Trade agreements

Countries have traded with each other for many centuries, but international trade as we now know it did not start to develop until the twentieth century. Modern transport and the internet have made it increasingly easy for companies and people all over the word to do business together; distance is becoming less and less important. To make free, fair and equal international trade even easier, various kinds of trade agreements have been created since the middle of the last century, such as the North American Free Trade agreement (NAFTA) between Mexico, the US and Canada, or Mercosur, the customs union between a number of South American countries. In the past three or four decades, however, trade seems to have become an end in itself and not only ignores the interests of people in poorer countries but also actually harms them. How has that happened and what can we do about it?

Free trade in a nutshell

In 1948, 23 countries signed the General Agreement on Tariffs and Trade (GATT), which contained agreements on free trade and open borders. Over the years, more and more countries joined the initiative. Later, it was decided that global trade should be liberalised even further and, in 1995, the World Trade Organization (WTO) was set up with sufficient powers to supervise that process. All trade agreements now have to comply with the WTO rules.

World Trade Organization (WTO)

The WTO is one of the world’s most powerful organisations and has the single aim of furthering free international trade. Its secretariat is in Geneva and it currently has 161 member states, mainly developing countries, meaning that it represents almost 100% of all global trade. The WTO is run by the member states themselves and its legislative body is the Ministerial Conference, which meets every two years.

The bigger the market share, the greater the power in the WTO

Decisions are officially made in the WTO is on the basis of consensus – all member states must be in agreement – and in theory all member states have the power of veto. In practice, however, the negotiating power of the member states is closely related to the size of their share in the world market. Moreover, developing countries often have fewer financial resources to represent themselves within the WTO and are sometimes literally denied a place at the negotiating table. The EU and a number of member states find the processes within the WTO too laborious, and conclude bilateral agreements. While the existing WTO rules already cause developing countries great problems, the bilateral agreements are even more damaging.

Free trade is more important than people and the environment

Free-trade agreements and the WTO rules often make it difficult for national governments to implement or improve laws and rules, because they overrule such national decisions. Member states that violate WTO rules can face serious penalties and sanctions. To date, some 500 such cases have been brought before the WTO.

At the moment, there are several charges under consideration against countries wishing to make their energy sectors more sustainable. One of these is a complaint from the US against India. India wants to strengthen its solar energy sector, but the US is trying to stop it from doing so. WTO rules on intellectual property are also restricting the access of local populations to affordable medicines.

A level playing field is not favourable for everyone

The ‘level playing field’ that the WTO advocates is often unfavourable for developing countries. Small-scale producers in these countries run a serious risk of losing out because they cannot compete with large foreign companies that can produce more cheaply. The economies of developing countries are often not sufficiently developed to stand up to this unfair international competition.

Poorer countries cannot afford to pay penalties or compensate for sanctions

The WTO rules can impact differently on rich and poor countries. Rich countries that violate the rules can ‘simply’ pay the penalty because they have plenty of money, while this is often more of a problem for developing countries. The same applies to sanctions: if, for example, Burkina Faso threatens the US with an economic sanction, it will have little impact on the US. If the US were to impose sanctions on Burkina Faso, however, it would have disastrous consequences for the latter’s economy. Poorer countries are therefore much more likely to avoid penalties and sanctions than richer countries by not introducing legislation that may contravene WTO rules. Consequently, people and the environment in developing countries are more likely to suffer from the negative effects of WTO rules.

Too little transparency and democracy

Negotiating processes within the WTO are not transparent and national parliaments have little influence on the decisions made within the organisation. Negotiations often take place behind closed doors and at informal ‘mini-summits’ to which not all member states are invited.

What Both ENDS is doing

Together with other civil society organisations, Both ENDS exerts pressure on the Dutch government and the European Commission to take their responsibilities within the WTO and defend the interests of developing countries.

In 2013, 2015 and 2017, Both ENDS attended the WTO Ministerial Conference as official civil society adviser to the Dutch government. A representative from Both Ends travelled with the Dutch delegation to inform the government from the inside on the standpoints and concerns of civil society organisations worldwide.

Besides directly influencing the Dutch government and the EU, Both ENDS also works continually with civil society organisations in developing countries. We provide these organisations with information so that they can represent their interests and persuade their own governments to defend people and the environment in negotiations on trade and investment agreements in and outside the WTO.