratic.

2. Respect lower levels of government: Global institutions should not undermine national rules, unless those rules violate fundamental human rights. Hence, a global trade body should not have the power to rule that a nation's environmental law is an "unfair barrier to trade." No global body should challenge a nation's imposition of capital controls. At the same token, countries that allow slavery or bonded labor should not be able to trade freely goods made under those conditions.

3. Stronger global institutions are needed to fight global harms: Stronger global environmental agreements with enforcement powers are needed.

4. More limited powers and mandates for the IMF, World Bank, and WTO will create more space for healthy development: Walden Bello points out that many countries experienced their most vibrant development (Latin America in the 1930s; East Asia in the 1960s) when global economic institutions were weak or non-existent. Bello argues that strong rules protect the strong and weak rules advantage the weak. The IMF, World Bank, and the WTO have primarily been protecting strong corporations over people and the environment. Stronger regional institutions in Asia, Latin America, and Africa would allow for weaker global institutions.

5. It's the Development Model, Stupid: The IMF, World Bank and WTO have been promoting a development model that places a premium on maximum trade and investment. This model has been devastating for workers, the environment, equity, and financial stability. (Harvard economist Dani Rodrik has pointed out that there is not even a statistical correlation between trade and investment liberalization and economic growth.) Alternative models that emphasize domestic production for domestic markets and that refocus trade and investment on serving national needs will be more resilient and sustainable.

With these principles in mind, we turn to the three main realms of global economic activity: finance, production, and trade/investment, in order to suggest new roles for the governing institutions.

B. Finance and the IMF: An Emerging North-South, Citizens-Labor Agenda on Global Finance

(The recommendations in this section are drawn from the December 9-10, 1998 Washington, D.C. conference on "Toward a Progressive International Economy," sponsored by Friends of the Earth, the International Forum on Globalization, and the Third World Network.)

PRINCIPLES

1. Reorient financial flows from speculation to long-term investment: The rules and institutions of global finance should discourage all speculation and encourage long-term investment in the real economy in a form that supports local economic activity, sustainability, equity, and poverty reduction.

2. Reduce instability and volatility: The rules and institutions of global finance should seek to reduce instability in global financial markets.

3. Enhance local and national political space: The rules and institutions of global finance should allow maximum space for national governments to set exchange rate policy, regulate capital movements, and eliminate speculative activity.

4. Keep private losses private: Governments should not absorb the losses caused by private actors' bad decisions.

5. Address the imbalance between growing private flows and shrinking public flows: The rules and institutions of the global economy should seek to decrease private speculative flows while increasing those public flows that support sustainable and equitable activities.

INTERNATIONAL/MULTILATERAL AGENDA

1. Create an International Bankruptcy Mechanism (to reduce "moral hazard") Outside the IMF: An international debt arbitration panel should be established to ensure that financial crises and sovereign debt obligations do not place undue burdens on countries and also to prevent a liquidity crisis from becoming a solvency crisis. When sovereign debt service threatens the welfare of a country's people, the panel would restructure and/or cancel debts so as to ensure that important social services are not compromised in an effort to meet debt obligations.

2. Substantial Debt Reduction Detached From IMF and World Bank Conditions: Currently, debt payments cripple the ability of many developing countries to invest in development. Any resolution to this crisis must include an expansion of the resources available, and the countries eligible, for bilateral and multilateral debt relief. This relief should not be conditioned on IMF and World Bank structural adjustment programs and it should allow countries to dedicate sufficient resources to health care, education, social services, and environmental protection.

3. IMF Reform: Member governments should insist that the IMF enforce Article 6 of its own charter, namely that the IMF should oversee capital controls, not capital account liberalization, and that it should end structural adjustment. With the establishment of the bankruptcy mechanism above, the IMF need only retain minimal capability as lender of last resort and gather and publish international economic data. Decision-making by the IMF board needs greater transparency and accountability. This could be fulfilled, in part, by introducing greater democracy in voting and publicly releasing all information about its operations.

4. Establish Speculation Tax: The governments of the world's major currencies should levy a tax on certain international transactions so as to discourage speculative and herd behavior in international capital flows.

REGIONAL AGENDA

1. Regional Crisis Funds: We support the creation of regional funds outside IMF control to ensure a quick response to crises while maintaining regional sensibilities and interests.

NATIONAL AGENDA

1.Retain the Right to Apply Speed Bumps and Capital Controls: The rules and institutions of the global economy should allow maximum space for national government policy making to regulate the amount, pace and direction of capital movements.

2. Eliminate Short-term Manipulative Instruments: National governments should set regulations and incentives on cross-border transactions so as to eliminate capital flows that are entirely speculative (e.g. gambling on market fluctuations as differentiated from hedging risk) and can undermine the real economy.

