Principles of the trading system 
A number of simple, fundamental principles run throughout all the WTO agreements. They are the foundation of the multilateral trading system. They include: non-discrimination ("most-favoured-nation" treatment and "national" treatment), freer trade, predictable policies, encouraging competition, and extra provisions for less developed countries. 

The case for open trade 
The economic case for an open trading system based upon multilaterally agreed rules is simple enough and rests largely on commercial common sense. But it is also supported by evidence. Protectionism leads to bloated inefficient companies and can in the end lead to factory closures and job losses. One of the WTO’s objectives is to reduce protectionism. 

The WTO's roots: from Havana to Marrakesh 
The WTO's creation in 1995 marked the biggest reform of international trade since 1948. During those 47 years, international commerce had come under GATT which helped establish a prosperous multilateral trading system. But by the 1980s an overhaul was due. 
The first five GATT rounds concentrated largely on tariff reductions. The first round, involving 23 countries in 1947, resulted in 45,000 tariff concessions affecting $10 billion of trade, about one-fifth of the world's total. The 23 also agreed to adopt the General Agreement in Tariffs and Trade, rescued from the failed attempt to create an International Trade Organization. 
The next GATT rounds concentrated on further reducing tariffs. Then, the Kennedy Round in the mid-sixties brought about a GATT Anti-Dumping Agreement. The Tokyo Round during the seventies was the first major attempt to tackle trade barriers that do not take the form of tariffs (non-tariff barriers), and to improve the system. The eighth, the Uruguay Round of 1986-94, was the latest and most extensive of all. It led to the WTO and a new set of agreements covering goods, services, intellectual property and a new dispute settlement mechanism. 

The Uruguay Round 
The Uruguay Round brought about that overhaul. It was the largest trade negotiation ever. At times the talks seemed doomed to fail, but in the end, the Uruguay Round was successful. The task was so immense that some people wondered whether there would ever be another negotiation like it - was it the round to end all rounds? 

WTO and GATT: are they the same? 
No. The WTO is GATT plus a lot more. GATT (the institution) was small and provisional, and not even recognized in law as international organization. It has now been replaced by the World Trade Organization. GATT (the agreement) has been amended and incorporated into the new WTO Agreements. GATT deals only with trade in goods. The WTO Agreements now cover services and intellectual property as well. 

While GATT no longer exists as an international organization, the GATT agreement lives on. The old text is now called "GATT 1947". The updated version is called "GATT 1994". 
Moreover, GATT's key principles have been adopted by the agreements on services and intellectual property. These include non-discrimination, transparency and predictability. As the more mature WTO developed out of GATT, you could say that the child is the father of the man. 
 

*Source:  http://www.wto.org/wto/about/facts0.htm 

The Text of the GATT:    1947 Orginal Agreement    GATT 1947 
                                                     1994 Revision                    GATT 1994 
 

The Text of NAALC:  http://labour-travail.hrdc-drhc.gc.ca/doc/nafta/eng/e/North-e.html 

Case Studies:  
Ethyl Corporation v.s. Government of Canada:  

                 Now Investors Can Use NAFTA to Challenge Environmental Safeguards  
 

Ethyl Corporation's $251 million lawsuit against a new Canadian environmental law should set off alarm bells throughout the public interest world. The suit, brought under the terms of the North American Free Trade Agreement, demonstrates the serious danger that present and future international economic pacts could pose to environmental regulations and other laws that protect the public. 

In early April, the Canadian Parliament placed public safety ahead of Ethyl's desire to sell its products in Canada by banning the import and interprovincial transport of a dangerous Ethyl product ­ the toxic gasoline additive MMT. Ethyl, the company that put the lead in leaded gasoline, retaliated on April 14 by slapping the Canadian government with a lawsuit under NAFTA. Ethyl claims that the Canadian import ban on MMT violates various provisions of NAFTA and seeks restitution of $251 million to cover losses resulting from the "expropriation" of both its MMT production plant and its "good reputation." 

MMT is a toxic manganese-based compound that is added to gasoline to enhance octane and reduce engine "knocking." Canadian legislators are concerned that MMT emissions pose a significant public health risk. Automobile manufacturers have long argued that MMT damages emissions diagnostics and control equipment in cars, thus increasing emissions.(1) Ethyl is the product's only manufacturer. 

