About Us

  • 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.

Contact

« November 2012 | Main | January 2013 »

December 18, 2012

WSJ: Forget TPP's Threat to Medicines. "Free Trade is Good for Health!"

Today the Wall Street Journal published an op-ed with the glowing title, “Free Trade is Good for Health.”  The piece gussies up the Trans-Pacific Partnership (TPP) as a healthy dose of medicine for the developing countries that are negotiating the NAFTA-style deal with the U.S. and other Pacific Rim nations.  The op-ed first takes on those who argue that the TPP poses a danger to access to medicines (i.e. the major health and development organizations from nearly every TPP country).  It then frames the deal as part of a benevolent “free trade” legacy which should be given unqualified credit for the wealth health of nations.  The op-ed’s omissions in the first argument are as large as its sweeping conclusions in the second. 

The TPP’s proposed intellectual property chapter includes even greater monopoly protections for pharmaceutical companies than seen in past U.S. “free trade” agreements (FTAs).  The extension of such anti-competitive protections, while safeguarding profits for large pharmaceutical firms, threatens to block generics and elevate the cost of medicines in TPP countries like Vietnam. 

One such protection that has been hotly debated within the TPP context is “data exclusivity.”  The brainchild of the pharmaceutical industry, data exclusivity goes even beyond patent protections by barring generic drug manufacturers from accessing the clinical test data required to market cheaper, generic forms of a drug, whether patented or not, for years.   Should we be concerned about the implications of such corporate protections for the cost of medicines?  Apparently not.  According to the op-ed, such concerns are the handiwork of “scaremongering NGOs.”  (I don’t recall that adjective making it into our mission statement.)  The author, Philip Stevens, argues that data exclusivity for chemical drugs is currently granted in the U.S. for five years, and “the chances that the TPP will lengthen the exclusivity period are very low.”   

But the point is not whether the access-curtailing U.S. data exclusivity periods will be “lengthened,” but whether they will be exported to ten other TPP negotiating countries.  Also, the author neglects to mention the U.S.’s new and significantly longer monopoly protection period of 12 years for biologic drugs—used to treat cancer, heart disease, and other deathly illnesses.  Pharmaceutical companies and their cheerleaders have been calling for this extreme, prolonged generics prohibition to be spread to TPP members, diminishing access to life-saving treatments from Vietnam to Peru. 

Indeed, this corporate push was recently emblazoned on the very same opinion pages of the Wall Street Journal, with former U.S. Trade Representative Charlene Barshefsky calling for the U.S. to use the TPP to export its 12-year exclusion of generics for biologic drugs.  Our own Peter Maybarduk retorted with a letter to the editor, arguing, “It would be cruel to impose this rule on the many people suffering from treatable conditions in the Asia-Pacific region who cannot afford the extraordinary monopoly prices…”

While the TPP’s intellectual property chapter could export the U.S.’s monopoly protections for pharmaceutical corporations, the leaked investment chapter would allow those corporations to directly challenge governments for access-to-medicines policies that they allege as violating the monopoly protections.  The Wall Street Journal op-ed comes on the heels of Eli Lilly’s announcement, detailed in our post last week, that the pharmaceutical corporation plans to use NAFTA to directly challenge the Canadian government before a NAFTA-created, three-person tribunal over the Canadian courts’ decision to invalidate Eli Lilly’s patent.  The courts made the decision after determining that Eli Lilly’s drug had failed to deliver on promised utility.   In response, Eli Lilly is demanding $100 million in taxpayer compensation. 

As we mentioned, but as the op-ed failed to, the TPP goes even beyond NAFTA in empowering pharmaceutical corporations to launch such attacks on access-to-medicines policies.  NAFTA implies that a corporation could claim “intellectual property” as an “investment” protected by the deal, allowing it to demand compensation for government policies alleged to be a violation of that “investment.”  But the TPP makes that possibility explicit by naming “intellectual property rights” under the definition of “investment,” raising the prospect of an increase in Eli-Lilly-like challenges to access-to-medicines policies under the TPP.   

