Members of Congress exercise their muscle on TPP

During the latest round of talks of the Trans-Pacific Partnerships (TPP) "free trade" agreement in Dallas, U.S. trade officials increased the use of heavy-handed tactics at the negotiating table, even giving a prize to the first negotiators to finalize their chapter.

But as more information about the TPP comes to light, our elected representatives are exercising their muscle, demonstrating that the U.S. Trade Representative's office is out of step with the American public and Congress.

69 Members of Congress (68 democrats and one republican) sent a letter to President Obama urging him to reconsider US proposals for the TPP that would effectively ban popular Buy American and buy local government contracting policies. An article in the Huffington Post called it a congressional "revolt".

On May 15, Rep. Darrell Issa (R-CA) published a leaked chapter of the TPP regarding copyright and the internet – defying the veil of secrecy over the negotiating texts.

This week, the momentum continued to build. Yesterday, Senator Wyden (D-OR) joined the "bipartisan trade revolt", introducing the "Congressional Oversight for Trade Negotiations Act", to protest the Administration's refusal to share information about the TPP with him and his staff.

Also yesterday Reps. Barney Frank, Ranking Member of the Financial Services Committee, and Sander Levin, Ranking Member of House Ways and Means Committee, sent a joint letter to Treasury Secretary Geithner challenging the U.S. Trade Representative's position in the TPP and trade agreements on limiting trading partners' abilities to implement capital controls to ensure financial stability.

If they are smart, U.S. trade officials will slow down and take notice of the mounting concerns by the public and Congress about the secrecy of the negotiations as well as the substance.

Analysis: today's WTO ruling bad for dolphins, consumers... and even the WTO

We’ve waded our way through today's 165-page, 771-footnote WTO ruling against dolphin-safe labels. Here’s a quick guide to what it says and means.

What it means for dolphins

From the 1950s through the 1990s, an estimated seven million dolphins were killed in the Eastern Tropical Pacific from the practice of chasing, encircling and netting them to catch the tuna underneath. This was profitable because, unlike in other fisheries and regions, dolphin and tuna swim together.

Beginning in the late 1980s and early 1990s, something changed: consumers got organized. First, they instituted a ban on dolphin-unsafe tuna, which the WTO’s predecessor organization ruled against in 1991 and 1994 and which was subsequently repealed. Around the same time, dolphin-safe labels were put on tuna, in order to allow consumers to “vote with their dollars” for dolphin-safe methods. These measures have been successful in reducing dolphin deaths to near-negligible numbers.

Countries like Ecuador were the success stories, in adapting to the dolphin-safe methods, and therefore tapping into consumers’ demand for dolphin-safe tuna. The U.S. and nearly all other nations’ fleets also adapted. Mexico, on the other hand, is almost alone as a hold-out – using litigation rather than adaptation, and in the process branding its fish in the minds of consumers as dolphin-unsafe. Not a real forward looking strategy, to say the least. This WTO case, brought by Mexico in 2008, is just the latest indication of this – after pushing unsuccessfully for a decade to get the Clinton and Bush administration and the U.S. courts to water down the labels.

It is vital for the ongoing health of dolphin herds that the U.S. not bow to this pressure from the WTO.

What it means for consumers

If the U.S. gives in on this WTO threat, consumers will have lower quality or less information on which to base their tuna purchasing practices. For families with kids (including of the grown-up variety) who love animals like dolphins, this will be deeply troubling on its own.

But think of the precedent this sets. The WTO has now said that even voluntary labeling schemes are open to WTO attacks if not all countries (regardless of their production practices) equally benefit from them. This is going to be especially the case whenever there are complementary governmental efforts to ensure the accuracy of the claims on the label.

Labels like organic, cruelty-free, fair trade, Buy Local, Buy America, green, natural, worker-friendly, gluten free and everything else could be next.

What happens next

After today’s ruling, Mexico will begin pushing for elimination of the dolphin-safe labels, or to be allowed to use the label without meeting the U.S. standards.

