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Over the past two decades, new international trade and investment rules of unprecedented scope and power, coupled with massive changes in business practices and organization, have resulted in an astonishing transformation of economic and social policy around the world. This new arrangement is often labeled "economic globalization." However, in addition to its economic consequences, globalization has a major effect on domestic governance, and thus on public health, economic development, and social and environmental policy.

NAFTA and the WTO
Two major trade pacts intensified and politically and legally formalized the move toward globalization: the North American Free Trade Agreement (NAFTA), passed by Congress in 1993, and the Uruguay Round of the General Agreement on Tariffs and Trade (GATT), passed in 1994. The GATT Uruguay Round established the World Trade Organization (WTO), a powerful new global commerce agency.

Together, NAFTA and the WTO constitute permanent institutional structures which are significant engines driving corporate economic globalization. Both pacts contain numerous provisions that go far beyond the usual purview of trade agreements, which traditionally focused on tariffs and quotas. NAFTA and the WTO include provisions governing the domestic public health, food safety, consumer, worker and environmental protection policies of member-countries. These are all issues which traditionally have been at the core of domestic policy-making.

Both NAFTA and the WTO establish comprehensive international rules constraining the domestic policy objectives member countries may pursue, and what policy tools member countries may use to obtain even the allowed objectives. A core provision of the WTO states: "Each Member shall ensure the conformity of its laws, regulations and administrative procedures with its obligations as provided in the annexed Agreements."

NAFTA also contains provisions limiting certain national investment and economic development policies. For instance, NAFTA forbids governments from establishing or maintaining some investment preferences to promote development in impoverished or minority areas, as well as investment conditioned on non-commercial performance standards, such as environmental performance.

Mechanisms of Harmonization
NAFTA and WTO provisions are based on certain underlying premises, among them: domestic health, safety, and environmental policies must be designed in the "least trade restrictive" manner and national laws and standards should be standardized internationally so as to maximize economic efficiency in cross-border trade. This process of global standardization has been dubbed "harmonization" by the corporations that favor it.

NAFTA and the WTO provide powerful incentives for governments to harmonize standards and regulations even when they are not legally required to do so by the pacts. NAFTA and the WTO also set constraints on member countries' domestic laws by naming certain international standards as the presumptively permissible ones, and by establishing binding international dispute resolution processes where non-conforming domestic laws can be challenged.

NAFTA and the WTO pressure member governments to base their domestic standard-making on specified international standards and on international standard-setting techniques. One example is a requirement that countries "base their sanitary and phytosanitary measures (food standards) on international standards, guidelines or recommendations. . . ." NAFTA contains similar requirements. NAFTA and the WTOpermit countries to have food safety measures that achieve a higher level of health protection than relevant international standards only in very limited circumstances.

NAFTA and the WTO also direct countries to use a standard-setting technique called "risk assessment." Yet, some U.S. standards are based not on assessing a tolerable amount of risk ("risk assessment"), but in forbidding public exposure to a risk altogether. Such "zero tolerance" standards, while safer for consumers, are inherently problematic under NAFTA and WTO rules because they are not developed using the internationally-recognized risk assessment method of standard-setting under the pacts.

Both agreements also require countries to base their non-food technical standards on relevant international standards, even where such international standards are not yet completed, but their completion is imminent. As with food standards, under NAFTA the WTO only technical regulations conforming to international standards are presumed not to create unnecessary obstacles to trade.

Standards providing more protection to consumers or public health or local communities or the environment can be challenged as unfair barriers to trade before dispute resolution panels established by both NAFTA and the WTO to enforce their rules over non-conforming domestic policies. The acceptable reasons for exceeding international standards in non-food areas under the WTO are strictly limited to fundamental climactic, geographical or technical inappropriateness. NAFTA's rules allowing exceptions that provide more protection than international standards are only slightly less restrictive.  

Because domestic standards that do not conform to international standards must satisfy a battery of NAFTA or WTO tests in order to avoid being considered barriers to trade, the burden of proof falls on the country defending a stronger domestic health or environmental law. Thus, the pacts create significant incentives for the U.S. to avoid exceeding international standards. The threat of a costly NAFTA or WTO trade challenge may also chill innovative solutions to consumer and worker health and safety, environmental, labor rights, or other social or economic development problems.

Types of Harmonization
There are two primary types of harmonization promoted by NAFTA and the WTO: global standard setting, which takes place in international standard-setting institutions, and equivalency agreements, which are usually bi-lateral agreements between two nations. Mutual Recognition Agreements, bi-lateral or multi-lateral agreements between nations, can be a vehicle for both types of harmonization.

