WHAT IF......?

What if the business elites of the world had joined in preparing a master plan to consolidate their power and render democracy impotent? What actions might their advisors have counseled? 

MEMORANDUM

December 1, 1983

TO: International Business Roundtable Members
FROM: Harry Winters, Staff Economist
SUBJECT: The Next Phase: The Uruguay Round of GATT

The Roundtable's leadership council has decided it is time to initiate the new phase of our plan to assume responsibility for the whole. Let me put this decision into historical perspective.

Following World War II, the Roundtable successfully promoted the formation of the United Nations to provide a symbol of democratic global government. However, as documented by economists and political scientists throughout the post-war period, the founders of the Roundtable were well aware that democracy is a luxury only the wealthy can afford. The elimination of poverty, which creates openings for the spread of Communism and limits expansion of consumer markets, is one of the Roundtables central priorities. Economic growth must come before democracy.

Consequently, the real power has been placed in the Bretton Woods institutions (the World Bank, International Monetary Fund, and the General Agreement on Trade and Tariffs or GATT) under the control of the executive branches of the G-7 governments. Executive branches of government are able to conduct much of their business in an orderly fashion because they can operate out of the public spotlight an impose security discipline, particularly where international negotiations are involved. Furthermore, the Roundtable has substantially greater influence with the Bretton Woods institutions as they are firmly in the control of the governments of the seven industrial countries.

The World Bank Phase

The World Bank had the lead in implementing the first phase of the Roundtable strategy. This focused on regaining control of the former colonial economies. The Bank's role was to convince these countries that foreign borrowing would spur their economic growth. Of course the borrowing was in foreign exchange, which meant that whatever money was borrowed was necessarily spent abroad. Their economies quickly adjusted to dependence on buying foreign goods and services beyond the value of their own exports.

The IMF Phase

Once countries were mortgaged beyond their means, the IMF was brought into play, teaming up with the Bank to place the indebted countries in the equivalent of bankruptcy receivership. This allowed the imposition of structural adjustment policies that reduced spending on social programs, reduced redundancies in the public service, eliminated restrictions on foreign investment and trade, forced the sale of public corporations at fire sale prices, and oriented their economies to production for export--opening up substantial new investment opportunities for our members. The reduction of public employment produced a sudden increase in the educated unemployed and helped to drive down wages, much as the increased pressure to export pushed down primary product prices in international markets. As planned, the adjusted economies became so deeply dependent on Roundtable member corporations for credit, technology, and jobs that they now actively compete with one another in offering investment incentives.

The GATT Phase

We are now positioned to implement the GATT phase of the Roundtable strategy by bringing into full play the most powerful and least known of all the Bretton Woods institution. We have intentionally kept it out of the public eye so that the public would not come to suspect its true power. While the World Bank and the IMF are almost powerless to dictate policies to the wealthy industrial countries, GATT agreements are imbedded in multilateral treaties that are binding on all signatory countries, both rich and poor. Its rulings are enforceable through the application of powerful sanctions and are beyond independent appeal.

While GATT has been styled as a trade organization, we believe we can successfully expand the definition of trade barriers to include virtually any constraint to corporate action in the global economy. Preparations are underway at this moment for a new round of GATT negotiations. U.S. President Ronald Reagan, who is almost assured a second term, will serve as our standard bearer. Our members are now working with Reagan's staff to define the U.S. position for the next GATT round.

Our GATT Agenda

The outlines of our strategy for the upcoming GATT negotiations are well defined. We will work to eliminate all remaining barriers to the free flow of goods between countries, including 1) measures that give domestic producers a competitive advantage over foreign producers; and 2) health and environmental regulations that exceed recognized international standards. Furthermore, we will work to eliminate the right of governments to:

• Restrict the export of natural resources.
• Give preferential treatment to local over foreign investors in any area of the economy, including manufacturing, mining, and services such as banking, insurance and shipping.
• Restrict any import on the grounds that the processes by which it was produced fail to conform to local social or environmental standards.
• Bring intellectual property rights under the GATT to assure their protection in all signatory countries.