After wiping aside or completely omitting these concerns that the TPP poses a sincere health hazard, the op-ed author framed the TPP as the continuation of a “free trade” legacy that has played a nearly unparalleled role in improving global health standards.  (That’s not my near-hyperbole, but his: “there have been few more powerful forces for improving health in the history of humanity.”)  He reasons that trade means growth in income, which means growth in living standards:

Prior to the 1950s, the majority of the world's population lived a precarious life as subsistence farmers. Since then, the opening of global markets, first by the General Agreement on Tariffs and Trade and then by the WTO, has transformed the health prospects of millions by raising incomes. That, and not IP flexibility, made decent food, sanitation, and new medical technologies available.

That's how the Asian countries involved in the TPP—Malaysia, Singapore, Brunei and Vietnam—have witnessed startling improvements in the health prospects of their citizens since the middle of the last century. Singapore signed GATT in 1973, and by 1993 there were no import duties for any product except alcohol, tobacco and automobiles, a situation that largely persists today. Singapore now surpasses many European countries for life expectancy, with Malaysia not far behind.

Oh my.  Where to begin?  How about Singapore.  The author’s poster child for the trade-equals-growth-equals-health argument turns out to be a pretty counterproductive candidate.  Stevens, the author, cites 1973 as the year Singapore began opening the door to unfettered trade, with the door cast mostly wide open by 1993.  But the years of highest growth for Singapore happened while the door was still closed.  In the decade before 1973, Singapore’s average inflation-adjusted GDP growth rate per person was 9%.  In the decade following its GATT accession, that average growth rate fell to 6%.  In the decade following the declared 1993 free trade finish line, Singapore’s annual per capita growth dropped further to just 3%.  One could be pardoned for expecting Stevens to conclude from his Singapore example that nations looking to boost incomes and health standards should reject across-the-board free trade, not embrace it. 

Singapore’s experience is not unique.  A study by Mark Weisbrot and Rebecca Ray over at the Center for Economic and Policy Research found that from 1960-1980, a period characterized more by import-substitution than by free trade, Latin America as a whole experienced a cumulative growth rate of 92%.  But during the free trade era of 1980-2000, the region’s cumulative growth plummeted to a measly 6% over the entire twenty-year period. 

Such findings, like the Singapore data, do not necessarily mean that free trade causes lower growth.  Other factors could of course be at play in this history.  But the facts show that the opposite certainly cannot be claimed.  Free trade cannot be categorically credited for higher growth, much less recommended as an unmitigated prescription for better health.  Op-eds making such a sweeping claim would seem to be driven more by ideology than by evidence.  Those struggling to pay for medicine in Vietnam could probably do without more ideology.  

December 14, 2012

U.S. Corporations Launch Wave of NAFTA Attacks on Canada's Energy, Fracking, and Medicines Policies

U.S. corporations have launched an alarming new offensive against Canadian health and environmental policies under the North American Free Trade Agreement (NAFTA).  Three U.S. firms recently announced plans to use the “trade” pact to seek nearly one billion taxpayer dollars in private, NAFTA-created tribunals as compensation for Canadian policies on fracking, wind energy, and medicine patents. 

Of the three corporate threats, perhaps most worrisome is the notice filed by U.S.-based pharmaceutical giant Eli Lilly, which became public this week.  It marks the first attempt by a patent-holding pharmaceutical corporation to use the investment provisions in NAFTA (or any other U.S. FTA) as a tool to push for greater monopoly patent protections, which elevate the cost of medicines.  (See our comments on the historic move in a post yesterday over at Pharmalot.) 

But how can a foreign corporation directly demand taxpayer compensation from a sovereign government over a democratically-determined policy?  Meet the “investor-state” system.  Written into NAFTA, this system uniquely empowers foreign corporations to skirt domestic laws and courts and directly challenge a government’s public interest policies.  The cases are decided by U.N. and World Bank tribunals typically comprised of three corporate lawyers.  Private corporations have launched these cases against a wide array of health, environmental, financial, and other public interest policies that they allege as undermining “expected future profits.” 

Such cases have soared over the last decade—last year the cumulative number of launched investor-state cases was nine times the cumulative investor-state caseload in 2000.  When the foreign investor wins the case, the government must hand the corporation an amount of taxpayer money decided by the tribunal as compensation for the offending policy.  Under NAFTA-style deals, private investors have already pocketed $365 million in taxpayer money via investor-state cases, while more than $13 billion remains in pending claims.

