Diminishing Sovereignty

Maybe it sounds like a good idea: a global regulatory body for a global economy. That's the latest suggestion floating around the Organization for Economic Cooperation and Development (OECD) a Paris-based group of thirty industrialized countries. The OECD is known to most through its country reports and economic policy prescriptives. But in recent years, the OECD has refashioned its role. The OECD wants a place at the international table with the World Trade Organization, the International Monetary Fund and the World Bank to regulate in areas ranging from financial privacy to biotechnology and “global governance.” What is global governance? The OECD defines it as “the process by which we collectively manage and govern resources, issues, conflicts and values in a world that is increasingly a 'global neighborhood.' Though there is no “world government”, the European Union, the OECD notes, “is a harbinger for global governance.” The OECD countries are bound together by the shared ideals of democratic government, free markets and the rule of law. Why wouldn't these nations want to have the same regulatory standards? Why not pool the knowledge of 30 mainly European nations and create best practices for the greater benefit of all? To start with: sovereignty. Global governance means that nations and agencies must surrender their authority to a panel of remote experts, unanswerable to the electorate. An international governing body could override the decisions of domestic agencies and the authority of the US Congress. Sovereignty is at the heart of the ongoing dispute over the OECD's harmful tax competition initiative. Since 1998, forty-one Caribbean and Pacific islands have been the target of an OECD project demanding that they stop certain tax practices or face sanctions by the member nations. Though the project has no basis in law, all but seven countries have agreed to comply. It isn't coincidental that the EU has been toying with idea of imposing one tax rate across its borders to stop capital flight within the EU. The project raises a question: will the United States — an OECD member — be expected to abandon some of its financial privacy protections to comply with the initiative? The US may choose to ignore some of the OECD's projects by invoking the principle of sovereignty, but that does not lessen the impact that such a global regulatory body might have. Secondly, countries don't always agree. Though bound together in common purpose, OECD nations differ in political and cultural practice. Where an American rancher may not think twice about feeding his cattle bio-engineered corn, a Frenchman recoils in horror. This is the thrust of the traceability and labeling debate. Seventy percent of the world's bio-engineered food is grown in the US. Both the European Commission and the U.S. Food and Drug Administration agree that numerous studies indicate that bio-engineered food is as least as safe as food produced by conventional methods. Secretary of Health and Human Services, Tommy Thompson recently stated, “…[M]andatory labeling will only frighten consumers. Labeling implies that biotechnology products are unsafe.” The US views the biotech revolution as potentially improving crop yields and reducing pesticide use: good for humans and the environment. Yet, one nation's bumper crop is another's plague. In spite of the European Commission's findings, the EU is suspicious of bio-engineered foods. It says the jury is out on their safety and impact on the environment. Without scientific proof, they won't allow any new bio-engineered seeds to be planted — stifling the European biotech industry and blocking US seeds exports. A requirement that most biotech-derived foods be labeled has also turned European food processors and supermarkets away from US food exports. The EU's labeling requirement is likely to be challenged as an unwarranted trade barrier at the WTO. The OECD is trying to make the EU's rule global and is working on a traceability and labeling program to track the contents of food products, seeds and feed. The EU is anxious to slap a “Made with genetically modified ingredients” label on imports. The OECD program would give them the freedom to do so. The difference in opinion stems from how the US and the EU approach regulation. The EU is all too willing to invoke the “precautionary principle”. That is, declare a substance potentially hazardous to humans or the environment, in the absence of scientific proof. The OECD endorses the “precautionary principle”. The United States believes that an element of caution is warranted in regulatory decision-making, but it generally believes that products should be lightly regulated when a risk analysis based on sound science shows them to be safe. In addition, areas where the OECD proposes to expand its reach duplicate standard setting and safety work already mandated to other international organizations. Codex Alimentarius was created in 1963 by the United Nations to develop food standards guidelines. Pharmaceutical standards are set by the World Health Organization. The OECD helped the EU with its disastrous Chemicals Strategy now being drafted into law. If a manufacturer doesn't meet the EU's data requirements, its products could be banned costing the US chemicals industry up to $17 billion in lost exports. The strategy includes products that use chemicals: toys, cosmetics and pesticides. What makes it so expensive is its testing rationale — a “Globally Harmonized System” developed by the OECD. When EU scientists ran the tests, 70% of the chemicals tested were classified as dangerous. If it becomes law, the EU's Chemicals Strategy will cripple jobs and innovation in chemicals worldwide. The US must closely examine the OECD's projects. They will find a common theme. OECD work tends to support the policy positions of the European Union. The EU's current policy concerns are intertwined with OECD agenda. Many of the projects are also designed with the EU's goal to “overcome US competitiveness”, in mind while bringing the EU's style of doing business to the rest of the world.