.. and International Monetary Fund in global importance, because it has a dispute settlement mechanism with enforcement powers. In the basic architecture of the current trading regime, three minimalist GATT principles continue to operate through the WTO. The first is the famous most-favored-nation status (MFN): Products traded among GATT members must receive the best terms that exist in any bilateral trading agreement. The necessity for an MFN clause arises because countries have bilateral trading agreements.
So if the United States imposes, say, a 10 percent tariff on product X from country Y, it must use that same tariff on all other members of the earlier GATT and the present WTO. Today nearly all countries are either members of the WTO or would like to be. Twenty years ago, however, only a minority of nations were GATT members and the MFN concept had more force, because those outside of GATT could not receive MFN treatment except by specific bilateral extension. The annual congressional fuss over China’s trade status occurs because China, which is not in the WTO, does not automatically receive MFN treatment. Congress must choose to grant it, withhold it, or subject MFN treatment to special conditions. In lending China MFN status, the United States voluntarily allows China to receive the rewards of WTO membership as it pertains to trade between the two countries, even though China has been denied membership to the trade organization as a whole. The second GATT standard is called non-discrimination, which demands that countries not discriminate between foreign and domestic products.
Goods produced domestically and abroad must receive the same “national treatment” equal access to domestic markets. The third GATT principle is “transparency,” which requires that any trade protection be obvious and quantifiable like a tariff. Finally, in addition to these rules, the WTO has the authority to resolve disputes and to issue penalties and sanctions. Moreover, its jurisdiction has been extended beyond manufacturing policy to include domestic policies that affect trade. The WTO can now apply to many service industries including banking, insurance, management consulting, and travel the same policies that GATT applied to manufacturing. Patents, trademarks, and copyrights, the bedrock of national policies that restrict trade in intellectual property, now fall under the WTO’s jurisdiction. Investment issues can also be subject to WTO rules when restrictions on investment among countries restrain free flows of capital and goods.
Any member country can challenge another’s practices and file a claim, which then triggers a formal procedure for resolving the dispute. Panels are established to look at each dispute there have been about 30 established since 1995 and, after several layers of appeals have been exhausted, the findings of these panels are binding. While GATT had a similar process, it did not have the power to recommend and enforce penalties, sanctions, and compensation the WTO panels do, and the signatories to the WTO have agreed to abide by the findings. So far, every country found to be in violation of WTO rules has voluntarily accepted the findings and taken steps to correct its practices. (When a country first rejects a WTO panel’s findings, the organization will face probably its most difficult challenge: enforcing a finding.) Once a special panel makes a decision about a specific dispute, a country found to be in violation of WTO rules has several options, including repaying the aggrieved country for its losses or changing its policies to comply with the panel’s findings.
In the event that a nation in violation elects not to abide by its rulings, the WTO allows the complaining party as a last resort to retaliate through the use of counter trade sanctions. T he most far-reaching new power of the WTO is its jurisdiction over national policies that affect trade. This has already allowed the organization to grapple with a wide variety of issues. Including the use of growth hormones in U.S. beef production; U.S. chicken production methods; India’s process-based patent laws that allow its domestic pharmaceutical industry to re-engineer drugs developed in other countries; EU claims that more of its cheese should be allowed to enter U.S.
markets; the way Mexico catches tuna; and Thai, Malaysian, and Indian shrimp harvesting techniques that kill sea turtles. To this list are added intellectual property claims by France over the use of its regional wine labels and Switzerland’s assertion that only it can use the Swiss Army Knife appellation. As more nations learn about WTO procedures, such examples will multiply. Although these trade policy reviews have just begun, they offer opportunities to introduce uniform global stipulations into domestic policies, with predictable outcries and controversies. The consequent reports that will emerge are one of the WTO’s levers for introducing standards for internal policies that influence trade, such as labor rights.
