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September 18, 2008

NAFTA Health Care Suits and Melamine Milk

Embassy, Canada’s Foreign Policy Newsweekly, reports that Melvin J. Howard, an Arizona businessman, frustrated after failed attempts to open private surgical centers in Canadian provinces, is asserting the rights NAFTA gives private investors: He is suing the Canadian government for over $150 million in lost expenses and profits!

Or at least he’s trying to - he's filed the first round of paperwork.

Canadian consumer advocates, legislators, and health care professionals will be up in arms! Rightfully so. Canadians have been assured time and time again that their federal trade negotiators have safeguarded their health care system and not ceded control to private investors.

Sound familiar?

This case would expose all sorts of vulnerabilities for health care services, many of which were discussed in a report issued by Public Citizen a few months ago.

What does this mean for us?

First off, the United States is just as vulnerable as Canada to these kinds of NAFTA investor suits. That is bad news since foreign investors have succeeded five times with NAFTA Chapter 11 claims, and $35 million in public funds have been paid in compensation to foreign investors by governments.

Furthermore, this example brings attention to the kinds of challenges legislators might face as they try to bring desperately needed reform to our health care system. Options on the table, like the single-payer systems proposed in 16 states and pharmaceutical purchasing plans, are among the many reform measures vulnerable to investor challenges.

Luke Eric Peterson, investor-state guru, thanks his lucky stars Canada already had a single-payer system in place before NAFTA:

A few years ago, lawyers working for the Romanow Commission warned that if Canada had been bound by NAFTA-type obligations in the 1960s, we might never have seen our single-payer government health insurance scheme brought into being. Quite simply, the price of paying off all of the private insurance operators might have been too high and the government would not have introduced a single-payer system.

That analysis doesn’t bode well for our own reform efforts in the United States. Peterson also discusses possible NAFTA hurdles a future pharmacare plan might face:

Concerns have long been raised that the NAFTA’s “expropriation” provisions might prevent governments from bringing private sectors of the economy into the public fold.  For example, Liberal proposals for a national Pharmacare plan raised questions as to whether such a public scheme might encroach upon—or, in NAFTA terms, expropriate—the turf of private insurers. If that were the case, Ottawa might need to compensate any U.S. investors who lost their business-line at the hands of the government.

Peterson points out that at the very least, if Howard brings his case to a NAFTA tribunal, we’ll get a chance to see some of NAFTA’s ambiguous language clarified.

On an even more disturbing health-care note, let’s shift to China.  At the end of last year, we discussed the recall of dangerous toys and dog food imported from China. Unfortunately, regulators this time around failed to protect Chinese consumers from baby formula which contained melamine, a chemical additive found in plastics and fertilizers (the same additive found in the dog food that was making pets sick last year).

The NY Times reports that 3 babies have died from the contaminated baby formula, with at least 6,244 babies sickened. 

The reason behind melamine in baby formula?  A mad dash for increased profits.

The WSJ reports that:

China's dairy industry has boomed over the past five years.  Milk formula alone is expected to bring in $3.45 billion in revenue in 2008, up 191.7% since 2003, according to market researcher Euromonitor International. 

The NY Times says that in order to compete in this rapidly growing market:

Some [dairy] dealers have admitted diluting milk with water, but doing so lowers protein levels. As a result, melamine, rich in nitrogen, is sometimes used to artificially inflate those levels.

What's worse is that these tactics aren't limited to just one company, as originally thought when this story broke.

The WSJ reports that in addition to the Shijiazhuang Sanlu Group (43% owned by New Zealand Dairy Company Co-operative), authorities have found melamine in the baby formula  of 22 producers!

What would we do if these Chinese products started heading for our shores? Well, thanks to WTO rules, our options for protecting the lil' ones are sharply limited, as we documented in a report last year.

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So what can we say about our President Obama speech? Do any of them have a better idea than his plan for our countries health care system future. I think it is worthy to try his plan rather staying in this rotten current system.

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