Part 2 of this article continues to explore the neoliberal transition of the Breton Woods institutions and how the Copenhagen Climate Summit was sabotaged by the US to prevent a Global Climate Agreement.
The mechanism that brought the WTO into existence was the Uruguay Round. The paper The Unbalanced Uruguay Round Outcome: The New Areas In Future WTO Negotiations explains the key differences between GATT and the WTO. Inevitably the driver of the new agreement was the US. The key elements are:
- an umbrella agreement (the Agreement Establishing the WTO);
- goods and investment (the Multilateral Agreements on Trade in Goods including the GATT 1994 and the Trade Related Investment Measures (TRIMS));
- services (General Agreement on Trade in Services (GATS));
- intellectual property (Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS));
- dispute settlement (DSU);
- reviews of governments’ trade policies (TPRM)
A central criticism was that the creation of the WTO would benefit developed countries at the expense of developing countries. The paper sums up the key points:
1. The developing countries’ lack of experience in WTO negotiations, particularly their (and everyone else’s) lack of knowledge of how the developing economies would be affected by what the industrial countries wanted in the WTO new areas.
2. An intensified mercantilist (our export interests first) attitude of the GATT/WTO’s major power, the US.
3. Creating the WTO put small countries over a barrel. It made ineffective the GATT tradition of decision by consensus. “No” by one country would not preserve the status quo; it meant that the country was out, stripped of the protection that the old agreement provided.
The argument over the WTO’s treatment of developing countries is further explored in an Oxfam report, particularly within the context of agriculture:
Agricultural dumping has a devastating effect on poor countries. The Uruguay Round at the WTO was supposed to cut the subsidies that lead to dumping, but it failed to do so — as did reforms of Europe’s Common Agricultural Policy and US agricultural policy.
The Uruguay round was designed to reduce export subsidies substantially. However, because of the restrictive way in which export subsidies were defined, the European Union and the United States were able to use hidden export subsidies while still abiding by the letter of the agreement. Oxfam has calculated that the EU and USA are massively understating the real levels of export subsidisation. The USA is providing 200 times more support in hidden export support than it declares, equivalent to $6.6bn (€5.2bn) a year. The EU pays out the equivalent of €4.1bn ($5.2bn) in hidden export support — four times what it reports to the WTO.
The price at which crops sell tells this story clearly. Thanks to an array of different support mechanisms, the USA is able to export its cotton and wheat at 35 and 47 per cent respectively of their cost of production. The EU exports sugar and beef at 44 and 47 per cent respectively of their internal cost of production.
This would fit in with the neoliberal agenda of US focused trade in the global north. It also reveals a paradox within the WTO. It’s willingness to promote free trade whilst harmonising global trade. Basically the WTO has submitted to the neoliberal agenda, but only so far. This has created contradictions:
All this directly contradicts one of the core purposes of the WTO, and the agricultural talks in particular: to cut market-distorting support. But the EU and the USA continue to attempt to force poor countries to give up their trade protection and agricultural support measures, while keeping their own in place.
Another area of contention is environmental issues. Through the Marrakesh Agreement (that created the WTO), the WTO can make a ruling on environment issues. But some critics think it does not go far enough. The processes are laid out on the WTO website. GATT Article 20 set the initial parameters:
Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade, nothing in this Agreement [the GATT] shall be construed to prevent the adoption or enforcement by any contracting party of measures:…
(b) necessary to protect human, animal or plant life or health;…
(g) relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption. …
In 2001, a new round of negotiations began — the Doha round. The initial aims were to resolve some of the difficulties raised above. But negotiations have been highly contentious.
What appears to be emerging is an organisation in crisis. Doha has failed to address many issues relating to the global economy. As a result, Free Trade Agreements (FTA) are seen as the final fronter for neoliberal expansion.