Global Standard Setting: NAFTA and the WTO name specific international standards, such as those established by the International Organization for Standardization (ISO) in Geneva and the Codex Alimentarius Commission (Codex) in Rome as presumptively complying with trade rules. Both the ISO and Codex are dominated by industry. Indeed, ISO, which sets product and manufacturing process standards, is a private sector organization, funded by industry and largely comprised of industry representatives. Codex, which sets food standards under the auspices of several United Nations-related organizations, consists of governmental representatives, but operates with an important formal role for industry. Citizen input in both is essentially non-existent, as is meaningful participation by health or consumer groups.

Currently, the U.S. is involved in international harmonization in the areas of genetically modified foods, meat and poultry inspection, medical devices, pharmaceuticals, chemical classification and labeling, pesticide residue levels, veterinary drugs, and automobile and aviation safety regulations, (just to name a few areas). These activities are being conducted in a diverse array of international standards organizations, industry associations, and inter-governmental fora.

Equivalency: In addition to the adoption of uniform international standards, another mechanism of harmonization required by NAFTA and WTO rules are "equivalence determinations." Under the notion of "equivalence," significantly different - and possibly less protective - regulatory systems and standards in other countries can be declared "equivalent" to domestic regulatory systems. Once a foreign system is declared "equivalent," it must be treated as if it were a domestic system, even if it differs from the domestic system in significant ways. Equivalence determinations are designed to allow foreign goods produced under "equivalent" systems free passage into the U.S. market.

The U.S. is in the process of determining equivalency between the U.S. and European Union (EU) member states in the area of manufacturing practices for pharmaceuticals. The U.S. Department of Agriculture (USDA) has already approved 32 meat inspection systems around the world as equivalent to our own and participates in a wide-ranging equivalency agreement with the EU on veterinary practices and medicines.

NAFTA and WTO rules mandate equivalence determinations but do not provide procedural guidelines or factors to consider. The absence of such guidelines and factors has resulted in subjective comparisons. Under these NAFTA and WTO rules, it is difficult, if not impossible, to understand how countries, including the U.S., will fulfill the requirement to determine whether the regulatory systems of dozens of other countries are equivalent to their own.

Mutual Recognition Agreements: Another tool in the international harmonization kit is the Mutual Recognition Agreement (MRA). A MRA is a negotiated, reciprocal agreement between nations which allows one nation to rely on the other's "conformity assessment" system.

"Conformity assessment" means verification by a country that a product meets a required standard. Thus conformity assessment systems include product testing, quality systems audits, and the reporting required from such testing or audits. For example, an MRA the U.S. is currently engaged in would allow foreign drug regulatory authorities to conduct inspections of that country's drug manufacturers on behalf of the U.S. Food and Drug Administration (FDA) to ensure they meet the requirements of U.S. law. The FDA will accept these inspection reports as if they had been produced by U.S. regulators.

The U.S. is currently participating in a MRA with the EU covering electromagnetic safety, telecommunications, marine recreational craft, electrical safety, medical devices, and pharmaceutical good manufacturing practices. Another MRA with Canada on molluscan shellfish regulation is in the works.

Industry documents are unabashed in describing that MRAs are intended by industry to be a vehicle for standards harmonization and equivalency, not just conformity assessment. The U.S.-EU MRA on pharmaceuticals, for example, necessitates the determination of equivalency between the nations involved regarding good manufacturing practices, which ensure the purity and quality of the final drug product.

Harmonization Upward or Downward?

Theoretically, international harmonization could occur at the lowest or highest levels of public health or environmental protection or somewhere in between. Unfortunately, the actual provisions in NAFTA and the WTO requiring harmonization or providing incentives for harmonization could result in the lowering of the best existing domestic public health, social, economic justice, natural resource conservation and environmental standards around the world.

For instance, under NAFTA and the WTO, international standards serve as a ceiling which countries cannot exceed rather than as a floor that all countries must meet. The agreements provide for the challenge of any domestic standards that go beyond international standards in providing greater citizen safeguards, but contain no provisions for challenging standards that fall below the named international standard. Thus, the provisions in NAFTA and the WTO promoting harmonization are likely to serve only as a one-way downward ratchet on domestic standards. Challenges of domestic standards that exceed international standards will be resolved in the binding dispute resolution system built into these agreements.

Dispute Resolution Process
While similar in some ways to a judicial proceeding, the dispute resolution systems in NAFTA and the WTO lack the procedural safeguards inherent in the U.S. judicial system. Cases are decided by tribunals comprised of three trade experts. Tribunalists are chosen on the basis of a list of qualifications that ensure that panelists will have a favorable view of current trade rules and the dominance of NAFTA and WTO rules over other domestic policies. (For instance, to qualify for a WTO tribunal a person must have worked at the GATT or WTO or represented a country there, with very limited exceptions.) Tribunalists are not required to disclose actual or potential conflicts of interest, nor are the tribunals required to follow other due process standards.

