Global Policy Forum

How the US is Pushing Iraq into the WTO

By Mary Lou Malig

Chapter from the Report "Destroy and Profit: Wars, Disasters, and Corporations"

In the last few months, all eyes were fixed on the outcome of the 6th Ministerial of the World Trade Organization (WTO) in Hong Kong. At stake was the fate of the Doha Development Round. Thousands of protestors, coming from all walks of life and various sectors and movements around the globe, swarmed the streets of Hong Kong to try to prevent a bad deal. However, the big trading powers knew they could not afford another Seattle or Cancun. And so with the help of India and Brazil, the US and EU saved the Round with a deal that will be detrimental to the majority of the world's peoples. As people analyze what is in this bad deal, most of what the people are rejecting will soon be, if not already, applied onto Iraq.

WELCOME TO THE CLUB

It is a little known fact that Iraq is now well on its way to becoming a full-fledged member of the WTO. Iraq has now advanced to step 3 of the accession process and will most likely complete it without most Iraqis knowing it even happened.

On February 11, 2004, less than a year after the US invasion of Iraq, the country was granted observer status at the WTO. Four months before the US handed over "sovereignty" to an interim government in Iraq, the occupied territory had already taken the first step of accession into the WTO.

According to a trade publication, "Geneva- based analysts were taken aback by the quick move, "I would have thought they would wait until the country was stable." 1 Even Ahmad Al-Mukhtar, Director General of Foreign Economic Relations of the Iraq Ministry of Trade, stated as fact the country's instability. "As you know my country is now going through very severe times. We are in a stage of instability." 2

Iraq definitely has strong backers for it to get a unanimous vote at the General Council at the first try, despite its instability. In the same meeting, the application for observer status by Iran, which has been on the table for the past three years, was blocked by the US for the fifteenth time. 3

The US it seems, has been able to push Iraq's accession so successfully that the members of the WTO and the secretariat itself had overlooked the fact that Iraq does not even pass the first requirement of accession. Under WTO rules, countries can only apply if they have full autonomy. "Any state or customs territory having full autonomy in the conduct of its trade policies is eligible to accede to the WTO on terms agreed between it and WTO Members". (Article XII of the WTO Agreement).

At the time of approval of observer status, which then WTO Director General Supachai Panitchpakdi declared as a first step to WTO membership,4 it hardly had autonomy, it was still being run by Paul Bremer's Coalition Provisional Authority (CPA).

But this did not deter the US' determination to make Iraq a member of the multilateral institution. On September 30, 2004, Iraq submitted its request for accession to the Director General of the WTO. Before the year ended, in the December General Council of the WTO, a working party was established to examine Iraq's membership application. Iraq also started the drafting of its Foreign Trade Regime Memorandum and the creation of a national committee for WTO accession, the third step to accession. Step two was in the bag and three was on the way.

And to make sure that Iraq would stay the course of accession, the US generously offered to help Iraqis prepare for negotiations. "The US government supports the Iraqi interim government's efforts. To that end, we have invited a team of senior Iraqi officials and experts to the US to discuss trade issues, including preparation for WTO accession negotiations." 5

INITIATION RITES

But what exactly does it mean when they say a country is going through the accession process of the WTO? Like any other entry process into an elite club, the accession process is highly secretive and is all about giving everything the club wants. As Jane Kelsey, renowned expert on the accession process of Pacific islands into the WTO, explains, "The accession process has no rules, except precedent and power, and is the very antithesis of what the members publicly state to be the intention and design of the WTO." 6

The whole process is shrouded in secrecy, with documents reviewed by the accession working party remaining restricted until negotiations are over. In many cases, both parliamentarians and citizens do not know what is at stake.

