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  • Eyes on Trade is a blog by the staff of Public Citizen's Global Trade Watch (GTW) division. GTW aims to promote democracy by challenging corporate globalization, arguing that the current globalization model is neither a random inevitability nor "free trade." Eyes on Trade is a space for interested parties to share information about globalization and trade issues, and in particular for us to share our watchdogging insights with you! GTW director Lori Wallach's initial post explains it all.

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June 29, 2012

WTO Rules Against Yet Another U.S. Consumer Protection Policy

WTO Rules Against Yet Another U.S. Consumer Protection Policy

 Final WTO Appeal Ruling Goes Against U.S. Country-of-Origin Meat Labeling Law that Applies to Domestic and Imported Meat

 WASHINGTON, D.C. – The World Trade Organization’s (WTO) final ruling today against a highly popular U.S. consumer policy – the country-of-origin labeling (COOL) for meat found in every grocery store – will only intensify public opposition to trade pacts, such as the Trans-Pacific Partnership (TPP), a nine-nation pact now under negotiation that is slated to include anti-consumer rules similar to those in the WTO, Public Citizen said. Last week, U.S. officials agreed to allow Mexico and Canada to enter TPP negotiations despite failing to obtain a settlement in the WTO meat labeling case.

 The WTO appellate ruling released today, which is final and not subject to further appeal, means that Mexico and Canada have succeeded in their WTO attack on the U.S. meat labeling policy. Under WTO rules, Mexico and Canada may soon be able to impose trade sanctions against the United States if it does not water down or eliminate the labels to comply with the WTO ruling. If the law is weakened, American families may not be able to know where there food is coming from, and health regulators may have a harder time tracking food borne bacteria to its point of origin. Public Citizen urged the administration not to weaken the law.

 “Today’s ruling makes very clear that these so-called ‘trade’ pacts have little to do with trade between countries, but rather impose outrageous limits on the most basic consumer safety policies on which we all rely,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “The WTO announcing that big agribusiness corporations must be allowed to sell mystery meat here, despite U.S. consumers and Congress demanding these labels, is yet another example of outsourcing our legal system to international commercial bodies that push corporate interests.”

 Earlier this month, leaked text from the TPP revealed that the agreement, if completed, would subject U.S. laws to challenges by private business interests before secretive foreign tribunals and authorize the payout of unlimited funds, in compensation to businesses, from the U.S. Treasury.  

 Today’s decision narrowed the number of specific WTO provisions that the U.S. meat labeling policy was found to violate, but still reaffirmed the previous WTO ruling that the law must be altered or eliminated. This ruling  follows WTO rulings this year against U.S. “dolphin-safe” tuna labels and a U.S. ban on clove-, candy- and cola-flavored cigarettes.

 “These three rulings – with the WTO slapping down safe hamburgers, Flipper and children’s smoking prevention policy – make it increasingly clear to the public that the WTO is leading a race to the bottom in consumer protection,” said Todd Tucker, research director of Public Citizen’s Global Trade Watch.

 After 50 years of state efforts to institute country-of-origin labeling for meat cuts and products, and federal experimentation with voluntary COOL for meat, Congress passed a mandatory COOL program as part of the 2008 farm bill. In their successful WTO challenge, Mexico and Canada argued that the mandatory program violated the limits that the WTO sets on what sorts of product-related “technical regulations” WTO signatory countries are permitted to apply. In their filings to the WTO, Canada and Mexico suggested that the U.S. should drop its mandatory labels in favor of a return to voluntary COOL or to standards suggested by the Codex Alimentarius, an international food standards body in which numerous international food companies play a central role. Neither option would ensure that U.S. consumers are guaranteed the same level of information as the current U.S. labels. In an initial ruling in November 2011, the WTO sided with Mexico and Canada against the U.S. law, but the U.S. appealed the decision in January of this year.

 The Obama administration is in the process of negotiating the secretive TPP trade deal, an expansive deal that expands on the North American Free Trade Agreement (NAFTA), which currently includes  11 Asian and Western Hemisphere countries. The pact is expected to include limits on domestic consumer safety and labeling policy.

 “The only thing worse than NAFTA-on-steroids with any old country is NAFTA-on-steroids with NAFTA countries,” said Wallach. “What’s worse, the administration appears to have abandoned its leverage and greenlit Mexico and Canada joining the TPP without an agreement to drop their WTO attack on consumer labels. The American public is desperately waiting for President Barack Obama to show some negotiating savvy, and to start fulfilling his campaign pledges and reconsider the so-called ‘trade’ model that his administration is pushing with the TPP.”

