The World Trade Organization and the issue of deeper integration
With the extension from the GATT to WTO a lot was said (especially in France and the USA) about social and environmental dumping. We need 'fair trade relations', the matured countries claimed, but what is fair and how can we achieve that?
With the extension from the GATT to WTO a lot was said (especially in France and the USA) about social and environmental dumping. We need 'fair trade relations', the matured countries claimed, but what is fair and how can we achieve that?
The other way around, in Paris with the negotiations concerning the MAI (Multi-lateral Agreement on Investments) the NGOs articulated that such an agreement should not be implemented if it harms governments in their capability to upwardly harmonize norms and standards concerning labor and environment.
Both debates are understandable: they invite us to ask ourselves: is it better to go for so called deeper integration, or is it better to work with one issue international governmental organizations (IGOs)?
IGOs, WTO and deeper integration
There is a tradition of one issue international governmental organizations. In fact there are different types.
ILO dates already from 1917. The mechanism there is that nation states are invited to participate in protocols, agreements and/or regulations). It is their "sovereign right" to do so, or not. If they have agreed to do so, they have to translate the ILO protocol in national law. Beyond that, national judges can decide that the ILO regulation (accepted by that nation state) is applicable (directly) for citizens of that country.
UDHR differs in that it is considered automatically universally applicable. Still, enforcement is difficult: the more so because of differences in interpretation and practice.
UNEP (environment) has again another systematic. It promotes "environmental friendly behavior". From a legal perspective this is done by specific international treaties. Beyond that, UNEP is active with programs and by promoting soft law implementation. Again, there is no enforcement procedure.
In the same period GATT developed into WTO. The World Trade Organization is first and for most supposed to regulate trade among countries of the world at the world markets. To be able to do this effectively members of the WTO recently developed further -in line with the GATT tradition- the dispute mechanism. The dispute commissions (panels) must come to their verdicts on basis of internationally acknowledged trade rules.
Many countries do sign WTO agreements, but are lacking in commitment to agreements centered around 'moral' issues like: free trade agreements, human rights issues, environmental norms, labor-issues, etc. That creates a problem: 'how should the WTO deal these other issues?' Should countries be forced by the WTO or its members to adopt agreements concerning moral issues? Can countries that themselves adhere to strict moral rules restrain trade with countries that are less concerned with those norms? In this debate roughly three positions can be taken:
1. Separate trade-issues and other issues (like environment)
2. Make it a rule that countries who signed specific agreements concerning environment, labor or other relevant issues must effectively implement adequate measures in their own countries to meet obligations. If conflicting parties have both ratified agreements (for example ILO, UNDHR or UNCED declarations), than these rules can also be applied by the WTO. This form of integration is shallow. We could call this model 'shallow integration'.
3. Pressure countries, both developed and developing, to adopt higher agreement obligations concerning issues like labor and environment by using trade-instruments. If countries do not apply to minimum levels (as formulated by 'the global community') of environmental, safety or labor norms (whether or not they have ratified these), their exports can be significantly harmed. That way, exporting countries must accept minimum standards. The upward harmonization dynamics is thereby stimulated. This is a plea for 'deeper integration'.
The positive effects of deeper integration are that trade will be embedded in several 'moral' regimes. Also, the danger of a 'race to the bottom' is prevented. Countries who compete on the world markets by lowering environmental and other measures so as to reduce costs of production, will run the risk of being excluded from the markets all together.
Deeper integration also poses some risks. First of all deeper integration can lead to protectionism in disguise. Especially the least developed and developing countries can suffer from this.
Second, deeper integration will strengthen the power of those countries that are already in a position to determine the international rules and regimes: the USA in particular. If countries view deeper integration as a Western project, their enthusiasm for world markets and liberalized trade might diminish quickly.
Third, for some countries it can be simply impossible to adhere to certain standards, given their stage of development. Implementation of environmental measures and policies bears high initial costs. One can not always expect from least developed countries that they are willing to spend money on environmental issues if starvation is still a real threat.
To avoid the above named risks, some claim it is better to refrain from deeper integration. The WTO must concentrate on trade-issues and trade regulations. If members -for whatever reason- impede free trade with other members, they are off line. Issues like health, labor and human rights must be dealt with by other one issue IGOs: the ILO, UNCHR, UNICEF, UNCED, etc.
Specialization will enhance expertise of these organizations and will prevent 'over-burdening' of the WTO.
This strategy has its own weak spots. Countries can choose to become a member of the WTO, without becoming a member of international organizations aiming at enhancing social/environmental standards or without accepting standards of 'quality of life'. Such a country can not be forced to change unsustainable practices. Worse: other countries will have to accept trade in these unsustainable (sometimes according to an importing countries own norms even health-threatening) goods. This in turn might raise resistance against trade liberalization in Western countries, which are particularly sensitive in this respect.
Third problem is that the strength and power of different IGOs differs enormously. The WTO is strong, the ILO has far less means to enforce compliance with its rules. Some issues, obviously the issues most important for maintaining the world markets, are strongly represented within the international arena (trade and safety), other issues are far less well managed.