As three more corporations get in line to use this audacious system against Canada, the country is ironically just joining negotiations for the Trans-Pacific Partnership (TPP), the NAFTA-style deal that would expand the investor-state system further.  With Canada preparing to spend more taxpayer money to defend its environmental, energy, and patent policies, you’d think that the country might soon sour on the investor-state system.  It wouldn’t be the first.  Australia has already publicly refused to be party to the expansive investor-state provisions of the TPP or any other trade deal. 

Here’s a quick summary of the three disputes and the NAFTA-protected “rights” that each investor claims, with a few more wonky details on the particularly dangerous patent dispute:

A Gas Corporation’s Right to Frack the St. Lawrence: In June 2011, Quebec passed a moratorium on the controversial practice of hydraulic fracturing, or fracking, for natural gas.  The provincial government declared the moratorium so as to be able to conduct an environmental impact assessment of the extraction method widely accused of leaching chemicals and gases into groundwater and the air.  Lone Pine Resources, a Delaware-headquartered gas and oil exploration and production company, had plans and permits to engage in fracking on over 30,000 acres of land directly beneath the St. Lawrence River.  Lone Pine argues that the fracking moratorium nullified those permits. In November Lone Pine formally accused Canada of violating its NAFTA obligations by permitting Quebec’s decision to conduct an environmental impact study before determining whether a foreign corporation should inject chemicals into thousands of acres of shale beneath the province’s longest river.  According to Lone Pine, such policymaking contravenes NAFTA’s protections against expropriation and for “fair and equitable treatment.”  As compensation, Lone Pine would like a quarter billion taxpayer dollars. 

An Energy Company’s Right to a Convenient Energy Policy: Ontario’s green energy policy, acclaimed for reducing carbon emissions and creating green jobs, has already come under attack at the World Trade Organization, resulting in last month’s regressive ruling against the successful policy.  Now a U.S.-based energy corporation named Windstream Energy plans to launch an investor-state case over its inability to participate in the green energy program.  The corporation had contracted with Ontario’s provincial government to provide energy generated by an offshore wind farm located in Lake Ontario.  But in February 2011, the provincial government declared a moratorium on offshore wind production, stating that time was needed to study the environmental impacts of the relatively new energy source (currently there are only a few freshwater offshore wind farms in the world). Windstream’s formal notice alleged that the moratorium “effectively annulled the existing regulatory framework” and thus contravened Canada’s NAFTA obligations concerning fair and equitable treatment, expropriation, and discrimination (para. 36).  As compensation for Ontario’s cautious approach to clean energy policymaking, Windstream is pushing for nearly a half billion taxpayer dollars. 

A Pharmaceutical Corporation’s Right to Break Promises but Keep Patents: Indiana-based Eli Lilly, the fifth-largest U.S. pharmaceutical corporation, has notified Canada that it intends to launch an investor-state case against the decision of Canadian courts to invalidate the company’s patent for Strattera, a drug used to treat attention deficit hyperactivity disorder (ADHD).  A Canadian federal court and court of appeals both ruled that the patented drug failed to deliver the benefits that Eli Lilly had promised when applying for the patent’s monopoly protection rights.  The resulting invalidation of the patent paves the way for Canadian drug producers, such as Novopharm—the generic drug company that filed the domestic case, to produce a less expensive, generic version of the ADHD drug. Eli Lilly’s notice argues that Canada’s basis for the patent invalidation—that a pharmaceutical corporation should be required to deliver on its promises of a drug’s utility in order to maintain the drug’s patent—is “discriminatory, arbitrary, unpredictable and remarkably subjective” (para. 43).  The company is pushing for $100 million in taxpayer compensation. 

Eli Lilly’s attack does not just target Canada’s particular treatment of Strattera, but the country’s entire basis for determining patent validity (the “promise doctrine”—that a drug patent will be honored so long as promises regarding the drug’s efficacy are also honored).  As such, the outcome of the case is particularly critical, as a loss for Canada could expose the country to a slew of investor-state attacks from other drug companies with invalidated, promise-breaking patents eager to follow Eli Lilly’s lead.  Indeed, Eli Lilly mentioned in its notice another invalidated patent for an anti-schizophrenia drug named Zyprexa, which Canadian courts have similarly determined to fall short of promised benefits.  Eli Lilly may be considering a second NAFTA investor-state case over that drug. 