Depending on how the compliance proceedings progress, the U.S. will have a matter of weeks or months to begin complying. After an extreme outer bound of about 15-18 months, Mexico may be able to begin instituting trade sanctions on U.S. goods or services. In the past, such sanctions have helped to create a domestic constituency in industry and Congress crying out for elimination of the “offending measure.”

It is vital that the U.S. communicate clearly to Mexico and other WTO members that the labeling standards will not be eliminated or watered down. The U.S. can talk to Mexico if need be about other options for compliance, and make the point that it is really long overdue for Mexico to bring its fishing practices into line with international norms.

What the ruling says

Maybe I’m losing my cynical edge, but I was shocked by today’s WTO Appellate Body (AB) ruling. There were a variety of ways that the AB could have worked itself out of the mess left by the September lower panel ruling, and instead, the AB chose to deepen the knot.

Public Citizen Condemns WTO Attack on U.S. Dolphin Protection Efforts

In Final Appeals Ruling, Global Commerce Agency Orders U.S. to Drop, Change Dolphin-Safe Tuna Labels

WASHINGTON, D.C. – The World Trade Organization’s (WTO) final ruling today against U.S. dolphin-safe labels on tuna cans deals a major blow to consumers’ ability to make free and informed decisions about how our food was caught and processed, Public Citizen said. This is the third time the WTO and its predecessor General Agreement on Tariffs and Trade have ruled against America’s dolphin protection policies.
 
“Today’s ruling makes very real the threats these overreaching pacts pose, which have little to do with traditional trade issues. The first round of this case in 1991 became known to environmental activists as ‘GATTzilla Kills Flipper’ and ignited U.S. public opposition to what would become the WTO,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “Until that first ruling, and then a second one several years later, all we could do was point out worrisome negotiating text that we thought could undermine vital domestic environmental and other public interest policies – and then, suddenly, we had the proverbial smoking dolphin.”
 
Dolphin-safe tuna labels are strictly voluntary. If Mexican fleets chose to use dolphin-safe tuna-fishing methods, they would have access to the label, just like fish caught by U.S., Ecuadorean and other nations’ fleets. Mexico wanted access to the label without meeting the standards.
 
“This latest ruling makes truth-in-labeling the latest casualty of so-called ‘trade’ pacts, which are more about pushing deregulation than actual trade,” said Todd Tucker, research director for Public Citizen’s Global Trade Watch. “Members of Congress and the public will be very concerned that even voluntary standards can be deemed trade barriers.”
 
The Obama administration is considering expanding some of these anti-consumer rules in the first trade deal it is negotiating – the nine-nation Trans-Pacific Partnership.
 
“This case underscores why countries must insist that WTO rules be altered and that no new agreements use the same corporate backdoor deregulation model,” said Wallach. “The Obama administration must stand with the thousands of Americans who have signed a Consumer Rights Pledge calling on the U.S. to not comply with these illegitimate trade pact rulings and to stop the Trans-Pacific Partnership trade negotiations that would greatly intensify this problem.”
 
This latest WTO ruling, along with two others in the past year against U.S. country-of-origin labels on meat and flavored cigarette bans, shows that a new approach to trade policy is needed – one that puts consumers, the environment and communities first, said Public Citizen.
 
Background
 
In September 2011, a WTO panel of three lawyers and diplomats from Chile, Singapore and Switzerland ruled that the U.S. dolphin-safe tuna labeling law violates WTO rules. The labels have been enormously successful in reducing dolphin deaths by tuna fishers – a major problem in the past, when tuna fleets set upon dolphins to catch tuna, since the two species associate with one another in the Eastern Pacific Ocean. The label allows consumers to “vote with their dollars” for dolphin-safe methods. Mexico successfully challenged the U.S. standard after decades of refusing to transition its fishing fleet to more dolphin-safe fishing methods.
 
