The Truth about Trade

Noam Chomsky interviewed by Nick Rosen

Boulder Weekly, May 14, 1998

QUESTION: What’s your take on the Multilateral Agreement on Investment?

CHOMSKY: It’s disastrous. It’s a major attack on democracy, even on markets and trade. It would transfer decision-making, to an extraordinary extent, into the hands of unaccountable, private imperatives. And that’s why the negotiations for it were conducted in secret. …

The MAI would eliminate virtually any democratic social and economic planning. For example, suppose Colorado decided to pass laws for consumer protection requiring investors to look to privilege depressed areas for economic development. Under the MAI, any such laws would be banned. Massachusetts, for example, has a law barring investment in Burma — that would be banned. In fact, just about all the things that any community might do to try to make investment worthwhile for the community and not just for the investor (would be banned). Furthermore, corporations would have the right to sue governments, which has never been allowed in the past. It’s sort of allowed under NAFTA. But they would be allowed to sue governments, from the federal on down to the local level, if there was any infringement on their right to do anything they feel like. These suits would not be in court, they’re in private appeal panels which are made up of trade experts, meaning basically representatives of corporations. There’s no rules of evidence, they are secret and there is no appeal process. The rulings are made by “trade experts” which are basically corporate representatives.

Of course these (litigation) rights are not reciprocal. All obligations in the MAI fall upon governments, communities and so on. No obligations fall on corporations.

QUESTION: What are the forces behind the MAI?

CHOMSKY: They involve the OECD (the Organization of Economic Cooperation and Development), representing the governments of the richest countries, which was trying to ram it through. … The groups behind it were the major power centers of the world: the powerful government-states, the transnational corporations, the international corporate sector and the international bureaucracies like the International Monetary Fund and so forth. … The international organizations of U.S. business were involved directly. In fact, the U.S. Council on International Business already had a publication on it back in January 1996, which they were circulating to their corporate membership. The USCIB requested — which amounts to a demand — that the Clinton Administration make the MAI a central part of fast track (the temporarily failed bill endowing the president with trade negotiating authority and limiting Congress to a “yes” or “no” vote), even before the legislation was produced. The White House backed off because they were afraid of the publicity.

QUESTION: You’ve emphasized the involvement of national governments within this process, but isn’t that ironic given the fact that the MAI severely undermines the sovereignty of nation-states?

CHOMSKY: That’s on purpose. The leaders of the national governments want to undermine their sovereignty. Remember what a government is. It’s not a government of the people. It’s a government of powerful interests. This was made dramatically clear in an interchange between the White House and Congress which the press refused to publish. Last November, 25 congressional representatives sent a letter to the White House saying that “it has come to our attention — due to the efforts of activist groups — that this treaty (the MAI) has been under negotiations for three years,” and they asked a couple questions. One question was, how is it possible that the White House is claiming that they need fast track to be able to negotiate trade agreements, and here’s a huge trade agreement they’ve been intensively negotiating for three years without fast track? Secondly, how is it possible that, given that under the constitution Congress has exclusive control over questions of international commerce, the Clinton Administration had been doing it without even notifying Congress? And third, they went into some of the wording of the treaty and pointed out that it grants corporations rights which are far beyond what U.S. law grants them, and that in fact undermines U.S. sovereignty. A couple of months later they got an answer, which is the kind of answer that you would get if you wrote a letter to the White House — “Thank you for your letter,” and it said nothing. In fact they did issue a formal statement last February, and it was a very interesting statement. It didn’t say much but it did say that “we are being very careful to insure that all of our domestic constituencies are actively involved in the process.” And that’s a very interesting phrase. Who are the “domestic constituencies” that are involved? Well it’s not Congress, they had never heard of it. It’s not the public, they’ve been kept out of it totally. The “domestic constituencies” that they’re referring to are the U.S. Council on International Business. That’s what the White House is telling us in a very crude form. Who are they the government of? People ought to pay attention. Their power rarely reveals its position. That’s why I would describe it not as ironic, but rather perfectly natural. …

If we go back to the Bretton Woods system again, back to 1944, one of the reasons that they gave for requiring regulation on capital flows was what is sometimes called the “incompatibility thesis” by international economists. That thesis states that liberalization of capital tends to undermine free trade, because capital flows make very volatile markets, and makes it much harder for trade to take place. In fact, the natural reaction to freeing up capital is increased protectionism, and incidentally that’s what has happened since the early 1970s. So this is not a period of free trade, it’s a period of greater regulation of trade. The United States is extreme in this regard. The Reagan Administration broke all records in closing off the U.S. markets to foreign exports. They doubled the protectionist barriers in comparison to any post-war administration. That was a global phenomenon and it’s well known among economists. And that is undoubtedly an illustration of the truth: As capital is liberalized, trade growth slows.

