September 1998
Civil Society and Trade Negotiations: A Business Perspective
Executive Summary
The Clinton Administration has taken the lead in calling for the participation of "civil society" in future trade negotiations, both in the World Trade Organization (WTO) and in the Free Trade Area of the Americas (FTAA). The U.S. initiative has taken concrete form in the FTAA negotiations by the creation of a Government Committee on Civil Society.
The concept of civil society remains amorphous. The definition used in FTAA documentation includes business, but some non-governmental organizations (NGOs) see their groups, labor unions, and consumer activists as the only legitimate spokesmen for civil society, and would exclude business participation. Others resent the business community's influential role in past trade negotiations and want business to channel its views on the FTAA through the Civil Society Committee instead of through mechanisms such as the existing Business Forums. To both groups, business and industry represent the status quo, which they are seeking to change through political pressure on governments.
Business, environmental, labor, consumer, human rights and other groups all have the right to make their views known to governments on issues directly or indirectly affecting them. Consultation with civil society in this broad sense of the term is essential to ensuring the legitimacy of public policies.
That said, business plays a unique role in trade negotiations. Trade and investment negotiations are about setting parameters for international commerce. Governments need business' technical expertise to identify market access opportunities and barriers to the free flow of goods and services. One-issue groups cannot possibly provide the same breadth of advice needed by governments in any sophisticated trade negotiation.
Governments bear the responsibility for formulating consensus positions in trade negotiations. Business will continue to work with all elements of civil society on a voluntary basis to find common ground on international trade and investment issues. However, we think it highly unlikely that groups with markedly different perspectives will arrive at useful consensus positions. We question the utility of forums that would bring together all elements of civil society with U.S. and foreign trade negotiators.
If the U.S. and other governments wish to intensify public participation in trade policy, they should consult separately with business, labor, and other NGOs. This format is more likely to produce serious dialogue and minimize political posturing.
Introduction and Background
The concept of civil society has taken on an increasingly political meaning since 1992 when Maurice Strong, the Secretary General of the Rio Earth Summit, marshaled a formidable force of NGOs to influence the conference outcome. He dispensed with the U.N.'s long-standing accreditation and vetting process for NGOs and opened the proceedings to any individual or group styling itself an NGO. While this move undoubtedly democratized and enlivened the proceedings, it also removed the responsibility of participants to demonstrate their accountability. Many of the groups now clamoring to be included in any new civil society process are openly hostile to business and see themselves as essential counterweights to the business community's influence on governments.
Smarting from the defeat on Fast Track during 1997 and the slowdown in negotiations of the Multilateral Agreement on Investment (MAI) -- both attributed to the strong opposition of labor and environmental NGOs -- the Clinton Administration has taken the lead internationally in calling for greater openness in trade negotiations and for a prominent role for all elements of civil society in trade matters generally. Unsuccessful efforts by the U.S. to establish separate study groups on labor and the environment in the FTAA negotiations led instead to the establishment of a Committee of Government Representatives of Civil Society. The task of that Committee is to hear the views of business, labor, environmental and academic groups, analyze them, and present them in some, as yet unspecified, form to hemispheric Trade Ministers.
Building on that precedent, a highlight of the 1998 WTO Ministerial was the emergence of the idea of civil society as an essential participant in future trade negotiations. President Clinton, in his speech to the Ministerial, proposed that the "... WTO, for the first time, provide a forum where business, labor, environmental and consumer groups can speak out and help guide the future evolution of the WTO." Continuing, he said, "When this body convenes again, I believe that the world's trade ministers should sit down with representatives of the broad public to begin these discussions." The President's speech at Geneva was the strongest call yet for what he termed a trading system that "honors our values."
Other leaders took up that theme in their statements at the Ministerial. WTO Director General Renato Ruggiero said he would "... devote a considerable part of my time after this Conference to try to improve information and dialogue with the civil society." European Commission President Jacques Santer said that it was "... urgent not only to increase the transparency of work carried out by the WTO, but also to engage in a genuine dialogue with all the representatives of civil society."
It is appropriate that the U.S. Administration should seek to bring labor and NGOs, including those groups opposed to trade liberalization and globalization, into the dialogue. NGOs believe they have been marginalized in past trade negotiations and have made clear that unless they obtain a seat at the table, which they assert business already has, they will use people power to block future trade negotiations. They strongly resent the business community's influential role in past trade negotiations, which they see as upholding the system -- the status quo -- that they are seeking to change through direct political pressure on governments.
A recent letter by a number of U.S. and foreign NGOs and the AFL-CIO, addressed to the Canadian Chair of the Trade Negotiation Committee of the FTAA, explicitly addressed this view: "We are concerned that labor, environmental organizations and other representatives of civil society be able to advise negotiators with an access thus far afforded formally and informally to business representatives." The letter goes on to claim that "many citizens do not trust governments to place their interests on par with those of multinational companies when negotiating trade and investment agreements."
Against that background, this policy statement:
· Stresses the business community's vital -- and unique -- role in civil society.
· Points to the continuing need for a specially defined role for direct business-to-government contacts on trade issues, irrespective of whatever institutional framework is created for broader consultation with civil society.
· Offers some practical suggestions for meaningful consultations on broader policy questions between the government and the private sector.
Who Belongs to Civil Society?
In a capitalist system, private enterprise is the essential driving force for the economy. It is responsible for our high economic growth rate and America's outstanding record of job and wealth creation. The mission of a corporation in a modern economy, to quote an influential new OECD study on Corporate Governance(1), is the "generation of long-term economic profit to enhance shareholder value." That same study also points out, however, that:
"Corporations also serve wider national objectives. They mobilize the economic resources of a country across different regions and segments of society; they generate employment, income and training for citizens; they secure domestic supplies of goods, technologies and services; they provide tax income, foreign currency, etc."
