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Trading for Freedom By: Susan Ariel Aaronson
The American | Wednesday, June 13, 2007

From the very start of his administration George W. Bush has posited a direct link between trade and democracy. As early as February 2001, in his first address to Congress, he claimed that “free trade brings greater political and personal freedom.”

Though Bush has been a particularly enthusiastic advocate of this view, the connection is nothing new, and it is not merely abstract. Policymakers have long recognized that they can use trade agreements as a tool for encouraging democratization. For over 60 years, the U.S. government has included provisions in multilateral and bilateral trade agreements that require trade partners to encourage transparency, protect due process rights, and promote citizen participation in policymaking.

Anecdotal evidence and preliminary studies indicate that such provisions may be effective at encouraging improved governance and greater political participation. But the link between trade and democracy is poorly understood by the general public, and therefore Americans are ambivalent about the direction and objectives of  U.S. trade policy.

From GATT to the WTO

The United States first began linking trade agreements with democracy in the 1940s. Business leaders were becoming increasingly vocal about the wide range of trade barriers they encountered overseas, particularly British preferences and cartels, which many U.S. exporters saw as discriminatory and opaque. They pressed policymakers to include rules governing these practices in the world’s first multilateral trade agreement, the General Agreement on Tariffs and Trade (GATT). When the GATT went into effect in 1948, all signatories were required to publish promptly all laws, regulations, and judicial decisions affecting imports and exports. They were also required to administer trade-related laws, regulations, and agreements in a uniform, impartial, and reasonable manner.

Democrats and Republicans alike supported this strategy because they wanted to ensure that trade partners did not make policy in an opaque and arbitrary manner, a concern that only became more urgent as exports became more important to the U.S. economy. The United States’ GATT partners in Europe were willing to accept the new provisions because they needed access to U.S. and global export markets to rebuild their economies in the aftermath of World War II. Other countries, such as Canada, were supportive of the U.S. approach; having experienced the disastrous trade policies of the 1930s, they recognized the benefits of a more transparent process for establishing trade policy.

In 1995, the World Trade Organization (WTO) superseded the GATT, and with the WTO came new rules that further bolstered the links between free trade and transparent policymaking. Under WTO rules, member states must guarantee certain civil and political rights to all individuals participating in trade. In addition, member states are required to provide information about their trade laws and regulations, to allow citizens to comment on these regulations, and to apply the same rules to both domestic and foreign market actors. If WTO member states fail to meet these requirements, other member states may challenge their trade policies under the WTO’s binding system of dispute settlement. These rules, embedded in the WTO guaranteed domestic and foreign producers key human rights central to democratic policymaking: these rights include the right to political participation, right to information, and due process rights.

These rules were designed to govern trade policymaking only, but over the years the scope of trade policy has become considerably broader. In 1948, the GATT governed only commercial policies: tariffs, quotas, and exchange controls. By 1995, the WTO governed not only tariff and non-tariff barriers but also health and safety standards, subsidies, procurement policies, trade-related investment measures, and even intellectual property rules.  

And as the turf of trade policymaking has expanded, so too has the membership of the WTO. In 1948, the GATT had nine signatories; in 2006 the WTO had 150 members, the bulk of the world’s nations. Thus, the WTO’s provisions on transparency, due process, and public participation have had a growing influence on governmental policymaking throughout the world and in almost every sector. Evidence suggests that in several countries policymakers have changed their behavior in direct response to WTO provisions. In their annual trade policy reviews at the WTO, Malaysia, Romania, Egypt, El Salvador, Guatemala, and even China  reported that they have developed new trade policymaking strategies to involve stakeholders from business, government, and civil society. They now hold public hearings and claim that they change trade policies and strategies in response to citizens’ concerns. Egypt noted that it had put in place new laws to foster political participation and strengthen civil society, which in turn would enhance foreign investor trust in economic, political and social reforms. Similarly, when Thailand entered into FTA negotiations with the United States, the Thai prime minister pledged to ensure greater public involvement in the trade policymaking process. In discussing how the WTO is helping China improve its governance, China cited how it has invited public comment on revisions to its labor laws and intellectual property laws. Taken in sum, WTO procedures appear to be teaching some policymakers the benefits of more transparent accountable governance.

Scholars are trying to investigate the relationship between WTO membership with quantitative tools. Political scientist Mary Comerford Cooper used Freedom House Data (www.freedomhouse.org) to examine the effects of membership in the GATT/WTO over time. She found a relationship between WTO membership and democratization, but could not determine whether democratic states were more likely to join the GATT/WTO or whether WTO membership makes countries more likely to become or remain democratic. In my own review of the this relationship, I found that if we exclude the 24 high income long democratic OECD countries, a growing percentage of GATT/WTO members are free and democratic, The percentage of WTO members increased from  from 19% in 1986 (GATT) to 42% in 2005 (WTO)  With my colleague Jamie Zimmerman, I also compared political participation scores over time with length of GATT/WTO membership, using the CIRI Human Rights Data Set developed by David Cingranelli and David Richards (ciri.binghamton.edu) Again, excluding the 24 high-income OECD countries, the  data indicates that the longer a country belongs to the GATT/WTO, the higher its political participation scores. Between 87 and 92 percent of countries that had been members for over 11 years had high political participation scores, compared to just 72% of those that joined after 1995. (Some of these studies can be found here)

More empirical research is needed before scholars will be able to say for sure whether trade agreements have directly led to greater democratization. It’s possible that there are outside factors at work, or that the causality is reversed (i.e., the more democratic states become, the more they want to join and remain in the WTO). But it seems likely that once citizens learn to influence their governments on trade issues, they will also want their voices heard on other aspects of public policy. The evidence suggests that ever so gradually over time, habits of due process and political participation encouraged by WTO rules and procedures  may spill over to other aspects of the polity.

