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Harmonization Handbook

Over the past two decades, new international trade and investment rules of unprecedented scope and power, coupled with massive changes in business practices and organization, have resulted in an astonishing transformation of economic and social policy around the world. This new arrangement is often labeled "economic globalization." However, in addition to its economic consequences, globalization has a major effect on domestic governance, and thus on public health, economic development, and social and environmental policy.

Two major trade pacts intensified and politically and legally formalized the move toward globalization: the North American Free Trade Agreement (NAFTA), passed by Congress in 1993, and the Uruguay Round of the General Agreement on Tariffs and Trade (GATT), passed in 1994. The GATT Uruguay Round established the World Trade Organization (WTO), a powerful new global commerce agency.

Together, NAFTA and the WTO constitute permanent institutional structures which are significant engines driving corporate economic globalization. Both pacts contain numerous provisions that go far beyond the usual purview of trade agreements, which traditionally focused on tariffs and quotas. NAFTA and the WTO include provisions governing the domestic public health, food safety, consumer, worker and environmental protection policies of member-countries. These are all issues which traditionally have been at the core of domestic policy-making.

Both NAFTA and the WTO establish comprehensive international rules constraining the domestic policy objectives member countries may pursue, and what policy tools member countries may use to obtain even the allowed objectives. A core provision of the WTO states: "Each Member shall ensure the conformity of its laws, regulations and administrative procedures with its obligations as provided in the annexed Agreements."

NAFTA also contains provisions limiting certain national investment and economic development policies. For instance, NAFTA forbids governments from establishing or maintaining some investment preferences to promote development in impoverished or minority areas, as well as investment conditioned on non-commercial performance standards, such as environmental performance.

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