What Wal-Mart Wants from the WTO

By Antonia Juhasz, AlterNet. Posted December 13, 2005.

The end is near. In the time it took to create the world, the global justice movement may herald in the demise of the World Trade Organization (WTO). For six days, from December 13th to the 18th, the WTO will hold its sixth ministerial meeting in Hong Kong. All signs point to the strong possibility that once again, the ministerial will conclude in failure. After the collapse of negotiations in Seattle in 1999 and Cancun in 2003, the WTO has tried with only limited success to get back on to its feet. The combined efforts of determined developing country governments supported by social movements the world over have successfully forced the WTO into a corner from which it seems unlikely to emerge.

Already, negotiators have been forced to abandon some of the most contentious and destructive agreements sought at earlier ministerials on investment, government procurement and competition policy. While whittled down and on its last legs, however, the agenda for the Hong Kong ministerial -- if successful -- threatens fundamental public rights in favor of multinational corporate expansion über alles.

A look at Wal-Mart's free trade history and its likely Hong Kong agenda exposes some of what's a stake at the sixth WTO ministerial and will hopefully motivate more of us in to action.

The North American Free Trade Agreement (NAFTA) and the WTO have paved the way for Wal-Mart to become the world's largest corporation. These agreements have enabled Wal-Mart to enter and dominate markets with its stores and for it to use those suppliers most willing to pick up, close shop, and scour the planet for the cheapest places to make products.

Wal-Mart did not open a single store outside of the United States until 1991 in Mexico. As late as 1995, the store reports that imports accounted for no more than six percent of the products sold in its U.S. stores. While some dispute that figure as far too low, there is no debate over the dramatic changes in Wal-Mart's operations following the passage of the NAFTA in 1994 and China's entry into the WTO in 2001. Today, Wal-Mart has more than 2,400 stores in fifteen countries outside of the United States. In 2003, consulting firm Retail Forward estimated that 50 to 60 percent of the merchandise sold in Wal-Mart's U.S. stores was made overseas.

And Wal-Mart just keeps growing. Wal-Mart's international sales reached $56.3 billion in 2005, an 18.3 percent increase over the previous year, and international profits rose to nearly $3 billion, an increase of more than 26 percent. In fact, Wal-Mart's overall economic growth rate is almost four times that of the United States (3.9 percent) and the world (4 percent).

Wal-Mart and NAFTA

In 1994, the U.S., Mexico and Canada signed the most far-reaching multilateral trade and investment agreement of its time. NAFTA investment and market access rules eliminated many of the existing government restrictions on how and where Wal-Mart could operate, clearing the way for Wal-Mart to become the largest retailer in all three NAFTA countries. Today, Wal-Mart is the largest private employer in Mexico. It has nearly 700 stores and does more business than the entire tourism industry. It sells six billion dollars worth of food a year, more than any other Mexican retailer.

NAFTA eliminated tariffs and other import controls on goods moving between the three countries. This meant that Wal-Mart's suppliers could send products to be assembled in Mexico, where labor is cheap, environmental protections weak, taxes low and protections from further regulation and government oversight even greater than in the U.S., and then send the finished products back home to sell at prices far cheaper than if the goods were produced in the United States. These factories, called maquiladoras, more than doubled in number between 1990 and 2001, from 1700 to 3600 plants.

According to the U.S. Congressional Research Service, U.S. imports from Mexico increased by 229 percent between 1993 and 2001. While U.S. exports to Mexico increased 144 percent, 60 percent of these were components being shipped to the maquiladora factories for processing, meaning little or no benefit was derived by the Mexican economy or consumer. Laws that would have addressed this problem, such as requiring a certain amount of domestic content in production, a certain amount of local investment, or a transfer of new technologies, etc., were stripped away by the NAFTA: good for the companies, bad for the country.

Antonia Juhasz is a visiting scholar at the Institute for Policy Studies and on the board of Oil Change International. She is author of The Bush Agenda: Invading the World, One Economy at a Time (ReganBooks, February 2006). Find more information on the Hong Kong ministerial, at Public Citizen and Third World Network.