To overcome some of the weak spots in this 'one issue per IGO' model, we should enrich it with the mechanism of best practice and the model of new governance.
Best practice
The mechanism of best practice simply refers to the rule that corporations active in different countries should -when making new investments- use the best possible, cleanest technology (that is to say: the best technology they are themselves already using in other offices). Whether or not a country has laws concerning environmental norms or not, is no longer the main issue. Corporations usually stick to the best practice rule by themselves (sometimes in deliberation with the government from the country of origin, sometimes also as a part of a companies own policy aimed at creating win-win situations).
The best practice mechanism as practiced by business is positive for the environment. It also promotes technology transfer from developed to developing countries. In that way it promotes certain values that need active promotion if we go for 'shallow integration'. It is clear that "shallow integration" will be the more satisfactory when "best practices" are really practices.
However, how to realize this and how to counterbalance the weak spots of the shallow integration IGO-model.
New Governance
Next to the best practice mechanism and next to the specialized IGOs who rest on the law-enforcing power of their member states and on the power of international law, NGOs play an important role.
NGOs are aiming at respectively possess the capability to realize societal values at the global level without legal pressure and without the law enforcing institutions of the state. NGOs stand for certain societal values, like sustainable development, nature conservation, human rights, neighborhood improvements, solidarity, equality, and so on. On the one hand NGOs try to realize these values in a direct, active way by actually planting trees, building schools, lending money to women and taking care of the ill and desperate. On the other hand NGOs put pressure on other actors to realize core values, in the least not to harm them. In that respect NGOs monitor the actions of businesses and states, they inform members, mobilize media and mobilize consumers/voters.
Businesses are also important partners in governance. It is a business's goal to make profit. However, in today's world, businesses become more aware of values and norms living in their social surrounding and they are more conscious that responding to those norms serves their own interests:
1. Corporations are vulnerable to actions of NGOs since employees and staff of TNCs does not like 'their' company to be scandalized (the shame factor). Management is afraid of de-motivation of personnel;
2. NGOs can mobilize consumers if a corporation violates important societal values: for example if it violates human or labor rights;
3. Judges (the judiciary) have now started to penalize TNCs when they violate soft law principles, such as the pre-cautionary principle. Judges do not only base their verdicts on hard law, but also on national and international values which are widely accepted. Banking and insurance companies have begun to differentiate their risk contributions in relation to whether or not companies internalize social values (diminishing the risks)
4. Companies learn from each other that internalizing societal values into the company's behavior can produce win-win situations (like eco-efficiency). As soon as they start to realize this. Corporations change, they start to practice themselves sustainability in a broad sense.
In the past TNCs were doing business based on the adage 'go for profit and respect the law in and of each country in which you are active'. Today multinational companies start to understand that this does not suffice.
Corporations have started to internalize societal values. They do so in their mission statements and in their codes of conduct. Companies internalize values beyond the obligations of the law (of the paper law of the nation states). They do so not based on moral sentiments or, if you like, liberal values. They do so based on self-interest; long term self-interest, but self-interest. They want to achieve their own sustainability.
Shallow integration, best practice and new governance
If we combine the mechanisms of best practice and new governance with shallow integration, we get the following picture.
Regulations and norms embodied in the WTO and other international agreements can only be applied to countries that have ratified the documents. Trade with countries that have not ratified (specific) international agreements can not be lawfully blocked for that reason. In other words: trade can not be blocked for social/moral reasons unless the trade-partner has previously formally accepted the social and moral rules.
The mechanism of best practice to which more and more companies adhere is a valuable addition. In a direct way it limits the environmental damage businesses bring upon the environment. Indirectly best practice stimulates technology transfer and it has its impact on other values (for example labor standards) as well.
Next to and in combination with shallow integration and best practice, new governance should function. Even in countries that have not (yet) ratified minimum standards TNCs will feel the pressure of NGOs to behave morally and environmentally sound. Also, TNCs will still care about their long term sustainability. This might give them an impetus to stick to strict social/moral/environmental rules, even if they operate in countries where this is not legally required. Thirdly, although governments can not protect their markets from unsustainably produced products, NGOs can inform consumers and they can launch actions against products/corporations.
Of course, this model is not watertight. Business motivation to play its role in the new governance model will depend on the profitability of this strategy; the credibility of it has to grow; and from thereon trust in such a strategy. Furthermore one has to be aware that TNCs are more vulnerable to the actions of NGOs as are smaller, local producers. The latter are more difficult to 'discipline'.
Finally, it remains to be seen how powerful the NGOs will become and remain. Their effectiveness depends largely on the support they get from members and citizens and on the access given to them in both national and international political processes.
The above is in fact about a new symbiosis of governance, business and civil society. From a democratic perspective this new symbiosis will only be valid if all three segments practice the norms of 'good governance': transparency, accountability and integrity (no corruption). Only then there will be credibility and the capacity to realize change towards a sustainable society.