Multinational companies contribute importantly to international economic development through beneficial capital flows and the diffusion of technology. By trade and investment, they ensure the most efficient use of capital, technology, and human resources.
Companies do not act independently from the societies in which they operate. Corporate activities must, therefore, be compatible with societal objectives concerning social cohesion, environmental protection, and workers rights. In fact, because of their overseas presence, multinational firms do much to promote higher labor standards and a clean environment. But, in contrast to other elements of society, they have direct responsibilities in that regard as both investors and employers. Company officials are on site and responsible, and not distant observers with no defined role.
In short, as recognized by the U.N.'s Agenda 21, business is an integral part of civil society, and any definition of "civil society" that excluded business, or was predicated on hostility to free enterprise, would be meaningless. We welcome, therefore, the opportunity to participate in any consultations that the U.S. and other governments arrange through the FTAA and Transatlantic Economic Partnership (TEP) processes or other regional and multilateral groups.
The Business Community's Role in Trade Negotiations
Irrespective of the establishment in the FTAA process or elsewhere of mechanisms for consulting with civil society, the business community has a unique role in trade negotiations -- one more substantially diverse and relevant to commercial negotiations than other societal groups. Governments cannot do without the business community's input in these negotiations. Moreover, business often provides governments with proprietary information to help in the formulation of trade negotiating positions, information which would be inappropriate -- and perhaps illegal -- to share with NGOs and unions. Business needs, therefore, to maintain its traditional channels to national trade negotiators and, in the case of the FTAA, to hemispheric Trade Ministers through such mechanisms as the Business Forum.
Business has special expertise and a financial stake in the full range of issues in any trade negotiation. After all, trade and investment policy and rules directly affect business transactions, and it is business, more than any other societal group, which is expected to implement and operate under the legal and regulatory frameworks that result from trade agreements. That is why in the words of Ambassador Barshefsky, the WTO is a "commercial organization," not a "political organization."
Nor is the business community monolithic. Trade negotiations are by definition about achieving a balance between competing commercial interests and objectives. Through contacts with the government, representatives of diverse and sometimes competing interests, industries, and enterprises provide the information that negotiators require to assess the economic and social impact of the trade-offs they will be required to make. Further, business is not a one-issue group. It has interests in, and must advise the government on, such matters as industrial tariffs, professional services, intellectual property protection, telecommunications, financial services, and electronic commerce. That expertise is specialized and technical. Generalists, whose focus is on only one aspect of foreign or economic policy, whether it be labor standards, the environment, or human rights, cannot provide the same breadth of advice. As the record of recent negotiations on basic telecommunications and financial services showed so clearly, the business community's input was vital in identifying market access problems and in evaluating offers and counteroffers by America's trading partners.
Finally, the question of accountability distinguishes the role of business from that of most NGOs and consumer groups and, to some extent, labor unions. Businesses are accountable to boards of directors and shareholders, regulatory authorities, customers and clients, and the public at large. In contrast, many NGOs are accountable to no one.
How to Make Consultations between the Government and Private Sector Meaningful
In the space of a few weeks, civil society has become a mantra, with government officials and NGOs using every opportunity to advocate direct citizen involvement in the trade negotiating process. Unfortunately, few of the ardent proponents of the civil society concept, including those in government, have really thought through the implications of what has been proposed. The danger is that when these high-flown expectations are not met, already strong populist fears about trade, investment, and globalization generally will intensify and feed protectionist pressures in this country. Efforts to liberalize trade to the benefit of American consumers, businesses, and workers will suffer as a result. The strong resistance of all Latin American governments to U.S. proposals on civil society in the FTAA negotiations is an indication of the problems that lie ahead.
While insisting on preserving the business community's unique status in advising governments in trade negotiations, business is prepared, as indicated above, to participate in governmental consultations with civil society and governments, as it does through entities such as the NAFTA Commission for Environmental Cooperation and the World Wildlife Fund Experts Panel on Trade and Sustainable Development.
However, caution is warranted, and the modalities of consultation must be carefully developed to emphasize cooperation and the sharing of expertise, while avoiding politicized rhetorical exchanges. In particular, efforts to forge consensus positions among groups with markedly different perspectives, experience and expertise in trade negotiations, and accountability to clients and constituents are seldom successful. The experience of both the Trade and Environment Policy Advisory Committee (TEPAC), which brought together business, environmental and other interests to advise the U.S. Government on trade and environment policy and which resulted in stalemate on all important issues, and the WTO Symposia on Trade and Environment, are indicative of the limitations and shortcomings of such approaches.
In short, the effort to be open and inclusive risks stalemate or lowest-common-denominator-type advice to policymakers, and undercuts other channels and sources of information and advice, notably from business.
We recommend, therefore, that in all trade initiatives the Administration conduct separate consultations with business, labor, and NGOs. Such consultations should precede every important negotiating session and be scheduled far enough in advance so that the Administration would have the opportunity to reflect on advice offered before the negotiations begin. Prompt debriefings after negotiations also are essential.
We see no merit in forums which attempt to force consensus among diverse groups. However, if established, such forums should not substitute or detract from separate consultations as outlined above.
In the end, it is up to governments to formulate consensus positions in trade negotiations. As the OECD study on Corporate Governance cited above clearly noted, "Societal needs that transcend the responsive ability of the private sector should be met by specific public policy measures ..." For its part, business will continue to work with all elements of civil society on a voluntary basis to find common ground on international trade and investment issues, as well as to continue to spread the message of the importance of international economic engagement to our future security and prosperity.
(1) Corporate Governance: Improving Competitiveness and Access to Capital Markets. A report to the OECD by the Business Sector Advisory Group on Corporate Governance.