This article from YaleGlobal offers a useful analysis of the failed TTIP Agreement:
First, TTIP is the result of the WTO’s troubles, not the cause of it. The latest round of multilateral trade talks, the Doha round, dragged on for 12 years, before member countries agreed on at least some of the issues under discussion in December 2013. But the Bali agreement fell short of original ambitions, and the WTO is still playing catch-up. Today, international trade is at least as much about rules and regulations as it is about tariffs. The WTO has not significantly updated its rulebook since 1994. But business has moved on. The idea from the US and the EU to work together to overcome global gridlock is legitimate.
Second, in many areas, regulations and processes on both sides of the Atlantic have been drifting apart for years, and even more so since the start of the financial crisis in 2007. The two sides owe it to their business communities and consumers to try and narrow the regulatory gap. Bilateral talks are probably better suited for this than involving the other 130 WTO members.
A transatlantic trade agreement had been in the pipeline since the Creation of the WTO. But the failure of any agreements from the Doha round sparked discussions. Finally in 2011, the process towards the Trans Atlantic Trade and Investment Partnership (TTIP) started and a negotiating framework was introduced in February 2013.
Meanwhile on the other side of the world, progress had already been made on the Trans Pacific Partnership (TPP). A version of the text of the treaty “Subject to Legal Review” was made public on 5 November 2015. However just after taking office in 2017, US president Donald Trump abandoned TPP.
The ratification of both treaties were meant to compliment each other. But there has been considerable opposition from civil society — an opposition that initially exploded back in 1999. YaleGlobal highlights the issues:
In parallel to TTIP, the US and the EU should support an ambitious reform of the WTO itself. Such reforms could include extending the WTO’s mandate to deal with 21st century issues and abolishing the overly rigid rule that all 159 WTO members need to agree on each and every trade deal. The partial Bali deal has shown that, in practice, this rule already plays a diminished role.
What the US and the EU should not do is pass up the opportunity to free up trade between the world’s two largest trade partners because the WTO is slow-moving and out of date. A well-functioning global trade body should be everyone’s first choice. But the WTO’s problems run deep; they have to do with new technology that is changing the nature of international commerce and with the rise of new economic powers. The WTO is by no means the only multilateral body that is in trouble: Consider the United Nations Security Council, the G20 or global climate talks. But TTIP could be a giant wakeup call for a trade organization that has been drifting towards irrelevance.
Following the creation of the WTO in 1995, the views of civil society regarding the new deal were similar to the concerns regarding TPP and TTIP.
Although ‘anti globalisation’ movements had been emerging for some time as part of the wider awareness of environmental and neoliberal concerns, it was after the Multilateral Agreement on Investment (MAI) was leaked that civil society began to mobilise.
The build up to the protests that took place in Seattle in 1999 was regarded as the first mass mobilisation to utilise the recently established internet. This enabled the protests to take on a global perspective:
For the first time, one is seeing the emergence of a global civil society represented by NGOs which are often based in several states and communicate beyond their frontiers. This evolution is doubtless irreversible. On one hand, organisations representing civil society have become aware of the consequences of international economic negotiations. They are determined to leave their mark on them.
Furthermore, the development of the internet has shaken up the environment of the negotiations. It allows the instant diffusion of the texts under discussion, whose confidentiality becomes more and more theoretical. It permits, beyond national boundaries, the sharing of knowledge and expertise. On a subject which is highly technical, the representatives of civil society seemed to us perfectly well informed, and their criticisms well argued on a legal level.
At the WTO ministerial conference in Seattle in November 1999, an attempt was made to include the MEI into a new “Millennium Round” of trade liberalisation talks. As a result, the ‘Battle of Seattle’ broke out. This was the culmination of campaigning that had taken place before the conference and was effectively the first major demonstration by civil society against the ‘system’. The demonstrations had caused widespread disruption within the city and the Mayor of Seattle declared a state of emergency. As far as activists were concerned, the protests were a success. MEI bit the dust:
People stayed in the streets all week until Dec. 3, when the WTO talks collapsed as representatives from poor countries, bolstered by public rebellion in the streets and pressure from movements in their home countries, refused to buckle under.