QUESTION: What was the nature of the grass roots effort opposing the MAI?

CHOMSKY: It actually started in Canada. There the activism was so strong that it broke into the national media. So for about a year in Canada it’s been all over national television, the main-stream press and so on. And it never crossed the border, which is interesting.

In January 1997, someone (at the OECD) — they won’t say who — in Paris leaked a draft treaty which the OECD wanted to keep secret, to grass-roots organizations. It was immediately put up on the Internet and at that point a number of organizations started getting actively involved in trying to circulate it. … In the United States, there was first a little public interest foundation in Washington called the Preamble Foundation, and I got my copy of the treaty from them initially. Then Public Citizen got involved, and there’s an international forum on globalization which is involved, as well as a lot of the environmental organizations — Friends of the Earth, the Greens. Pretty soon it just sort of spread its way through this whole network of organizations. A lot of non-governmental organizations were opposed, and they were able to compel the OECD to let them have a say at the OECD meetings last October. They had a press conference afterwards which none of the press covered. But at that point even the United States (representatives) didn’t want it signed. It was just getting to be too hot an issue. They don’t want people to know what they are doing, that’s why it is in secret. That’s why the major press wouldn’t cover it. But it was just breaking out.

The point is that activism got so strong that the OECD sort of backed off. That’s a pretty impressive achievement. … Keep in mind that (in the U.S.) fast track was defeated. And that’s another important popular victory. Because, as the government pointed out, fast track authority is conventional-just about every other president had it. And the reason was (because there) wasn’t enough popular opposition. Now there is. What the press ought to have on the front pages is that (the failure of MAI and fast track) are tremendous victories for popular activism against extraordinary odds. Those are hopeful signs, and that’s why they’re not being reported. They don’t want to encourage democracy.

QUESTION: Was popular activism the prime factor in stopping the MAI push?

CHOMSKY: There were other issues, I should say. A lot of different countries introduced what they call “reservations” to protect something that they wanted to protect. We can’t really know in detail what (the reservations were) because it was secret. But there is no doubt that France and Canada introduced reservations to try to protect their cultural industries. The U.S. has different laws that would be threatened. For example, foreign ownership of the U.S. press is barred. Also the Helms-Burton Act is in radical violation of the WTO rules, and has been condemned by just about everybody. It’s been declared illegal by the Organization of American States. And (Helms-Burton) would be totally inconsistent with the MAI, so the U.S. was trying to introduce reservations to permit it to continue these illegal activities.

QUESTION: But still, it’s big news, so why isn’t the mainstream press covering it?

CHOMSKY: Because it’s big news. I mean, they knew perfectly well that the public is going to hate it. So they wanted to keep it secret, and keep it to what they call the “domestic constituencies” — the international business community. The mainstream press is simply part of the corporate sector, that’s not a secret, after all. I mean what is the New York Times? It’s a huge corporation. The press is just one arm of the corporate sector. Well, the whole corporate sector doesn’t want the public to know about it. They sometimes tell you why. For example, when fast track was running into trouble, the Wall Street Journal ran an article saying this is terrible, we’ve got to get it through, and they said the critics (of fast track) have what they call the “ultimate weapon,” which is that the public is opposed to it. They’ve got to keep the “ultimate weapon” silent. And the best way to keep them silent is not to tell them anything. Why does the IMF operate in secrecy? Well, that’s why.

QUESTION: Is the MAI dead in the water?

CHOMSKY: No, it’s not. In fact it’s been interesting to read the wrap-ups in the international financial press. And they say “look, we lost at the OECD, but we’ll sneak it in some other way.” Right now there’s a fight going on in Congress because the Clinton Administration is trying to get the IMF to change its charter, and there is opposition to that. Gephardt and some of the Democrats have proposed a resolution just in the last few days to try to bar this. But that is part of the effort to get around the OECD.