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In light of the recent Mini-Ministerial of the World Trade Organization in Montreal and the 5th WTO Ministerial in Cancun, shunpiking online is posting below reference material which explain some of the issues involved in the next round of trade negotiations. The following item is Part One of a report by Maude Barlow and Tony Clarke of the Council of Canadians entitled Making the Links: A Citizen’s Guide to the WTO and the FTAA. Part Two, which we will post online at a later date, examines the Freed Trade Agreement of the Americas.
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What is the WTO?
The World Trade Organization was formed in 1995 at the conclusion of the "Uruguay Round" of GATT (General Agreement on Tariffs and Trade) negotiations. It did not cancel out the GATT; rather, the WTO began to enforce that agreement and others, using its status asa permanent institution with a huge secretariat. The WTO is a global trade institution with teeth. It is responsible for administering dozens of international trade agreements and declarations on a range of issues from agriculture to intellectual propertyrights. It also handles trade disputes, monitors national trade policies, and operates as the overarching forum for global trade negotiations, called "rounds."
Since the creation of the GATT in 1948, there have been eight rounds of trade negotiations, each consisting of a series of meetings spread out over several years to negotiate a fixed agenda of issues. The first six rounds concentrated exclusively on tariff reductions on goods. But the seventh, the "Tokyo Round" (1973-1979), coincided with the emergence of a strong market-driven ideology in Washington and the rise of giant transnational corporations. Almost exclusively based in the industrialized countries of the North, these companies wanted more access to unregulated labour and consumer markets andan expanded supply of natural resources.
So trade negotiations started to deal with "non-tariff barriers" — the rules, policies and practices of governments, other than those pertaining to tariffs, that can have an impact on trade. Since non-tariff barriers can potentially apply to everything governments do, including social services and protecting health and the environment, citizens’ groups, particularly in the Third World, began to monitor the GATT for the first time.
The Uruguay Round of negotiations(1986-1994) expanded the scope of the discussions dramatically, tabling issues concerning agriculture and services and covering areas not until that time associated with trade. It was during these years that Canada, the United States and Mexico negotiatedNAFTA, which introduced many issues, such as services and investment, which would be taken up by the newly minted WTO.
Operating out of Geneva, Switzerland, with an administrative staff of five hundred, the WTO enforces more than twenty separate international agreements, using international trade tribunals that adjudicate disputes. Although on paper all countries are equal under the WTO, in reality, the larger countries have the economic power to withstand trade sanctions from smaller countries, whereas smaller countries are always at a disadvantage in any dispute.
How does the WTO Work?
The WTO is crafted like no other international agency. Unlike the GATT, which was effectively a business contract between nations, the WTO has a "legal personality" and the power to enforce its rulings. It has an international status equivalent to the United Nations, but unlike the UN, it carries the powers and tools of a global government. WTO rulings are so powerful, they take precedence over Multilateral Environment Agreements (MEAs) such as the Convention on Biological Diversity; human rights agreements like the UN’s Universal Declaration of Human Rights; and international labour codes, such as those of the International Labour Organization (ILO). WTO rulings also apply to laws at every level of domestic governance — federal, provincial, state and municipal.
Levers of Power
Under the WTO’s dispute settlement mechanism, member countries, often acting on behalf of their business sector, can challenge the laws, policies and programs of any other country as being in violation of WTO rules. Panels of un-elected experts have the power to adjudicate claims of alleged violations of these rules and to hand out punishments. The losing country has three choices: change its law toconform to the WTO ruling; face harsh, permanent economic sanctions; or pay permanent compensation to the winning country. Because their only task is to judge whether or not a country’s policy is a "barrier to trade," the panels do not have to consider other factors such as public health, economic justice or democratic sovereignty. Non-governmental organizations (NGOs) and other non-commercial interests are entirely excluded from the process.
These powerful tribunals have the authority to strike down domestic laws, policies, and programs of other countries and require them to establish new rules more favourable to business interests. The vast majority of WTO tribunal rulings to date have favoured the interests of corporations over the rights of nations andtheir social and environmental standards. Panel decisions can be appealed, but only a unanimous vote of all member nations can overturn a WTO ruling.