The accession process is all about the applicant country giving away as many concessions as possible and being prepared to change their domestic and national regulations in order to conform to the new agreements. In the case of the small Pacific island of Samoa, the working party even demanded for concessions that Samoa can't afford. "They can ask for all sorts of commitments which Samoa isn't in a position to offer. If they insist, there are two options: we will never become a member or we have to give in to that request." 7

This is because accession to the WTO is ultimately a process of negotiation. Article X11 of the WTO Agreement states that accession to the WTO will be "on terms to be agreed" between the acceding government and the WTO. 8 This means that those "terms to be agreed" can be a wish-list that goes beyond current WTO commitments or negotiations. According to Kelsey, "It is important to recognize that most of what the South is rejecting (in the Doha round of negotiations) has already been forced, arrogantly and invisibly, onto some of the world's smallest, poorest and most vulnerable countries." 9

Member countries who join the accession working party can then push the applicant as far as they can. And whatever concessions they get are then enjoyed by the rest of the membership under the non-discrimination policy of the WTO. These talks cover everything from tariff rates to market access to policies in goods and services. For Iraq, it is expected that the US will lead the negotiations as it has shown the greatest interest in Iraq becoming a member of the multilateral body.

In fact, since day one, the US had already planned Iraq's entry into the WTO. Iraq's reconstruction has been geared towards becoming WTO-compliant. According to one researcher, "The US ordered Bearing Point, the contractor tasked with the economic reconstruction of Iraq, to "create a WTO-consistent trade and investment legal framework which will both promote competitive development of domestic business… and lay the groundwork for greater integration into international financial and trading networks."" 10 This means that Iraq's laws have to be re-written to become WTO compliant and to transform Iraq's formerly state-controlled economy to a complete market-controlled economy with international trade at its center.

Bremer also made sure that Iraq would become a member of the WTO. Bremer Order number 12 or the "Trade Liberalization Policy" was one of the now infamous Bremer Orders, which, in one stroke, transformed the economy of Iraq. This trade liberalization order set the target date of February 2004 for joining the WTO. And of course, come February 2004, Iraq was unanimously granted observer status at the WTO.

Bremer also made sure that even if the CPA was no longer there, it would take short of a miracle to overturn his orders. "The Bremer Orders would remain – repealing them would be near impossible – because to do so would require the approval of two-thirds to three-fourths of a future assembly." 11

Accession processes for other countries have taken years. For Iraq however, it seems to be on fast-track as it has moved from observer status to drafting its Foreign Trade Regime Memorandum, which is the starting point of the intensive negotiations of accession, in no time at all.

This was all part of the US' grand plan for Iraq. Clearly, the reason why the US has been in a mad rush to push Iraq's accession into the WTO is to lock in the economic transformation of Iraq and its commitments to the WTO, just as the Bremer Orders have been locked in to the laws of Iraq. By binding them internationally, the US closes the door to any future policy changes by any future government of Iraq. It not only limits, but removes the ability of future governments to introduce public interest policies or legislation.

FREE TRADE IS A GIFT…

In all this time however, the US has continuously projected the benevolent occupier image as it generously helps Iraqis get on the glorious road of free trade and democracy. It has taken Iraq out of the stone age and into modern society. Al-Mukhtar declares Iraq's accession into the WTO as its first step towards integration into the global economy. "After decades of isolation, Iraq is beginning to rejoin the international community and your decision today sends a positive signal to the people of Iraq that they are welcomed back and that the world really cares about their welfare," al-Mukhtar said. 12

Free trade supporters have even hailed this as a blessing to countries like Iraq. As Daniel Griswold of the libertarian think-tank Cato Institute based in Washington DC states, "What do Libya, Sudan, Syria, Iraq, Iran and Afghanistan have in common? Besides all of them being ongoing or recent sponsors of terrorism, not one of them belongs to the WTO." 13 Making the generalization that if you are not a member of the WTO, you therefore are a sponsor of terrorism.

The US then went ahead and outlined a plan similar to that of Iraq for the rest of the region. "The Middle East Free Trade Area (MEFTA) was billed as part of a plan to fight terrorism – in this case, by supporting the growth of Middle East prosperity and democracy through trade," an analyst with the Congressional Research Service wrote. 14 And the first step to becoming a part of MEFTA is joining the WTO.

…WITH STRINGS ATTACHED

What is the reason for the push to make Iraq, and later on, other countries in the Middle East, members of the WTO? The US says it's the way to fight terrorism. However, what they're not saying is what's really in it for them and their corporations.