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June 21, 2012

Can you say "Déjà vu" in Spanish?

Dear Neighbor:

Congratulations on your inclusion in the elite group of states that are currently negotiating the Trans-Pacific Partnership (TPP) Agreement! Your acceptance into this proposed “historic, 21st century trade agreement” means that much of the “burden” of making laws and regulations for your nation will be taken off of you. No worries; lobbyists for Hollywood and American pharmaceutical companies and more than 600 official “corporate trade advisers” to the Office of United States Trade Representative (USTR) will help take care of the details.

Sorry to mention it, but we’re afraid many of your laws pertaining to intellectual property (IP), affecting issuesACTA Rises from Internet privacy to access to affordable medications, might need a little “tweaking” to ensure they comply with the specifications of U.S. corporate “advisers.” The USTR’s demands at the TPP negotiations read like a wish list from the Pharmaceutical Research and Manufacturers of America (PhRMA) and the Recording Industry Association of America (RIAA), and YOU have the opportunity to grant all their wishes.

You see, the condition the U.S. imposed for Mexico to get a seat at this corporate banquet was that Mexico agree to accept everything that the other countries already have negotiated over the past three years. Sure, NAFTA required some nasty changes to your IP laws. Remember the millions your government wasted trying to lift the U.S. patent on common yellow beans that a bio-prospector filed after NAFTA? Well, wait until you get a look at the 21st century NAFTA on steroids!

As a part of the “historic” TPP negotiations, it is time for your laws to truly reflect your new “21st century” status. For instance, you need to expand pharmaceutical patent protection and create new pharmaceutical monopolies in Mexico. You also need to extend copyright protection to device memory buffers and criminalize circumvention of technological protection measures, limiting fair and educational uses of all kinds of literary and artistic content. Overall, you are expected to introduce new, draconian provisions into Mexican law to lengthen, strengthen and broaden IP monopolies in Mexico.

The strict IP enforcement in this scenario may seem very familiar to you. In fact, you fought off a very similar – although less extreme – attack on your privacy and rights on the Internet in 2011 in the form of the Anti-Counterfeiting Trade Agreement (ACTA). Some objections to ACTA expressed by Mexico Senator Carlos Sotelo Garcia in September 2010 included the opaque nature of the ACTA negotiations, stringent IP enforcement measures (championed by the U.S.), and the “erosion” of access to information technology for approximately thirty million Mexican citizens.

A look at any current media coverage of the TPP will reveal a scene that is eerily familiar and equally concerning. Sorry to break the news, but the opacity of the TPP negotiations makes the ACTA process look like a pinnacle of open government. The TPP has been negotiated entirely in secret, with the only glimpse of the text coming from leaks of the IP, investment and other chapters. Furthermore, each of the negotiating nations has agreed to keep all documents besides the finalized text a secret for four years following the conclusion of negotiations, whether it is ever finalized or not. So whereas the same report by Senator Garcia implemented a working group to review the provisions of ACTA, no such legislative oversight would be possible in the TPP. Apparently the only way to get a look at the “21st century agreement” – even for legislators of the countries in the negotiations – is to introduce a resolution demanding they be allowed to see how trade negotiators are rewriting a nation’s laws. In the U.S, the chairman of the Senate committee with official jurisdiction over TPP, U.S. Sen. Ron Wyden (D-Ore.), has done just that. Yup, the chairman of the Senate Finance Subcommittee on International Trade, Customs, and Global Competitiveness and his staff were explicitly refused access to even the U.S. negotiators’ proposal to the TPP negotiations.

The legislature of Mexico has already expressed its opinion of trade agreements that restrict privacy and rights on the Internet. On June 21, 2011, the Mexican Congress passed a resolution that urged that the Federal Executive not become a signatory of ACTA:

The Standing Committee of the H. Congress, respectfully urges the Federal Executive Power to, within the framework of its powers, instruct the ministries and agencies involved in negotiating the Anti-Counterfeiting Trade Agreement (ACTA), not to sign the Treaty.

Reading this sort of language coming from the national legislature of a sovereign nation, one might draw the conclusion that ACTA is doomed in that country. But foreign corporate interests have found another foothold in the laws of Mexico – in the form of the TPP. You may have believed that ACTA was dead in Mexico, but, like el chupacabras, it is rising again and this time it is even stronger.