In addition, there are rumors that Pfizer may be considering launching its own investor-state case against Canada over, yes, Viagra.  Canada’s Supreme Court has invalidated the Viagra patent on the basis that Pfizer failed to disclose its active ingredient, thereby allowing generic firms to begin competing with Pfizer in production of the erectile dysfunction drug.  While this suit has less to do with Canada’s “promise doctrine,” Pfizer could similarly seek to undermine the patent criteria of Canada’s highest courts by turning to a NAFTA-created private tribunal to demand taxpayer compensation.

In its notice regarding the Strattera patent, Eli Lilly specifically argued that the patent invalidation violated Canada’s NAFTA obligations concerning expropriation, a “minimum standard of treatment,” and national treatment.  If you’re interested in weeds-level analysis, here’s some for each claim:

Expropriation: Eli Lilly claims that the decision of Canadian courts to terminate its Strattera patent for lack of promised utility constituted an expropriation of its “intangible property”—part of NAFTA’s broad definition of a protected “investment.”  NAFTA does not explicitly state that intellectual property (e.g., patents) falls under the definition of an “investment,” though many have assumed the inclusion of patents to be implicit.  But in the TPP, to which Canada is now a negotiating party, the investment chapter leaked earlier this year proposes to explicitly name “intellectual property rights” under the definition of a protected “investment.”   So if Eli Lilly thinks it can define patent invalidation as property expropriation under NAFTA, it certainly could do so under the proposed TPP text.  Thus, if Canada plans to continue its rather incongruous commitments to the TPP and to sovereign determination over how patents are awarded, it should view Eli Lilly’s dispute as a sign of things to come. 

Minimum Standard of Treatment: Eli Lilly’s second claim against Canada is that the rulings of its courts violated the “minimum standard of treatment” that NAFTA signatories are obliged to provide foreign investors.  Sovereign states, such as the United States, have consistently argued that this standard means providing police protection and due process, such as that afforded to Eli Lilly when it defended its patent before Canada’s courts.  But investor-state tribunals have generated increasingly inventive interpretations of the minimum standard, arguing that it also requires governments not to enact policies that could violate expectations foreign investors may have plausibly had upon investing.  As the United States argued in a previous investor-state case, “if States were prohibited from regulating in any manner that frustrated expectations—or had to compensate for any diminution in profit—they would lose the power to regulate” (para. 576).  

Yet, this extreme interpretation is precisely the one on which Eli Lilly relies, accusing Canada’s courts of “contravening” its expectations (para. 100).  Such elastic interpretations have made the minimum-standard-of-treatment claim the single most successful allegation that investors can mount against a state—of every four investor-state cases launched under U.S. treaties in which the investor has won, three cited a “minimum standard of treatment” claim as the basis for the “win.”   

National Treatment: In its final claim, that Canada violated NAFTA’s “national treatment” obligation, Eli Lilly surpasses even the runaway interpretations of past investor-state tribunals.  The national treatment obligation requires governments to afford foreign investors treatment that is “no less favorable” than that afforded to domestic corporations “in like circumstances” (para. 105).  But after quoting this NAFTA definition, Eli Lilly ignores it, inventing instead a standard that would require Canada to afford foreign investors treatment no less favorable than what Canadian companies could hypothetically receive in other countries.  Such a speculative obligation is rather unprecedented, seemingly concocted by Eli Lilly itself.   

The corporation also alleges that the courts’ patent invalidation violates national treatment by advantaging Canadian generic firms that can now create and market generic versions of Strattera.  Here, Eli Lilly presumes to challenge Canadian courts’ removal of a patent on the incredible basis that patent removals help generics.  First, a patent-holding firm and a generic firm plainly do not meet the “in like circumstances” requirement of a national treatment claim concerning a patent (the relevant comparison would be between Eli Lilly and Canadian patent-holding firms).  But more importantly, of course the removal of patents advantages generic producers, but it does so regardless of whether they are foreign or domestic.  Were Eli Lilly’s inventive logic to be accepted by the tribunal, it could jeopardize generic medicines in nearly any country that finds cause to terminate a patent but also finds itself subject to a NAFTA-style treaty.