The neoliberal juggernaut had just came up against an unexpected barrier. Civil society had spoken loud and clear and had demonstrated that it could mobilise effectively in a new age of electronic communications. Although mass protests had taken place before, Seattle represented a new phase in global awareness that also connected to the environmental movement.
The other Bretton Woods organisations — the World Bank and the IMF — has observer status at the WTO.
The World Bank has a poor record on climate change. Friends of the Earth International (FoEI) released the report World Bank: catalysing catastrophic climate change. The report examines the Banks investment in high carbon infrastructure and the knock-on effects of its policies in developing countries.
Overall the World Banks’ contribution to GHG emissions is estimated to be around 7%. Much of the investment made by the World Bank — via the IFC (International Finance Corporation) — is targeted towards coal based projects, mainly in developing and emerging economies, such as India, locking these economies into fossil fuel dependence when they could be better served by a solar power based infrastructure.
The World Bank has also been heavily criticised for its ‘Structural Ajustment Programs’. In the ‘80’s, the bank began lending money to developing countries along with prescribed policy changes. The results were highly contentious, as this article from Global Issues discusses:
Many developing nations are in debt and poverty partly due to the policies of international institutions such as the International Monetary Fund (IMF) and the World Bank.
Their programs have been heavily criticized for many years for resulting in poverty. In addition, for developing or third world countries, there has been an increased dependency on the richer nations. This is despite the IMF and World Bank’s claim that they will reduce poverty.
Following an ideology known as neoliberalism, and spearheaded by these and other institutions known as the “Washington Consensus” (for being based in Washington D.C.), Structural Adjustment Policies (SAPs) have been imposed to ensure debt repayment and economic restructuring. But the way it has happened has required poor countries to reduce spending on things like health, education and development, while debt repayment and other economic policies have been made the priority. In effect, the IMF and World Bank have demanded that poor nations lower the standard of living of their people.
Particularly noteworthy is the fact that the people in charge of running the world bank have in the past been all American. This article from Al Jazeera gives an outline of the Banks activities and policies:
…structural adjustment programmes were not designed to reduce poverty (in fact, they specifically preclude poor countries from using the basic strategies that Western countries used to develop their own economies). Rather, they were designed to pull wealth from third world governments into first world banks, allowing the US to transfer the crisis of capitalism abroad for a while without having to solve its contradictions at home. It’s no accident that all of the Bank’s past presidents have been US military bosses and Wall Street executives (see the full line-up here); they’ve been put there to underwrite this strategy.
…the World Bank is so valued by the US government and Wall Street: because it is instrumental to expanding the sphere of Western capitalism, a role not dissimilar to that which colonialism once played for Europe.
The bank also enjoys ‘“sovereign immunity” status, which presently allows it to avoid responsibility for the perverse outcomes of its policies.
The initial role of the IMF was to monitor exchange rates and provide short term funding to countries during the post war recovery, ultimately attaining monetary stability. However, the role of the IMF in the ‘70’s altered:
The countries that joined the IMF between 1945 and 1971 agreed to keep their exchange rates (the value of their currencies in terms of the U.S. dollar and, in the case of the United States, the value of the dollar in terms of gold) pegged at rates that could be adjusted only to correct a “fundamental disequilibrium” in the balance of payments, and only with the IMF’s agreement. This par value system — also known as the Bretton Woods system — prevailed until 1971, when the U.S. government suspended the convertibility of the dollar (and dollar reserves held by other governments) into gold.
The IMF is mandated to oversee the international monetary and financial system and monitor the economic and financial policies of its 188 member countries and facilitates international cooperation:
This activity is known as surveillance. As part of this process, which takes place both at the global level and in individual countries, the IMF highlights possible risks to stability and advises on needed policy adjustments. In this way, it helps the international monetary system serve its essential purpose of facilitating the exchange of goods, services, and capital among countries, thereby sustaining sound economic growth.
Each member country is assigned a quota, based on relative economic size. This means that the US — the largest global economy — effectively wealds more power within the IMF. This has led to criticisms of undue influence over the workings of the IMF. As such, the US has blocked recent calls for reform at the IMF.