The goal has always been the oil. "With the US expected to depend on other countries for 70% of its oil needs by 2025 – securing access to oil was both a matter of survival and a source of great power." 15 And gaining control would mean changing the current system as 70 percent of the worlds oil is still distributed through national oil companies.

As a US analyst explains, a key pillar of the Bush Administration strategy is to consolidate control over global energy services and the principal way to achieve that is through the services negotiations under the WTO. 16 The WTO is still the best arena because of its legally binding agreements. The US is a few steps closer to its goal of control once Iraq becomes a member of the WTO. As US Vice President Richard Cheney states, "While many regions of the world offer great oil opportunities, the Middle East, with two-thirds of the world's oil and the lowest cost is still where the prize ultimately lies." 17

The real winners of this will be the US oil giants, who have been eyeing Iraq's sea of oil even before the invasion. A recent report by Global Exchange states, "Billions of dollars in contracts have been handed out to multinational corporations with ties to the Bush administration like Halliburton, Bechtel and Harken Energy Company for services such as getting the oil from the earth to the market." 18 The same report asserts that energy services have become more profitable than the oil itself.

THE MAIN AGENDA: ENERGY SERVICES

Through the North American Free Trade Agreement (NAFTA), the US was able to remove Canada's control over its vast energy resources by, among other measures 19:

- establishing rights of foreign companies to invest in the energy sector;
- stripping Canada's National Energy Board of its powers and dismantling the "vital-supply safeguard" that required Canada to maintain a 25-year surplus of natural gas (the US maintained its 25-year reserve for national security purposes)
- banning export taxes (a major source of government revenue exports)

The NAFTA however only covers Mexico, Canada and the US. The US therefore has proposed to expand the services negotiations in the WTO to include energy. "The US has called upon WTO members to open markets eligible for private participation in the entire range of energy services, from exploration to the final customer…" 20

The plan would be to pry open the energy services sector and shift the control over oil from national governments to oil service corporations. According to Victor Menotti of the International Forum on Globalization, "If the Bush White House gets its way with energy services negotiations, the control of the global economy's primary energy source could shift from national governments to oil services giants like Halliburton." 21

In the recently concluded 6th Ministerial Conference of the WTO, the US and its allies, succeeded in expanding the services negotiations and including Energy Services in the sectors to be negotiated. This covers all activities composing the energy services sector across all modes of supply and a whole range of activities under the oil and gas sector, from exploration services, services incidental to mining, technical testing and analysis and refining services. 22

Under the new expanded services mandate, there will be plurilateral negotiations on various sectors, including energy, which will open up these services to privatization and corporate control.

REVERSING THE TREND

As it looks now, it all seems to have fallen into place. The US grand plan for Iraq and its oil is coming to fruition. Iraq will soon become a member of the WTO and energy services have been included in the WTO mandate. The US just has to simply count the days before its corporations all control Iraq's oil and soon, the rest of the world's oil.

However, as the resistance in Iraq grows and the anti-war and anti-globalization movements maintain the international pressure, there is still a chance to turn things around.

Iraq's accession may well be underway but it is not yet complete. The legitimacy of the whole process should be questioned as in the first place Iraqis do not have autonomy over their country, let alone trade policies. The accession process began before the country even had elections. And even with the new Iraqi government in place, its legitimacy and autonomy are still under question because the country is still under occupation by the US. Observer status was granted to Iraq while the country was still under the CPA. The Iraqi minister which pursued the accession process was handpicked by the US government. The country effectively was still under occupation when it took its first step towards WTO membership.

The US, or any occupying force, has no right to alter and implement new policies and legislation. As stated by many legal analysts, in altering Iraq's economic policies, the US violated international law. Article 43 of the Hague Regulations of 1907 states "The authority of the legitimate power having in fact passed into the hands of the occupant, the latter shall take all the measures in his power to restore, and ensure as far as possible, public order and safety, while respecting, unless absolutely prevented, the laws in force in the country." This means that the US had no right to restructure Iraq and turn it into a WTO-compliant economy. Even the UK Attorney General, Lord Peter Goldsmith advised Prime Mister Tony Blair, "The imposition of major structural economic reforms would not be authorized under international law." 23

Iraq's accession must be stopped. Only a legitimate and truly sovereign Iraqi government should be able to determine its future.