In sum, the outcome of Eli Lilly’s claim is critical for those seeking to safeguard access to medicines, both in terms of what it means for Canada’s broader policy of ending patents found to not deliver promised results, and in the message it sends to pharmaceutical firms contemplating investor-state attacks on other governments’ policies to control medicine costs.  The dispute, in addition to the investor-state attacks on Quebec’s fracking moratorium and Ontario’s offshore wind moratorium, should also make Canada think twice about the TPP.  While defending its pharmaceutical and environmental policies before unpredictable three-person tribunals created by NAFTA, Canada should reconsider signing up for an expansion of the system that placed those policies under such inordinate threat.  

December 11, 2012

U.S. Exports to Korea Suffer under FTA

Today's release of new trade data for October revealed more of the same under the Korea FTA: lower exports, higher imports, and a deeper U.S. trade deficit with Korea.  We've reported similar trends in past months here, here, and here.

In comparison with the FTA-free month of October 2011 (after adjusting for inflation), this FTA-encumbered October saw 3% fewer exports to Korea, 3.4% more imports from Korea, and a 20.4% jump in the U.S.-Korea trade deficit.   For the full seven months since the FTA's implementation for which data is available, exports have fallen 7.5%, imports have risen 0.4%, and the deficit has widened 23.3% in comparison to 2011 levels.  That's bad news for U.S. job creation--the promise under which the Obama administration sold this NAFTA-style deal.  

The falling exports are particularly disconcerting.  While, the U.S. has yawning trade deficits with many countries, exports to those countries tend to still rise, though overshadowed by even larger increases in imports.  Under the Korea FTA, exports have actually been falling in real terms in comparison to 2011.  Indeed, most of the deepening deficit under the FTA can be explained by reduced exports rather than increased imports.  

For a depiction of this job-erasing reality, see the graph below, which portrays the difference in inflation-adjusted export levels, import levels, and overall trade balance when comparing the FTA months of 2012 with the same FTA-less months of 2011.  This year's overall more negative trade balance (i.e. deeper deficit), represented by the green area, owes largely to the fact that exports, represented by the red line, have remained consistently lower (with the tiny exception of June) under the FTA.  

The US Trade Representative under Obama sold the Korea FTA with the slogan "More Exports. More Jobs."  I wonder how they'd sell this graph.  

Korea FTA Graph

December 10, 2012

Mexican Unions Say No to "Free Trade" Expansion Through the TPP

 

IMG_4562

Above: Celeste Drake (AFL-CIO) and Melinda St. Louis (GTW) pose with representatives from Mexican unions and civil society organizations at a seminar on the dangers of the TPP in Mexico City, Mexico.

Last week, Mexico and Canada took part in their first official closed-door negotiations of the Trans-Pacific Partnership (TPP) “free trade” agreement, which the U.S. has been negotiating for the past 2 ½ years with countries in the Asia-Pacific and Latin America. The TPP would expand the North America Free Trade Agreement (NAFTA) model to 11 Pacific Rim countries (and eventually any nation in the Pacific Rim, from China to Russia to Japan, could be included).

In mid-November, Mexican officials hosted negotiators from the 10 other TPP nations in secretive talks in Los Cabos, Baja California. In response, Mexican labor, farmer and fair trade advocates, including the National Workers’ Union (Unión Nacional de Trabajadores--UNT), the National Council of Rural and Fisher Organizations (Consejo Nacional de Organismos Rurales y Pesqueros--CONORP), and the Mexican Action Network against Free Trade (Red Mexicana de Acción Frente al Libre Comercio--RMALC), organized a half day seminar raising concerns about Mexico’s participation in the TPP on November 14 in the Mexican Senate building.

The seminar launched a regional political alliance between partners from Canada (Common Frontiers), the United States (AFL-CIO and Public Citizen), and Mexico (the organizations listed above and others). Senators Fidel Demedicis Hidalgo and Isidro Pedraza Chavez also participated in the seminar and expressed concern about the lack of transparency in the TPP process. The organizers presented this statement to the Mexican press at the end of the seminar (translated below).