Because Mexico prevailed on some counts but lost on others, both Mexico and the U.S. appealed the lower panel decision. 
 
Today’s Appellate Body ruling flipped the findings of the lower panel ruling. The lower panel found that the dolphin-safe labels were “more trade-restrictive than necessary to fulfil a legitimate objective.” While this finding was problematic, the lower panel at least acknowledged that the U.S. objectives of consumer information and dolphin protection were legitimate.

“The Appellate Body went in an even more anti-environment, anti-consumer direction by claiming that these labels – which regulate imported and domestic tuna alike, and for which many foreign nations’ tuna qualifies – were discriminatory against Mexico,” said Tucker.

This follows on a deeply troubling ruling from last month that found that a U.S. ban on sweet flavored cigarettes that applies to imported and domestic cigarettes also is somehow “discriminatory.”

“In essence, the WTO has found that voluntary is the new mandatory, and non-discriminatory is the new discriminatory,” added Tucker.

The ruling’s implications are dire, especially in the context of a decades-long battle to save dolphins. This struggle has been beset by countless trade-related obstacles: 1991 and 1994 rulings under the WTO’s predecessor organization led to the U.S. eliminating the more potent import ban of dolphin-unsafe tuna, and environmentalists fighting successfully in U.S. court to block the Clinton and Bush administrations from also watering down the voluntary labeling policy. These groups narrowly blocked this executive branch effort, which U.S. courts deemed “Orwellian” and “a compelling portrait of political meddling.”

Implementation of Colombia Trade Deal a New Low for Workers and the Environment

It is oddly fitting that U.S. Trade Representative (USTR) Ron Kirk would celebrate today’s implementation of the U.S.-Colombia trade deal at the U.S. Chamber of Commerce. After all, even as the U.S. government’s own projections showed that this pact and a similar one with Korea would increase the U.S. trade deficit, both USTR and the Chamber worked overtime to misrepresent this and other likely impacts.
 
At a time when nearly four out of ten Americans are unemployed or simply not participating in the labor force, it is unconscionable to implement a trade deal with Colombia – the unionist murder capital of the world.  At a time when multinational mining and other extractive industries are displacing poor Colombians, it is unthinkable for this pact to privilege these same corporations with special rights to challenge Colombia’s social and environmental mitigation policies in supranational tribunals. The Colombian government’s own pre-pact assessment anticipated the likely consequence of this deal: rural Colombians “would have no more than three options: migration to the cities or to other countries (especially the United States), working in drug cultivation zones, or affiliating with illegal armed groups.''

The failed North American Free Trade Agreement has virtually identical rules as the Colombia pact, and we know how that worked out: increased job insecurity and more corporate attacks on public interest policies outside of national judicial systems. These rules weren’t a good idea when it came to Mexico: they’re even worse when it comes to Colombia.

In October, President Obama set a new low by pushing a controversial U.S.-Colombia trade deal that attracted the highest level of Democratic opposition to a Democratic president’s trade initiative in history. Instead, record high levels of Republican support were marshaled, only because the Tea Party-supported members of Congress flip-flopped on their campaign commitments by voting for a trade deal that undermines American jobs and sovereignty.

If the administration continues the course on the failed trade policies of the Bush-Clinton-Bush years (as it seems to be with the nine-nation Trans-Pacific Partnership), it can expect continued outrage from people across the political spectrum.

TPP = Corporate Power Tool of The 1 Percent

DALLAS- Tuesday, the Trans-Pacific Partnership (TPP) twelfth round of negotiations will begin behind closed doors at the Intercontinental Hotel here. Branded as a "trade deal" by its corporate proponents, the TPP in reality would establish new corporate rights to ease job offshoring, attack environmental and health laws in foreign tribunals and extend medicine patents. Its expansive non-trade provisions would impose constraints on government regulation of financial firms, food safety and more. As the Huffington Post's Zach Carter reported, the TPP would even ban "Buy America" procurement policy.