Although official WTO decisions are made by vote or by consensus of the 146-member General Council, real decision-making powers are now increasingly vested in what is known as "the QUAD" — the U.S., the European Union (EU), Japan and Canada. The QUAD convenes several times a year, making key decisions on WTO priorities. These meetings take place behind closed doors without the participation of other countries, and although the QUAD is not formally structured as the WTO executive, it is by nature of its power, able, in fact, to exercise executive powers. If a smaller country balks at QUAD decisions or priorities, it can be threatened with investor boycotts and reduced access to World Bank and International Monetary Fund (IMF) aid.
WTO Agreements
The major agreements administered by the WTO include the following:
- The General Agreement on Tariffs and Trade (GATT), whose mandate is to eliminate all remaining tariff and non-tariff barriers to the movement of capital and goods across nation-state borders;
- The General Agreement on Trade in Services (GATS), the first multilateral, legally enforceable agreement covering trade in services. Negotiations are now underway to expand the scope of the GATS to potentially cover all services;
- Trade Related Intellectual Property Rights (TRIPS), which sets enforceable global rules on patents, copyrights, and trademarks, and permits the patenting of many plant and animal forms, as well as seeds;
- Trade Related Investment Measures (TRIMS), which dictate what governments can and cannot do in regulating foreign investment;
- The Agreement on the Application of Sanitary and Phytosanitary Standards (SPS), which sets constraints on government policies relating to food safety and animal and plant health, ranging from those governing pesticide use and biological contaminants to policies related to food inspection, product labelling, and genetically engineered foods;
- The Financial Services Agreement (FSA), which was established to remove obstacles to the free movement of financial services corporations, including banks and insurance companies. This opens the door to mega-mergers in the financial sector and the loss of local economic control;
- The Agreement on Agriculture (AOA), which sets rules on the international food trade and restricts domestic agriculture policy, including government support for farmers, maintaining emergency food stocks, and ensuring that citizens have an adequate food supply;
- The Agreement on Subsidies and Countervailing Measures (ASCM), which sets limits on what governments may and may not subsidize and contains many loopholes favouring wealthy countries and agribusiness;
- The Agreement on Technical Barriers to Trade (TBT), set up to limit national regulations (non-tariff barriers) that interfere with trade;
- The Agreement on Government Procurement (AGP), which sets limits on government purchasing, including "domestic content" or community development.
Corporate Influence
The WTO is set up to serve the interests of big business and promote economic globalization in a world increasingly dominated by transnational corporations. (Of the 100 largest economies in the world, 53 are now corporations.) What they want is to operate across borders under common rules and with little interference. For this to happen, governments must lose their power to set rules and standards. The essential goal ofWTO rules is to deregulate international trade. The WTO agreements provide extensive lists of things that governments can no longer do. So it is not surprising that transnational corporations and their domestic and international associations have had a direct voice in shaping the entire structure of the WTO from the beginning.
In the United States, more than five hundred corporations and business representatives have been officially credentialed as "security-clear" trade advisors, including the U.S. Chamber of Commerce, numerous Fortune 500 companies, The Business Roundtable (BRT, representing the country’s two hundred largest corporations), and a host of industry-specific lobby groups. (The BRT has just launched a multi-million-dollar campaign to ensure the success of the Cancun meeting and is co-ordinating its work with its QUAD counterparts, including in Canada.) The U.S. Trade Representative works closely with the Coalition of Service Industries, whose members include the major energy, insurance, and financial giants, as well as major pharmaceutical companies and the newer players in the field, like HMOs, who were instrumental in creating the list of services the U.S. is seeking in the GATS.
The powerful U.S.-based Pharmaceutical Research and Manufacturers Association spent U.S. $197 million to elect Republicans to office in the November 2000 presidential election in order to protect their patent monopolies. This wasthe most money ever spent by any corporate sector on a presidential election in Americanhistory. And Ambassador Allen Johnson, the Chief Agriculture Negotiator for the U.S. government in all international trade negotiations, was formerly the President of the National Oilseed Processors Association, whose members represent every major factoryfarm and biotechnology corporation in the world, including ConAgra, Cargill, Unilever and Procter & Gamble.