Welcome to the 21st century, dear neighbor.

 

Follow Public Citizen's Global Access to Medicines on Twitter: https://twitter.com/#!/PCMedsAccess
Read more at our webpage: http://citizen.org/Page.aspx?pid=4955

Just Relax, Canada. U.S. Pharma Will Handle It

Dear Fellow Canadians:

Welcome to the Trans-Pacific Partnership (TPP) negotiations! Since you are fresh off a bruising fight getting provisions that protect Internet freedom and privacy into Canada’s copyright Bill C-11, I’m sure that you are exhausted with defending your rights. Take heart. With the TPP, you will not have much of a say on laws or policies threatening your privacy, rights on the Internet or access to affordable medicines. Instead, lobbyists from major American industries and some 600 “corporate trade advisers” have helped lay out some of what the Office of the United States Trade Representative (USTR) expects from you.

These are the same industries that forced major concessions on C-11’s approach to digital locks despite near-universal criticism. Hundreds of pages of new non-trade policy contained in the most sweeping “free trade agreement” could face a mere up or down vote in the House of Commons. And the USTR proposes intellectual property provisions that cover dramatically more than copyright law. They touch a wide range of IP issues.

You thought NAFTA was a pill? Sure, Big PhRMA used NAFTA to attack our drug formulary system and all of those compulsory licenses for affordable meds. But back then, our government drew a line. Despite some considerable hysteria from the U.S. drug industry giants, you did not give away all of our policy space. This time, however, the TPP gives Prime Minister Stephen Harper a way to write all of us a real prescription for high drug prices and cement his view of Canada as an extended playground for corporate America.

Here are some of the highlights of the U.S. proposed IP chapter:

• Expand patent evergreening and create new pharmaceutical monopolies, raising medicine costs;

• Dramatically increase the life of a copyright term from 50 years in most cases under C-11 to 95 years;

• Increase penalties for circumvention and reduce the exceptions for individuals; and

• Establish an American-style notice-and-take down system for online copyright infringement.

This seems like a lot. If you were worried, however, that we had some duty to at least read the proposals for the law and voice our democratic concern, fear not. Negotiators act in secret. The only glimpse of the actual agreement so far has come from leaked copies of the text from the IP, Investment and other chapters. Remember in the good old days of ACTA when the University of Ottawa filed an access-to-information request but received a blacked out document with only the title visible? Expect similar treatment during TPP negotiations. While lobbyists and corporate liaisons are granted electronic access to the agreement, your parliamentary representative might have to walk down to the Department of Foreign Affairs and International Trade to speak personally with The Honourable Ed Fast P.C. , M.P., Minister of International Trade.

Moreover, if you are distressed by the fact that our respectable Department of Trade will have lots of work reviewing all the work done so far once Canada’s negotiators get hold of these secret drafts, you will be relieved to hear that Canada has a lesser role in the negotiations. By coming late to the table, Canada has achieved a second-tier position. This status requires Canada to agree to all the settled chapters, which its officials have not even read, and Canada cannot veto current provisions. Thus, not even lobbyists or the trade minister need concern themselves with settled provisions. The TPP negotiations shut individual citizens and even members of parliament and ministers out of the process.

The public response to C-11 proved that civil engagement has made a difference on intellectual property issues in Canada. The people—frustrated, fearful and bedraggled—woke up to the oppressive measures of industry groups and fought hard. But this is far from the end. In upcoming years, we might still witness the implementation of a multinational corporations’ wish list, which seeks to criminalize copyright infringement, implement ACTA-plus provisions and restrict Canadians’ access to affordable medicines. Through the TPP, the USTR seeks to achieve all these goals and more—without too much of a voice from us. Will we allow American industry to dictate to the Canadian people our rights—or stand up and demand that Canada step down from these negotiations?

Follow Public Citizen's Global Access to Medicines Program: https://twitter.com/#!/PCMedsAccess

James Cormie is a legal intern at Global Access to Medicines Program.  Originally from Edmonton, Alberta, James blogs on issues of trade, IP, and international law.

June 19, 2012

Leaked TPP Chapter Sparks Outrage

The Trans-Pacific Partnership (TPP) Investment Chapter that leaked last week has been making waves. Trade scholars, talking heads, citizens and politicians are all discussing the ramifications of this chapter, which outlines the process that multinational corporations can use to sue governments that enact laws to protect public health, workers’ rights, and the environment.