The TPP also includes aspects of SOPA, the controversial Stop Online Piracy Act. The pact would even elevate corporations to equal status with signatory governments allowing them to privately enforce their new rights be suing government in foreign tribunals to demand taxpayer compensation for policies that undermine the companies' expected future profits. Intensive negotiations have been underway for two years under conditions of extreme secrecy. More than 600 hundred corporate "advisors" have access to the draft texts while the press, public and Congress are shut out. This comic video, set to a parody tune based of the Jackson Five's ABC, aims to pierce the dangerous lack of public awareness about this audacious corporate power grab. With funny animation and a sarcastic tone, it highlights that the TPP is "all about secrecy" and has "nothing to do with trade you see". You can learn more about the TPP at www.TPP2012.com

Members of Congress Urge Obama to Stop the TPP from Banning Buy American

Here is the text of the letter:

Dear President Obama,

 We write in strong support of Buy American procurement policies, including the various federal programs that have been in place since the enactment of the Buy American Act in 1933 and passage by many states of similar preference policies.  We are concerned about proposals we understand are under consideration in the Trans-Pacific Partnership (TPP) agreement negotiations that could significantly limit Buy American provisions and as a result adversely impact American jobs, workers, and manufacturers.

Under the proposed TPP framework, individual states and the federal government would be obligated to bring existing and future domestic policies into compliance with norms set forth in 26 proposed TPP chapters, including one covering government procurement policy.  Failure to conform our domestic policies to these terms would subject the United States (U.S.) government to lawsuits before international dispute resolution tribunals empowered to authorize trade sanctions against the U.S. until our policies are changed.

In the past, U.S. Free Trade Agreements (FTA) required that all firms operating in a signatory country be provided equal access as domestic firms to U.S. government procurement contracts over a certain dollar threshold.  To implement this “national treatment” requirement, the U.S. waived Buy American procurement policies for firms operating in FTA-signatory countries. Effectively, in exchange for opportunities for some U.S. firms to bid on contracts in smaller foreign procurement markets, we traded away an important policy tool that can ensure that billions in U.S. government expenditures are recycled into our economy to create jobs, strengthen our manufacturing sector, and foster our own new cutting-edge industries.

We do not believe this approach is in the best interest of U.S. manufacturers and U.S. workers. Of special concern is the prospect that firms established in TPP countries, such as the many Chinese firms in Vietnam, could obtain waivers from Buy American policies.  This could result in large sums of U.S. tax dollars being invested to strengthen other countries’ manufacturing sectors, rather than our own.  At a time when U.S. manufacturing only employs 11.71 million people, a 40% decline from its peak in 1979 and the lowest since 1941, we simply cannot allow this to happen. 

As you know, procurement policy established in trade agreements cannot be later modified without consent of all signatory countries.  This would deprive Congress and U.S. state legislatures of their authority to modify procurement policies despite fundamentally changed national or international circumstances.  Therefore, we are writing to inquire about U.S. negotiators’ procurement proposals for the TPP and to encourage your Administration not to provide “national treatment” for U.S. government procurement.  This matter is of considerable urgency given the stated goal of completing these talks this summer and the special TPP intercessional negotiations on procurement held early last month.

 While we may have different views on other aspects of the prospective TPP, we are united in our belief that American trade agreements should not limit the ability of Congress and U.S. state legislatures to determine what procurement policies are in our national interest.  Thank you for your consideration of our views, and we look forward to your response on this important matter.

 

Sincerely,

Donna F. Edwards                                                                Nick J. Rahall, II

Member of Congress                                                      Member of Congress

 

 cc: The Honorable Ron Kirk, United States Trade Representative

Obama’s ‘Regulatory Cooperation’ Executive Order Is a Smokescreen for Deregulation

Note: Today, the Obama administration announced an executive order on the need for international harmonization of regulations. Below, please find reactions from two Public Citizen experts.