It is the same in the other QUAD countries. In Japan, it is the industry lobby group, the Keidanren. In Europe, the Commissioner of the European Union on WTO Policies and Administration maintains direct links with the European Round Table of Industrialists (ERT), which is composed of representatives of the fifty largest European-based corporations. The European Services Forum has lobbied forcefully to remove exemptions for public services from the GATS. In fact, in a May 2002 letter to the CEOs of Europe’s three largest water corporations — Vivendi, Suez and RWE Thames - EU Director General of Trade, Ulrike Hauer, thanked them for their contribution in negotiations to reduce trade barriers in water services.
In Canada, large corporations have been deeply involved in the creation of trade agreements since the first Canada-U.S. Free Trade Agreement, signed on January 1, 1988. Former deputy chief negotiator Gordon Ritchie set up a series of advisory groups to government whose membership was a "who’s who of the elite of Canadian business"; this practice he says "forever changed the way that government managed trade policies." Once established, this link was never broken.
The Canadian Council of Chief Executives (CCCE) — formerly the Business Council on National Issues (BCNI) — representing the 150 largest corporations in Canada works closely with the Chretien government to promote both the WTO and FTAA negotiations. Another powerful Canadian business lobby that has influenced trade policy in its interest is Canada’s Research-Based Pharmaceutical Companies (Rx&D) — formerly the Pharmaceutical Manufacturers of Canada. Rx&D worked very hard to get the former government of Brian Mulroney to grant its members (many of whom are foreign-based transnationals) 20- year patent monopolies and subsequently convinced the Chretien Liberals to break their 1993 election promise to repeal this legislation. This lobby group has deep ties with the governing Liberals.
None of these privileges are given to not-for-profit non-governmental organizations. As a senior WTO official told the Financial Times, the WTO "is the place where governments collude in private against their domestic pressure groups."
How do WTO rules affect our lives?
Since it was created in 1995, the WTO has already become a major influence in the lives of the world’s citizens. Using both the fundamental rules of most WTO-enforced agreements combined with WTOenforcement mechanisms, the major power blocks and their big business sectors are forcing many countries to weaken their regulatory frameworks in several important areas.
Social Security
The WTO threat to the social security of the citizens of all member countries comes from the new services talks — the GATS. The aim of these negotiations is to radically restructure the role of government worldwide by subjecting an ever-greater degree of governmental decision making to the discipline of the WTO. The GATSapplies to all levels of government, including domestic policy governing a huge array of services. These include: health care; hospital care; home care; dental care; child care; education — primary, secondary, and post-secondary; museums; libraries; law; social assistance; architecture; energy; water services; environmental protection services; tourism; postal services; publishing and broadcasting — among many others. The ultimate goal of the GATS is to "progressively liberalize" until all these services are fully commercialized. This means that all these areas, once delivered by governments as fundamental rights on a not-for-profit basis, could eventually be offered by corporations to those who can afford them on a for-profit basis.
The potential fall-out on the social security of the world’s citizens is enormous. Global annual expenditures on education now exceed U.S. $2 trillion and on health care U.S. $3.5 trillion. Public education, health care, welfare, and water services have been targeted by predatory and powerful transnational corporations who want to use the WTO/GATS process to dismantle domestic public systems. The strategy is to subject governments who run these services to WTO rules — the same type of rules that have knocked down domestic standards in the areas of culture, the environment, and fair trade.
Technically, governments are allowed to exempt certain services from GATS discipline; however, these measures have to be totally free from commercial influence to qualify. There are very few countries in the world who do not have some measure of privatization in education, health care or the delivery of water. Once privatization has been established in a sector, the exemption becomes essentially null and void. The current talks are putting heavypressure on all governments to expand the type and number of services covered by the GATS and to get governments to agree to further constraints on their regulatory structures. They also want to add "National Treatment" to the services sector, which would allow foreign corporations to set up a "commercial presence" in other countries and apply for public subsidies now restricted to domestic, not-for-profit services, like schools and hospitals.
The massive privatization —which is both the goal and the logical outcome of the GATS — will have a devastating impact on public sector workers and working standards in general. Deregulation of government structures includes labour standards. In order to compete in the global, WTO-ruled world, domestic companies have to seek the same level playing fields as transnationals by lowering working conditions and wages.