The leak of this secretive chapter has amplified the voices of bipartisan congressmen and numerous civil society organizations who have long been demanding transparency in the TPP negotiations. Huffington Post ran an article which opened on the front page and has drawn a record number of reader comments- 29,959 to date. The text of the article cites the list of calamitous effects the TPP Investment Chapter could have, including raising the cost of vital medicines and effectively ending “Buy American” preferences for domestic manufacturers. Global Trade Watch Director Lori Wallach warned that "the outrageous stuff in this leaked text may well be why U.S. trade officials have been so extremely secretive about these past two years of [trade] negotiations."

The progressive online magazine Salon ran a story warning its readers that TPP could grow “bigger than NAFTA.” Other articles have also appeared in a variety of domestic and international outlets, including RT (which also interviewed our own Todd Tucker), Inside US Trade, The New Zealand Herald, Law360, the Santiago Times and the International Economic Law and Policy Blog, among others.

Wallach has also discussed the leak on numerous radio and television programs. On the news show “Democracy Now,” Lori spoke with Amy Goodman and Juan González about the dangers of TPP as “a 'one-percenter' power tool that could rip up our basic needs and rights." She also appeared on numerous other TV and radio outlets, including the Viewpoint with Elliot Spitzer on CurrentTV, Let’s Talk About It Radio, Pacifica Radio, CounterSpin, the Dave Sirota Show, the Nicole Sandler Show, Stand UP! With Pete and Dominic, the Bill Press Show, and Sly in the Morning.

The leak has incited extremely significant dialogue, especially in Australia, which according to the leaked document would be the only TPP nation exempt from the Chapter’s provisions on investor-state tribunals.

Providing the public with access to the TPP Investment Chapter is a significant beginning step towards unearthing the secrets of the TPP negotiations and promoting awareness of the powers it bestows upon corporations at the expense of the citizens of America and the eight other TPP nations. (Or eleven, if you include this week's announcements that Canada and Mexico would join the talks.) The more exposure this document receives, the more pressure can be put upon negotiators to live up their promises of transparency.

Thanks to Jed Silver for contributing to this post.

June 18, 2012

Following Last Week’s Damaging Revelations About the Trans-Pacific Partnership (TPP), the Obama Administration Expands Controversial Trade Deal

Following Last Week’s Damaging Revelations About the Trans-Pacific Partnership (TPP), the Obama Administration Expands Controversial Trade Deal 

 WASHINGTON D.C. – That the Obama administration would invite an additional country to join the Trans-Pacific Partnership (TPP) after last week’s leak of secret negotiating documents revealing the proposed pact’s threats is outrageous, Public Citizen said today.

 Last week, after three years of closed-door negotiations, the text of the TPP Investment Chapter leaked, revealing that the Obama administration had agreed to submit the U.S. to the jurisdiction of foreign tribunals where foreign corporations would be empowered to challenge U.S. laws and demand unlimited compensation from the U.S. Treasury.

 The revelation was met with criticism from the political left and right.  However, the U.S. Trade Representative (USTR) refused to comment on the leaked chapter. Increasingly, members of Congress are raising concerns about the pact, including Sen. Ron Wyden (D-Ore.), chair of the Senate Finance Committee’s Subcommittee on International Trade, Customs, and Global Competitiveness, who has been denied access even to the U.S. proposals to the TPP negotiations.

 Following the growing criticism of the administration’s lack of transparency and the newly revealed substance of the TPP, instead of the administration reconsidering the many TPP provisions that would vastly expand corporate rights and privileges, the administration’s response was to add yet another country into TPP talks: Mexico. Meanwhile, reports out of New Zealand indicate that China also is pursuing entry into this so-called trade deal.

 “The TPP model is fundamentally flawed: It’s hard to imagine who in this country would support it if they knew that it banned ‘Buy American’ procurements, limited Internet freedom a la SOPA (the controversial Stop Online Piracy Act) or created a two-track judicial system privileging corporations with a new ticket to raid our tax dollars,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “Adding more countries just expands the potential threats of corporate attacks that the TPP poses to people here and now also poses to Mexicans.”