3.Maintain Stable Exchange Rate Regimes: National governments should strive to reduce the volatility that has characterized exchange rates since the collapse of the Bretton Woods arrangements in the early 1970s. Any international regime should reinforce the ability of governments to maintain this stability.

LOCAL AGENDA

1.Democratize Mutual Funds and Pension Funds: Local and national regulations and taxes should be structured in such a way so as to encourage local investment and control of local capital. Local education initiatives should also inform citizens about the power of using their assets.

C. Production and the World Bank

The World Bank began with a lofty and worthwhile mandate to provide low interest, long-term loans to help rebuild a world destroyed by world war. Confined to this mandate, it could have done much more good than harm.

Unfortunately, the Bank has evolved into a key purveyor of the corporate-led "free trade and investment" development paradigm. It has become an institution that subsidizes large energy and agribusiness corporations to break into new markets. These corporations have been the prime beneficiaries of hundreds of billions of dollars of low interest World Bank project loans. Other corporations have benefited from World Bank loans which build roads, electrical grids, and power plants which too often serve global corporations and not the local population. Since 1980, the World Bank has also used its considerable leverage to press for the "structural adjustment" of developing country policies towards privatization, deregulation, and trade and investment liberalization. Regional development banks along the World Bank model have been set up for Latin America, Asia, Africa, and Europe and have largely copied this failed model.

These institutions fail in part because they push the wrong development models and in part because they are simply too large to respond effectively to the needs of people on the ground. It is true that people in their individual capacities and small entrepreneurs often need loans. Yet the World Bank and its regional affiliates are ill-equipped to meet these needs. Much smaller regional, national, and local institutions that respect basic democratic principles and are shaped to meet local needs can do a much better job.

D. Trade/Investment and the WTO

The most fundamental problem with the global trade order is the mandate of the governing institution: the World Trade Organization. Ironically, it is the one institution with roots in a dialogue over at least some of the eight principles laid out earlier. A very healthy debate was launched after World War II about the need for a global trade and investment institution that could help generate full employment and protect worker rights around the world and that could help protect against what were then referred to as "global cartels," small groups of corporations that were gaining too much power in one sector. These broad-based goals where enshrined in a Havana Charter of a proposed new body: the International Trade Organization (ITO). The U.S. Senate raised objections to this broad mandate, and the ITO never opened its doors. Instead, governments created a smaller body whose mandate was centered on reducing tariffs on trade in manufactured goods: the General Agreement on Tariffs and Trade (GATT). This body, with its narrow trade expansion mandate, evolved into an institution that promoted corporate rights over the broader social agenda. Without a broader social and environmental mandate, increased trade after World War II benefited some but at the expense of many.

In 1994, the expansion of the GATT mandate into a much more powerful WTO deepened the imbalance. The WTO took on increased powers in areas unrelated to trade. The WTO limits governments' ability to put controls on investment and it gained new powers to enforce its interpretation of trade and investment rules through sanctions. It gained new powers to protect the so-called trade-related "intellectual property rights" of corporations. With a series of rulings that negate national environmental legislation, the WTO has become a nightmare for environmentalists and has undermined democratic development around the world.

Among the organizations and individuals in the IFG community, there is a unified vision that the mandate and powers of the WTO should be significantly reduced in accordance with the following observation of Indian scholar/activist Vandana Shiva: "The future is possible for humans and other species only if the principles of competition, organized greed, commodification of all life, monocultures, monopolies, and centralized global corporate control of our daily lives enshrined in the WTO are replaced by principles of protection of people and nature, the obligation of giving and sharing diversity, decentralization and self-organization enshrined in our diverse cultures and national constitutions."

IFG participants have called for no new issues in the WTO, no new round of trade talks, no further liberalization negotiations, and that a democratic review of the last round be undertaken. In addition, IFG participants recommend the following fundamental changes in a global trade body:

  • the mandate should reflect the principles as stated above by Shiva.
  • the body's decision making should be democratic: decisions should derive from majority voting, not the current WTO "consensus" model where the rich countries dominate; representatives of civil society should be at the table.
  • no patenting of life forms and no intellectual property regime.
  • the subordination of global trade and investment rules to national and local governments' decisions about conditions on investment within their borders. Every government has the right to set development priorities, protect the commons, set performance requirements on investment, control financial speculation and curb capital flight.
  • the subordination of global trade rules to global environmental agencies.
  • the elimination of agriculture from global trade rules to allow countries to pursue food security and sustainable farm policies.

Some within the IFG go a step further and advocate the elimination of the WTO altogether and its replacement with stronger regional bodies that facilitate cross-border dialogue and interchange. Strong local, national, and regional bodies that encourage investment in dignified work, healthy communities, and a clean environment would go a long way toward fulfilling the needs of the public. Cross border trade and investment in this context would support sustainable communities rather than undermining them.

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