The dispute resolution process in both NAFTA and the WTO is secretive; documents are confidential; oral arguments are closed to observation or participation by any entities except national government representatives; and no outside appeal is available. Nor is there any mechanism for nongovernmental entities or other outsiders to submit amicus briefs. A recent WTO ruling announced that such submissions are not absolutely forbidden, but can only be accepted if they are submitted as part of an involved government's documents. State, federal or local laws and regulations judged to be out of compliance with NAFTA or the WTO must be eliminated or changed, or the "winning" country can place trade sanctions on products from the country whose law is ruled against.

Expansive international rules strongly enforced through international dispute resolution bodies have significant implications for the laws and policies domestic governments may establish, as well as for the processes domestic governments use to make policy. Yet, while the WTO and NAFTA establish an entire system of international governance, the two agreements were designed to promote narrow economic goals, such as freeing investment flows from government policies seeking to shape economic development, and expanding the volume of international trade.

Other valuable goals, such as the promotion of democratic accountability, just economic distribution, strong communities, and consumer, public health and environmental protection were not included. Indeed, the pacts contain provisions to limit countervailing policy goals to the extent they could impact trade and investment flows.

Implications for Democracy
Under NAFTA and the WTO, international standards developed in industry-only standard-setting institutions that are closed to government or public participation or outside scrutiny or input have the same status as standards developed by wholly governmental institutions or quasi-governmental standard-setting institutions.

Standard-setting bodies recognized by NAFTA and the WTO operate with widely differing membership, decision-making structures, and rules about transparency. In many, members of the public or public interest groups have no standing, can be refused a seat at the table and denied access to documents. Yet, because of NAFTA and WTO requirements, the international standards set in these institutions have the same compelling implications for existing domestic standards and the ability of interested parties to have future standards developed.

In sharp contrast to the closed door process of many standard setting institutions, U.S., policy-making must be conducted "on the record," with a publicly accessible docket, under laws such as the federal Administrative Procedure Act. Public access to information and decision-making is also guaranteed in U.S. domestic law by the Freedom of Information Act, the Government in the Sunshine Act and the Federal Advisory Committee Act (FACA). FACA requires balanced representation on and open operations of government advisory committees.

For international harmonization of standards, however, agency adherence to the U.S. domestic procedures for notice, balance, openness, and public input has been spotty at best. U.S. federal agencies follow different procedures for involving the public in their international harmonization negotiations and make differing amounts of information available to the public at different stages. In a manner both subtle and powerful, recent international commercial agreements such as the WTO and NAFTA have redefined the relationships in policy-making between governments, industry, and the diffuse public interest.

The Origins of NAFTA and the WTO
NAFTA and the WTO's systematic prioritization of commerce over all other policy goals was possible because the negotiation and adoption of both NAFTA and the WTO largely foreclosed citizen and public interest group participation. The agreements were negotiated behind closed doors between unelected and largely unaccountable government agents, such as staff of the Office of the U.S. Trade Representative and U.S. Department of the Commerce.

Under uniquely constricting procedural rules called "Fast Track," Congress' role in the development of NAFTA and the WTO was also very limited. During negotiations of the pacts, consultation with Congress was minimal. Once completed, Congressional approval of the pacts and the thousands of pages of changes to U.S. law required to conform to the pacts' terms by a simple majority was required within 90 days. Uniquely, under Fast Track the Executive Branch writes trade agreement implementing legislation. Under Fast Track's uniquely restrictive procedural requirements, only 30 hours of Congressional debate is allowed and the vote must occur without any amendments to the lengthy implementing legislation. As a result, few Representatives were well-informed about the pacts' requirements.

Documents, draft texts and negotiations on NAFTA and the WTO were inaccessible to the public. Even Members of Congress were largely limited to information provided by negotiators. Actual draft texts were only available to Members of Congress at certain times and under certain conditions. Only staff with security clearance were allowed access to such documents at all.

At the same time, industry had extensive access to information and the opportunity to provide input into the negotiations through an official trade advisory committee system. The U.S. trade advisory system includes more than three dozen committees with over 800 industry representatives who have access to inside information and provide advice on most aspects of negotiation and implementation of trade agreements and policies. During the negotiation of the WTO and NAFTA, a dozen labor representatives, but no health, consumer, or environmental representatives were included on these committees.

The constricted and one-sided access to information, the lack of a full public debate and the constraints placed by Fast Track on the normal democratic process, virtually guaranteed that these important trade pacts would be unbalanced and thus would cause significant problems when implemented.