Globalization or Democracy? Trade Pacts and Tribunals behind Closed Doors

7 December 2016

 Wallonian Farmer, photo by André Mouraux

Canada’s Minister of International Trade, Chrystia Freeland, shed a few tears of frustration in October when the little region of Wallonia blocked the Canada-EU trade pact that she worked so hard to negotiate. Imagine that: a bunch of Belgian farmers standing up to the mighty forces of globalization. Next thing you know, Britain will be brexiting the EU and Trump will be trexiting the TPP (Trans-Pacific Partnership). What is this world coming to? Its senses?

At the very least, the genie is out of the globalization bottle. Many people now realize the opaque consequences of globalization. Unfortunately, no small proportion of them have been convinced by demagogues to accept solutions that could be worse.

The Loaded Global Game   Economists have been telling us for decades that globalization is motherhood, as is free trade and free enterprise. After all, they insist, greed is good and markets are sacred while governments are suspect. Well, I am one of those who believe that governments are suspect when they buy into this nonsense. You don’t have to be bribed to be corrupted; you just have to be conned by dogma.

Nowhere is this more evident than in the sham tribunals that have been written into the trade pacts of recent years. These enable those free enterprises to sue sovereign nations whose laws or regulations—even in matters pertaining to health, culture, and environment—they deem to have affected their profits. So much for free people.

To understand why Trump and Farage as well as Sanders have been getting so much support, please notice two disconnected dots: the multinational enterprises that barrel ahead in the back rooms and the people in local communities who feel shut out. Something is rotten in the state of democracy.

This global game is loaded. The international trade pacts privilege large corporations that can move freely around the globe. They face no countervailing power, to use John Kenneth Galbraith’s forgotten phrase1—no global taxes, no global regulations to speak of (except for the ones they develop for themselves), no global government with teeth, just a set of international agencies, all of them economic—the IMF, The WTO, the World bank, the OECD—that act mostly as their cheerleaders. All of this has enabled these corporations to ride roughshod over governments, for example by playing them off against each other for tax breaks and by being allowed to enter the back rooms of the trade negotiations for their own benefit. 

Local businesses, in contrast, are subject to the countervailing power of their own governments, comprising regulations and national taxes. They have no foreign tax haven where they can plant some phony headquarters. Instead, these businesses are rooted in local communities, which, in fact, they serve socially as well as economically. And make no mistake about their importance to us all: count the number of local businesses with which you regularly interact. I’ll bet they far outnumber the global ones. Yet the concept of community does not figure in mainstream economics, nor therefore in the trade pacts. It took the peculiar veto power of Wallonia to open the closed doors of this pact, thereby providing three million people with an 11th-hour deal for themselves. Is this any way to make some of our most momentous policy decisions?

The Sham Tribunals  Here is what was written about these tribunals in a spate of articles three years ago, as their consequences became evident. In the Guardian: their hearings “are held in secret, the judges are corporate lawyers, many of whom work for companies of the kind whose cases they hear. Citizens and communities...have no legal standing. There is no right of appeal.”2 A New York Times article and editorial pointed out how “big tobacco” had been using these tribunals to “intimidate” and “bully” poor countries into rescinding regulations intended to control the use of tobacco. The health minister of Namibia reported receiving “bundles of letters” from the industry about its attempts to curb smoking rates among young women.3

As for our rich country, Canada, with regard to NAFTA (the North American Free Trade Agreement), one Canadian official reported seeing “the letters from the New York and DC law firms coming up to the Canadian government on virtually every new environmental regulation and proposition in the last five years” (in the Guardian article). Before the trade negotiations for the EU-US pact had even begun, according to another New York Times article, European officials were “consulting with business leaders on both sides of the Atlantic on how to structure a free-trade pact…. Among other things, the business community was seeking an active role in writing new regulations.”4 Cry for democracy Minister Freeland.

The recent Canada-EU agreement has removed the most abusive aspects of these tribunals. But not the tribunals themselves, whose very existence is abusive, as are some other aspects of the agreement. Here is what a prominent group of Canadians with extensive experience on this issue wrote in a open letter to the people and parliamentarians of Wallonia. This “agreement will impose new constraints in many...areas of public policy”, including “pharmaceutical regulations, public health, agriculture… [and] labor rights.”5 This undermining of democracy by democratically elected government is happening in Trudeau’s Canada, not Erdogan’s Turkey.

Time to use our own courts   Democratic countries have laws and courts dedicated to protecting all their citizens and institutions. We don’t need special courts outside our borders devoted to the protection of private capital. We should be challenging in these courts the self-assumed right of our governments to bargain away our basic rights as citizens. Strike down this travesty of justice in just one country and watch the whole house of cards come down.6

Globalization needs to be constrained, not further entitled. Continue to allow it to trump democracy and watch the rise of more Donald Trumps.


© Henry Mintzberg 2016. For more on global, local, and community, see my book Rebalancing Society...radical renewal beyond left, right, and center.

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1 J.K. Galbraith, American Capitalism: The Concept of Countervailing Power (Houghton-Mifflin, 1952)

2 Monbiot, G. 2013, November 4. This transatlantic trade deal is a full-frontal assault on democracy. The Guardian. www full-frontal-assault-on-democacy

3 Tavernise, S. 2013, December 13. Big Tobacco steps up its barrage of litigation. International New York Times.

4 Hakim, D. 2013, October 8. European officials consulted business leaders on trade pact. New York Times. www.nytimes .com/2013/10/09/business/international/european-officials- consulted-business-leaders-on-trade-pact-with-us.html

6 As part of their deal, the people of Wallonia have set off a process that may accomplish just that, while judges in Germany are already questioning the constitutionality of the tribunals in the EU pacts.