Two decades of “Free Trade” is enough: Say No to Expansion through the Trans-Pacific Partnership (TPP)
Statement of UNT, CONORP and RMALC of Mexico
November 14, 2012

"According to the United States government, big business and the Mexican Ministry of Economy, the TPP is the most ambitious free trade agreement that has ever been proposed in terms of the extent of issues it aims to address, but what the enthusiastic promoters of the trade agreement are hiding is that the true intention is to deepen and complete the commitment made by our country in NAFTA and other free trade agreements signed with various countries.

Through TPP the sectors and powers that have benefited from the previous generation of trade agreements will be strengthened and even larger swaths of our economy will be at the disposal of transnational corporate monopolies. This is the trend of the new era of trade liberalization in the 21st century.

Continue reading "Mexican Unions Say No to "Free Trade" Expansion Through the TPP" »

December 06, 2012

Live from Auckland: Lori Wallach Interviewed at TPP Negotiations on Dangers of the Deal

Watch our own Lori Wallach interviewed live from Auckland, New Zealand, on the sidelines of 15th round of the Trans-Pacific Partnerhip (TPP) negotiations, where civil society members have been shut out of the discussion while 600 advisors, most representing U.S. corporations, have unparalleled access to the text. The TPP has the potential to ban Buy America provisions, decrease access to medicine, limit the ability to regulate Wall Street, and empower corporations to directly attack public interest laws. 

Check out the interview here:

December 05, 2012

IMF Endorses Capital Controls while U.S. TPP Negotiators Try to Ban Them

The International Monetary Fund has now codified a significant policy shift signaled by statements over the past few years: acceptance of capital controls as legitimate policy tools.  Ironically, "trade" policy currently being hatched in Auckland, the site of the current round of Trans-Pacific Partnership negotiations, threatens to move in precisely the opposite direction.

A long and growing list of economists and governments have found capital controls to be an essential component of a policy toolbox to prevent sudden inflows or outflows of speculative “hot money,” the destabilizing impacts of which became manifest in the global financial crisis.  Beyond avoiding the crises that emerge when lemmings-like investors decide to pull funds out of a country en masse, capital controls can also be employed in an enduring form for a range of worthy goals.  These include preventing asset bubbles, forestalling currency appreciation and export deterioration, controlling inflation, maintaining effective monetary policies in the face of procyclical flows, and ensuring a stable climate for long-term domestic investment. 

A paper released this week and approved by the IMF Board (on which the U.S. holds by far the greatest voting power), states the new IMF official policy position: “In certain circumstances, introducing [capital flow management measures] can be useful for supporting macroeconomic policy adjustment and safeguarding financial system stability.” 

The newly official position is not a categorical endorsement of capital controls.  It states that controls should be “generally temporary,” “should not be used to substitute for or avoid warranted macroeconomic adjustment,” and should be considered as a last resort.  Such narrow qualifications have irked countries like Brazil, whose representative on the IMF Executive Board responded to the tepid change by saying, “The extent of the damage that large and volatile capital flows can cause to recipient countries has not been sufficiently recognized.” 

Still, the formalized policy shift, which allows the IMF to actually recommend capital controls in its regular doses of policy advice to troubled economies, contrasts starkly with its history of requiring countries to dismantle capital controls as a lending condition during the free-market-fundamentalist 1990s. 

Trade policy, by contrast, is still stuck in the ‘90s. 

The rules of the World Trade Organization, enshrined in that deregulatory era, bar most uses of capital controls.  The transfers provisions in the WTO’s General Agreement on Trade in Services forbid any country that has committed financial sectors to WTO rules from restricting capital flows in those sectors.  Under a limited exception, countries can enact capital controls during balance of payments crises, though permitted controls may only apply to capital outflows, must be temporary, and must be deemed “necessary” by a WTO body. 

NAFTA-style “free trade” agreements are even worse.  These deals prohibit capital controls without even including the WTO’s very limited caveat for balance of payments crises.  Further, they allow private investors to directly attack a government’s capital control policy, demanding taxpayer money as compensation, via the notorious and increasingly-used investor-state system. The leaked investment chapter proposed for the TPP replicates these same extreme prohibitions on a policy tool backed by a growing chorus of economists and policymakers. 

As the IMF joins that chorus (albeit as one of the more timid singers), U.S. trade officials are left making discordant noises by themselves.  Coinciding with the IMF’s release of its U.S.-approved endorsement of capital controls, this week U.S. negotiators in Auckland are pushing other TPP negotiating countries to lock in the proposed TPP prohibition of capital controls. 