 “Via closed-door negotiations, U.S. officials are rewriting swaths of U.S. law that have nothing to do with trade, and in a move that will infuriate left and right alike, have agreed to submit the U.S. government to the jurisdiction of foreign tribunals that can order unlimited payments of our tax dollars to foreign corporations that don’t want to comply with the same laws our domestic firms do,” Wallach said. “U.S. trade officials are secretly limiting Internet freedoms, restricting financial regulation, extending medicine patents and giving corporations a whole host of other powers.”

 Opposition to the TPP is growing. Last month, 69 members of Congress sent a letter to President Barack Obama in response to revelations that TPP actually bans “Buy American” procurement rules.                                                       

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Public Citizen is a national, nonprofit consumer advocacy organization based in Washington, D.C. For more information, please visit www.citizen.org.

June 15, 2012

Korea trade deficit balloons under NAFTA-style deal

Last October, President Obama and House Republicans teamed up to pass a NAFTA-style deal with Korea, even though the government's own projections showed it would increase the U.S. trade deficit.

That deal ended up going into effect on March 15 of of this year (despite many Koreans' opposition to the rights given multinationals under the pact, not to mention the opposition of many here at home).

We now have the first full month of data on the deal, and it's not looking good.

The deal, sold as a way to increase job-creating U.S. exports, actually saw job-displacing imports rise much more quickly in its first full month. As Inside U.S. Trade reports,

The U.S. trade deficit in goods with South Korea tripled during the first full month the U.S.-Korea free trade agreement was in force, amid a slight decrease in the overall U.S. goods and services deficit that month, according to April trade data released last week by the Commerce Department. The bilateral FTA went into effect on March 15.

The U.S. goods trade deficit with South Korea grew to $1.8 billion in April, with imports totaling roughly $5.5 billion compared to exports of $3.7 billion. That was a larger bilateral deficit than the $0.6 billion recorded in March, where imports totaled $4.8 billion and exports were $4.2 billion. In April 2011, the U.S. goods deficit with Korea was $1 billion.

On auto trade, the bilateral deficit with South Korea climbed to $1.65 billion in April from $1.45 billion the previous month. While U.S. exports of autos and auto parts stayed the same over both months at roughly $100 million, imports from Korea rose to $1.76 billion in April from $1.56 billion the previous month. The data were released June 8.

While it's difficult to draw too many conclusions from a single month of data, rest assurred that workers concerned about offshoring of jobs and trade displacement are going to be watching these numbers closely for many months and years to come. If the trade deficit (in autos and more generally) continues to climb, it will be very difficult for policymakers to sell more NAFTAs (like the proposed TPP) to an already skeptical public.

June 14, 2012

TPP could undermine Medicare, Medicaid and Veterans’ Health - hurting seniors, military families and the poor

You've read about how the leaked chapter of the Trans-Pacific Partnership (TPP) that surfaced yesterday will outsource our judicial system and allow corporations to attack our laws.

But did you know that an earlier leaked text shows that the TPP could also undermine Medicare, Medicaid and Veterans' Health? This could hurt access to affordable medicines for our seniors, military families, and poor.

Indeed, it has been an open secret among trade negotiators that U.S. pharmaceutical companies have pushed to limit drug price containment measures, such as through the recent bilateral trade deals with Korea and Australia.

But, in our new public interest analysis, Public Citizen shows that Medicaid, Medicare, the Department of Defense’s TRICARE program for active military personnel, and the Veterans Health Administration and the 340B program are all threatened by the TPP.

We also show how proposed changes to Medicare championed by President Obama would clearly risk violating the TPP. Throughout, we show how trade tribunals are less likely to defer to national healthcare regulators than do national judges, including conservatives like Justices Scalia and Thomas. We conclude with suggested changes to the TPP to insulate smart drug price containment strategies.

Read the full memo here.

June 13, 2012

Controversial Trade Pact Text Leaked, Shows U.S. Trade Officials Have Agreed to Terms That Undermine Obama Domestic Agenda

PUBLIC CITIZEN PRESS RELEASE

After Two Years of Closed-Door Negotiations, Trans-Pacific Partnership Text Replicates Alarming Bush Trade Pact Terms That Obama Opposed as Candidate, and Worse

WASHINGTON, D.C.– A leak today of one of the most controversial chapters of the Trans-Pacific Partnership (TPP) reveals that extreme provisions have been agreed to by U.S. officials, providing a stark warning about the dangers of “trade” negotiations occurring under conditions of extreme secrecy without press, public or policymaker oversight, Public Citizen said.