The Environmental Defense Fund (EDF), which tracks the use of MMT, reports that the additive is used only in Canada. The United States EPA has banned its use in reformulated gasoline, which captures approximately 1/3 of the U.S. gasoline market. An EDF survey of the remaining producers reports that none use the additive.(2) California has imposed a total ban on MMT. 

Canadian legislators wanted to ban the use of MMT in order to protect the Canadian public. Because they could not do so under Canadian Environmental Protection Act (CEPA) provisions, they did the next best thing: banning MMT's import and transport.(3) 

Under NAFTA, Ethyl has been able to sue the Canadian government for compensation. The investment chapter of NAFTA, for the first time in a multilateral trade or investment agreement, confers upon corporations "private legal standing" ­ or the ability to sue governments for compensation ­ in international courts. This "investor-to-state" mechanism diverges from dispute resolution systems in previous international economic agreements in two radical ways: First, in agreements like GATT, only national governments can bring suits in front of international tribunals. Second, national governments cannot sue for compensation. The most a government can do if the tribunal rules in its favor is to reimpose tarriffs on the violating nation. 

This lawsuit is the third, and largest, under NAFTA's investor-to-state dispute mechanism. According to an official at the International Centre for the Settlement of Investment Disputes (ICSID), the institution that arbitrates most of the world's investment complaints, the $251 million Ethyl seeks is higher than any amount requested in an ICSID investor-to-state proceeding.(4) 

The Ethyl suit raises a host of issues that should be of serious concern to policymakers ­ particularly since the U.S. is negotiating the expansion of NAFTA as well as a new multilateral investment agreement (MAI) that would apply NAFTA standards worldwide. 

     The Ethyl case could set a precedent where, under NAFTA and similar agreements, a government would have to compensate investors when it wishes to regulate them or their products for public health or environmental reasons. Under NAFTA, the presumed "right" of corporations to be compensated when public health regulations affect a company's bottom line is treated as the moral equivalent of the public's right not to be harmed by industrial toxins. This sends the strong message to investors that demanding compensation from the public for the inconvenience of complying with environmental regulations constitutes a legitimate and lucrative business strategy ­ a message Ethyl has clearly heard. Thus, in pacts like NAFTA, anti-environmentalists may have found an effective mechanism for advancing the radical "takings" agenda that they have not been able to move through the democratic process. The effect on environmental regulation could be chilling. 

     The safeguard against frivolous lawsuits has been removed by giving investors the right to sue national governments on their own behalf. When governments are the only entities that have legal standing to bring a case against a regulation or other law under an international agreement, political and diplomatic pressures reduce the likelihood that frivolous lawsuits will be initiated. The investor-to-state dispute resolution clause in NAFTA (and in the proposed MAI) removes this safeguard, allowing corporations and individual investors to sue for compensation. Any corporation can simply represent itself in a binding international proceeding. The Ethyl suit demonstrates the danger in granting investors this new power. 

     The threat of suits like Ethyl's can be used to intimidate lawmakers who are considering new regulations. Ethyl submitted an intent to file suit six months before the MMT ban was passed in the Canadian legislature. Ethyl hoped that the threat of a multimillion dollar lawsuit would deter policymakers from passing the bill. While Ethyl failed in this instance, the ability of investors to use their private legal standing to credibly threaten major suits could lead to successful efforts in the future to derail the democratic decision-making process and alter the outcome of the legislative debate. Ethyl also claims that the legislative debate itself constituted an expropriation of its assets because public criticism of MMT damaged the company's reputation. Thus, Ethyl is using NAFTA to file what is, in effect, a SLAPP-suit against the Canadian Parliament. Far from worrying about the implications of such actions, U.S. government negotiators have actually argued that the ability of investors to use legal threats to influence legislative debates is a healthy innovation that will prevent governments from passing laws that violate international agreements.(5) 

     The Ethyl case demonstrates how domestic courts can be bypassed for international tribunals. No Canadian court will ever rule on whether the import/transport ban on MMT violated NAFTA. NAFTA has allowed Ethyl to pursue its case before an international tribunal, where the proceedings are conducted in secret and the records are not publicly accessible. In addition, claims that go to international arbitration are often expedited; lawyers for Ethyl claim that the case will be settled by the end of the year. Since the tribunal's decision will be final and binding, the Canadian government has no recourse to appeal (outside of the tribunal's own limited appellate process). In allowing corporations to bypass national courts, international economic agreements like NAFTA and the proposed MAI replace the provisions of constitutional law with the authority of international panels established primarily to defend investors' "rights." 