Environmental Security
Two key free trade provisions — "National Treatment" and "Most Favoured Nation" — negatively affect the environment by preventing governments from setting standards to favour goods that have been produced or harvested in an environmentally sustainable way. These clauses stipulate that countries must treat "like" products from one country as favourably as those from another, that no distinction can be made between foreign and domestic "like" products, and that quotas or bans imposed for environmental reasons can be challenged as forms of protection. Hence, objections to methods of production cannot be used to ban a product. This suddenly legalizes a whole host of terrible and inhumane environmental practices. (The same provisions can be used to challenge domestic standards that ban products from countries with poor human rights records or sub- standard labour practices.)
For example, these clauses of the GATT were successfully used to strike down the U.S. Marine Mammal Protection Act and to override the U.S. Endangered Species Act, which were designed to protect dolphins and turtles. The Agreement on Technical Barriers to Trade forces nations to prove that their environmental laws are "necessary" and have been established in the "least trade restrictive" way. This means that a country bears the burden of proving a negative, rather than having the right to adopt the "Precautionary Principle," acting in the case of doubt on the side of caution. The "least trade restrictive" test has created a "chill effect,"causing smaller countries to avoid enacting standards, such as eco-labelling, in the first place for fear they will be exposed to a WTO challenge.
The WTO also undermines progress in Multilateral Environmental Agreements by building "WTO Superiority Clauses" into them, so that, in a case of conflict, WTO rules take precedence. Even when an MEA appears compatible with the WTO, other rulescan interfere. For instance, the rules of the Convention on Biological Diversity are being undermined by the WTO with its enforceable rules promoting industrial agriculture and the patenting of Indigenous knowledge. (The U.S. didn’t sign the Convention and maintains the WTO’s supremacy over it.)
Food Security
The main goal of the WTO Agreement on Agriculture is to reduce or eliminate agricultural import tariffs and Quantitative Restrictions (QRs). However, while most of the South (and Canada) has alreadyended QRs as well as farm export and domestic subsidies, the U.S. and Europe have in fact stepped up agriculture subsidies — the U.S. with its 2001 Farm Bill which injected huge new funds into American food production, and the EU with its Common Agriculture Policy which will expand funding until 2013. This has allowed cheap, subsidized products from the North to flood the Third World. Subsidized meat imports from Europe, for example, have helped to wipe out the pastoral economies and cultures of West Africa.
Family farms and small agricultural operations all over the world have been destroyed by free trade in agriculture. Even in the North, it is almost impossible to guarantee a fair return at the farm gate because of the global flood of cheap imported products produced under deteriorating conditions and declining standards. When small farm operations lose profits because of worldwide fluctuations in commodity prices, they can be wiped right off the map. Only huge operations, with investment support from megacorporations, can survive.
AOA rules also mean that sovereign nations are now in the ludicrous position of not being able to maintain food stocks in anticipation of drought, crop failure, or war. They are forced to buy everything they need on the open market. "Food self-sufficiency" now means having the money to buy food, not the domestic ability to produce it. Food is grown, not by farmers for local consumers, but by corporations for global markets. The WTO sets the backdrop for the spread of biotechnology in the form of genetically engineered foods, as well as the control of seeds by life sciences corporations who contractually force farmers to buy their seed every year, or face sanctions and fines.
The WTO SPS agreement reduces the ability of governments to maintain safe food standards. Canada and the United States, for example, successfully used the SPS to strike down a European Union ban on North American beef containing harmful, possibly cancer-causing hormones. The WTO panel said that the EU did not have "scientific certainty" of the harm of these hormones.
What happened in Seattle?
The World Trade Organization has had four ministerial meetings since its founding: Singapore in December 1996; Geneva in May 1998; Seattle inDecember 1999; and Doha in November 2001. Most of the world’s citizens first heard about the WTO at the Seattle "Millennium Round" (popularly known as the "Battle of Seattle"), when talks ended in failure amid massive street demonstrations.
The agenda for Seattle was ambitious: agriculture; services; intellectual property rights; government procurement (contracts) and competition rules, to name a few. Seattle was chosen as the site because the meeting was to be fully funded by the private sector (for the first time) and the city is home to Bill Gates of Microsoft and Phil Condit of Boeing, who co-hosted the Ministerial and put together a "who’s who" of corporate sponsors. With over 3,000 journalists from all over the world attending, President Bill Clinton saw the meeting as an opportunity to showcase American economic strength; his Trade Representative, Charlene Barshefsky and co-chair, WTO Director General Michael Moore, ran the meeting with an iron fist.
