Global Policy Forum

By Greg Palast

Three confidential documents from inside the World Trade Organization Secretariat and a group of captains of London finance, who call themselves the "British Invisibles," reveal the extraordinary secret entanglement of industry with government in designing European and American proposals for radical pro-business changes in WTO rules. One set of documents, minutes of the private meetings of the Liberalization of Trade in Services (LOTIS) committee were discovered by the Dutch think tank Corporate Europe Observatory. They record 14 secret meetings from April 1999 and February 2001 between Britain's chief services trade negotiators, the Bank of England and the movers and shakers of the Euro-American business world. Those attending the closed LOTIS include Peter Sutherland, International Chairman of US-based investment bank Goldman Sachs and formerly the Director General of the World Trade Organization. LOTIS is chaired by The Right Honorable Lord Brittan of Spennithorne Q.C., who, as Leon Brittan headed the European Union. He currently serves as Vice-Chairman of international banking house UBS Warburg Dillon Read.

Other LOTIS members include the European chiefs of US service industry giants Morgan Stanley Dean Witter, Prudential Corporation and PriceWaterhouseCoopers. LOTIS is an outgrowth of the self-styled, "British Invisibles," more formally known as the Financial Services International London group. They were joined at various times by specially-invited members of the European Commission's trade negotiating team.

The minutes indicate that the government officials shared confidential negotiating documents with the corporate leaders as well as inside information on the negotiating positions of the European community, the US and developing nations. At the meeting held on February 22nd of this year, Britain's chief negotiator on the General Agreement on Trade in Services (GATS) made reference to the European Commission's paper on industry regulation which had been privately circulated to LOTIS members for their comment.

GATS is a far reaching agreement that would affect every public service from healthcare and education to energy, water and transportation. It would challenge national environmental, labor and consumer laws as barriers to trade making these and other critical services totally unregulated, say critics.

Barry Coates, director of the WTO watchdog organization the World Development Movement, said he was surprised to learn that the LOTIS industry members received documents which the British government had refused to give his organization, even papers "which they told us did not exist."

Coates, in Qatar today to monitor the WTO confab, was somewhat amused that the minutes indicate that LOTIS members, whose companies represent over $100 billion in assets, seemed fixated on countering the arguments and actions of Coates' low-budget organization. Two of the LOTIS meetings concentrated on hiring consulting firms and academics to provide the government agencies with answers to the World Development Movement's arguments which question GATS and the wider globalization agenda. The minutes noted that "the pro-GATS case was vulnerable when the NGOs asked for proof of where the economic benefits of liberalization lay."

Reuters executive Henry Manisty offered his news service to the LOTIS propaganda effort. Manisty told the LOTIS group he "wondered how business views could best be communicated to the public." Reuters, he said, "would be most willing to give them publicity."

"For a long time conspiracy theorists thought there had been secret meetings between governments and corporations," said Coates. "Looking at these minutes, it was worse than we thought. [The WTO GATS proposals] are a stitch-up between corporate lobbyists and government."

A Question of Necessity?

Besides having advance or exclusive access to otherwise confidential governmental negotiating documents, the minutes indicate that the industry chiefs, as members of the European Services Forum, held exclusive meetings with the "Article 133" group, which sets the European Commission's trade policies. The Article 133 group's deliberations are supposedly confidential.

At least one such gathering with the Article 133 committee, held on October 30th has been independently confirmed by investigators from the think tank Corporate Europe Observatory.

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.

NAFTA on Steroids

The changes, as proposed, would slash regulatory controls over local businesses as well as foreign operators seeking entry to a market. For example, the State of California banned the gasoline additive MBTE because pollutes ground water. The Canadian maker of the additive has sued the United States under NAFTA on the grounds that banning the chemical was not the "least trade restrictive" choice for stopping ground water contamination. California could have, the Canadians argue, chosen to dig up and repair thousands of gas station holding tanks and established a giant new inspection system. While the cost of the alternative, running into billions of dollars, could effectively force California to back away from protecting its ground water, it would permit Canada to continue to export the contaminant.

California is fighting Canada's interpretation of the necessity test before a NAFTA disputes panel. But under the language proposed for WTO, the state would have no defense. Lori Wallach of Global Trade Watch, Washington DC, calls the proposed language GATS language changes, "NAFTA on steroids."

The WTO Secretariat's proposals follow lines suggested in another confidential document from the European Community's Working Group dated February 24 and entitled "Domestic Regulation: Necessity and Transparency," issued just after LOTIS meeting on the matter with European trade negotiators.

Spokespersons for Britain's Department of Trade and Industry, a leader in the EC Working Group, responded to our discovery of the documents by stating that the GATS changes, as proposed, would still allow nations their "sovereign right to regulate services" to meet "national policy objectives."

However, according to the confidential March 19 memo, in the course of secret multilateral negotiations trade ministers have agreed that, before a WTO tribunal, a defense of, "safeguarding the public interest... was rejected."

In place of a "public interest" defense, the WTO Secretariat suggests in the memo that the trade body adopt an "efficiency principle." This has the advantage, states the official Working Group paper, of allowing Presidents and Prime Ministers hostile to environmental protection regulations to eliminate them -- not through votes of a nation's congress or parliament, but through an edict of WTO which a nation would be powerless to reverse. "It may be politically more acceptable," says the memo, "to countries to accept international obligations which give primacy to economic efficiency."

If, for example, the Bush Administration would rather not reduce the arsenic contamination of water from mining operations, despite congressional legislation and decisions by regulatory panels, it could eliminate the anti-pollution laws by acceding to orders of a WTO disputes panel that found regulation "more burdensome than necessary." Unlike US congressional, regulatory and court proceedings, WTO disputes panel deliberations and submitted evidence are closed to the public and the records sealed. A World Trade Organization spokesman acknowledged the authenticity of the March 19th note. However, he said the internal discussion document could not be read to suggest that WTO have the, "power to strike down national laws or regulations." Barry Coates of the World Development Movement disagrees, "At its heart, it is a direct attack on the democratic process."

To read the WTO confidential memo.

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