 “The outrageous stuff in this leaked text may well be why U.S. trade officials have been so extremely secretive about these past two years of TPP negotiations,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “Via closed-door negotiations, U.S. officials are rewriting swaths of U.S. law that have nothing to do with trade and in a move that will infuriate left and right alike have agreed to submit the U.S. government to the jurisdiction of foreign tribunals that can order unlimited payments of our tax dollars to foreign corporations that don’t want to comply with the same laws our domestic firms do.”  

Although the TPP has been branded a “trade” agreement, the leaked text of the pact’s Investment Chapter shows that the TPP would:

  • limit how U.S. federal and state officials could regulate foreign firms operating within U.S.  boundaries, with requirements to provide them greater rights than domestic firms;
  • extend the incentives for U.S. firms to offshore investment and jobs to lower-wage countries;
  • establish a two-track legal system that gives foreign firms new rights to skirt U.S. courts and laws, directly sue the U.S. government before foreign tribunals and demand compensation for financial, health, environmental, land use and other laws they claim undermine their TPP privileges; and
  • allow foreign firms to demand compensation for the costs of complying with U.S. financial or environmental regulations that apply equally to domestic and foreign firms. 

While 600 official U.S. corporate advisors have access to TPP texts and have a special role in advising U.S. negotiators, for the public, press and policymakers, this leak provides the first access to one of the prospective TPP’s most controversial chapters. In May, U.S. Sen. Ron Wyden (D-Ore.), chair of the Senate Finance Committee’s Subcommittee on International Trade, Customs and Global Competitiveness – the committee with jurisdiction over the TPP – filed legislation to open the process after he and his staff were denied access to even the U.S. proposals for the TPP negotiations. 

Last month, U.S. Trade Representative Ron Kirk defended the unprecedented secrecy of TPP negotiations by noting that when the draft of a major regional trade pact was released previously, it became impossible to finish the deal as then proposed. 

“The top U.S. trade official effectively has said that the administration must keep TPP secret because otherwise it won’t be able to shove this deal past the public and Congress,” said Wallach. “The airing of this one TPP chapter, which greatly favors foreign corporations over domestic businesses and the public interest and exposes us to significant financial liabilities, shows that the whole draft text must be released immediately so it can be reviewed and debated. Absent that, these negotiations must be ended now.” 

The TPP is the first trade pact the Obama administration is negotiating. Today’s leak further complicates the administration’s goal of completing TPP negotiations this fall. Already the TPP timeline was generating political headaches for the Obama re-election campaign, as repeated U.S polling shows that majorities of Democrats, Independents and GOP oppose more NAFTA-style trade deals. 

The TPP may well be the last trade agreement that the U.S. negotiates. This is because TPP, if completed, would have a new feature relative to past U.S. trade pacts: It would remain open for any other country to join later. Last month, USTR Kirk said that he "would love nothing more" than to have China join TPP.

The TPP offered an opportunity to develop a new model of trade agreement that could deliver the benefits of expanded trade without unduly undermining signatory nations’ domestic public interest policies or establishing special privileges for foreign corporations. President Barack Obama and countless members of Congress campaigned on fixing these investment rules to better protect the public interest. But Public Citizen’s analysis of this text shows that the U.S. positions do not reflect any of the changes that candidate Obama pledged when he recognized the threats posed by the NAFTA-style investment provisions in trade agreements. 

The leak also reveals that:

  • Australia has refused to submit to the jurisdiction of the “investor-state” private corporate enforcement foreign tribunal system;
  • U.S. negotiators are alone in seeking to expand this extra-judicial enforcement system to allow the use of foreign tribunals to enforce contracts that foreign investors may have with a government for government procurement or to operate utilities contracts and even related to concessions for natural resources on federal lands;
  • Other countries are proposing safeguards for financial regulation and limits to the corporate tribunals that the U.S. has not supported.

 Public Citizen’s analysis of the leaked text and guided tour through its provisions can be found here.

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BREAKING: For an analysis of these developments by Zach Carter of The Huffington Post, click here.

June 04, 2012

El Salvador loses on three out of four counts, as anti-environment and anti-development case launched under CAFTA drags on

El Salvador lost three out of four of its major arguments in last Friday’s Pac Rim Cayman LLC v. El Salvador jurisdictional ruling. Even though it narrowly won dismissal of its CAFTA case, the underlying claims will proceed at World Bank-based hearings as a challenge under El Salvador’s domestic Investment Law.