Three factors caused the breakdown of this Ministerial. The first was the massive global coalition of influential labour, environmental, human rights, cultural diversity, Indigenous, farmer, consumer, and social justice organizations who came together both before and during the meeting to put enormous pressure on their governments not to sign on to the new round. The famous pitched street battles that accompanied this meeting all but prevented serious negotiations from taking place.
The second was the deep and unbridgeable schism between the United States and the European Union over the issue of food safety. The EU was adamant in its refusal to relinquish its right to ban or control imports of GE foods and hormones it considered dangerous to the health of its citizens. The United States (and several other countries, including Canada) was equally adamant that it would use the WTO talks to break down domestic rights to ban such imports.
Finally, delegates from the Third World, who almost unanimously believed that the WTO had failed to deliver on previous promises to the South, came together in an unprecedented show of solidarity against the might of the QUAD and its agenda of new issues.Each Ministerial Meeting tables a working Declaration, which all nations have worked on for months preceding and which forms the basis of negotiations. In Seattle, the 80-page text had been deeply controversial and was highly bracketed, showing a lack of consensus going into the meeting. Despite intensive browbeating from the U.S. and other QUAD countries, the delegates from developing countries stoodfirm. The Millennium round ended in complete failure.
What happened in Doha?
The QUAD countries and the WTO powers decided this would never happen again. For their next Ministerial Meeting, the so-called "Development Round," they chose the oil- rich Gulf state of Qatar where free speech is forbidden, rendering any show of visible opposition by civil society impossible. As well, Europe and the U.S. worked feverishly behind the scenes in advance to ensure solidarity or at least the appearance of solidarityon the issue of food safety.
Most important, the WTO powers decided not to table another bracketed text over which North and South would fight. Instead, in an arbitrary move, the WTO Secretariat tabled a short Declaration at the opening of the meeting which favoured the QUAD agenda of aggressively moving on a host of "new issues," instead of the South’s agenda of implementing past development promises. This one-sided text became the blueprint of negotiations. Third World countries had been trumped before they even began negotiations and they were furious.
But the political moment worked against a united Southern front as much as these tricks. The Doha negotiations were held just two months after the terrorist attacks on the United States and the U.S. openly linked the fight against terrorism to a new round of world trade talks and an ambitious agenda of new items of interest to U.S. corporations. In this highly-charged political environment, it became very difficult for any country to say no to the U.S. which was putting intense pressure on smaller countries to sign on to a new round.
Six "friends of the Chair" — trade ministers from countries supportive of a new round, including Canada’s International Trade Minister, Pierre Pettigrew — were sent out to promote the contentious issues such as investment and market access to reluctant Third World delegates. In intense all- night closed door sessions, and in calls back to their capitals, the QUAD exploited the vulnerability of poor countries. At the last minute (and a day late), a text was produced containing the complete QUAD agenda and weary Third World delegates signed on.
The Doha program is an ambitious agenda of at least 19 multilateral negotiations including: accelerated pressure in ongoing sectors suchas agriculture and services; new pressure for Third World countries to open up the last of their industries to foreign take-overs; and now clear sailing for the so-called "new issues"— investment, government procurement, and competition policy. For good measure, the EU threw in a provision on the last day, taking down tariff and non- tariff barriers to trade in environmental services such as water. Weary negotiators didn’t even notice it.
In a widely endorsed "Joint Statement," civil society roundly condemned the Doha process and outcome as illegitimate, profoundly undemocratic and a "development disaster," and committed itself to fighting to defeat it in Cancun.
What are the issues in Cancun?
Over the months since Doha, the WTO Secretariat has worked feverishly to further negotiations on all these fronts so that as many of these deals can be locked down before the 5th WTO Ministerial. Although the new Director General, Thai economist Dr. Supachai Panitchpakdi, is the first WTO leader from the South, he will be expected to deliver the developing world when the delegates arrive in the Mexican resort town of Cancun.
Already the battle lines have been drawn up. Intensive pre-negotiations take place at the Trade Negotiations Committee (TNC), a powerful new body of the WTO co- ordinating the Doha work program in preparation for Cancun. There, Third World countries have already staked out their strong stand against the introduction of the QUAD’s "new issues" until the long-promised issues of development are dealt with. They had tabled 85 measures for "special and differential treatment" that would recognize their vulnerable status and set up an agenda for redress before the Doha meeting. These demands are central to their position in Cancun and there appears to be a renewal of the consensus and determination that characterized this block in Seattle.
