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Big Box Backlash: Local Control Over Land Use Threatened by WTO

Dec. 12, 2005

Big Box Backlash: Local  Control Over  Land Use Threatened by WTO

Public Citizen Briefing Paper Reveals Push by Big Box Retailers to Use Trade Rules to Undermine Local Zoning and Other  LandUse Laws

WASHINGTON, D.C. – A controversial World Trade Organization (WTO) services agreement that will be discussed at this week’s WTO ministerial meeting in Hong Kong poses a serious threat to state and local authority over land use policy, according to a briefing paper released today by Public Citizen.

Public Citizen released the paper, Big Box Backlash:The Stealth Campaign at the World Trade Organization to Pre-empt Local Control Over Land Use, as trade negotiators flew to Hong Kong in a last-ditch effort to revive stalled WTO talks. The briefing paper exposes how big box retailers such as Wal-Mart are pushing for new provisions in the WTO’s General Agreement on Trade in Services (GATS) that could further undermine local zoning and other land use and development policies. The briefing paper is available here.

“This briefing paper points out that, unlike many European and Asian nations, U.S. trade negotiators failed to safeguard local land use laws from the existing WTO services agreement, much in the same way that they failed to protect state gambling laws from the GATS,” said Lori Wallach, director of Public Citizen’s Global Trade Watch division, referring to a recent WTO ruling against U.S. gambling laws. “Rather than paring back our commitments under the GATS to protect state sovereignty and the right to regulate as a local governing entity, the Bush administration is hoping for an agreement in Hong Kong that would deliver a vast expansion of the GATS, including into areas largely regulated by states, such as higher education.”

In 1994, the United States committed retail and wholesale distribution, as well as the hotel and restaurant sectors, to the terms of the GATS, one of 17 Uruguay Round agreements enforced by the Geneva-based WTO. The GATS expansive “market access” rules are geared toward facilitating the entry of foreign service providers into the U.S. market by incorporation or acquisition of U.S. firms. These GATS rules forbid limits on the number of services suppliers, as well as measures that would reduce the value of a service transaction or limit the number of employees. Policies containing economic needs tests, like that in the city of Los Angeles for very large retail operations, are explicitly forbidden.

Unless the United States takes action to fix this problem in the current round of negotiations, local governments could see challenges to state and local land use laws brought before WTO tribunals, which are empowered to authorize trade sanctions against countries that refuse to conform their domestic policies to WTO dictates. Across the country, state and local officials are working to put laws in place to protect their communities, their environment, their wage base and tax dollars by putting land use limits on “big box” retailers, as well as retail chains and other development projects they deem destructive to the community or the environment or out of step with local needs and planning.

Among the local laws threatened by GATS rules are those that impose:

  • size and height restrictions on big box stores;
  • limits on hours of operation;
  • economic needs tests before stores can be approved; and
  • limits on development to protect the environment or protect historic and cultural sites.

No state or local group has yet recognized the threat posed to land use laws and local sovereignty by the WTO’s one-size-fits-all rules for service firms. One group that has recognized this threat is major retail firms.

“Major big box retail corporations have been eyeing the GATS as a way of gutting local zoning and land use laws that have kept them out of communities in Europe and the United States,” said Saerom Park, Public Citizen’s GATS outreach coordinator. “They are pursuing a strategy of global pre-emption. Citizens concerned about setting sane land use policies need to know that Wal-Mart is just one of the firms that has been lobbying both the U.S. government and the WTO on this issue.”

Indeed, Wal-Mart, in a May 1, 2002, submission to the U.S. Trade Representative, asked that Bush administration trade negotiators press countries to remove “any size limitations on individual stores” and “geographic limitations on store locations” in member countries. Similarly, at a Sept. 12, 2002, conference on the GATS organized by the U.S. Department of Commerce, a retail industry representative identified IKEA (the Swedish furniture retailer) and Royal Ahold (the Netherlands-based owner of the Stop & Shop and Giant Food chains in the United States) as among the globalized companies facing problems with local land use policies. The representative identified regulations related to the “size and location of stores” as a specific trade barrier.

The threat posed by the GATS to state and local governments was highlighted this year by the WTO’s ruling in an Internet gambling case. Over the strenuous objections of the U.S. government, the WTO Appellate Body declared hat the United States had signed up (or committed) the entire gambling sector to the GATS, even though the word “gambling” never appeared in U.S. negotiating papers. Because of this ruling, all federal, state and local laws governing gambling must comply with GATS rules, which forbid bans on activities (such as gambling) in committed sectors and forbid a variety of other limits on gambling. While the United States dodged a bullet in this case, because the WTO said it could rely on the public morals exception contained in the GATS to argue that Internet gambling posed a unique hazard, no such exception would protect local zoning policies, and the GATS does not include even a weak exception for the protection of natural resources found in many other trade agreements.

The WTO service negotiations are a key part of the WTO’s negotiating mandate heading into the WTO’s 6th Ministerial, which begins this week in Hong Kong. New services negotiations launched in 2000 have been tied up with bitter debates over the pace and results of services liberalization, especially in the developing world. Services talks are scheduled to conclude in 2007.