The Bush Administration Approach

Frustrated with the pace of decision-making at the WTO, the Bush Administration focused initially on bilateral trade agreements, primarily with small Central American and Middle Eastern economies. However, like WTO membership, these bilateral agreements come with pro-democracy strings attached. In the Bipartisan Trade Promotion Authority Act of 2002, Congress required the Executive to ensure that regulations to protect public health, labor, the environment, and public safety were developed through transparent processes so as not to “arbitrarily or unjustifiably discriminate against United States exports or serve as disguised barriers to trade.”

Of course, the primary goal of such provisions is to facilitate commerce, and a cynic might say that this is their only goal. But just as foreign producers benefit when they can comment on and influence their country’s trade-related regulations, so do ordinary citizens of these countries. And once these citizens learn to influence their governments on trade, they may expand their influence to other sectors as well.

Under that Act, free-trade agreements have gone into effect with 13 countries, including Jordan, Singapore, Chile, Australia, Morocco, Bahrain, and the CAFTA-DR nations (El Salvador, Honduras, Nicaragua, Guatemala, Dominican Republic). Each of these agreements has a chapter on transparency requiring trade partners to publish, in advance, all laws, rules, procedures, and regulations affecting trade. These agreements also include provisions for review and appeal, designed to give all parties affected by trade regulations a reasonable opportunity to advocate for policy change.

These agreements also include language designed to promote direct public participation in policymaking. This language builds on provisions first included in the 1993 North American Free Trade Agreement (NAFTA). As part of that agreement, Mexico, Canada and the United States created an international organization, the Commission for Environmental Cooperation of North America (CEC), which provides citizens with a forum to claim that their government is not enforcing its environmental laws. Although the Commission’s resolutions are non-binding, they have occasionally spurred governments to change course. After toxic pollutants were abandoned at a lead smelter in Tijuana, the Mexican government promised remediation and declared the Cozumel Coral Reef a protected area in response to public appeals through the CEC.

The Bush Administration expanded on the NAFTA model for several reasons. After September 11, 2001, policymakers wanted to use trade agreements to encourage democracy, particularly in the Middle East, and to cement democracy in Central America. Second, recognizing that FTAs are often unpopular at home and abroad, they hoped that encouraging citizens to participate in the making of trade policy might also increase the perceived legitimacy of trade agreements. Finally, they hoped to attract Democratic Party support. They knew that Sen. Max Baucus, the ranking member (and now Chair) of the Senate Finance Committee, wanted to replicate and strengthen the citizen-submission process, particularly with regard to environmental policy.

Working with their counterparts in the Environmental Protection Agency and the Department of State, policymakers in the office of the U.S. Trade Representative (USTR) developed three models for the environmental chapters of FTAs. The first model, designed for FTA partners such as Australia that already have robust democratic institutions and environmental protections in place, includes minimal public participation provisions. The second model is designed for younger democracies and countries with relatively weak systems of environmental regulation, including Chile, Bahrain, Oman, Morocco, and Singapore. Under this model, the bilateral FTA partners set up an advisory committee that meets regularly to engage the public in discussion on the environment.

Sen. Baucus played a major role in developing the third, more extensive, approach, which was first used in the Central American/Dominican Republic Free Trade Agreement (CAFTA-DR). In February 2005, the United States and its six partners in CAFTA-DR agreed to establish a secretariat that would allow the general public to submit petitions regarding the operation of the agreement’s environmental provisions. In addition to setting up this complaint mechanism (funded in its first year by the United States), USTR and trade and environmental ministries in each of the CAFTA countries sought input from constituents on the agreement’s environmental chapters. They held hearings, solicited public comments, and published the new regulations both in print and on the Web. Under pressure from Sen. Baucus and other members of Congress, USTR has agreed to replicate this model in future FTAs, including those with Colombia and Peru.

Some members of the Trade and Environmental Policy Advisory Committee (TEPAC) have criticized this three-pronged approach, noting that it may be inappropriate for countries such as Bahrain and Oman that have no history of democratization. The mere inclusion of participation provisions in trade agreements cannot magically stimulate democracy. Signing free trade agreements with such countries, even with the requisite due-process requirements, could be interpreted as “tacit acquiescence in the very undemocratic practices we seek to have changed.”

USTR has tried to respond to such concerns by providing training in environmental decision-making to countries with little experience with such participation. For example, it hired the Environmental Law Institute to provide training to set up transparent accountable environmental institutions and processes in Morocco, and USTR officials have indicated that they plan to replicate this training in Bahrain and Oman. But relying on outsiders to train foreign officials is unlikely to assuage critics who oppose the linking of trade and democratization in the first place.

Ironically, while the United States aims to encourage transparency abroad, its own trade policymaking process is widely viewed as insufficiently democratic. Polling data reveals that many Americans believe that U.S. trade policymaking is opaque and beholden to business interests, and that the fast-track process is undemocratic. A plurality of Americans (49%) surveyed in 2002 by Investors Business Daily/TIPP believed that the President “should not be given” the authority to negotiate free trade agreements. A July 2005 poll by the German Marshall Fund found that while 66% of Americans have a favorable opinion of international trade, 61% of Americans think freer trade mostly benefits multinational companies and not ordinary people. It is clearly in the American interest to encourage a more democratic approach to trade policymaking among our trade partners. But if American policymakers want to use trade agreements to encourage democracy abroad, they need to do a better job of explaining their strategies and goals to the American people.

Susan Ariel Aaronson teaches at the George Washington University School of Business. She is the author of five books on trade and globalization issues.

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