The occupation of Iraq has become two ugly heads of military and economic occupation. Even if the Iraqi's peoples' resistance is successful in ending the occupation and driving out the US-led military forces, the US and its allies' would still have gotten their way through the restructuring of Iraq's economy and its membership into the WTO where they can continue controlling and exploiting Iraq's resources.

If Iraq's occupation is to be truly ended and the right to self-determination restored to the Iraqi people, the links must be made between military and economic interests and the campaigns must be fought on both levels.

Notes

1. BRIDGES Weekly Trade News Digest Vol 8, Number 35, Iraq Seeks WTO Membership, 20 October 2004.

2. Lubetkin, Wendy Iraq granted observer status at the WTO. 2005

3. BBC News. "Iraq granted WTO observer status" 11 February 2004

4. "Iraq took the first step towards joining the 148-member organization when the General Council approved Iraq's request for observer status on 11 February 2004." BRIDGES Weekly Trade News Digest Vol 8, Number 35, Iraq Seeks WTO Membership, 20 October 2004.

5. BRIDGES Weekly Trade News Digest Vol 8, Number 35, Iraq Seeks WTO Membership, 20 October 2004.

6. Kelsey, Jane. Acceding countries as pawns in a power play: A case study of the pacific islands. Focus on Trade No. 103, August 2004

7. Interview with Tuala Falani Chan Tung, Sunline, April 2004. quoted in Kelsey, Jane. Acceding countries as pawns in a power play: A case study of the pacific islands. Focus on Trade No. 103, August 2004

8. World Trade Organization website: www.wto.org

9. Kelsey, Jane. Acceding countries as pawns in a power play: A case study of the pacific islands. Focus on Trade No. 103, August 2004

10. Docena, Herbert. "Shock and Awe" Therapy: How the United States is attempting to control Iraq's oil and pry open its economy. Presentation at the World Tribunal on Iraq June 2005

11. Docena, Herbert. "Shock and Awe" Therapy: How the United States is attempting to control Iraq's oil and pry open its economy. Presentation at the World Tribunal on Iraq June 2005

12. Speech by Mr. Ahmad Al-Mukhtar, Director General of Foreign Economic Relations, Iraq Ministry of Trade, to the General Council of the World Trade Organisation – 11 February

13. Griswold, Daniel. Can Free Trade Promote Peace in the Middle East? Capitol Hill Forum 20 June 2003.

14. Boelle, Mary Jane. Middle East Free Trade Area: Progress Report. CRS Report for Congress February 8, 2005

15. Docena, Herbert. "Shock and Awe" Therapy: How the United States is attempting to control Iraq's oil and pry open its economy. Presentation at the World Tribunal on Iraq June 2005

16. No Iraq-ification of the World: Oil out of the WTO. Global Exchange. 2005

17. Docena, Herbert. "Shock and Awe" Therapy: How the United States is attempting to control Iraq's oil and pry open its economy. Presentation at the World Tribunal on Iraq June 2005

18. No Iraq-ification of the World: Oil out of the WTO. Global Exchange. 2005

19. A complete list of measures and more on NAFTA can be found in IFG Special Report "The Free Trade Area of the Americas" by Maude Barlow. Quoted in Menotti, Victor. The WTO and Oil. International Forum on Globalization. October 2004

20. Menotti, Victor. The WTO and Oil. International Forum on Globalization. October 2004

21. Menotti, Victor. The WTO and Oil. International Forum on Globalization. October 2004

22. JOB(05)/237/REV.2 Sectoral and Modal Objectives as Identified by Members, Council for Trade in Services Special Session, World Trade Organization, 17 November 2005

23. Stated in a leaked memo dated March 26th 2003. Quoted in Press Release Economic Occupation of Iraq on Trial 22 August 2005