Wal-Mart and the WTO

Date: 12 Dec 2005 | posted in: Retail | 0 Facebooktwitterredditmail

Global retail corporations are aiming to use international trade agreements to challenge local land use and zoning regulations, according to an alarming new report from Public Citizen.

As a growing number of cities in the U.S. and around the world adopt land use rules that restrict the size and location of big-box stores and require large retailers to undergo economic impact reviews, global chains including Wal-Mart, Target, Home Depot, and Ikea are working behind the scenes to harness the power of the World Trade Organization (WTO) to weaken local authority.

Negotiations are also underway for the passage of new trade “disciplines” that would allow secret WTO tribunals to review any local zoning regulations they deem “unnecessary” or “burdensome,” regardless of whether they discriminate against foreign companies.

While most people think of trade agreements in terms of facilitating the exchange of goods by eliminating direct barriers, such as tariffs and quotas, current trade agreements go far beyond this. The General Agreement on Trade in Services (GATS), which the U.S. has adopted as law, covers trade in a broad range of services, such as banking, healthcare, and retail. It embodies an expansive definition of what might constitute a trade barrier to include all manner of local, state, and national regulations that govern the establishment and operation of banks, retail stores, and other commercial enterprises.

The GATS is administered by the WTO, a global commerce agency made up of 149 countries. Under its rules, a country, perhaps acting on behalf of a particular retailer, could challenge the laws of a city or state in another country. The case would be decided by a WTO tribunal made up of appointed judges. The city or state would not have any right to participate in proceedings, which would be held behind closed doors, out of view of both the press and the public.

In a new report, ” Big-Box Backlash: The Stealth Campaign at the World Trade Organization to Preempt Local Control Over Land Use,” Public Citizen documents the threat the GATS poses to numerous land use policies, highlights evidence that mega-retailers intend to use GATS to further their expansion in the U.S. and abroad, and discusses negotiations underway that could dramatically expand the reach of GATS.

Lobbying activities and memos indicate that big-box retailers clearly see the GATS as a vehicle for eliminating local land use policies that in any way restrict their expansion or profitability. In a 2002 letter, Wal-Mart asked U.S. trade negotiators to pressure countries to remove any size limitations on individual stores and  geographic limitations on store locations.

The International Mass Retail Association, whose members include Target and Home Depot, similarly made their case to negotiators, arguing that zoning and store size restrictions, and hours of operation restrictions, although frequently imposed . . . make investment unattractive in some markets.”

Most recently, the National Retail Federation led a delegation to lobby the WTO that included representatives from Wal-Mart and The Gap. A press release said the purpose of the trip was to highlight limitations on ?retailers? ability to open stores overseas.

Meanwhile, representatives of foreign retailers with stores in the U.S., including Ikea, Aldi, Royal Ahold (which operates supermarkets like Stop & Shop and Giant), have identified local land use policies as trade barriers.

Although Wal-Mart’s U.S. operation could not challenge local land use laws in this country, the company could do so via one of its many foreign subsidiaries. Wal-Mart’s Mexican subsidiary, Wal-Mex, for example, could work through the Mexican government to challenge a municipal ordinance in the U.S. as a barrier to trade.

Thus far, there have been few cases brought under the GATS, but Public Citizen notes that the agreement’s powerful “market access” rules could be interpreted by WTO tribunals to allow retailers unlimited rights to build and operate stores of any size and number, regardless of the sentiments of communities and their democratically elected local governments.

“Any local laws that apply height and size restrictions to big box retailers that impacts a foreign service operation could constitute a GATS market access violation,” Public Citizen reports. Laws requiring economic impact studies for big-box stores could also be threatened: “Although the economic analysis is geared toward enabling the City Planning Commission to make an informed decision, it could be considered a GATS-prohibited economic needs test if it results in the demise of a planned superstore owned by a foreign investor.”

Also at risk are historic district preservation rules, bans on building in ecologically sensitive areas, and laws that restrict a store’s hours of operation.

One relevant case so far involved Japan’s Large-Scale Retail Law, which required local governments to conduct extensive public hearings and economic, traffic, environmental and other impact assessments before a large retailer could open for business. The U.S. complained to the WTO that this was a barrier to trade because it did not give big-box retailers unfettered market access. Japan ultimately acquiesced to U.S. demands and substantially weakened the law.

Trade negotiations currently underway would go further still. Under proposed “disciplines,” WTO tribunals would be allowed to rule on any land use rules they simply deemed “unnecessary.”

Public Citizen notes that several other countries opted to exclude their own local land use policies from GATS coverage, but the U.S. did not. Nor has the federal government consulted with or gained the consent of state and local governments, many of which are unaware of the extent to which U.S. trade negotiators, backed by global corporations, are working to curtail their authority.

Public Citizen concludes the report with a variety of policy recommendations. It argues that the U.S. should not proceed further without the informed consent of local governments and that it should in fact utilize a GATS provision that allows it “tack back” its commitments to make land use policies subject to the agreement. Doing so would incur trade penalties, but, Public Citizen asserts, the protection of local democracy and U.S. sovereignty are worth it.


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Stacy Mitchell

Stacy Mitchell is co-director of the Institute for Local Self-Reliance and directs its Independent Business Initiative, which produces research and designs policy to counter concentrated corporate power and strengthen local economies.