This irony yields a unique diagnosis: the U.S. suffers from capital controls schizophrenia.  It appears that the U.S. officials at the Treasury Department who okayed the IMF policy shift should have a little talk with their counterparts at USTR who are actively undermining said shift. 

If they don’t, and if the TPP is allowed to contravene the solidifying consensus that capital controls are legit policy tools, TPP countries who take policy advice from the IMF may find themselves in a baffling predicament.  What happens if a TPP member like Chile, which successfully employed capital controls during the 1990s, experiences a surge in destabilizing capital inflows, gets an IMF recommendation to stem the flow, but is bound by the TPP not to?   In the 1990s we saw the IMF threaten lending cutoffs for countries that did not adhere to a NAFTA-style system of trade deregulation.  Could we now see that same system threaten investor-state attacks for countries that actually adhere to IMF advice? 

As the IMF position on capital controls begins to more closely align with the policies of many countries, the views of many economists, and the realities of the post-crisis world, the TPP capital control ban pushed by U.S. trade negotiators becomes an increasingly isolated (and continuously senseless) outlier.  

December 04, 2012

Recap from Lima: What Went Down at the Public Forum on the Renco/Doe Run Investor-State Case

LimaPublicForoum

Above: Nearly 150 people attend a public forum in Lima on the injustice of the Renco/Doe Run investor-state case.

Last week we traveled to Lima to participate in several events organized to raise awareness about the injustice of Renco’s $800 million investor-state case against Peru. The U.S. company has launched an investor-state attack under the Peru "free trade" agreement (FTA) on behalf of its subsidiary Doe Run, whose metal smelter in Peru has severely polluted the town of La Oroya (declared one of the ten most polluted sites in the world), leaving the inhabitants to suffer from lead poisoning, air pollution, and water contamination. Now, instead of fulfilling its contractual obligation to remediate the damage, Renco/Doe Run is demanding $800 million from Peru – money that would come out of the pockets of the same people who are already suffering from the horrendous pollution.

One of the most powerful events of the week occurred on Thursday when nearly 150 journalists, activists and community members gathered in Lima to attend a public forum to learn more about the implications of the pollution and the investor-state case for the population of La Oroya.

We were livetweeting over at @PCGTW, but in case you missed it, here are some highlights:

+ Our own Melinda St. Louis, Director of International Campaigns, noted that instead of re-thinking the investor-state system based on the situation in La Oroya, Peru is currently negotiating the Trans-Pacific Partnership (TPP), another trade agreement which will expand investor rights according to a leaked draft of the text of the investment chapter.

+Jose de Echave, Director of CooperAcción and previous Deputy Minister of Peru’s Environmental Ministry, explained how the corporation has not fulfilled its contractual obligations, and noted that the U.S.-Peru FTA is not simply about trade – it also has far-reaching social and cultural implications.

+ Matthew Porterfield, Senior Fellow and Adjunct Professor of Law at the Harrison Institute for Public Law at Georgetown University, discussed several alternative solutions to the investor-state system that other countries have already taken, including withdrawing from the International Centre for Settlement of Investment Disputes (ICSID) (a la Bolivia, Ecuador, and Venezuela), withdrawing from investment treaties (a la Ecuador, and possibly South Africa in the near future), or refusing to be a party to the investor-state provisions of the TPP (a la Australia).

+Rosa Amaro, local leader and president of the Movement for the Health of La Oroya (MOSAO),  gave a moving testimony about the dire situation in her community, including the heartbreaking story of the sick children who are seeking justice, the divisions the situation has caused, and the looming lawsuit which would drain the community of the money it has earned from the company, all as a result of breathing “public” air and seeking dignified work. (Those of you who speak Spanish can find part of Rosa’s testimony here).  

The events in Lima may have ended, but Peru and the community of La Oroya continue to find themselves sickened from the pollution and fighting against an unfair $800 million lawsuit. Now it is crucial that the investor-state system not be expanded through the TPP--we have already seen the damage it can do through the eyes of La Oroya.

Below: Panelists from the public forum pose with members of the La Oroya community, which has been contaminated by Renco/Doe Run's metal smelter.

LimaPublicForum2

Recent Posts

Subscribe