LABOR RIGHTS AND TRADE The idea of linking labor rights and trade was included in the Havana charter of 1948. Article 7 of the ill-fated charter proclaimed that “members recognize that unfair labor conditions, particularly in production for export, create difficulties in international trade, and, accordingly each member shall take whatever action may be appropriate and feasible to eliminate such conditions within its territory.” GATT lacked such a sweeping commitment and only allowed a country to restrict another’s exports based on the use of prison labor. The deliberations leading up to the formation of the WTO did not take up the issue of labor rights until almost the last moment. Because the Reagan and Bush administrations were uninterested, the issue did not receive attention until the late fall of 1993, and it only became a factor then because, in order to win congressional support for WTO approval, the Clinton administration needed to regain labor support lost during the NAFTA debate. When the Clinton administration did finally raise the issue of labor rights and trade, the ensuing uproar among Third World delegations forced the issue to the sidelines. It did not become part of the agreement, but the signatories agreed to take up the matter in the future.
This could be construed as either a victory or a defeat, and in fact it was both. Labor rights did not become part of the WTO. But the opportunity for tying labor rights to trade policy is significant, and subsequent maneuvers within the WTO have nudged labor’s concerns closer to the playing field. Shortly after the inauguration of the WTO in 1995, the International Labor Organization was commissioned to come up with a program for introducing labor rights into the development of WTO trade regulations. Its draft produced such a firestorm of controversy that it never saw the light of day. Even now, few people have seen it, and those who have will not talk about it.
That experience has made the organization wary of treading onto this terrain unless its mandate is more clearly defined, although the issue of linkage surfaced again during the WTO’s second-year review. Organized labor and its friends would do well to make the WTO a priority issue. The labor movement’s attention, divided as it is among so many demands, has not focused on Geneva in part for historical reasons. For years, the ILO afforded equal status to trade unions from communist countries. As a result, the AFL-CIO became disenchanted with the ILO and encouraged the United States to withdraw from the organization, which it did between 1977 and 1980. This Cold War legacy continues to cool the AFL-CIO’s relationship with the ILO despite the potential linkage of international labor rights to trade policy and the importance of the WTO to this process.
In addition, American labor should connect the WTO’s interest in linking labor rights to trade with efforts to end child labor, which is certainly an issue destined to receive widespread support if the WTO begins to focus on labor practices. So far, these issues have not been integrated, and so the campaign against child labor remains a moral crusade, rooted in labeling and consumer consciousness and detached from enforceable trade sanctions and penalties. But there are at least several concrete ways in which the WTO could soon be used to link labor rights to trade policy. The first opportunity will arise when China is proposed for admission to the WTO. Previous congressional statutes (specifically the Jackson-Vanik amendment) give Congress the opportunity to vote on China’s accession to the WTO although congressional approval is not required for other countries. So if members of Congress choose, China’s WTO membership could be conditioned upon the WTO’s adoption of labor rights protections.
Second, future negotiations about specific productswith textiles being the most likely candidatemight tie trade rules to labor standards. The Third World’s eagerness to accelerate the elimination of existing import quotas can be connected to their acceptance of labor rights as part of the WTO trading system. The whole linkage issue won much greater prominence during the recent congressional rejection of renewal of fast-track negotiating privileges for the President. Now might be the time to press for the linkage of labor rights to trade rules in the WTO. The introduction of labor rights into the WTO framework is central to any strategy of softening global pressures on labor. It would allow the United States, for example, to file a claim against Indonesia for prohibiting trade union organization; Germany could object to Pakistan’s use of children in the production of carpets; and the use of bonded and prison labor could be challenged wherever it occurs. This would be a major advance for labor in industrial countries, for human rights, and for the welfare of the most marginalized people in Third World countries.
Bibliography The WTO and the Battle Over Labor Standards” by Martin Khor, Third World Network published by Third World Network Features January 13, 1997 http://www.wto.org/ Handbook of WTO/GATT Dispute Settlement (Pierre Pescatore, William J. Davey & Andreas Lowenfeld eds., Transnational Publishers, 1991- )(ISBN: 1-57105-032-9). Includes full text of WTO/GATT panel reports. Kept up-to-date by looseleaf supplements. The International Trade Law Reports (London : Cameron May, 1996- )(ISSN: 1364-9205). Looseleaf including decisions of the World Trade Organization panels and the Appellate Body.
Law and Practice of the World Trade Organization (Joseph F. Dennin ed., New York: Oceana Publications, 1996- )(ISBN: 0379213583). Looseleaf service includes Dispute Resolution binders containing WTO panel reports).