Just as the World Bank has been led by an American, the IMF has a European at the helm. This article — a review of the book Globalization and Its Discontents — takes a critical look at the IMF and its policies.
The underlying argument is that many policies of the IMF is flawed, with too much preoccupation on ideology and discredited economic theories. The reviewer argues:
…the IMF’s policies stem not from economic analysis and observation but from ideology — specifically, an ideological commitment to free markets and a concomitant antipathy to government. Again and again he accuses IMF officials of deliberately ignoring the “facts on the ground” in the countries to which they were offering recommendations. In part his complaint is that they did not understand, or at least did not take into account, his and other economists’ theoretical work showing that unfettered markets do not necessarily deliver positive results when information or market structures or institutional infrastructure are incomplete.
More specifically, he argues that the IMF ignores the need for proper “sequencing.” Liberalizing a country’s trade makes sense when its industries have matured sufficiently to reach a competitive level, but not before. Privatizing government-owned firms makes sense when adequate regulatory systems and corporate governance laws are in place, but not before. The IMF, he argues, deliberately ignores such factors, instead adopting a “cookie cutter” approach in which one set of policies is right for all countries regardless of their individual circumstances. But importantly, in his eyes, the underlying motivation is ideological: a belief in the superiority of free markets that he sees as, in effect, a form of religion, impervious to either counterarguments or counterevidence.
Other criticisms levied at the IMF include funding for oppressive regimes, impacts on food availability and public health. This article from the Lancet offers an interesting reflection on the IMF’s role regarding health issues. Essentially the Journal lays the blame for the recent Ebola outbreaks in Africa on IMF programs, despite coming ‘to the rescue’ as the crisis worsened.
Environmental impacts have also been blamed on the IMF. However following COP15 at Copenhagen, the IMF announced it would set up a Green Fund. The IMF lays out its stall here. To date, the Green Fund has not been formally implemented.
Pulling it all together
In this article, I’ve considered how neoliberalism and the environmental movement have emerged almost in tandem, resulting in a stand-off between the two. But the greatest assault was yet to come.
Just as the Falklands war triggered an era of change in the UK and elsewhere, so the terror attacks on the World Trade Centre on 9/11/2001 would serve as a trigger for unleashing the neoliberal ‘beast’ big time.
The first shots were fired — literally and figuratively — when a US led coalition illegally invaded Iraq. This was despite huge public opposition to the war. It was the largest civil society mobilisation in history and it was completely ignored.
As this article from Greenpeace shows, it was Big Oil that was calling all the shots:
Iraq has the second largest proven reserves of oil in the world, but its production has been severely reduced since the Gulf War, due to effects of economic sanctions and the destruction of infrastructure. Rebuilding that infrastructure and increasing production will take years. Oil executives hungrily eyeing those reserves are enthusiastic to take on that work.
And they’ve never had such close ties to the White House. For Vice President Dick Cheney, this may well be round two for his post-war dealings with Iraq. Cheney is a former head of Halliburton, the world’s largest oil service contractor. In August 2000 Cheney publicly stated that, as the head of Halliburton, “I had a firm policy that I wouldn’t do anything in Iraq, even arrangements that were supposedly legal.” And yet, as the Financial Times eventually proved, Cheney oversaw $23.8 million in sales to Iraq in 1998 and 1999.
…Though it’s no secret that the White House cozies up to oil executives, declaring war on Iraq required a bit of a cover story. The “War on Terror” launched in the wake of September 11th was the perfect vehicle. With the world reeling from the threat of more chaos and destruction, Iraq was quietly slipped into key speeches. Bush quickly diverted attention from Osama Bin Laden to Saddam Hussein and now the hunt is on for his weapons of mass destruction.
Iraq wasn’t the only war Bush intended to wage. Under his administration, a major climate denial machine was set in motion. Scientist’s were gagged. Information relating to climate change was suppressed. This article from Rolling Stone outlines the climate policies of the Bush administration.