     The Ethyl case points to the possibility that corporations could drain state treasuries. There is no limit to the amount of compensation that could be sought by corporations under investor-to-state dispute resolution in the NAFTA and the proposed MAI. The $251 million that Ethyl seeks may be the tip of the iceberg since corporations can request compensation for actual and future earnings losses as well as to repair their "tarnished images." If such cases are successful and proliferate, the day could come when a government's mandate to protect citizens extends only as far as its limited fiscal coffers. In addition, any number of corporations can consolidate their suits, thereby multiplying a government's potential payout. 

     The Ethyl case suggests that critics of NAFTA and GATT were correct in claiming that these agreements could pose a real threat to national 
sovereignty. The likelihood that NAFTA, and other agreements like it, could restrict the ability of democratically elected governments to legislate on such important matters as public health and safety and environmental protection was dismissed by many NAFTA supporters. Yet the Ethyl case shows that the predictions of critics were in fact quite trenchant, as illustrated by Ethyl's attorneys: "[T]he potential for lawsuits under this [investor-to state dispute resolution] process is far-reaching since it could be used by more than 350 million individuals and corporations throughout the NAFTA countries."(6) Under the proposed MAI, which will cover investor from 29 of the world's richest countries, the numbers can only grow. 

 
Another Broken NAFTA Promise:  
    Challenge by U.S. Corporation Leads Canada to Repeal Public Health Law  

Ethyl Wins $13 million Settlement and Repeal of Ban on Controversial Gasoline Additive  

 
What Congress and U.S. consumer and environmental groups were promised could not happen just did: Canada has repealed a national public health law after it was challenged under NAFTA. 

The Canadian ban on the gasoline additive MMT was challenged directly under NAFTA rules by MMT's producer, U.S.-based Ethyl Corporation. The corporation was able to bully the sovereign government of Canada into abrogating its duty to protect the health and safety of its citizens. 

The case provides the latest evidence that recent international trade and investment agreements are leading to the elimination of important environmental, consumer, health and human rights laws. 

In the past two years, the Clinton Administration has pushed through Congress a repeal of a successful dolphin protection after it was threatened with a WTO challenge and weakened reformulated gasoline cleanliness regulations of the Clean Air Act after they were successfully attacked by Venezuela at the WTO. 

As well, the Administration has been pressuring state legislatures not to pass human rights laws that might conflict with WTO rules: in Maryland investment and trade sanctions against Nigeria's dictatorship and in Massachusetts measures against the dictatorship of Burma. 

In the Ethyl case, Canada repealed its ban on MMT and agreed to pay Ethyl $13 million in order to avoid the $250 million damages Ethyl claimed in its NAFTA suit. Ethyl’s challenge to the Canadian law was the first suit initiated under NAFTA provisions that allow corporations in one country to directly sue the government of another country for cash damages. 

In April 1997 Canada imposed a ban on the import and interprovincial transport of the gasoline additive MMT. Some U.S. states also ban MMT, whose primary ingredient, manganese, is a known human neurotoxin. Ethyl responded to Canada's public health law with a $250 million lawsuit claiming the law violated its investor protections under NAFTA. Ethyl argued that the law was an "expropriation" of its assets or an action "tantamount to expropriation" because it would eliminate profits Ethyl expected to earn through Canadian sales of the additive. 

The Canadian government settled the NAFTA suit yesterday agreeing to pay Ethyl $13 million in damages and to cover the company’s legal costs. It will also proclaim publicly that MMT is "safe" – in direct contradiction of the view of its national environmental protection agency. 

Trade negotiators in the U.S. and Canada have generally dismissed concerns that trade and investment agreements would have a "chilling effect" on public interest laws. The outcome of the Ethyl case demonstrates that corporations can and will use the rights granted to them under trade agreements to attack – and in some cases eliminate – public health and environmental laws. 

If a country with the economic standing of Canada can be forced to repeal its public health laws, the threat is obvious for environmental and health and safety protections worldwide, including in the U.S. 

Even before Ethyl forced Canada to dump its public health law, a more potent version of the NAFTA provision Ethyl employed had become one of the most controversial elements of the proposed Multilateral Agreement on Investment. 

*Source:    http://www.citizen.org/pctrade/nafta/naftapg.html 

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