Economic Efficiency and International Competitiveness

Competitive pressures are the key to increasing global economic efficiency. A critical element of our strategy is to expose communities to the discipline of the market by making their access to jobs dependent on increasing their international competitiveness in three areas.

Labor. The goal is to create a global competitive labor market that places all workers in competition with one another. As we remove barriers to trade and investment, workers the world over will be placed in competition with one another for those jobs that are mobile. Placing high wage workers in competition with the vast pool of unemployed in the global labor market will create substantial pressure to eliminate the labor market rigidities such as labor unions and minimum wages that currently are a major source of economic inefficiency. Once capital is fully mobile, it will become apparent that it is unfair to prohibit the similar free migration of labor across national boundaries. We will encourage these tendencies, since labor mobility will increase the competition for non-mobile service jobs as well and complete the globalization of the labor market. Labor will be treated as any other commodity in the global marketplace.

Raw Materials. Here we are pursuing a two-fold strategy: increasing the dependence of national economies on exports and, through GATT, eliminating the legal right of governments to restrict the sale of natural resources on environmental grounds or reserve them for local value-added production. This strengthens competitiveness in commodity markets and assures productive enterprises access to natural resources anywhere in the world at favorable prices.

Regulation and Taxation. As corporations increase their freedom to choose where they locate production facilities, localities all around the world are brought into competition with one another to provide the most cost competitive production sites by assuring the availability of low cost, disciplined labor, freedom from costly social and environmental regulations, generous tax abatements, and such investor friendly facilities as publicly funded infrastructure and worker training.

With the completion of the forthcoming round of GATT negotiations, the state, with its concern for national boundaries and power, will become increasingly inconsequential and powerless. Inefficient small producers will either be driven out of the market or absorbed into the procurement and marketing systems of more efficient larger firms. The rights of capital and technology, and thereby of the transnational corporation, will be irrevocably imbedded in international law. The process of fashioning agreements on the sharing of technology, markets and production facilities among corporations through the formation of strategic alliances will continue--leading to the creation of a unified global governance structure driven by the principles of economic efficiency. The corporation will assume responsibility for the whole--ushering in an era of universal peace and prosperity.

Over the next few months we will draft articles for the new GATT round consistent with the above principles. It is important that all our members recognize the significance of the Uruguay Round of GATT negotiations and give this effort their full support.

Indeed it is impossible to over stress the importance of a disciplined approach as we move into this critical strategic phase.

We must present a sufficiently united front through the media we control to avoid any consequential public debate. To this end we have had our best media people working out the message we will ask our members to support in public communications. Surveys reveal that jobs and the environment are both emerging as critical public concerns. Consequently we should saturate the media with the message that free markets and free trade will provide jobs and protect the environment through stimulating economic growth and increasing economic efficiency. We can contract with prestigious university economists to develop computer models that will affirm these claims. We will stress the benefits to consumers of allowing free entry to competitively priced consumer goods. Our response to arguments for preferential treatment for local producers will stress the need to treat all businesses fairly by providing them a level playing field. Those who become persistent in their challenges will be dismissed by labeling them special interest protectionists and economic illiterates who advocate economic inefficiency and elite privilege.

We may only get one chance on the GATT round. If we do not get these agreements negotiated and confirmed by national legislative bodies before the public becomes aware of our agenda, we are likely to face serious opposition, particularly from special interest groups such as labor, environmentalists, and civil libertarians inclined to put their narrow concerns ahead of the larger global welfare to which the Roundtable is committed.

The memo is fictitious. The events, however, are real. Is it really a conspiracy? It seems inconceivable in our complex and fractious world that any large group of power holders could maintain the discipline and unity of purpose required to advance the implementation of such an ambitious plan over a period of some fifty years. Yet the events described have occurred and the Uruguay round GATT proposals now being finalized seek to implement each of the provisions outlined in the memo. Agreements with similar provisions are being put into place under the North American Free Trade Agreement (NAFTA) to meld the economies of Canada, the United States, and Mexico.

True to the strategy outlined in the memo, the public has remained uninformed of the scope and implications of these agreements. Fortunately, public awareness is now beginning to emerge that the GATT and NAFTA involve a good deal more than simply another round of boring trade negotiations.

Anonymous

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