The lowlights?

  • El Salvador lost on three out of four counts, and Pac Rim Cayman LLC's attack on El Salvador's mining policies will proceed. The government may still have to pay millions in tribunal and legal costs for the CAFTA portion that was dismissed.
  • CAFTA's extraordinary investment protections kick in for existing investments even without a firm making any new investments after CAFTA went into effect.
  • Government actions that predate CAFTA - but continue after it went into effect – can be a "continuing omission" that can keep governments on the hook years later. In this case, Pacific Rim's mining permit was presumptively denied before CAFTA went into effect, but the firm and the government continued to discuss it and the permit remained not granted to date. Following this logic through, a company’s failure to meet a regulatory requirement in the year 1800 can constitute a “continuing omission” attributable to the government (as if it were a contract) for centuries to come, provided the government is nice enough to continue to talk about it. 
  • The dismissal of CAFTA jurisdiction was on worryingly narrow grounds: had the firm reorganized its corporate structure so that its pre-existing U.S. corporate entity obtained ownership of the Salvadoran mining interest (rather than Pacific Rim's Cayman subsidiary that owned those assets being reincorporated as a new U.S. entity to pursue the CAFTA case), El Salvador could have been held liable for a CAFTA violation on the basis of a dispute that actually started before CAFTA, just because the governmental authorities were kind enough to keep speaking to the company about their permits.
  • Through this narrow dismissal of the CAFTA complaint, the tribunal practically laid out a road map for future aggressive nationality planning companies to abuse the investor-state system to attack environmental policies.

Please find the official docs in this case here, our earlier statement from Saturday here, and our earlier backgrounder on the case here. (See here for our analysis of the closely related Commerce Group v. El Salvador case.)

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As the complainant’s name implies, Pac Rim Cayman LLC started out as a Cayman Islands company. The firm was a subsidiary of Pacific Rim Mining Corp., a Canadian company, that had sought but failed (as of March 2005) to qualify for a gold exploitation license, after having made a tepid but ultimately failed attempt (as of December 2004) to secure the necessary environmental permits.

In March 2006 – long after these facts – the U.S.-Central America Free Trade Agreement (CAFTA) went into effect. CAFTA provides certain outrageous benefits to U.S. investors to challenge El Salvadoran environmental and health measures for cash compensation, outside of Salvadoran courts for acts or omissions that would not be violations of Salvadoran law. The Cayman subsidiary reincorporated in the U.S. state of Nevada in December 2007. In March 2008, El Salvador’s then-president Elias Antonio Saca, gave a speech that various foreign investors deemed as announcing a ban on gold mining. In April 2008, Pac Rim Cayman LLC began threatening to launch a CAFTA claim as an allegedly “U.S.” investor, which they did formally in December 2008. (Canadian investors in El Salvador, in contrast, would not generally be protected by CAFTA.)

Continue reading "El Salvador loses on three out of four counts, as anti-environment and anti-development case launched under CAFTA drags on" »

June 02, 2012

CAFTA Ruling Continues Corporate Attack on Environmental Protection

Part of Attack on Mining Law Will Proceed at International Tribunal; El Salvador May Pay Millions in Tribunal, Legal Fees Even for Dismissed Claims

WASHINGTON, D.C. – A tribunal constituted under the Central America Free Trade Agreement (CAFTA) ruled that Pacific Rim Mining Corp. could proceed with half of its attack on an El Salvadoran mining law strongly supported in that country by the left and right political parties and the Catholic Church. Given the extraordinary facts of this case, the only reasonable outcome should have been total dismissal and that today’s outcome is even possible spotlights why the extreme investor rights and their private enforcement in foreign tribunals included in past U.S. “trade” pacts must be ended, Public Citizen and Sierra Club said today.
 
Legal observers expected the tribunal, constituted under the World Bank’s International Centre for Settlement of Investment Disputes (ICSID), to deny all jurisdiction. Not only is Pacific Rim a Canadian firm, but it failed to complete the permitting process to operate a mine. The tribunal also held that the Canadian firm could not pursue claims under a trade pact between the United States and six Central American countries, but refused to waive millions in tribunal costs and legal fees accrued by El Salvador defending against that aspect of the attack. It permitted Pacific Rim’s claims at ICSID under an investment law with provisions similar to CAFTA to continue.
 