The QUAD, on the other hand, is insisting on a "single undertaking" deal, which means that it won’t address development issues unless all countries agree to put everything on the table together, including issues meeting strong opposition in the South, such as investment.
There will be several major areas of contention:
Services
The GATS negotiations are done in secret. All governments have submitted their requests to other countries and have received requests made of them. As of March 31, 2003, some countries have given their "initial offers" and the hard negotiation is now on. While little is known about the requests of most nations, the entire European Union set of requests was leaked to civil society and put on the Internet. They are indeed ambitious. The European Union is demanding that most countries (including Canada) offer up water, energy, transport, postal, tourism, broadcasting, municipal, publishing and financial services among others to the discipline of the WTO. The EU is seeking the elimination across-the-board of rules and laws in every service sector. Particularly targeted are developing countries - already deeply vulnerable to the corporations of the North.
Agriculture
Agriculture is a potential deal breaker. Countries with totally different economies and food production systems have only months to come up with binding commitments. Many Third World countries are seeking protection from market fluctuations in commodity prices, what they call "security crops," as well as rural development programs, while trying to get the EU and the U.S. to cut back on the heavy subsidization of their food exports. It is highly unlikely that the South will be successfulin either case. Europe shows no signs of reducing its high subsidization of its food exports, and the EU and the U.S. are openly sparring again over GE foods, having lost some of the will to look like a united front in the aftermath of the Iraq war. In fact, in May 2003 the United States (joined by Canada, Argentina and Egypt) launched a challenge at the WTO of the European Union’s moratorium on the import of GE foods. Cancun appears to be destined, once again, to really only be about more market access by the North to the South.
TRIPS
In Doha, much was made of a "new" deal called the "TRIPS and Health Declaration," which clarified that the TRIPS Agreement does not prevent member countries from using their own generic drugs to protect public health (for catastrophic illnesses like AIDS)instead of the more expensive brand name drugs. As well, a committee was set up to find agreement on how to allow poor countries with little or no manufacturing capacity of their own to import generic drugs from other countries. A solution to this was to be found by the end of 2002. However, U.S. brand-name pharmaceutical companies strongly oppose these moves and have pressured the American negotiators to limit both the number and kinds of diseases that can be considered a public health crisis, as well as the conditions under which countries could import generic drugs. In the November 2002 Congressional elections, the industry lobby targeted key Republicans for re-election in order to have the U.S. remain firm in its opposition to any easing of the TRIPS deal.
The refusal of the U.S. government to renegotiate the TRIPS agreement will have other impacts on Canada. Canadians will continue to live with the outrageous drug prices caused by the WTO/ NAFTA enforced 20-year monopoly rights of the big pharmaceutical companies. One result of this regime is that prescription drug prices in Canada rose 342 per cent in the 15 years since these companies obtained these monopolies. To add insult, the U.S. is seeking to extend the patent protection of these drug giants to 25 years.
Investment
At the heart of the QUAD demands for Cancun is the revival of the failed Multilateral Agreement on Investment (MAI), which was abandoned in the face of massive civil society resistance. Powerful corporations and investors are seeking binding protection for foreign direct investment around the world, and want WTO rules that would drastically limit the right of national governments to set any conditions whatsoever on this money. Developing countries have turned proposals around investment rights away before, calling it a form of "neo- colonialism." They and many NGOs around the world fear that what the big countries really want is a NAFTA-like investment agreement which would give corporations the right tosue governments. The European Union dismisses such fears, promising to limit dispute resolution rights to nations. But the International Chamber of Commerce (ICC), responsible for drafting the original MAI, has recently published a report calling for a full MAI at the WTO, including corporate "investor-state" rights.
Other Issues
The other "new issues" are government procurement and competition rules. "Government Procurement" in the WTO would prevent governments from fostering domestic economic development, such as favouring local or national suppliers, setting domestic content standards or implementing community investment rules. "Competition Rules" would end the right of national governments to protect domestic monopolies. The real goal is to give foreign transnationals access to domestic markets now in the hands of local companies. Taken together, these provisions will spell the demise of government control over natural resources and economic policy and give transnational corporations formidable new powers.
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