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[GreenYes] World Trade Rules Impact on Environmental Regulations

Greg Palast
Special to CorpWatch
November 9, 2001

LONDON -- 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, obtained by BBC television's
Newsnight program and CorpWatch, 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

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

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 Dutch 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

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

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

Barry Coates of the World Development Movement disagrees, "At its heart, it
is a direct attack on the democratic process."


Greg Palast can be seen today, Friday November 9th, reporting on the WTO
Doha conference, on Britain's premier news program, Newsnight.

You can view this program live at 5:30 PM EST at

AOL users <a
.stm">Click Here</a>

The program will remain at this location for 24 hours after which time it
will be linked from

Greg Palast is an investigative journalist who writes a column called
"Inside Corporate America" for the Observer, Britain's most respected Sunday
newspaper. View all of Greg's columns at

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