“The fact that corporate attacks on a sovereign country’s domestic environmental policy before a foreign tribunal would even be possible – much less cost a country millions when a key element of the attack is dismissed – highlights what is wrong with our ‘trade’ agreement model,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “These investor rules are an outrageous example of how ‘trade’ pacts have been stuffed with special-interest terms that empower corporate attacks on basic democratic public interest policymaking at home and abroad.”

“The CAFTA attack on mining policy has reignited the debate about trade pacts’ threats to the environment and public health, and spotlights why the Obama administration must exclude these extreme investor rights for future trade deals,” said Margrete Strand Rangnes, director of Sierra Club’s Labor and Trade Program. “Even when a country successfully defends against elements of an attack on its environmental laws, it can face major legal costs. The very existence of this undemocratic mechanism threatens critical environmental and health improvements.”
 
Unfortunately, the long tragedy of the Pacific Rim case is not over. The tribunal found that, thanks to a neoliberal law put in place by El Salvador in 1999, many claims similar to those under CAFTA can continue to be adjudicated in foreign courts, namely at ICSID. That poor countries have been pushed to offshore their very judicial systems – through trade pacts’ investor-state enforcement systems and through investment laws like El Salvador’s – show that the world needs a fundamental rethink of the way we regulate foreign investment, said Public Citizen and Sierra Club.

The tribunal’s conclusion that this Canadian firm could not pursue CAFTA claims is welcome. But that El Salvador could be charged millions for costs related to that aspect of the case is outrageous, given Pacific Rim had no U.S. business activity and established a U.S. corporation only months before launching its CAFTA case. Public Citizen and Sierra Club urge the tribunal to waive these costs, already totaling millions.
 
Pacific Rim began exploring for gold in El Salvador in 2002 and applied for an “exploitation permit” in December 2004. Its application lacked three of the five required elements, and no permit was issued. A year later, CAFTA went into effect. In December 2007, Pacific Rim reincorporated a Cayman Islands corporate shell (which had formally owned the Salvadoran operations) in Nevada. Shortly thereafter, the company launched the first environmental challenge under CAFTA, using the extremely controversial “investor-state” enforcement procedure. This process allows investors to directly sue signatory governments in foreign tribunals, where they can demand cash compensation for government policies they claim undermine their new CAFTA investor rights. Pacific Rim’s attack on El Salvador demanded more than $200 million in compensation, alleging (among other claims) that the failure to automatically issue an exploitation permit was a violation of CAFTA.

“These trade pact investor attacks ring an alarm across the political spectrum – from conservatives concerned about sovereignty threats posed by the U.S. government being under the jurisdiction of foreign tribunals, to progressives concerned about corporate attacks on domestic environmental or health policies,” said Wallach. “Do we want to leave a two-track justice system to our children: one for multinational corporations and another for average citizens?”

The Pacific Rim CAFTA case also spotlights how a U.S. “trade” agreement can be exploited by a multinational mining firm to attack El Salvador’s fragile democracy, which emerged from 12 years of civil war, and to undermine the laws enacted by its elected leaders to regulate mining and safeguard the environment. Although Salvadoran civil society has been effective in getting the government to review the potential environmental and social impacts of mining, the government has made no decisions about future mining policy. CAFTA’s extreme investor rights now loom over these policy decisions, with the government forced to calculate potential CAFTA liabilities against publicly demanded improvements in environmental policy. Another CAFTA attack on the mining law by U.S. firm Commerce Group was dismissed last year because that firm had not terminated its domestic legal challenge of the law, but the firm has since filed to annul the dismissal.
          
Increasingly, multinational companies are using trade-agreement investor rights in situations where natural resources and public health are at stake. Of the 137 investment cases pending before ICSID, 59 cases relate to oil, mining or gas projects. The Pacific Rim case also raises much broader concerns about the foreign investor rights provided in U.S. trade agreements. Even assuming that foreign firms meet all laws in effect in another country when setting up operations, a trade agreement should not guarantee that foreign firms are sheltered from or compensated for having to meet new laws that apply to foreign and domestic firms equally that are enacted through normal democratic practices, Public Citizen maintains.

“We have seen an alarming increase of cases related to oil, mining and gas projects with hundreds of millions of dollars already paid to corporations through these secret trade tribunals,” said Strand Rangnes. “Not only are the environmental and health implications for local communities severe, but this is also the exact wrong way to go as we look to curb global warming and climate change.”

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