Leading the charge was Dick Cheney. Rolling Stone summed it up :
An examination of thousands of pages of internal documents that the White House has been forced to relinquish under the Freedom of Information Act — as well as interviews with more than a dozen current and former administration scientists and climate-policy officials — confirms that the White House has implemented an industry-formulated disinformation campaign designed to actively mislead the American public on global warming and to forestall limits on climate polluters.
The IPCC was also targeted. This revealing paper from the Meridian Program outlines how the Bush administration influenced the final text of the Summary for policy Makers of the IPCC’s Fourth Assessment Report in 2007:
From its inception the IPCC has been subject to the tension between these two incompatible drives. Its conflicted primary task involves both the mobilisation of best possible scientific engagement with the global “problematique”, and also the containment and control of the scientific endeavour on behalf of those vested interests most threatened by its findings. After the publication of the Third Assessment Report in 2001 the fossil-fuel industry recognised that the scientific information presented by the IPCC posed a massive threat to its future profitability and steps were taken to gain control of its process and agenda. The leader of the Senate in the Washington administration went on record at this time to castigate climate change as “The greatest hoax ever perpetrated on the American people”, a sentiment later echoed by the President himself.
The paper notes in conclusion:
The outcome is a document which lays a necessary but far from sufficient basis for the formulation of strategic policy. Despite the best efforts of the global scientific community, pursuit of goals based upon this Report may contribute to the sustained profitability of the hydro-carbon-based industries, but they do not get to first base in the task of preventing catastrophic climate change.
The Copenhagen Failure
Returning to Copenhagen, there was little doubt that considerable momentum was building up to COP15. Leaders who had met at the Major Economies Forum on Energy and Climate on July 9, 2009, declared:
Climate change is one of the greatest challenges of our time. As leaders of the world’s major economies, both developed and developing, we intend to respond vigorously to this challenge, being convinced that climate change poses a clear danger requiring an extraordinary global response, that the response should respect the priority of economic and social development of developing countries, that moving to a low-carbon economy is an opportunity to promote continued economic growth and sustainable development, that the need for and deployment of transformational clean energy technologies at lowest possible cost are urgent, and that the response must involve balanced attention to mitigation and adaptation.
We reaffirm the objective, provisions and principles of the UN Framework Convention on Climate Change. Recalling the Major Economies Declaration adopted in Toyako, Japan, in July 2008, and taking full account of decisions taken in Bali, Indonesia, in December 2007, we resolve to spare no effort to reach agreement in Copenhagen, with each other and with the other Parties, to further implementation of the Convention.
A series of commitments followed. But as noted above, COP15 failed. Why? The answer is revealed in this Ecologist article. It was scuppered by the US.
Based on revelations from whisleblower Edward Snowden, ‘we now know that the US National Security Agency (NSA) gathered intelligence from key countries involved in the Copenhagen talks.’ The article notes:
The NSA documents show that the US monitored communications between countries before the summit, and planned to spy on the negotiations during the conference.
China was prepared to negotiate an agreement. But:
In the event the US worked assiduously at the conference to engineer a split in the developing country bloc of countries — a highly effective means to counter a Chinese proposal before it was even made.
This appears to have been part of a deliberate strategy to make China ‘lose face’ as its negotiating tactics were pre-emptively undermined. And it worked. China emerged from the talks universally condemned as the ‘climate baddie’ — as eloquently expressed by the journalist Mark Lynas.
The article concludes with this thought:
Now, faced with the brutal reality of how the US scuppered Copenhagen, we must ask ourselves — how can dark powers such as these be overcome in the future, so that the world can secure the global climate agreement that we so desperately need?
And that is the key question. Which brings us round full circle to Paris. Has UNFCCC had its day and did Paris really matter?
Paris in essence was neither a failure or a success. It did what it was supposed to do. And although civil society has had its say, it could be argued that its influence is limited.
The dark powers here are the neoliberal fundamentalists. This is what civil society needs to challenge. As for the UNFCCC process. That has with little doubt already been targeted by the ‘dark powers’. Meanwhile we await the outcome of Brexit and whatever that entails.