Statement of Amit Narang, Regulatory Policy Advocate, Public Citizen’s Congress Watch Division:

With this executive order, the administration once again has decided that appeasing big business is more important than vigorously defending the importance of public protections to our country. The public and small businesses believe, as demonstrated in pollafter poll, that strong regulatory standards are essential and can be achieved while growing our economy. The administration should stop catering to big business and should move quickly to finalize the numerous workplace safety, food safety, consumer product safety and environmental protections that have been under review at the Office of Management and Budget for months, and in some cases, years.

Statement of Lori Wallach, Director, Public Citizen’s Global Trade Watch:

Unfortunately, international “regulatory cooperation” largely has been a smokescreen for deregulation, which typically involves trade pact rules setting ceilings on consumer, environmental, financial, health and other public interest standards that no country is permitted to exceed.

Deregulators have been trying for years to use the claim of maximizing trade flows as a reason to gut sensible public interest regulations and impose lowest common denominator standards internationally on food safety, environmental protection and financial regulation.

Whether you call it harmonization, deregulation or international regulatory coherence, this controversial agenda of using “trade” pacts to set a ceiling on health, safety, financial and environmental standards stalled out in the WTO Doha Round of trade talks, and now is being resisted in the Trans-Pacific Partnership (TPP) trade deal. This recent executive order appears to be the latest effort to introduce by stealth what has been rightly rejected elsewhere.

The magic of government and the legitimacy of international legal orders

In the comments section, Scott Lincicome refers to Lori Wallach’s piece in the HuffPo and apparently is ruffled by the tone.

If only you could see what Public Citizen’s membership and our allied organizations wanted us to publish! We were pretty restrained, and actually understating the political damage this ruling will have on the WTO’s long-term legitimacy.

The fact of the matter is that Public Citizen expended a decent amount of energy trying to lay out for the Appellate Body a way through this morass. We thought that (as a legal matter) there was a way that the lower panel ruling could be overturned and allow the institution to save face. In retrospect, I’m not exactly sure why we did this, because the tone deafness of the Appellate Body ruling is startling.

Scott also dislikes our characterization of the WTO ruling as an “order.”

The relevant passage of the HuffPo piece is: “The ruling, issued Wednesday, was on the final U.S. appeal which means that now the U.S. has 60 days to begin to implement the WTO's orders or face trade sanctions.” Some version of that formulation has appeared consistently in our publications throughout the years.

I could “order” Scott to take down his blog, but he would not need to comply with that “order.” At the other end of the spectrum is an “order” delivered at the barrel of a gun or by a vengeful Norse god, with which compliance is strongly advised.

Somewhere in between is that magical thing we call modern government. The Supreme Court doesn’t have an army, but non-acquiescence with its decisions is rare, because elites believe that the benefits in social order (the other kind of "order") outweigh the costs to complying with disagreeable decisions. The Court in turn exercises (typically) great deference to the political bodies, or it becomes politicized and sees its legitimacy damaged.

Likewise, a WTO “order” backed by the threat of trade sanctions is as close to forced compliance as it gets in international law at peacetime. (The Bank of International Settlements or UN human rights agencies don’t have powers like this.) On the spectrum of meaningfulness of “orders,” the WTO is substantially closer on the spectrum to what modern governments do than my order to Scott to abort his blog. Indeed, by triggering political economic consequences, the WTO agreements create automatic constituencies for compliance, in addition to those that think complying with WTO panels is good per se.

The WTO Appellate Body, just like our own domestic Supreme Court discovered in the New Deal era, cannot be blind to how its rulings actually play out in the real world if it hopes to retain its authority.

In this case, I think we’ve laid out pretty well the politics behind the FSPTCA – a menthol ban is unlikely to happen (not because California Democrats want to protect tobacco industry jobs but because of reasonable regulatory distinctions). However, a roll back of a ban on cloves might happen if the administration doesn't stick to its guns.

Those politics are unlikely to change, and the WTO doesn’t require them to in order to begin compliance proceedings.

If, as a practical matter, the only way that U.S. could comply would be exempting imports from incremental regulatory schemes (and thus, yes, leading to more teenage experimentation with cigarettes than would be true with the FSPTCA whole and intact), then the TBT Article 2.1 ruling becomes the same as an order backed by trade sanctions to eliminate or water down the flavored cigarette ban now in place. Presumably, when some U.S. industries are hit by trade sanctions, the demands for watering down the FSPTCA will grow, increasing the likelihood of that outcome over time.

If the AB is going to get in the habit of putting countries’ backs against the wall on sensitive matters of public health, you’re going to see a lot more demands for non-compliance and non-payment of compensation. My question for the WTO’s supporters is how that state of affairs advances your goals.

Again, we were genuinely surprised by the AB’s ruling. We thought that the public interest stakes were very clear (as they were in EC-Asbestos), and that the AB would find some grounds for overturning the lower panel ruling (say on likeness) and thus allowing the institution to save face.

The fact that they were unable to act in self-preservation (and made a political decision that now is having predictable political consequences) is a bad sign for those that hope to see the WTO remain a legitimate force in global affairs.

Korean Supreme Court urges renegotiation of investor-state clause; expresses concerns of “extreme legal chaos”

An English language Korean newspaper broke some startling news earlier this week. See the full story here.

In 2006, the Supreme Court in Korea submitted an opinion to the government recommending a renegotiation of the investor-state clause, citing concerns that the dispute system could lead to “extreme legal chaos” resulting from increased arbitration requests from U.S. investors.

Five years (and a negotiated trade deal) later, the court’s request has finally been disclosed.

The document warns against problems of sovereignty infringement, extreme investor rights, and legal instability. It also notes that “whether or not to introduce an investor-state dispute system is a decision to be made after the sufficient gathering of opinions from the South Korean public.”
(See here for more on that.) Apparently, one of the bases for their concern was a NAFTA case brought against the U.S., which we detail here.

And according to the article,

The South Korean government announced that it would be renegotiating investment-related provisions in the KORUS FTA with the US within 90 days of its effective date of Mar. 15. It has had a task force working since March on a negotiation draft.

Will DIOCOSEFLRD save tobacco rules from the WTO?

The WTO ruling against U.S. measures to reduce teen smoking continues to make waves, with folks like Daniel Ikenson, Scott Lincicome, and my old trade professor Steve Suranovic weighing in - mostly with straw man arguments or the straight libertarian push for less regulation. These are probably not the folks that have a lot invested in maintaining the Family Smoking Prevention and Tobacco Control Act (FSPTCA) to begin with.

We've laid out the essential timeline issues with compliance here. One of the more novel arguments for compliance comes from trade lawyer Rob Howse, who has commented on the issue at IELP here, here and here. In addition to recommending an extention of the FSPTCA's ban to menthol (which I've said is likely to be politically difficult if not impossible), Rob has suggested that the U.S. could comply by making a better case that the exclusion of menthol from the ban is justified. Towards this end, Rob advanced a novel interpretation of Article 21.5 of the WTO's Dispute Settlement Understanding (DSU), which reads:

“Where there is disagreement as to the existence or consistency with a covered agreement of measures taken to comply with the recommendations and rulings such dispute shall be decided through recourse to these dispute settlement procedures, including wherever possible resort to the original panel. The panel shall circulate its report within 90 days after the date of referral of the matter to it.  When the panel considers that it cannot provide its report within this time frame, it shall inform the DSB [Dispute Settlement Body] in writing of the reasons for the delay together with an estimate of the period within which it will submit its report.”

Rob seems to be saying that, while an Article 21.5 compliance panel could not overturn the AB’s ruling, it might be able to deem that the U.S. is acting consistently with the ruling if it had more data and studies justifying the U.S. approach.

There is a debate as to the legal merits of this argument, but it seems unlikely that the same panel that ruled against the FSPTCA once would think differently a second time around.